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1948 FEB 6 BUS. ADM ESTABLISHED 1839 library. Ree. tr. S. Pat. Office Volume New York, N. Y., 167 Number 4670 Price 30 Cents Thursday, February 5,. 1948 Cites Deflationary Stock Maiket-The Finale Copy Demand Performance and the Dangers in Use of Treasury Surplus a Chicago of estimated $6 to $8 use billion surplus will have found effect on our a developments of past year and, on basis and assumptions, conclude "we are about to enter the distressing phase of decline in the bear market which began in September, 1946, which has potentiality of developing later into a ' depression of great magnitude/' Holds government bonds, despite : Treasury's efforts, may be driven below par; and major break in stock prices is distinct probability Within next six months. of analysis economy The Government has within its a "tremendous anti-infla¬ tionary force" in the form of an cash surplus of $6 bil¬ lion to $8 billion for the current grasp estimated A ago, the authors of this article submitted an domestic economy, entitled '■ Demand Performance analysis of the and. the Stock Market" (see "Chronicle" of April 3, 1947), in an effort tc demonstrate that neither present income nor accumulated savings year <£- Quarter, according' to an article in the February issue of "Business Comment," the bulletin of The the that use is It by the Federal This would banks. an anti-inflation surplus of $8 billion used entirely to redeem debt helc "A- cash Federal the could cause Reserve banks decline in the 9% a aggregate demand deposits of in¬ and corporations, with collateral effects on interbank de¬ dividuals posits," the article points out. Sev¬ eral factors, however, would prob¬ ably limit these effects and lessen their severity. Continued heavy gold imports and a decline in money in circula¬ tion would increase deposits as well as reserves of the commer¬ cial of Gilbert M. Haas James J, Quinn in the hands of consumers would be sufficient to current move prod uction at current prices beyond the early part of 1,948. The analysis concluded that the con¬ sequent effect Of such a condition would result in a profound down¬ ward readjustment of the stock market as well as the economy. While we firmly believe that banks. Secondly, expansion developments during the past year bank loans and purchase of not only continue to support but securities from the public by the reinforce greatly those conclu¬ this article will endeavor prove, there are many who now sions, (Continued on page 31) or inevitable, of course, . . . to as assert that the proposed European Recovery Program provides /' cognizance of the gross over¬ the markets of the world. of opinihn as to the wisdom of the precise measures now adopted in Paris, but that some¬ thing had to be done no one can well doubt. All this was as true of the franc as it wag of the lire and is today of the pound sterling and a numbfer of otlier currencies whose (Continued on page official "values" are no red The real question has to do with whether any such steps as those now taken by France and due sooner or later in London and a number of other countries will place the currencies of these nations on a sound basis, or even prove to be helpful in reaching that goal. Upon inquiry the answer to this question is soon found to depend less upon currency devaluation than upon other and far more basic considera¬ tions. It, of course, may be taken for granted that what has now been done in Paris, or correspondingly similar action in the other capitals, even if more wisely and expertly de¬ vised, will of itself not cure the underlying ills of a new . (Continued . on page 24) * , Established — ★ and ob¬ structions. : Every wants , iames D. a . one reduc¬ tion in taxes. Mooney This is not altogether in' flated prices and costs are making selfish desire, difficult it their for The present workers to meet bills and for many businesses to keep in the black. Political leadership has promised daily Economic reduction. tax a business necessity and dictate the need hold for tax reduction in order to up purchasing power and reduce costs to avoid a slump, in business. (Continued on page 26) „ State and 28) R. H. Johnson & Co. tape eliminate a less than fantastic. the interests of the country to cut through that the French authorities later would take Havana Lithographing Go. will serve best valuation of their currency in There may well be differences of great proportions, by was sooner con¬ move It require lead¬ ership with a to Inevitable, of Course, But that it will be used to retire debt held stitute We See It coun¬ more urg¬ determination profound effect on the economy," adding that the present intentions of the authori¬ Reserve try a ties indicate this of As it of made do. can when strong and far-seeing leader¬ ship rises to the emergent necessity of reducing the budget to essen¬ tial needs and eliminating political luxuries. - Never before was a strong,/forthright determination to solve the economic and finan¬ cial problems ent. surplus," the bank states, have Communists Tax reductions will be easy EDITORIAL-'.^ Northern Trust Co. of Chicago.' will sharpening of budget axe to reduce taxes 20%/ sufficiently stimulate business and raise income until total government revenue would exceed present amount. Analyzes important budget items and points put possible reductions and pos¬ sible economies,; and concludes, with high cost of doing business incentive for risk-taking and new business is being destroyed, and danger signals point to readjustments which may shake our econ¬ omy and do more harm to our prestige and foreign relations than Mr. Mooney urges which would Investment analysts review pro¬ employed to redeem debt held by Federal Reserve Banks could cause 9% drop in demand deposits. ■; "and i Investment Counsel With Mol & Co., Members N. Y. S. E. and if "This President and Chairman of Board, Willys-Overland Motors, Inc. By GILBERT M. HAAS and JAMES J. QUINN Northern Trust Co. of holds By JAMES D. MOONEY ; STATE 1927 and Munici MUNICIPAL BONDS — INVESTMENT SECURITIES Hirsch & Co. Members New York Stock Exchange BOSTON and other Exchanges 25 Broad St., New York 4, N. ; London Cleveland Geneva Y. Teletype NY 1-210 HAnover 2-0600 Chicago 64 Wall Street, New York S Troy Bond Department THE NATIONAL CITY BANK HART SMITH & PHILADELPHIA Albany Buffalo Wilkes-Barre Woonsocket (Representative) OF NEW YORK Scranton Harrisburg 52 WILLIAM ST., N. V. Bond Dept. Teletype: NY 1-708 , HAaovsr HW Common * BANK INVESTMENT Underwriters and Distributors of SERVICE Municipal and Appraised *• Air Products, Inc. Com. & "A" Detroit Harvester Co. Com. *DeWalt, Inc. Common Emery Air Freight Corp. and Analyzed Montreal 30 Broad Common Corporate Securities OTIS & CO. Tele. NY 1-809 Reynolds & Co. (Incorporated) INVESTMENTS Established Street, New York 4, N. Y. Tel. WHitehatr 4-5770 THE CITY OF NEW YORK OF {Toronto Bond 1899 Members New York Stock Exchange CLEVELAND New York Cincinnati Chicago Columbus 120 Denver Toledo Buffalo Broadway, New York S, N. Y. Telephone: REctor 2-8600 Bell Teletype: NY 1-635 New England Brokerage Service Public Service Co. A for Banks, Brokers and Dealers *Prospectus on request Gordon Graves & Co. INSTITUTIONAL NATIONAL BANK Bell Teletype NY 1-895 New York *ABC Vending Corp. / Specialists in Accounts THE CHASE New York Security Dealers Attn. Springfield Washington, D. C. CD. Members Syracuse Hardy & Co. new Analysis study upon request ira haupt & co. Members New York Stock Exchange and other Principal Exchanges " Members New York Stock Exchange Members New York Curb Exchange 30 Broad St. Tel. DIgby 4-7800 New York 4 Tele. NY 1-733 111 Broadway, REctor 2-3100 Boston N. Y. 6 Teletype NY 1-2700 Telephone: Enterprise 1820, 2 THE COMMERCIAL (598) Common Stock & . •'/: ;/ ' / Afr/iV Handy reviews origin and growth of Community Property Laws in the various states, and points adoptions of this principle have been taken in states to obtain Federal tax advantages for inhabitants. Sees dangerous implications in community tax laws if extended to estate taxes, and con¬ AT NET PRICES NY remedy situation by annulling community property principle in all Federal can taxes. Bought—Sold—Quoted of the world's oldest ethical systems the tenth precept lays down the rule: "Thou shalt not covet." And yet covetousness is one of the motivating sources of economic progress. The desire to keep up with the Joneses is actually a dynamic force for good—or Corporation Teletype Congress In Broadway, New York 5 one for 'for perhaps 1-583 evil. 1 ; ' •" ■' • ex¬ it of ponents '' ' " 1 - ■•"; ■■ ■■ ries, he. makes his wife not only the partner of his joys and sor¬ rows but also, of his income and in chorus the has of rates the tax louder grown possessions. than and^ fewer dulcet tones are heard. form. dees mula This the far morh means standardized contained in Members New munity the will Tel. REctor 2-7815. The Because Handy The international Bank eight to States in the married cou¬ preferred tax position whereby their financial burden was reduced the wedded residents ples For Reconstruction a of the Development other 40 States asked their with a greater or lesser degree of fervor, "Why the discrimination?" Why should those Congressmen 21/4% due 7/15/57 chief feature of; the partnership, each takes his or half. NY 1-1557 to branch offices our wife and members of vides, in as the However, : in, '. these her regarded are marital partnership. com¬ as of Bought The law of case pro¬ every are community and property. In the la Per class there are included generally partners. The two spouses again under the law, must be treated as equal partners and hence all in¬ agree the partnership must be consisting of 1 two regarded as equal parts: part belonging to the husband and the other to the wife. Quoted -. Separate tances. be the partners may that certain property shall separate property of one the other. cise rule But there is that no all governs the decisions of the as the ; 120 . > (Continued on page Bell Teletype NY 1-1227 pre¬ cases, courts community jurisdictions - Broadway, N. Y. 5 WOrth 2-4230 , the or man Members Baltimore Stock Exchange Also a one That is, when a MO III! gifts, devises, bequests and tiheri- of Sold Business of vary 27) Detroit Canada Tunnel Detroit Irit'l Bridge : Prospects and Distribution Trends WM. E. POLLOCK & CO., INC. By C. F. HUGHES* Street, New York 5, N. Y. HAnover 2-8244 Business News ■ 5? Editor, The New York :"Times" on and notes increasing competition Aetna Standard Engineering . American Time Corp. Artcraft Manufacturing Manufacturing got Electric Bd. & Share Stubs ■ Hood Chemical age Kirby Lumber f Punta Alegre Sugar Taylor Wharton Iron & Steel - \ V United Artists Theatre ? tyorks Taca Airways as < Telecoin Corp. &Teeue«vACompan.u Members N. Y. Security Dealers Assn. months. tainty A deal good of uncer¬ registered concerning the second half of the year. There was only small mention of the in¬ the was that over these reviews from test of prices and supply and de¬ and, in¬ mand conditions will appear some six or seven months from now. fluence of have improved. They are not C. F. Hughes bombastic pieces of pollyanna ballyhoo and short which once instances. a Presidential election, perhaps it is believed that the so they They were are One notion expressed in some of these forecasts reminded the Advertising . more Hughes be¬ and Sales Executive University, Columbus, Conference, of 12 months that I hedged it ago rather nicely and without too — Stock Curb York York Exchange Exchange Cotton Commodity playing of the "handy game" which goes like this: "Now .on the hand one ; now —- hand." ' the on • , • • of New Orleans Cotton N. And other Y. Cotton NEW Inc. Trade Exchange Exchanges 7What Happened other 4, N. Y. DETROIT PITTSBURGH GENEVA, SWITZERLAND 5 Mike?" ye, What I some mean quarters so And Mike far!" is that business in is feeling little a too cocky, perhaps, because of 1947 predictions did not true. You will recall variously that called a a lot, Minn. Placer & Ont. Paper Development Canadian Securities Kingdom 4% spring of 1947 and it and of the Mgr. .. ;y.. > York Curb Stock Broadway Digby 4-3122 ' • f New York 6 ; . Exchange Exchange Teletype NY 1-1610 Giant Portland Cement Co. crop Prospectus coal- ised to -hold request news the off on ; A v:" Firm trading Market; sag in | Common-—Rights—-Warrants ex¬ ports under the "dollar squeeze."^ The coal-wage agreement led to. higher steel prices which invited ; • Members, ■ . . come "reces¬ '90 (Continued ,•;■ on page 44) Bankers to the Government In Scophony, Ltd. • 26, Bishopsgate, London, E. C. in India, Burma, Ceylon, Keny4 Colony and Aden and Zanzibar Paid-Up Reserve NEW YORK 6, N. Y. The Bank banking and every exchange description business Trusteeships and Executorships Teletype NY 1-672 also Common undertaken V * !''' Raytheon Manufacturing Co. ; $2.40 Conv. Preferred *UniversaI Winding Company 90c Conv. Preferred *Prospectus £4,000,000 Capital £2,000,000 Fund—___._^_£2,300.000 conducts ^Georgia Hardwood Lumber Co. Twin Coach Co. $1.25 Conv. Pfd*. Office: Branches Department 1 T'1 Solar Aircraft Co. 90c Conv. Pfd, Kenya Colony and Uganda Head -.-n Teletype—NY 1-376-377-378 v." of INDIA, LIMITED Securities New York Security Dealers Ass'n ; NATIONAL BANK Goodbody & Co. Telephone BArclay 7-0100 New Chicago Mar¬ quick the Subscribed Capital 115 BROADWAY Members 39 was some¬ Exchange and Other Principal Exchanges ; Joseph McManus & Co. pointed < to sustained high food prices. The Marshall Plan prom¬ Gaumont-British British Asst. v s the late settlement.; The are KANE, •;,-v.. in 1947 wage "How friend Rhodesian Selection Co., Ltd. MICHAEL HEANEY. Mgr. WALTER The fact is" that there was the beginning of ■ 'a readjustment in Plan, Powell River Members N. Y. Stock CHICAGO NEW YORK HAnover 2-9470 Securities v announcement United Department Exchange Bldg. YORK U , shall his past lower beam, Pat yelled, Noranda Mines Exchange Exchange, Board 1923 Curb Exchange York Curb and Unlisted much crop, whizzed a We Maintain Active Markets in U. S. FUNDS for Members New ST. Teletype NY 1-1140 was H. Hentz & Co. • / at least on thing O., Jan. 30, 1948. or readjustment, he so many now moderate a As in Promotion Established 1856 bit sion,'' a' "shakedown," thought to be quite likely. I think I made a few suggetsions on that order myself, though I find on re¬ reading of my year-end offering Pat on Ohio State York Established WALL only saved from growing by three major developments—a short com yelled back, "OK, fore a me off Teletypes—NY 1-1126 & 1127 *An address by Mr. t . Concludes, with current uncertain of that old story of Mike, who fell the top of a new skyscraper. long on facts— — Hanover 2-4850 St., N. Y. 5 optimistic, particularly respect to the first six the years the Swasey were rule a with dustry Merchants Distilling Warner & we whole I would trade U. S. Finishing com; & pfd. Business forecasts for 1948 out only a token section. say Title Guaranty & Trust - putting On Time,Inc. United Piece Dye < realistic, tell what happens and a reasonable appraisal of plans and possibilities. per¬ and were N orthern N e w England Pacific Telecoiii and confusion in merchandising. offer The short¬ still sists Newmarket Manufacturing Chicago . • international situation, business forecasting "is downright guesswork." others didn't. paper International Detrola New '' the into paper, General Aniline & Film "A" New '■; >, v:' * Members 64 engaged on the paper in putting together a small busi¬ section—something to accommodate advertisers and not chew too much newsprint— and we were knee-deep in reviews and forecasts. Some of them up Clyde Porcelain Steel New ' Frank C. Masterson & Co. financial annual and ness Boston & Maine R.R. • . Holds boom is at tag About six weeks ago we were Baltimore Porcelain Steel Bell Common • - :V • end, because: (1) supply pipe, lines, with few exceptions, are full; (2) bank credit is jumping too fast, and (3) competitive imports will increase under Geneva Agreement. Sees concern regarding continuation of consumer demand Qctual~fflarkets Qu 37 Wall y v. current business forecasts, Mr. Hughes reviews trends in }947, and ineffectual efforts of retailers and manufacturers to balk inflation. , Hoving Corp. - Teletype NY 1-2846 Commenting Bates ■ classes, these a other partnership, the acquets and gains shall be divided between the come Pfd.,;;v\ '; Tobin Packing 20 Pine „ property and income fall into two species Com. & ; due 7/15/72 3% • Elk Horn Coal I: States band being ,-?y\ accorded Union and Albert great inventions, the epic-making discoveries, mostly find their source an this state of mind. i > wires has property munity property rule is that hus.-r has which he desires. 5 The his which . com.-; rights upon her. In the community fundamen¬ property Sta-es the law is that, a]s tally nothing to do with tax rates. on the dissolution of every other things and BROADWAY, NEW YORK 120 all envy, man neighbor York Curb Exchange Direct seated belief to the contrary forts to attain and New York Stock Exchange HAnover 2-0700 for¬ put forth tre¬ after . Exchange the mendous .ef-r is York Stock St., New York 4, N. Y. New Orleans. La.- Birmingham, Ala. marriage people are entitled to. ceremony, "With all my worldly preference according to the law, goods I thee endow"; / Usually th£ as interpreted by the courts, be¬ wife never gets anything substan¬ cause they live in community tial by virtue of this provision; ajt property States. Despite a deep- least these word3 confer no leg.^1 only McpONNELL&fo 25 Broad These Covetousness Bought—Sold—Quoted Steiner, Rouse &Co. Members New live perhaps crease in its most de¬ praved chosen to who have Stalin have been '" — • in California, perhaps in Texas, be favored over us? With the in¬ Hitler- and Longchamps, Inc. Alabama & r Louisiana Securities recent cludes request New York Hanseatic 7-5CG0, , Formerly Lecturer in Taxation, New York University out BOUGHT—SOLD-QUOTED BArclay Thursday, :February 5,-1948 • Mr. ♦Expire close of business Feb. 10th. 120 CHRONICLE ■ • on i;, By ALBERT HANDY ■ • Rights Prospectus FINANCIAL Community Property and the Split Income Tax Gulf Oil Corp. . & on & Common request Reynolds & Co. of Members New York Stock Exchange 120 Broadway, New York 5. N. Y. Telephone: REctor 2-8600 Bell Teletype: NY 1-635 • ♦ Volume 167 Number 4670 *,v,, THE COMMERCIAL & FINANCIAL CHRONICLE (590) 3 ' t: I N D EX Articles, and A Reduced .r r ,i News".V..-Pa*e Demand Performance and the Stock Market—The Finale By WESLEY LINDOW* " :: ■y —Gilbert M. Haas and James'J; Quinni;^l_L^_--______Cpver Mr. Handy 2 Business Prospects and Distribution Trends—C. F. Current Business Situation—Wesley Lijrdo w _ _ _ 21'|"; Hughes"! _ 3 — _t _ ^ _ -r Market Speculation, and —rjtancis Aaains Venture Capital Western In , the end 1 Cowan.2^.2—._ every 9 Trends—Myron L. Matthews. This Talk About Anti-Inflation—William 9 had corrective a 11 Cession. Congress and the Materials Shortages—A. W. Zelomek-^.. 12 Outlook—Alan H. Temple.. 13 :__22222u.__ : 15 ..... __ 15 _____ The Change in the London Stock Exchange Organisation* —A. M. Sakolski 2: of game Cites Deflationary Dangers in Use of Treasury. Surplus___Cover James J. Caffrey Recommends Investment Bankers Publicity Campaign Metals—1948 ■ ■ 1 begin. Rep. Sundstrom Proposes ':■> Hoarding ___ A. F. Davis Seeks Test of Status of Federal Canadian Exchanges to Resume Saturday But How Do We Know It Will Work? FIC Banks Place Reserve NotesL See It sion* at 20 ^ S.essions__.____rJ_. . _ Canadian most reasons From Funds Banks and Wilfred Reporter May___ Railroad ._ .The State of Trade :< COMMERCIAL FINANCIAL CT. Reg. WILLIAM Dominion B. and DANA COMPANY. New York 8, <HERBERT D. Bank $25,00 per the SEIBERT, Editor & Publisher rate RIGGS, Business per forces. 1 Thursday,- February 5, ■j per year.- various overall extra.) Monthly; —: account of. exchange, the fluctuations in remittances for for- New. York funds. . >. "2 : * at Offices: 135 S. La Salle St., Chicago 3, 111.' (Telephone:** State 0613) ;' 1 Draper^ Gardens, London, E. C., Eng-^ land,; c/'o Edwards & Smith. ^ i Copyright *2 * 1948 by William Company "" « Reentered ary 25, YoRc, i, 1879. 1942, N. Y., ., V".' at post the. lender the office Act '*. *. • at of ■., Subscription in Bond & > Union, and $35.00 N. Y. Title & Mtge. Co. U. Members per Prudence Co. year; The S. o1 in com¬ Members N. Y. Security Dealers Assn. WHitehall St., New York 4, N. Y. 3-0272—Teletype NY 1-956 Now, let cf companies rising to- new ris¬ this level under In 1947, twice — range it outlook point fore the Men in York SOLD QUOTED — FIRST COLONY CORPORATION 52 Wall St. New York 5, N. Y. Tel. HA 2-8080 Tele. AY 1-2425 capacity is planned for in 1948 and * 1-949. are is scheduled. seems for a to me Central Public Never¬ that the continuation tight supply situation in steel' time. • Southwest Gas Producing Commonwealth Gas • . Another bottleneck on the Utility 5y2s Southwest Natural Gas of some side shortage United Public Utility (Commoir) unusually severe win¬ ter has brought this to a head,, and everybody knows about the tight supply. situation in petro¬ Edward A. Pureed & Co. of suoply is of fuel. Our the the general Members New York Stock Exchange Members New York Curb Exchange leum and heating gas. Here again, the shortages are occurring in the face, of unprecedented.production, by Mr. Lindow be- New - University Demand New York r > Finance Club, — peaks. the spring and again toward the end *An address new for or present in even BOUGHT prices that steel ingot ca¬ the United States was theless, it reached once Forming Corporation been There have also been increases in coke capacity and important new " at Metal and scrap, have completion demand * pig iron, which largely to a short¬ Also, there is a by almost 3 million tons. An additional 2 million tons review us in increased to price show supply 190-192 conditions. We are '■i-. j '• faster has simply/moved up than capacity. * The same (Continued on page' '42) 50 Broadway WHitehall .Bell System Teletype New York 4, NY N. i * 4-8120 ! ' 1-1919 Y. • T l.l / ' '; i interested in offerings of ' " >• •' & Trust PREFERRED STOCKS " " 15 Broad New ■York St., NX 5 Bell Teletype Stock & Co. 25 Neio-York Stock 1-2033 Exchange Members Broad Street, New York 4 Tel.: HAnover 2-4300 ' New York 135 S. La Salle •, \ Tel.: Curb Exchange St., Chicago 3- FINancial 2330 Teletype—NY 1-5 "jL-v-v" —Boston - Glens" Falls « C. E. Members 61 - Worcester analysis on regnest Unterberg & Co. N. Y. Security Dealers Aie'n Broadway, New York 6, N.Y. Telephone Schenectady Company of New York " Spencer Trask & Co. Exchange WHitehall 4-6330 NY y Year-end * f i ( The Public National Bank '/■ • " " Newburger, loeb . shortage is shortage of steel pacity in . Members Members States, Mtge. Guar. €o. Lawyers Title & Guar. Co^ New v spring Lawyers Mortgage Co. March Rafes United Territories Pan-American i "CERTIFICATES^; second-class matter Febru¬ v Subscriptions Possessions. B. Dana * as the 25 Broad TITLE COMPANY ■" f 'Other DUNNE&CO. — wartime - it is reported production apparently difficult time going above a Every Thursday; (general news.and ad-2 issue) and every Monday (com¬ plete statistical issue -^--market quotation records, corporation news, feank clearings,, "state and city news, etc.).,; .- in tons Meanwhile,, the steeL industry increasing its plant ca¬ pacity. During the past year alone, capacity continues (3) City, Feb. 3, 1948. ▼er.tising Susquehanna Mills has been ceiling be¬ a is dustrial the postage "Lea Fabrics annual an ket in order to keep scrap situation to has "• Sugar Warren Brothers "C" sire to stay out of the scrap- mar¬ about present levels of production. The Federal' Reserve index of in¬ Manager 1948 formid¬ the near reached steel from today. supply, the facts pretty clearly to a ceiling Record—Monthly, (Foreign pressure. As 48 Punta Alegre Hydraulic Press Mfg. torn between the desire to buy up the scrap they need and the de¬ f. ; dif¬ .' 90; million coke. mcreases 35 year. severe .year.,-(Foreign; postage extra.) in .WILLIAM DANA SEIBERT, President D. .$38.00 Earnings. Record of made our of the The Production Index oign subscriptions- and; advertisements must ufe WILLIAM Quotation year. Note—On .'•/ ' . per Monthly Publisher Y. and The weeks, tlie* output very situation look conclusion, I briefly the supply and de¬ and factors in further detail. Other Publications j >25 00 N. of Canada, Countries, £42.00 ' CHRONICLE REctor 2-9570- to 9576 . ; • Patent Office S. Park Place, 25 Weekly Other The ' Twice opt.i- still continues to the 5 i (Walter Why te Says) __i'2_*___2____j___ and You.__ i-\L Published | and Industry _LJ"_ Tomorrow's Markets -Washington is rate age the side on bearish Demand ing 44. System Teletype N. Y. 1-714 un¬ expansion ingots reached in turn is due the at > 18 __ Broadway Bell seems present of 1944. The steel tc* 1908 much above almost peak that the of forces supply. barometer 12 Corner___2_2 Securities Now in Registration._i - (2) exceed 8 1 Salesman's is you one production, levels. 46 __ ;___ Securities Securities fwither recent of the review present 29 _2_ it go future. near in machine which is apparently close to 47 .___ Utility Securities but can bottlenecks./' the - tell this to hard vote bullish like The 5 Established Members N. Y. Security Dealers Assn. REctor 2-4500—120 slightly move rate al¬ hesitate may of steel may be summarized in three short statements as follows: (1) Supply L-_-_ -Prospective Security Offerings__2 -Public am my mand situation 21 Governments-.J on I cast support cause ____! '___ Our Reporter's Report 'Our is 14 Bankers—_2_ J.K.Rio«\Jr.&Co. in of course, that many of component parts of our eco¬ Within we 16 ^_-_v__-__-2_-____ Observations—A. that I highlights of ; Engineers Public Service knew, one of the most important of these bottlenecks is steel, although steel production is setting new records for peacetime. reces¬ It - • well as the too • may should 7 ; - inflation that 8 .____ — About people stronger than the 41 Notes News some outset 8 Recommendations Electric Bd. & Share (Stubs) VAs you the on and time. same To Washington Ahead of the News—Carlisle Bargeron NSTA inflation 20.,- Securities Kingan Com. & Pfd. are, able • 31 Indications of Business Activity" Mutual of ihists. i * ' 4-6551 plicated by a number of corollary shortages. There is a tight sup¬ I 14 ' Dorset Fabrics (w.d.) U. S. Finishing Com. & Pfd. are ply tight Cover WALL STREET, NEW YORK to-7 be proved they fear they might usher in the 33 * ' in¬ recession. 31 Stocks___ Investment half though they were thing. And one of same ) pay for itT Telephone: WHitehall the reached 1948 the nomic we as 23 2 i Coming Events in the Investment Field_______ Dealer-Broker and : the 20;. (Boxed) (Editorial) Business Man's Bookshelf. recession have talk - Debenturesc____L Insurance day with this on The result of all this is that ?0 Regular Features and 1948 other side; R Bank other economists! and so in the question. As. you might suspect, the results were just about half predicting v As We or 195 19 _ Australian Pound Discussed by Chifley____ |\ lunch the dozen a _____ higher in likely that it polled ourselves Stephen M. Foster Estimates 1948 Lite Insurance New Capital" Absorption at S5 Billion "_i 18 N. Y. Chamber of Commerce Committee Urges Delay on Return to Gold Standard_______,__^__i had soon index 1948 a 18 Col. II. Murray-Jacoby Suggests Three Moves to Avoid War With the Soviet. * Wesley Lindow that I New U. S. Currency to Reveal a ___ This ficulties ___ 99 since figures. I have cited seasonally adjusted rates. not 1948 before Nov. 2. 14 Ever a post¬ peak of 192 in November, to by 191 in December. 1948 is the year. Others ray 1548 is not the year—at least . have been we All of the Some people First National Bank of Boston Calls Swollen Budget" National Security Threat ^17 .'V; ' time production war recession say at ob- up any and Obsolete Securities Dept. be followed will 12 Sumner Sllchter Commends Taft-Hartley Act, but Warns of Abuse trial try- the 11 him and the index of indus¬ erroneous in g to pick the time when- /:• ;___ guy take offer you , some terpretation we; are still Engaged, in a ^ a s c'i nating 16 ____ t'o day, So He'll * / r ; interpreted as the birth of long awaited .recession. That appear, t junk the to Street! good money yeu wave of doubt and hesitation which began in the spring. As you know, this wave has sometimes taking a long time to 13 Saltonstall Problems of Postwar Monetary Policy —Woodlief Thomas and Ralph H. Young This recession is The Problem of Rising Prices—Paul H. Nystrom A Year of Decision—Sen. Leverett the solete of the year. In between, however, the index- dropped off to a low of 176 in July, reflecting a broad time, however, Economic Wall hanging heavy over logical expectation, of course, for alter a re- Witherspoon____ The . 99 referring we war have Home Building Costs and This has been IS A DOPE We're ; " * . may be called the battle of the recession, of the war, there has been a recession heads. pur 7 THE GENTLEMAN ■ ; will be pressures wages. having what 6 Europe in the Balance—John L.'Simpson.... look stronger than bearish forces, present the business and financial world for 6 New Era of Prosperity Ahead—Gen. Robert E. Wood_2 Utilities Face Their Gravest Test1—David to - r . 1 iiusiow_____l Lindow points higher labor costs? and concludes inflationary increased by new round of higher V 4 - Stock r _ The Franc Crisis^alld International Monetary Fund Emest H. Weinwurm _/ _"j 2 ^J ..._2_ Economist, Irving Trust Company, New York City capacity production demand still exceeding supply, and rising prices. Sees further shortages of steel,, fuel and transportation, and rising demand for more expensive foods as growth of income makes it possible for * consumers to spend more. Predicts greater outlays for capital goods to offset . Responsibility in Flow of Investment Capital—; ^ —John A'. Murphy v Contending bullish forces still Community Property and the Split Income Tax Ys —Aioert Brokers' Cunent Business Situation • Budget Before Tax €uf—James D. Mooney__ Cover BOwling Green 9-3565 Teletype NY 1-1666 4 THE COMMERCIAL (600) CHRONICLE FINANCIAL & Thursday, February 5, 1948 . . The Fianc Crisis and International Brokers' Responsibility in Flow of Investment Capital Monetary Fund "V By JOHN A. MURPHY* ; Partner, Reynolds & Co., Weinwurm, in holding franc crisis found both the Fund and American financial high-command unprepared for emergency, urges efforts should be made to improve the Fund's organization and pre* pare it for future troubles. Sees mistake in acceptance of unreal¬ not only paying are ting only about one-half of share istic can markets and employing more middle-man between the accumulator of savings and legitimate business purposes, such as expanding their people. In this basic function of the formation of capital or in the original of % about only the for the needs. (3) A vast expan¬ distribution of included, securities gigantic outlays necessary can be met out of reinvested earnings. sion Therefore, corporate business has been forced to seek billions of higher standards of living. to general the b 1 i p u broker the c, plays little part, but there very is a dual in- the vestment banker sense in the that the broker should contribute part in creat¬ a future ing John A. Murphy for liquid market that invest¬ securities new his Stockholders' Not know ease they because confidence with they can be liquidated with in a broad, continuous and Association of an analysis National The in only share the they 1938. are the national income of received between 1929 and Percentagewise, their share dropped fr6m 6.1% has to 3.1%, benefiting they are nor through enhancement of the value of the their equity or struction and care of more prices of con¬ can not take than half of the funds needed simply to replace on facilities This situation, top of the requirements for in¬ they wear to and Capital utility and industrial Fire insurance commercial with the out. com¬ cap¬ compan'es banks faced are problem. same in recent has years the lowered ratio of capital and surplus to pre¬ mium volume in many fire insur¬ companies ance forced to the news of by financing to be of the com¬ depressing effect some panies has had on that they are capital. so additional seek a the market value of their stock price have been considerably indicated stockholders' though even selling at below many a equity. Mr. ventories which have doubled dur¬ Marriner the S. Chair¬ Eccles, Board Governors of its Says there members weeks for the first time Department on tional t Mone- of most Retained earnings amounted While Roughly, the new capital was the latter figure may seem large, of equity money and % of debt its inadequacy is revealed in De¬ money. The Brookings Institute recently partment of Commerce data that estimates business expenditure for stated that three factors will make to a little $10V2 billion. over y to expansion in capi¬ producers' equipment and indus¬ for still further trial and business construction has tal been advances in wage and other running at an annual rate of around $22 to $23 billion. In addi¬ tion, there is an estimated inven¬ tory increase of about $7,600,000,000 for the year. It was further shown that even if funds from current depreciation charges were requirements: (1) Still further costs will necessitate a larger supply of funds for payroll and other work¬ ing expenses. (2) An unusual vol¬ ume of replacement of worn-out and obsolete is necessary plant and equipment — all of which will life insurance, U. S. Savings bonds, trusts and savings banks, that so these available The for monies financing. equity economic not are that will of consequences capital equity not survive business of a would laws be regulating (Continued could of test One partial amend the depression. solution the to life on attention the f o insurance page 24) address by Mr. Murphy at Forum sponsored by The Investors Philadelphia, Pa., League, Inc., Jan. 29, 1948. serves that seemed adequate on '30's are the low-cost basis of the not now likely to prove sufficient oublic small group experts as proved the Fund of spect ports French well. If the cur¬ Fund had postponement of a franc par value the recent dispute would have the strug¬ ther designed arisen in the first place. never Ernest H. Weinwurro gle. Obviously, they were nei¬ As matter of fact, the trends which a forced the recent devaluation were able to convey any full or adequate coverage of so highly technical a subject. It apparent a year ago. But they were disregarded for reasons is of still an far nor too early venture to which- solely last half be useful the high¬ ,The velopments the during Yet it deal with may of some lights and draw a few important conclusions preliminary to a more exhaustive discussion of the whole . the When in Fund December, original par values in accordance with article 1946 published there IV, the were doubts grave whether it had followed the best (though French the not franc easiest) which was already overvalued at that time. Indeed, the Fund expressed its in an accompanying reservations statement as well as in its Annual Bowser Com. & Pfd. Durez Plastics & Chem. in terms but were not based such considerations. on Devaluation Plan French The Oxford Paper scheme French two principal ond, a free market for convertible (hard) currencies principally dol¬ lars for all transactions excepted half value of the of imports f'red r-ew exports and exchanged at the be to of rate 214 to The Fund did not object to the first part of the plan. But some provisions of the second met with the from particularly opposition strong British who were sup¬ ported by a majority of the Fund members. One , of Fund" as the "Purposes of the enumerated in Article I of the Charter is "to promote exchange stability, orderly exchange maintain to arrangements members, among avoid to and competitive ex¬ change depreciation" (par. III)., The the Fund majority plan French with the accord spirit of these basic had thus and to pro¬ dis¬ be provided for in Ar¬ as IV, sect. 4. • . , doubt no was the that in not was with agreed contention British there Com. & Pfd. francs the dollar. Such was the legal Stromfaerf-Carison Com. & Pfd. involved features. First, a straight devaluation of the franc by some 80% (from 119 francs to 214 francs to the dollar). Sec¬ ticle Crowell-Collier Pub. explained were economics adequate appraisal of the de¬ Art Metal Construction Carey (Philip) Mfg. and day- on position and that it was legalistic point of view. .But probably more impor¬ tant is an analysis of the real mo¬ tives of the parties behind their formal argumentations. ^ feasible from FOR re¬ franc number of other' a as approved Company with erroneous the followed those who recommended events n doubt no re¬ to-day in were to rencies a was con¬ developments that the policies of is subsequent have a us- of ; the basis of on There perhaps There flood sound as that rather than merely However, it defended its visions Buda news operations siderations.1 general Depreciation re¬ high-cost basis. started statistical data and economic have^to be constructed on a new *An American headline were they decision method in accepting the ''official" parities be serious. Concerns will be un¬ without Vany adjustments. This able to expand or will end up was particularly true for the with grotesque capital structures shortage since future. the of this is channeled through oensmn the Reports and emphasized the pos¬ sibilities of adjustments in the Fund brought the a r . ient. glaring lack of a with two years ago. The franc devaluation and the controversy between the French Government and a majority of the members of <$>Interna¬ ing the past few years, makes the of the Federal Reserve System, Com¬ problem more acute. not long ago stated that banks merce's figures recently declared problem as will certainly develop Recently, there has been heavy with low ratios of capital to risk that profits of corporate business during the months to come. are proving inadequate to meet recourse to borrowing and risk assets should build un their canthe requirements of current busi¬ capital is becoming increasingly ital even if thev had to sell addi¬ Determination of Franc Par-Value This is not always ness Was Premature * expansion. It was pointed difficult to obtain.; This is a dan¬ tional'stock. out that while profits are higher gerous trend because in times of easy to do because the stocks of Article IV of the Fund Charter than prewar margins, out of the prosperity, we should be paying nigny of' the largest banks have sets the framework for the con¬ $28 billion of corporate profits, off debt and the portion of equity been selling at prices below their troversy on the franc devaluation be rising. This book value. Federal and State corporate taxes interest should It provides for both determination absorb $11,200,000,000 and $6,200,- month's National City Bank letter The heavy rate of individual of par values of member curren¬ 000,000 was paid out in dividends showed that the percentage of saving during the war has given cies (sect. 1) and changes in those that were again taxed to the recip¬ capital raised by selling bonds and way to a present low rate and par values (sect. 4). notes in 1947 rose 50% from 1945. based was and almost to of man recent of January. the and the The sharp increase in premium volume undertaken equipment, current depreciation charges ital. and Fund Activities of the Bretton Woods organizations in latter companies are not the only panies in need of additional Yet shares. advanced With as orderly market. Manufacturers Burden stockholders pay¬ ing income taxes amounting to about % of their dividends, but as a group they are getting about V2. so float additional public will buy the that All Businesses Need More Railroad, ment bankers can issues economic* progress further , re¬ sponsibility with financing. dollars in new is indispensable program between administration, which should be corrected quickly. those savings for use par-value for the franc. liaison ,The investment banker is .the - those who -V? WEINWURM II. Mr. one-third of their dividends in taxes, but, as group, are get¬ of national income as compared with prewar days, Mr. Murphy denies corporate profits are abnormal, and points out need for higher corporate depreciation and inven¬ tory charges because of higher prices. Sees more investment capital demanded by all business under¬ takings, which, because of inability to float securities, must borrow from banks, thus accelerating inflation. Upholds securities salesmanship, and urges investors organize for protection. Asserting stockholders ERNEST By ... Members of the New York Stock Exchange a , Bought Primary Markets in Unlisted Securities Direct f™ 'Phone to BUFFALO BOSTON Enterprise j Quoted : Exchange and Other Principal Exchanges 105 West Adams St.. Chicago * Teletype NY 1-672 Wires LOS Ward & Co. Crude Oil Guarantee Telephone: REctor 2-8700 practiced been had those (especially of-; Dr. and there determination to a Each one a fixed do away currency price. to Any the (Continued Bought—Sold—Quoted devaluation another lower) fixed rate. principle was & Trust should have price and it should be lead should (though Undoubtedly, a sound one; on page 43) "Exchange Rates and the Interna¬ tional Monetary Fund" by Lloyd A. Metzler in "International Monetary Policies,'* one of a series of "Postwar Economic 1 See 1926 York Security Dealers Ass'n Seligman, Lubetkin &> Co. INCORPORATED. Broadway as the 'thirties. There 'was strong recollection of their all. Foundation Co. Title Members New a only Cities General 120 during with those practices once and for DuMont Laboratories ESTABLISHED schemes then was Accepted in Most of the Principal the Woods agreements were opposed to both multiple and fluctuating currency Schacht and the Nazis) ANGELES Electrol, Inc. Deliveries Bretton the of that doubt little is There abuses PHILADELPHIA and 2100 - Goodbody & Co. Members N. Y. Stock 115 Broadway, New York HARTFORD Sold drafters Telephone BArclay 7-0100 FROM - New York 5 Studies" 41 Broad Street Teletype: NY 1-1286-7-8 New York 4, N. Y. ernors published by the Board of Gov¬ the Federal Reserve System of (Washington, September 1947) for a thorough presentation of the statistical background supporting the Fund's de¬ cision. , . ... ... I Volume THE COMMERCIAL 167 Number 4670 FINANCIAL,. CHRONICLE & (601) 5 John H. Anderson With Steel The Observations . . By A. WILFBED MAY * . Production White, Weld in Chicago Electric Output Carloadings Retail State of Trade (Special Trade to Chronicle) Financial The ILL.—John H. An¬ CHICAGO, Commodity Price Index pood Price Index Public Relations Warfare Is Extended to Investment Must Political and Industry Banking derson has become associated with Auto Production --- White, Weld & Co., 231 South La Business Failures Salle Strategy Also Sabotage the Satisfaction of Industry's Pressing Need for Capital? J This week's urgent call by former SEC Chairman Caffrey on the investment banking industry to embark on a nation-wide self-adver¬ production held to a very high level the past, week and compared favorably witji the like week of 1947, scattered strikes through the country, coupled with bad weather and indus¬ trial gas shortages, served to retard output to some degree. In fact, postponement of the scheduled resumption of industrial gas service to plants this week will again work to keep down output of automotive factories another week. Transportation delays, too, highlights the tising campaign growing need for defensive "public relations" effort here as well as in so many other sections of the community. The need for self-protective 'strategy is made acutely pressing now by the institution of the government's suit against 17 of in this area the most active investment bankers monopoly on well the as our whether their best the of mended forward; from a court proceedings is be to With com¬ . to wants the end sorely-needed insurance may modus effectively making funds available to industry. He is operandi company now also asking that the investment bankers be forced to act either as an or as a financial adviser;'which such mutual exclusion would, unlike the functioning of a medical doctor or an architect, force the investment banking machinery to act, if at all, issue-merchandiser in a vacuum. While ' . the run over a capital of wide very President Truman's figure of $50 billion requirements range, we and needed for industrial as the need only accept ex¬ pansion, to appreciate the financing difficulties which a successful prosecution by his Department of Justice would impose. In particular industries, key billion by such the as utilities, will which of other require over the possible functioning in the political trafficking which has engulfed tax policy and so many of our problems. For it may be asked why, after the oft- the anti-bigness and monopoly thesis in the so-called Pecora investigation leading up to the Securities Act of 1933, again in the much-publicized fulminations from the TNEC arena in 1939, and after long and continuing supervision by the SEC this new show should be scheduled for public production "repeatecl airings of shortly before Election Day in 1948. clothed with stringent powers to cur¬ malpractice (as detailed in this columnist's "Observations" of Nov. 6 last), but the Commission has affirmatively given the industry the green-light for its present standards. Is the puzzled public to believe the Commission, or the Department of Justice which, in the words of one of its interested high officials, recently excused the present suit to this writer on the ground that "the SEC is really only a bankers' agency"? Intra-Government Or Disagreement other hand, the how is Mr. John Public to evaluate the following critique of the government's action recently uttered by a member of the Federal Trade Commission, Mr. Lowell B. Mason: "The on Comintern loves it when the men of America who govern, put themselves against the men of Amefrica who produce. . . . The present anti-trust laws are the basis for certain antique court rituals which have little or no effective connection with the and democratic needs of our social, economic people"?* ■ expression from the Federal Trade Commission is in line with the apparently unenthusiastic reaction from the Securities and Exchange Commission toward the Attorney General's action. And like the SEC, the FTC has jurisdiction over at least the fringe of the unfair trade and monopoly spheres concerning which its sister branch in the government is concurrently complaining. The FTC would, for example, certainly seem to cover the matter of a banker's interlocking directorates, and the lessening of competition through his membership on more than one company board; which are cited as a serious abuse in the Attorney General's present suit. Maximum t Cure Would Be i i ' , The - public also get may a shade below. number large the country, . v/V/:-';'; ; : gathered in the wholesale centers Retailers were generally unrestrained in buyers of throughout the nation. placing moderate orders, but evidenced considerable caution when large orders were involved. Wholesale volume in the week was modestly above the level of the previous week and moderatly ex¬ ceeded that of the like week a year ago. 000 the from consumer end of December, 1946. This form of credit covers charge accounts and loans repayable in a single sum as ments. 1 „ to olis. With Commerce Trust Co. (Special firms who mentioned in lo CITY, MO.—Jack E. added been has the to Com¬ Trust Commerce of Chronicle) Financial The KANSAS Dillard 10th & Walnut Streets. pany, With King Merritt & (Special ST. to is He Street well as instal¬ with connected Co., & 408 previously was Olive with Slayton & Co., Inc. Weinert With du Pont Co. to Financial The Chronicle) Arthur J. Weinert has become associated with Francis I. du Pont & Co., 200 ILL. CHICAGO, South La — He Street. Salle was formerly with Mitchell, Hutchins & Co. ' .. 'T\ substantial of credit although instalment deals showed the increase in each type With S. A. Sandeen & Co. about the articles same such as (Special automobile sales rose $60,000,000, or 5%, as in November, to a total of $1,159,000,000, and on furniture, refrigerators and washing machines in¬ Loans repayable in a lump $2,697,000,000. Charge accounts, the biggest single item of consumer credit, increased by $295,000,000, or 9%, to $3,598,000,000. This was "sbmewhat more than the customary seasonal amount in December," the sum The Wermuth is deen $1,684,000,000. $231,000,000 to to Financial & Chronicle) with S. A. San¬ now Co., Talcott Building. Board said. STEEL OPERATIONS AFFECTED BY SEVERE WEATHER contributing to higher scrap prices and gray market activity has been removed in the past few weeks by some steel pro¬ ducers. Steel firms which have converted ingots from outside sources and have been well paid for the processing have become extremely shy towards such deals, according to "The Iron Age," national metalA major prop Brown Canadian Pac. - In some cases the matter has gone so far as Rwy. ^Vzs) 1951 Steep Rock Iron Mines, Ltd. to produce outright ingots for conversion. This does not mean strictly legitimate conversion operations where a producer and his own customers benefit, states the magazine, but it may mean an Company 5's, 1959 5 Yz's 1957 refusals to accept any more companies in indiscriminately engaging in the conversion of steel ingots. 1, It has become apparent this week that as long as fabricators insist on keeping their operations at a high level and the supply of steel falls below total demand, the elimination of gray steel markets will prove difficult. Added pressure on steel deliveries has driven the gray market price of sheets further upward. A few months ago, the trade paper notes, $200 a ton was a rough average price for gray market sheets and $300 a ton is a good median now, which means that in many cases much higher prices have been paid. Despite extreme pressure for steel deliveries, steelmakers have made friends. Stopping of shipment on certain proprietary shapes long used in manufacturing operations, has produced considerable HART SMITH & CO. abrupt change in the policy of these the St. in Louis area. Carelessness on 52 WILLIAM ST.. N. Y. 5 Bell Teletype HAnover 2-W80 ail Toronto LAMBORN&CO.,Inc. 99 . WALL STREET NEW YORK 5, N. Y. the part of some overselling their output and then not being able to good on delivery promises, "The Iron Age" points out, has provoked suffering consumers, while a policy of complete candidness by other steel mills has made fast friends in spite of reduced deliv¬ eries. V'V' v ,-,/ •vV...In the conflict over scrap prices, consumers have played their companies in SUGAR make (Continued on page 33) ; i,; = Raw—Refined—Liquid i > Exports—Imports—Futures DIgby .. 4-2727 }{• Kingwood Oil Co. if the charges A American Maize Products Co. oil crude has over the producer continual had . past that! . earnings^, seven yearsj |, Bought—Sold—Quoted Market are not by Mrv Mason before the of Commerce and Industry. - 2%«% the address V'-f." , NY 1-395 Montreal New York : - Analysis Available FREDERIC H. HATCH I CO., INC. -Established 1888 '* PETER MORGAN & CO. 31 Nassau Street Association , increased $20,000,000 to a total of Moreover, the relief asked for would not touch the conduct of 'From P. ILL.—Robert ROCKFORD, ' Chicago Business Problems i/■' School of •' (Continued pipage,.47) t ' V' , defendant issue • : F. MO.—Alvin now Merritt King Co. Chronicle) Financial The LOUIS, Hansen v wonder how, even defendants in the suit.- (This is the complaint as the total number of nonmanagers; the "Investment Dealers Digest" of Oct. 19, 1948 states that last year alone 317 investment banking firms •managed issues, and 820 formally participated in their distribution.) number Brown Chronicle) RICHMOND, 1ND.—Howard T. Duffey is with Sherman J & Co., 10 North Eighth Street, members of the Chicagc Stock Exchange. He was for¬ merly with Slayton & Co., Inc and in the past was with W. E Shumaker & Co., Inc. of Indianap¬ Time Inc. functioning, the charged "club-ism," mutual back-scratch- ment banking • J. Financial Brown largest percentage gains. Instalment credit on and inequitable allotment and apportionment of new issues would be eliminated from the behavior of the remaining 258 invest- • The J. >ing, • to (Special credit established a new record of $13,368,000,000 at the close of December, 1947, the Federal Reserve Board reports. Increasing $739,000,000 in that month, it was up $3,202,000,- Outstanding Limited should be substantiated in the courts and the cited 17 firms estopped 'from their A bitterness This i volume remained working weekly.- Not only has the SEC been tail investment bankers' cold and heavy snows in many parts of generally continued to seek winter items and evidence little interest in early promotions of spring merchandise. The dollar volume of retail trade rose slightly in the week. While dollar volume was a trifle above that of the corresponding week a year ago, unit creased - public might also be justifiably concerned immersion of the status of the investment bankers' sea likely 1952, the problem of new-capital provision would become particularly acute. The severe Sherman (Special According to the Federal Reserve Board there was a estimates experts' paucity of savings was consumers May well be worried over the effect of successful hamstringing of our only proven investment banking machinery on the country's imminent financing needs. The Attorney General With staff A. Wilfred Anderson castings. but the possibility of labor trouble over wage proposals presently being formulated by the United Steelworkers of America, CIO, to obtain higher pay for its members. ethically and strategically sound, or whether they are perhaps mistaken in habitually "ducking" under fire. At any rate, in one-man protest against this over-emphasis on public relations strategy, this writer herein is going to examine the direct effect on the objective public interest of some of the vital issues raised by the Attorney General's suit. ■ ! , • ; example, the public production since to industry's greatest worry is the as For block stumbling equal to about 5,000,000 tons a year of steel ingots and This loss is causing much concern among steel producers, publicly putting is, whether their embroglio in ad¬ that newspaper another is the bankers are foot abstention vance not or be to or bankers, unfortunately quite typ¬ present-day political set-up, are dom¬ inated by public relations calculations. The At¬ torney General, it is understood, was given the green light to go ahead by a mere one-vote ma¬ jority decision of the Cabinet that the suit would produce a net gain for the Administration. Simi¬ larly most current comment is concerned with as ical in proving inability of the snow-bound carriers to get raw materials into plants fihiShed goods out, tends to slow production lines. In the steel industry the present lack of scrap and coal is respon¬ sible for a loss of close to 5% of the country's steel capacity which Moreover, the proceedings by the government Mr. vice-president of Har¬ old E. Wood & Co., St. Paul. industrial While are charges. Street. formerly -""CV MEMBERS the 63 Wall \ "V T. N. Y. SECURITY DEALERS Street, New York 5, N. Y. • ASSOCIATION New \ork 5, N. j |'i i Vl : Bell Teletype NY 1-897 Tel. BA 7-5161 Tele NY 1-2078 6 (602) Stock Market New Era oi Speculation and Venture Capital j FRANCIS By President, , ADAMS New York TRUSLOW* Curb low ebb of public interest in stock markets, Mr. Truslow points out for this reason ; venture capital can't be raised and business is relying more on debt financing. Sees danger in thiav development, and defends speculation as factor in growth of venture capital. Holds stock market Commenting To open my particular subject, I would like published early this month. comments which call to of This their tinued by statement 48% of all course, and for the year by that whole a in 1946 in change. markets stocks of trad¬ more than a third from 1946." Francis A. Truslow tional long-term manifested of stream purpose in capital the are increased security issues for the raising of capital. new the tendency to rely on borf rowing—through sales of debt ob¬ ligations—for the bulk of new requirements is striking." money ,!An address a Forum by Mr. Truslow at by' The In¬ sponsored vestors League, Inc., Philadelphia, ebb. Venture ;. circulated about stock market—and when I market" "stock word I the mean the stock know What are venture capital? stock market c an of them inactive think prevent the raising effect and facts, be¬ exist relationship or ans iiK,vy both merely same manifestations of the conditions—namely, a public unwillingness to risk capital or a lack of capital to risk? If economics were a science, in mathematical sense, we could up statistics and get# the answers from the footings. Fortu¬ any nately, it is merely human fallible as other attempt to the motives of the any to up commentary just as a behavior -and the that Some establish I small a is -of usually referred to as "they" as the "insiders," get, together men, cr and "r determine whether stock market prices will go up, down or sideways. Volume The York the Exchange Curb York changes two York the .New and floors about trans¬ these of the of 90% NeW New Exchange, the on the of exchanges, Stock act New York Exchanges on members t n r y entry into Peart ex-- total belt corn advance enormous design and use of agricul¬ machinery; how completely 7 A factor, which has been accen¬ tuated during the postwar period, Harbor decentralization the .s of There enormous has increase facturing.. position adead issue, and 'I, Wood E. this in an the farm has been mechanized. opposed • the m tural , made that op¬ the group this World War II. an .It prices. encounter to that of u our 16 seem Governors uncommon conviction add on another. to Exchange not of venture capital? Does' amr tween these two o what there has been in the last 10 years busi¬ of ness to the sources Does the of never- means know - from towns and are located Cities section cross Within the, last few else. someone word that bankers who unique a. on These of you 25% fewer workers. its officers to get in this talk exchanges—that I what products, enables the, for stocks market — agriculture we are getting.25% more production from industry except goods lood the use aid our of prosperity ahead. y I am not a banker or economist and presumably I cannot speak any authority before a gathering of bank .officers, But the of the business of Sears, Roebuck & Co., which has stores and mail order plants in every section of this country, which deals : .in practically^ every l'ne of iS equally true that hi our greatest much misin-; so Holds needs. its nature do What facts. the are market essential to the raising add Pa., Jan. 29, 1948. There has been finance stabilization in Europe should precede currency each; and in past decade to resources and ccncludes nation has long period months I have met people who thought we dealt in cattle, others' of stock market transactions? Is who thought the exchanges bought an active interest in the stock securities from one group and sold Those i ;• i The N atlonal City Bank of New York in its/''Monthly Letter" for January 1948 pointed out: " "TT "Corporate demands for addi¬ " low capital it must have. they mean? v .t-, at stock the to obtain the ing fell ume is in vol¬ the we can get some help with questions by enquiring into our formation interest "ebb, at But the of capital—equity ^capital—can't be raised, so business has turned more and more to debt financing was low and 73% 1947. Public Pub¬ reached and total lic interest in 1945. capital was raised new accumulated with human units it tries to rationalize/ selling bonds and notes, but how the stock market functions this percentage rose to 58% ' and how venture capital is raised. they showed virtually no a. immediate "During the last quarter of 1947 illustrated was has section ;V speculation In its ''Monthly Review" for January chart showing that in a indecisive as ing and finance is benefiting country <$>- con¬ industrial technique : \our , • attention to two year-end your greatly improved war and, because of increasing wealth, nation can well bear immense •National Debt. Says accentuated decentralization in marrufactur-" . were 1948, the Federal Reserve Bank of New York states: stocks intelligent Chairman of the Board, Sears, Roebuck & Co. j ^ Gen. Wood holds need of removal of artificial barriers ham¬ sees Stresses value of providing data for pering risk investment. prices j on speculation is guide to placing of venture capital, and .^ V.- ; , * . ^v.VV By GEN. ROBERT E. WOOD* :V>. ■v Exchange Prosperity Ahead of manu¬ been <>.n manufac¬ the Pacific Coast, a growth in the South and Middle West, and the begin¬ what effort I could toward winning nings of growth in the "transthe war. History will decide who Missouri region. All this is was right. But I did rightly an¬ healthy and to the best interest of the nation.. ticipate the results of the war. I 7777 7777, 7v:;'.7; predicted in 1-940 that our national I believe that we are also seeing debt would rise to: $250 billion as a decentralization of f nance and a result of the war, a figure of financial power. In the past 10 Gen. R. turing yr\.ir --t vy ;y7:-';;' like ■ every other good American, cbntributeu on substantial . thought fantastic at that time, and also ' believed " that potentially years; Russia; with its type (if govern¬ ment and its resources, would cial form to far a clcal. .with than Germany to finance the needs resources their of dangerous power more each region of the country has accumulated sufficient finan¬ It is territories. own no longer necessary for industrialists and from every Section to run to New capital.. This I was deeply, pessimistic -after change; is also ."to the benefit* of country. The balance of the trans¬ actions take place on the several we entered the war, not-as to w nour country. -; ,-SVk'i regional exchanges located in n:ng the war, which I felt sure wr You will - recall the ' gloomy other cities. could do, hut as to the aftermath Essentially our ex¬ prophecies of our 7 government changes are simply market places cn our economy—the effect of this economists and many of our pri¬ stock exchange business pf the Japan combined, i York to secure new . V BOSTON ST LOUIS . B & Boston which to & buy to order." Stix&Co. SECURITIES INVESTMENT But because OLIVE at St.LouisI.Mo. Walter J. Connolly 4 Co., Inc. ItT Ludlow I New Analysis was for Wrong, mania- our New York Stock- Exchange, economists, that vate overproduction great , facturirig techniques and our-farm production that-today this natior can produce wealth on a scale unexam.plel Lit history and can sufficient factured and we a and ' Amalgamated Sugar — is Dividends years see no signs production, except in a of Wei have serious; problems be¬ fore us. One of these problems is the State the question of our aid to Europe, of the Union. I was discouraged the so-called Marshall Plan. I am, because that message ireacbe j an not going to bore you -with a dis¬ ail-time low. of demagogy. ; h cussion of the pla n. >, It i s very Few understand what an enor¬ ablv treated in a monograph, "Will mous improvement occurred in Dollars Save the World?",; by our tools, equipment and tech¬ Hehry Hazlitt, which I recom¬ last message ident's on - prices result froni selling opinion of a literally innumerable group of individuals and institut Federal New tions — a who these use It markets.1 mistake to think that common (Continued on page t 25) established - 1b99 160 S. MAIN STREET Telephone— Salt lake SYSTEM City PAINE INDUSTRIES, INC V 1, Utah TELETYPE SU 464 • Stabilization v7v:,!: '7 7; V There ■ by ♦An address at dinner tional General Wood given by The Fiyst Na¬ of Chicago at Con¬ Bank Correspondents, Bank ference of are a few po.rts currencies. Unless (Continued the European 31) on page 5 -! PEABODY COAL COMPANY Callable @105 5% Prior Convertible Preferred $25 Par SPOKANE. WASH 38,880 sh. outstanding. i. ■ .>• NORTHWEST MINING American Air Filter , American Turf Ass'n 1 Consider II. Willett ,- of Murphy Chair Company Immediate Exchange Varnish A.M., Pac. other Reliance Execution from , of Quotes call TWX Sp-43 10:45 mately Floor on to Time: have 3.6 requirements covered been r Market: at Detailed 54 — and description of 56 its operations ested dealers on this Incorporated , 1st Floor, Kentucky Home Life Bldg. LOUISVILLE 2, KENTUCKY Long Distance 238-9 Bell Tele. LS 186 of Brokers - Stock Spokane Dealers - - : •• Bought — Sold — Quoted ' request. ACAUYN'-">COMPANY Incorporated Exchange COMSTOCK & CO. ; '7; ::;.:: Underwriters CHICAGO Peyton Building, Spokane Branches ' • available to inter¬ CORPORATION Members Standard 1 h company STANDARD SECURITIES ca - 11:30 Sp-82 Co. BANKERS BOND .. ■ issuance, -i since times .. of* a'pproxi- Orders hours. Std. dividend $156,000 SECURITIES For or Annual 231 So. La Salle St. at Kellogg, Idaho and Yakima. Wn. * Teletype 4, ILL. Dearborn CG 955 7.1 1501 . 7 New York Minneapolis. • ; CHICAGO Boston .. Omaha which might he mentioned briefly. As ,a sine qua non condit'on, there is the question -of stahili7ation of Chicago, 111., Jan. 29, 1948. 4% Preferred $100.00 par LOUISVILLE It cept in the building industry. -1 & COMPANY Street, Boston York ★ EDWARD L. BURTON BELL i over¬ few minor lines. the conflict of buying and $6.00 REctor 2-5035 m a in¬ manu¬ this Stock market is DAYTON HA1GNEY& CO., Inc. , an our Now/nearly two after V-J Day, goods.. half still faced we for market variety of opinion it. reflects Mfg. & Sales Co. @$% Private I improved so nique during the war.i It is true mend to be read by every one pricing function that that in somelines of industry., interested; it is fully treated by is of interest to us today and it is 'productivity per worker has de¬ Mr) Hoover's ^ecent statement, 'y-j* clined, though ! believe the extent essential that we fully appreciate of this has been exaggerated ex¬ Question of Currency { V2; the available upon request 75 the on the New York Curb It i debt. iwar . business. Common .1947 and major cross-section of American V y a • 7 buy pricing function of those mar-* kets provides a continuous ap¬ praisal of the value of shares In '•TV**'*.,. _ to the place, one in on SALT LAKE CITY 100 shares orders the Tele. BS 128 We offer, subject to confirmation: of Exchange and 836 different issues Members St. Louis Stock Sxcbango ' „ exchange our a dealt Traded in Round Lots Tel. HUbbard 2-3790 his send can colossal they have beV* carry this debt provided we have major pricing mechanism a reasonably intelligent leader¬ in our I onus* economy. And because ship in our government. 1,397 different issues o£ stock are confess that after I read the Pres¬ STREET come Federal Street, Boston trading, centration sell 509 24 to facilities permit a very great conr RR. Prior Preferred / wants stock',, which Is-ad*• a initted ' Maine sell or who anyonpj , 1 • V-: :f v"7'7 7-7 i Philadelphia - - Milwaukee Kansas City :Flint. ; * '■(603) Western on Ahead 1 much so of the News spondent has had irresponsible reason in babbling on, - your years, occasionally to doubt the doubt, it seemed to adding to the confusion. But when cam¬ paign for Presid enc you've got conclude f r e e d they contented ' •-/ a in¬ Take, example, rating Carlisle the - ceive of that because other way no could he I con¬ can in. the world the attained have be done classed ments he be sent have ' taken may ■ place by the time this article is published^ V",, - : . •/. \' : In that«event, Henrys Wallace will have accomplished a good of no small proportions. It will have r, justified. the -freedom of speech : \yhichv has made Henry and his ;• shenanigans/ possible;.*:;/It will,t in v„ v. fact, have-justified most anything. i;.'■ >.4* Pressmany of course, is not the only man to make the ;CIO a vehiclect propaganda and activ- 1 a migity challenge of the In those good old days, too, the lobbyist or the lob¬ the Constituent' organ¬ L. for could to go alone to attend to In addition did and see •bor, and get favors. Now, in one whole, has figura¬ a tively barred the portals of ^Nevertheless, at we than two-thirds of Congress to its representatives. What good is there for the A. F. of L. lobbyist, as Events have way remove has labor lobbyists nre rue¬ this out.: Plying choice of numerous on We disregard encouraging any rate they hamstring en¬ vastly important subject selves if they all. Some hard now; are If considerably will alone certainly not! food, commodities rials, if they and Arguments Against the playing be thriftier, and better for Europe in the long run, to con¬ fine our aid to private charity and. governmental some mate¬ are to be tided crisis. this postwar the trouble. cease would Dol¬ dollars in root of all Europeans would States to refrain from wasting its substance in a hopeless cause. It to But the equivalent they must have, some subsidizing— policies which even That being the case it is considered, by those who reason, thus, far wiser for the United them— save — Plan. working harder.- not over food when donations our breeds facts and If strictly orthodox business con¬ ditions could be met, loans might ' be negotiated with the Interna¬ tional Bank Plan circumstances, oi! absolutely necessary. floated in the pri¬ or The foregoing conclusion, which vate capital markets as of linger glorious new con-lf0 many seems supported by the Europe should be advised our to as help. politics with economics, and puli up their socks and go to work, they would not need a Marshall of have at the are to be helped at people are others will extent an ill-conceived the the European Recovery Program, the Marshall Plan. The European nations of course must help them¬ work At is likely to defeat its own end by specific These observations lead back to lars reckless improvi¬ or both. no are neighbors' ruin; for despair .and rage which overstep frontiers.- Today as The prob¬ but con¬ smack Quite to the contrary, goes the argument, such outside assistance work thing about specific problems is that they lend them¬ selves to specific remedies. the or is devices such terprise to such a entangled in the Restiny of all mankind. We dare not ruin finding a of rolling orir The great globe tinent-jbut fully certain point issue, realistically, Who !1 The a grim alternatives. has dwindled. ' c-;ry. affairs. inclined to be¬ always obliged to face the are iter example, to go into the office ofany Senator-or congressman fact. are "at are of more already been, declared 1 utside the pale, and ajsk him to do anything? - What effrontery, in our own are we woes.1 fell swoop, organ¬ as safely ignore Europe. The that of produc¬ It render futile any outside and the good lieve that Europe's mistaken pol¬ icies, both political and economic, are the source of many, of her go to see members of Congress, labeled far and wide, as an.i-la- ized labor can Western L. Simpson question, which has presented itSelf in one form or another sev¬ eral times during this century, is always a painful one. Most of us would vastly prefer being left is amazing, too, how they can dig up such convincing arguments. dence interferences commerce. of Socialism decline. and after World War I. cis lems they of decadence Recuperative forces John and tended to these repre¬ All course stifle initiative and general fronted with fate difficult accumulation Nevertheless in my opinion this is by no means one of Americanpeople are con¬ the is it situation Once more local ruins budgets. governmental tion whole. a events. in sent exaggerate the of difficulties which beset Europe as rheto¬ ric but repre¬ •It by edging side^Yet -it may it and true than did Phil's to close not are empty' ^ influence many to whether izations currencies, high tariffs ami trade barriers, and unbal¬ i; These state¬ campaigns manned by A. F. of L. leaders, each insisting 'that his man is labor's real friend. byist other with the natural the are the problem as of of and stakes. j. F. The British anced You find Republicans Democrats among the A. F. of leadership and it is a great joke lm Washington that both political parties always have their labor A. of : — stand alone. can role German coal in the European eco¬ we divisions in . ; -—-—: of them traditional nomic system, and its present lack, furnish but one example of this. With Britain weakened and Ger¬ which live, never¬ fayors for the ; one in 100% as the Western world the ahd - .. this to eader. Bargeron '1 -1 goats fibm uie sheep and similar expressions by which men so vividly express what they have inexactly in their minds. It is reported around Washington that Henry, is pulling Lee Pressman away frpm the influen¬ tial position he has long held as the Bergen of Phil Murray. Lee, it is said, is to resign and join up openly with Henry. It is diffi¬ cult for your correspondent to believe it 'anti-labor," but who "had theless chaff from the • could record - the wheat, leaving invariably worked at cross Purposes." Some of them, indeed, i.vould be found playing ball with a congressman who on his voting thing, for circulating almost a how he is sep-i -7 with and of oraer units to determine what they vanted to do, These local leaders ;■ deed. •' and Points out private loans required to provide needed margin assistance. is European economic revival. $ very. structure ocal wonder- very itself Congress pf is The he voting records of members of ,• to rh o sparingly. big, unwieldly A. F. of L., the other hand, has in the past on Plan designed to promote economic recovery and maintain political independence in the participating countries of Europe. Its aim is to support and sustain those nations most closely allied with ourselves by ties of tradition and common cause. The that speech ful their power lishing furnishing them needed for Ously opposed but they have used ac- p his c o m in SIMPSON* The Marshall Plan is <S>- Henry Wallace is past mistakes should not detract from recent think" you L. -would be inadequate to remedy situation, and Marshall i corre¬ wisdom of freedom of speech. At these times of be accomplishing no more than what JOHN Simpson upholds Marshall Plan as emergency measure to save western Europe from economic and political collapse and from domination by Communism. ^ Analyzes arguments against Plan, and contends they can be overruled. Holds European nations have been working for recovery and their : going By -Mr. By CARLISLE BARGERON With Europe in the Balance ' • 7 is not the fallacies cialism. of Statism yore. as and to So¬ And Universally accepted. - The belief incidentally, the is held by some that despite the sooner this country sets a really of the war European pol¬ good example itself with regard to icies followed since the war are such things, the better for all havoc heretofore Americans must de¬ primarily responsible for the concerned. % .t Capitol cide,- not whether we are glad to present difficulties., ityJor nearly every Leftist "enter^; There is matter here to appeal Hence, it is the' in¬ dct, but whether we dare refrain. argued, the Marshall Plan must to prise with which the country has many:- Americans. Whether consistency of their position is be¬ ■I A recent visit to several West¬ been' plagued inv recent years. be regarded as ill-suited to ac¬ one's political leanings be to the Its coming manifest. Legislation is ern European countries gave me complish the desired result and Right or to the Left, the criticism high councils are saturated with always pending, not of .the. head¬ an --.■•-academic minds who have considopportunity to make a few di¬ as a sheer waste of good Ameri¬ of excessively high tariffs and line ./yariety, that- affects them. rect observations. ered the organization their forum As usual the can dollars. other trade barriers, and of arbi¬ How can they go to a Senator and known facts, both business and instead of a bona fide labor or¬ 5 Mf. Henry Hazlitt " has ex¬ trary and fictitious exchange rates, esk him to vote for or against, political, stand in relief when ganization. But he has been shoul- when the pounded this view in a book en¬ makes a great deal of sense. Prac¬ Senator can logically Studied at first hand. Never did it ders above the rest'of them. If titled, "Will r/Dollars Save"; the tically everyone agrees that trade say: "Why should I listen to you'; seem to me more apparent that you could oversimplify the shape World?" He and those who share should be encouraged, not ham¬ nothing I can do will get your this labor movement has taken the./-European countries are de¬ his ideas attribute most of West¬ pered. Some will no doubt sym¬ Support." ;,y into the/ handiwork of one man, pendent on a network of inter¬ ern Europe's troubles to price con¬ pathize with other points of the 'after the late Sidney Hillman, r Perhaps it is significant that argument. Most of us, certainly relationships among themselves trols, rationing, priorities, alloca¬ the A. F. of L." executive V. you i would have to put your fincouncil, most American business men and tion of materials, foreign ex¬ meeting in Florida, is now refer- and with the world at large. No ger on him. \ change regulations, overvaluation (Continued on page 32) ing to its campaign as one against It was Pressman's design, to no the small extent, that organized labor Taft-Hartley Act, and also in : *Mr. Simpson is Executive Vicesupport of the Marshall has been jockeyed into its drive, Plan. President of J. Henry Schroder They seem to - be diluting their Banking in which millions are to be spent, standard gas & electric Corporation, New York against not only the Act but Those original crusade. City. /' i, • 7 , theif Trade -through the con idors day after day, ' . ' - . , for voted who drive the is of mean, legislative . ' than both House and •"\j» the measure.' •: Pressmari ' put Senate -voted for "A '■'< the campaign over on the CIO; at least;--it was mostly he, ' and the A. F.; of L. 'and the Railroad or- • organizations,' finding themselves up against the proposition of lack of aggre:siveness, / have / tagged - * . along;-'':--; h •?' r - - WHAT'S HAPPENING THE BOND MARKET? next year, betwo-thirds' of the ddea^ of •} v- ;I;,;7 1 bb'. L;--%'•b'/b set up -separate :iL still be-a You But it is v apparent to ■ • ers and those-Of a:> < brotherhoods of The. Big Four railroad or- '"ganizations have always been quite effective in-knocking off rates? subscription many bond to to whom- they were wigor- At Are we what point 5686-Sta. V request other York Stock Exchange Principal Exchanges , NEW 1700 1 YORK" One Wall Street Bowling Green 9-1432 ■, ' •;<. Corporates We Standard & Poor's Bond announce with pleasure that Mr. Ralph H. Weseman now associated Outlook. • is with us in our Trading Department MAIL THIS AD TODAY FOR VALUABLE DESCRIPTIVE BROCHURE AND COMPLETE INFORMATION : : on 231 S. La Salle Street Ran. headed toward will analysis CHICAGO problems STANDARD & POOR'S CORPORATION 345 Hudson Street * " New York ' . those and v econ- dispute clears proxy Members New * confronting bankers, insurcompanies, investors,- businessmen and brokers. the tailf oad or¬ the Government stabilize the of for early,, reorganization plan way buy? trial ance j, ganizations that they don't relish^ the undertaking upon which they haye-rembarked. Preference Hicks & Price ' can Answers anyone who talks to the A. F.-of L. lead-? ■ Preference Prior Recent apply our expert analysis to your own situation.... This special Study comes to you in Eight installments with v who make money out -of free flow¬ ; higher interest - The "biggest problems confronting bond1 °hiy and still inaintain the-2^2 % rate? - campaign ing campaign funds. on investors, including—Can the v-;-/ t't -headquarters 'in Washington. It's to "be a big year for the parasites On© °f the Most Important Studies ever made by Standard & Poor's Corporation. Questions They, too, have raised millions and Prior $6 * • Settlement completely-/new body -more cause - a $7 r lexxxixiixxxixxiixxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxs) shall that/ we course, dlmost have it in Congress. If successful, it will . v '■."••• " 14, N. Y. A658—127 LXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXl t fc - Goldwater & Frank 39 Broadway, New York 6?1 N. Y. Telephone HAnover 2-8970 . Bell System Teletype NY 1-1203 * THE COMMERCIAL (604) & CHRONICLE FINANCIAL Thursday, February 5, 1948 .-MP COMING rakerInvestment Dealer-B EVENTS ■ Recommendations and Literatu re investment Field In It is understood that the Federal Water and Gas Federal Water & Gas has already liquidated a substantial part sof its system as "required under the Holding Company Act. In 1945 »the company sold its holdings in West Virginia Water Service, Ohio ■Water Service and Peoples Water & Gas, and in 1946 Mississippi Gas Chattanooga Gas were sold<£ ^nd to Southern Natural Gas. The interest in New stock ,common York Water Service was Court, the question as to Chenery and his as¬ sociates can be paid off at $313,190 (cost plus interest to Oct. 31, 1941) preme lost in still .65 between one-half share ence (about 54% interest) and ScranBrook Water interest). (79% Service July, In 1947 Southern Natural Gas distributed its (to stockholders (including unsettled. The differ¬ seems cipally of Southern Natural Gas ton-Spring share Scranton of the approximate amount which is in this litigation. If the SEC agrees to the smaller fraction of Scranton, and the Water & 1947 filed Gas to distribute to each own stock Nov. on plan with the SEC a .78 share share of its Southern Of Natural Gas, the same amount of Southern Production, and onehalf to share .65 $prihg Brook." of Scranton- variable The amount named for Scranton re¬ flects the long-standing litigation over the terms to be accorded to the preferred stock held by cer¬ tain officers of the company, in- deluding President Chenery. The ;SEC decided that these holdings •Should be "Deep Rocked," i.e., ♦reduced in value to the-cost price plus interest. On certiorari, the the State then of Delaware and will* distribute the three stocks as a first liquidating distribution (stock certificates be¬ ing surrendered for- stamping). After the- Chenery and other claims are cleared up a final liquidating dividend will be paid to stockholders. ; However, the issue was further complicated by an informal com¬ promise agreement among coun¬ sel for various groups of stock¬ holders at a hearing Jan. 20 before the SEC.. Under this agreement the company would retain 5% of the assets subject to future rul¬ ings of the SEC or the Courts, and would make immediate an dis¬ of Appeals in the resulting litiga¬ tion. On Dec. 12, 1947, the Court representing the holders of 5,500 common shares, proposed of Appeals, pursuant to the however son, distribution should that firmed the order of the Commis¬ visement. sion dated Feb. 7, 1945, which It would make relatively little provided that the preferred stock difference as to the value received pany's proposed distributions, or the Jackson proposal, should be accepted. Federal Water is now quoted about 26-7. The three prodate of the plan. nosed initial liquidating dividends ; Despite the fact that the litiga¬ would be approximately as set tion has twice gone to the Su¬ forth in the accompanying table: Price Proposed Distrib. About (1) (2) (3) Indicated Values (1) (2) (3) Southern Natural Gas__ Southern Production—* 22y2 .78 .78 9y2 .78 .78 .70 $17.60 $17.60 $15.80 .70 7.41 7,41 6.65 Scranton-Spring 10% .50 .65 .70 5.25 6.80 7.35 — — $30.26 $31.81 $29.80 —_ .Judging from the tenor of the the Chenery claims, and it seems §®C notice of hearings the Com- to be assumed that further de¬ jjpission appears to favor making lays, including another appeal pe¬ the larger distribution of the two riod 4^roposed by enforced 3b© present price I of compared with the However, Federal as after a the Federal final Court SEC has decision, will prove necessary—with the potential possibility remaining, of course, indicates that that the whole affair will remain &rjeak-up values stockholders are still puzzled re¬ garding the legal ramifications of FT. WAYNE, IND—Wolf & Pessauer Co., 923 South Calhoun Street, is engaging in a securities •business. W. Johnston Opens JT. WAYNE, IND. — Ira W. Johnston is engaging in a securi¬ ng business from offices in the Antral Building. ysis—Reynolds & Co., 120 Broad¬ way, New York 5, N. Y. Annual Review of Business and Feb. 7, 1948 (New York City) Association Cashiers the Security Markets and Forecast for Wall of Street annual dinner at the Hotel tied up in the 'time. - • ■:' : courts '• > ■ • for some •:> ,V: •' i-iP ,;:- Ewing and Danielson With Wheelock & Cummins Bank have ' become Wheelock & associated . with Cummins, Inc., 135 South La Salle Street. Mr. Ewing was for many years with Rawson Lizars & Co. with F. S. Mr. Danielson Moseley & Co. Federal Water & Gas was & Co., 60 Stocks Year-end — 61 (Atlanta, Ga.) Meeting of Board of Governors Feb. 13, 24th Annual ciation ner Winter Din¬ Bond Club of Chicago 37th an¬ dinner and meeting of the nual Chicago Club. Feb. 20, 1948 Bond winter party Club N. Y. the at Milwaukee Feb. 23, 1948 ' Feb. 27, 1948 Bonds — available are (Philadelphia, Fa.) Philadelphia Ratios and Yields on 123 Public Utility common stocks. Earnings High Grade Bonds—or Cash?— Study of the "worth" of capital- Wood, Walker Co., & 63 Wall x Twenty-fourth Also available Railroad is Week. Wall leaflet a sociation the for 22nd Annual Dinner & New York. 1948 ((Toronto, Traders a* Ont.. at the Oil Kingwood Co. — Special survey—Peter Morgan & Co., 31 Nassau Street, New York 5, N. Y. ; New England Public Service Co. —Analysis—Ira Haupt & Co., Ill Broadway, New York 6, N. Y. Northern Engineering Works— Stocks— Operating Earnings and Ratios of 20 Stocks—Laird, Bissell & Meeds, 120 Broadway, New York 5, N. Y. pany—Analysis—J. R. Williston & New York City Bank Northern Co., Railroad 'Earnings—Analysis of ^States Power Com¬ 115 Broadway, New York 6, Y. N. estimated earnings of 20 selected railroad companies for the year King Edward Hotel. Nov. 15-18, 1948 analyses^ of are Co., Wellman Engi¬ and Tennessee Products & Chemical. V; neering, Memorandum—Fitzgerald & Com¬ pany, Inc., 40 Wall Street, New York 5, N. Y. -v the Toronto Association available Foundation 36 :Wall Co., Street, New York 5, N. Y. Astoria. Dinner of Annual 1948—Outlook Industry—Bache Canada) . Graham-Paige Motors Corp.— Analysis—Seligman, Lubetkin 8c Co., 41 Broad Street, New York 4, the , Security Dealers As March, 12, Bond equipment for aviation and indus¬ trial uses—Seligman, Lubetkin & Co., Inc., 41 Broad Street, New York 4, N. Y. V.-v; of of Developments Metals Benjamin Franklin Hotel. March 5, 1948 (New York City) the Waldorf 120 Co., Electrol, Inc.—Analysis of man¬ of hydraulic control Income Mortgage Bonds—Anal¬ Annual Mid-Winter Dinner at the New York & valuation a and appraisal of Railroad Equip¬ ment Certificates and the Price- ysis—Vilas & Hicjcey, 49 Street, New York 5, N. Y. party. Investment Traders Association of Ward Street, New York 5, N. Y, .. Dealers Association of Houston annual — Broadway, New York 5, N. Y. (Houston, Tex.), Investment Laboratories DuMont B. Circular Also annual Athletic Club. Philadelphia and appraisal—Stroud & Company, Inc., 123 S. Broad Street, Philadelphia 9, Pa. (Milwaukee, Wis.) Milwaukee of Valuation Also Feb. 18, 1948 (Chicago, 111.) & ufacturer City at the Hotel Somerset. — 1 Wall Street, New York 5, Co., Allen analysis of group of country's leading banks—Blyth & Go., Inc., 14 Wall Street, New York 5, N. Y. 1948 (Boston, Mass.) Boston Securities Traders Asso¬ Memoran¬ Cudahy Packing Company Memorandum—A. M. Kidder com¬ parative Of Association of Stock Exchange Firms. ' (Dallas, Tex.) T National Security Traders Asso ciation Convention. - Pathe Industries, Inc.—Detailed description of company and its New York 6, operations—Comstock & Co., 231 1948—McGinnis, Bampton & Sellger, 61 N. Y.' ■" Broadway, Chicago 4, South La Salle Street, 111. Railroads hnd Their Outlook for Iowa In v. Bankers RAPIDS, IOWA—The held at the Montrose Hotel, Rapids, Iowa, op Jan. 29 and the following officers were elected for the new year and also Cedar four Directors: new Portsmouth Steel Corp.—Data— Buckley Brothers, 1240 Walnut Street, Philadelphia 2, Pa. — York 5, N. Y.- annual meeting: of the Iowa In¬ vestment : Bankers Association was Memorandum— Stanley Heller & Co., 30 Pine Street, New 1948 Elect New Officers available is late informa¬ Also Special Situation—Analysis of tion on Du Mont Laboratories, 85-year-old New England com¬ Gruen Watch and Buffalo Bolt Co. pany with large dividend accumu¬ lation—Raymond & Co., 148 State Public National Bank & Trust Street, Boston 9, Mass. * ,> : Company of New York—Year-end analysis—C. E. Unterberg & Co., Stocks for 1948—Discussion and 61 Broadway, New York 6, N. Y. Suggested Portfolio—Hornblower & Weeks, 40 Wall Street, New Shepard Niles Crane & HoistYork 5, N. Y. '[ Report—'Troster, Currie & Sum¬ mers, 74 Trinity Place, New York What's Happening to the Bond 6, n. y. . , Harry Des Graefe, Graefe & Co., Moines, Iowa, President. Thomas Crabbe, Thomas L. Co., Cedar Rapids, First Vice-President.: Crabbe & John.' H. : Ruhl, Davenport, : iowa, Quail & Co., Second Vice- W. Fowler, Iowa-Des Bank, Des National Moines Moines, Secretary-Treas¬ Iowa, urer. New Directors: Kosek, Ernest Ernest Kosek & Co., Cedar Rap¬ Victor F. Becker, Becker & Cownie, Inc., Des Moines, Iowa; Thomas J. Landstorfer, McCrary-Dearth & Co., Inc., Des Moines, Iowa; Carl Stutz, White-Phillips Co., Inc., Daven¬ ids, ' Market?—Study of problems con¬ fronting bond investors including "Can the Government stabilize the Sherman Herbert N. N. Danielson — Hentz — Smith & Co., Broadway, New York 6, N. Y. — Feb. 12-14, 1948 President. Special to The Financial Chronicle CHICAGO, ILL. Ewing and David 1948—H. Pacific Canadian dum—Zuckerman, Beaver Street, New York 4, N. Y. New Yorker. Iowa, & Dess&uer Co. St. of Hotel. CEDAR - company. Club Traders Louis annual dinner at the Chase by stockholders whether the com¬ rendered to the company for re¬ tirement at cost plus 4% from the ■dates of purchase to the effective Totals (St. Louis, Mo.) Security Percival Jack¬ date of the United States Supreme be Changed to seven-tenths share Court, set aside and annulled its of all three companies. The SEC decision of Feb. 4, 1946 and af¬ now has the matter under ad¬ Brook Kansas Aluminum Industry and the Reynolds Metals Company—Anal¬ Feb. 6, 1948 immediately tribution of 95%. held by Mr. Chenery and others in ihe management should be sur¬ of Club tied up Supreme Court on June 23, 1947 .reversed the decision of the Court man¬ Traders Meuhlebach. and represents Federal) stock of Southern Pro¬ amended plan is approved by the duction Company, which owns U. S. District Court, Federal will filU a certificate of dissolution in gas wells and acreage. Federal Bond firms mentioned will be pleased the following literature: interested parties send to (Kansas City, Mo.) City annual dinner at the Hotel whether Mr. that company's reorganization. Remaining assets consists prin¬ a Feb. 5i 1948 Iowa; the and still maintain 2%%. rate? Are we headed economy toward ■■still higher interest rates? at what point- will Corporates be a buy?"—In eight instalments with a trial subscription to Standard & Poor's Bond Outlook—Write for descriptive brochure and complete •. ■ ■ • Gas Standard Electric—Re¬ & analysis—Hicks & Price, 231 South La Salle Street, Chicago 4, cent Illinois. Company Brothers Warren — appraisal —Kalb, Voorhis & Co., 15: Broad Street, New York 5, N. Y. Review and investment information—Refer to "A658-127" Corporation, —Standard & Poor's 345 Hudson Street, New York 14, Y. N. With Central Securities Co. (Special to The Financial OMAHA, NEB. man What port, Iowa. f International the Bank You—Descriptive book¬ of Public Relations, International Bank, 1818 H Street, Means to is ities now Chronicle) Harold Hult- — with Central Secur¬ National First Company, Bank Building . let—Office Southwestern Public Service Central Illinois Public Service Ralph C. J. Somers With Shearson, Hammill & Co. Hammill Shearson, Wall Street, & New York So., members of the New York Exchange Gilbert J. Postley . & 29 BROADWAY. NEW YORK 6, N. Y. Direct Wire to Co. stock other City, Stock principal and commodity exchanges, announce, that Ralph C. J. Som¬ ers Chicago and 14 has become associated the firm in its main office. with N. W., Washington 6, D. C. » Amalgamated * * V Sugar — Graham & Co., Pittsburgh PITTSBURGH, ■ ■. „ New Analysis—Edward L. Burton & Co., 160 South Main Street, Salt Lake City 1, Utah. Sterling Graham PA. — E. W. formed has Graham & Co. with offices in the Granite the Building, securities to engage in business. With E. H. Rollins Staff American Water Works & Elec¬ tric—Analysis—A. M. Kidder & Co., 1 Wall Street, New York 5, IN. Y. (Rneciol to The Financial Chronicle) MIAMI, FLA.—William J. But¬ ler is now connected Rollins & Sons, Inc. with E. H. THE COMMERCIAL Volume 167 Number 4670 FINANCIAL & (605) CHRONICLE 9 Utilities Face Their Greatest Test Home Building Costs and Trends > 1 ' , By MYRON L. MATTHEWS* By DAVID COWAN* ' 1 ' new will take $4-$6 billion of years Mr. generating capacity in next four whose raising will new money, both. in form, there some be can ■ maintains, because Matthews, after analyzing present day construction costs, constitute wages re¬ ' ■ > , Mr. Cowan asserts need for 1 Vice-President, The Dow Service, Inc. Utility Specialist, Shields & Co. . 1 . ' , . construction reduction until wages drop or productivity increases, program. Points out some building costs may be no Sees»inadequate apprenticeship training quire joint cooperation of Federal Government, local rate-making or agencies and private lending institutions. Believes bonds and high- pegged, and contends, with construction costs 104% higher than in 1941, situation is not alarming and > ;present construction costs are not out of line. grade preferred stocks be absorbed by life insurance may panies.. Advocates modified revival of holding • ship pattern. com- company owner- Home building costs have been discussed so often it is becoming increasingly difficult importance to what has already been stated over and over again at such imme¬ conferences as this one. We will deal.today with a discussion of some of the factors con¬ Electricity has become essential to our living.; We expect delivery of this current to our homes and factories when we need it. Not only do we determine our own time-table, irrespective of the hour, weather or season, but we really don't care much about m a n's needs undertones, the Holding Company *:<* the at Act of 1935 recognizes this by vir¬ s a m e of its Section 30 which paves time. Complex tue problems stem the from this sim¬ „ and consolidations. for way from financial ' I -i costs which out to be clearly above the fog envel¬ lars. association old here not a sweep¬ the and 1948 Between of end .1952, some 23,000,000 kw. of new .capacity are projected, of which perhaps 80% will be installed by private companies. It is a boost of nearly 50%. The increase alone measures up to our total generat¬ To bill the foot invested 20 years will cost earnings. thirds • . quite freely that pyramided companies, wish call to it that, if you created an earnings leverage with the ex¬ pected results marketwise. There be need fact. the The this blinking no low in return of rate plain utility business is compen¬ for by the regularity and sated relative certainty of income. Now, capitalizing on this way might appeal to from here sold a like two- but In new-money issues $538 million in 1947 and $173 million in 1946, both active years. comparison, investors of street for a who in a limited a large group won't cross the straight 4% return or a 25% market play in the next 36 months. were the does How the tackle to industry propose we the We do know that don't know. on financial be will Plainly, problem? key roles scene, by life insurance played companies, investment bankers C naturally, by Federal and State Commissions and particularly by Technical Achievements The remarkable thing about the utility industry has been its abil¬ ity to lower the unit price of its spiraling costs. There is nothing to equal it in our economy. It still takes only about $4 to produce $1 of revenue. Abnormal conditions product in the face of ing under the shadow of the Hold¬ of this achievement; such as for example use of capacity ordinarily held in reserve. Also last year, fuel plants operated on an average nearly ing Company Act, they speak to their considered very high for an aver¬ of all four. ' i in analysts the employ • y During this period utilities can¬ not play a Still liv¬ passive role. public in carefully chosen words; perhaps too much so. The highly mechanized nature of the •' utilities lowed to securities in of which market new-issue • sell three has al- figure. age part there But fundamental more are traceable reasons to engineering and technical refine¬ billion $4 for account may ments. with Just years as the old steam engine was ' a of effort minimum not and cost, is good conditioner for hardier a " ahead. weather The next few require a sales job and publicity program the like of • years may ; a has which • been not seen since the days of the National Electric Light Association. And there is much to favor such a campaign now in view of the industry's rec¬ displaced the and because now there is little abuse possible in the framework of a regulation which overlooks nothing. very The holding company pattern of ownership may well have to be revived and soon. The character of the business makes it desirable ly over holding convenient where often have operations large areas under single trol and the a to frequent¬ way actual was not. con¬ company was to effect physical this merger look son's 208,000 kw. State at fore the Boston Mr. Cowan be¬ Security Analysts Society, Feb. 2, 1948. triple shaft unit the large turbine generally in use today is more nearly in the 160,000 kw. class. from an Line, pressures, 600 lbs. per of heat—no to more Estimated air shovel to coal and Builders overhead Costs doesn't you don't mind having it into the door fit clinic today. The There is price cessity we peek at a % x ■9r simply like most other and machine say Incx*ease in Increase ; of everything. houses, and But it now we find in 1948., lbs. climbed inch to lbs. In the have 1500 < Electric of Mat'l Labor Total $5,214 $3,561 $8,77-5 97.9 90.9 1,000 85.0 —— the air to our dream cost-wise? It's hard They go may or up some¬ 100-story skyscraper,' It is merely a con¬ a labor. materials here. • What building costs labor and the bal¬ being X% ance we have mean to as done say is the cost of materials delivered at we the site of construction is so much the If assemble them is cost to much. cost is of wages whether we one not or referred look behind the we material to will kind the as that it see another, or components more seems pressures are Trade t l . ! % ' ■ and the Class : '' 11 Excavation, Foundation, and Landscaping 31 nally, transmission voltages were some years ago stepped up from 110,000 volts to 220,000 volts. 10 Carpentry Brickmasonry 17 Plumbing 3 Electrical 6 Plastering F American in Gas some & cases Electric is ex¬ now with 500,000 volt transmission. delivered produce it now. a kilowatthour in 1919 30) $ at Bathroom 100 c/o $ form one Kitchen _ 25 240 $ 725 75 67 898 33 493 55 395 it follows the total cost is product of labor's wages. We can toy with such terms as the cost of management and the employer's overhead and profit as something separate and apart from labor but for purposes of discussing con¬ struction costs, these things mere¬ ly confuse thinking. Carrying this line of reasoning a step further— sale prices of homes being predi¬ cated age upon compound percent¬ a mark-up over site cost—what the purchaser / ♦An to agrees (Continued address on page pay is 35) Matthews of Insured Savings by Mr. at the Management Conference Council the of Associations York of York New State, City, Jan. 23, 1948. _ 1,000 * 500 67 33 145 55 120 60 218 40 57 50 75 20 57 50 293 . STOCKS & BONDS Bought — Sold — Quoted 80 25 350 263 75 87 328 75 110 25 475 75 158 25 $8,775 —i— • REAL ESTATE 45 326 633 _ X-—— ALL 45 $5,214 $3,561 (100) (59.4) (40.6) shades, accessories, Distribution since the wages in m _ _ ________ all wages another, that construction — 438 and cabinets _ materials site is the or land. of > 1,822 114 screens Totals 965 368 . . Hardware, Labor Amount 265 ; Steel equipment 8 — — c/c 544 _ ___ & Material Amount .(Including , Roofing 5 •— 1,500 Miscellaneous the of cost ACTIVE MARKETS 2,720 _ Painting only 1.3 pounds, at which fj/gure it has remained ir on page ^ 878 work 4 takes (Continued the TODAY Grading Insulation) 4 While it took 3.2 pounds of coal Const. : Heating & 1 perimenting purchase Therefore, Site Construction Cost Breakdown ' ' 93.8 breathe out in the open we spaces. Construction cost starts with the claim of the raw material salary, wages, interest, insurance, dividends, taxes, freight, depreciation on in¬ vested capital, or what have you. The origin of every product is raw material, which prior to ac¬ quisition was as free of cost as had $3,561 $11,625 ■ venience to refer to are $5,214 assembly cost is also all is all na¬ $6,000 in the broad sense, and, house so $1,865 »— — "cost the and .1,000 100.0 to remember at all times that to build," whether a sary see 1.850 conclusions it is only neces¬ such 95.0 ■-V Ex¬ Indiana square - Total $4,500 500 (700 Sq. Ft.—21M cubic feet) 25' x 28' x 30' Estimated Average and fi¬ 1000° per 1948 — To understand the basis for 1941 $6,000 HOUSE THE follows: as Labor exactly, but we feel that say, what. . to produce more below $1,865 building costs will not come down man we whittled — __——_— Increase to the victims of many dollars chasing too few houses. That's what we're being told nowadays. right along be , $2,635 _r—, What will happen tional economy, are us could Development house in 1948, dollar-chasing—too They told —i Will Costs Rise? pre¬ present it $11,500. y.y. 1 Summarizing this set of figures $2,635, that houses, the and r/o differ¬ products of hood Construction, Management and Land Summary ; fo our and this one could easily reach $12,000, but there is little likeli¬ vary will estimates cost as Increase, Finance, Overhead, Sales and Profit—-—-— ■ Land sell for $12,000. Per¬ haps rather than recite all the lurid details it would be simpler, and certainly much more chari¬ to 1,000 $11,625 pense how it got to table, 100) land Design, spaces our $6,000 dream house war .$1,850 —^______„_$10,625 profit development (40 1941 will talk about both. take us 130 1,500 Mat'l as Let $ with $11,625 is somewhat below Construction know, between (1) sell¬ and (2) cost. Of ne¬ ence, you ing and Above — including Estimated out run a a Labor Costs profit-——^—' cost Land price Inasmuch What makes it cost little under? with ' 220 and $12,000 figure used in our opening remarks but the practical difference is slight in relation to the convenience of a round figure. $12,000?—pardon, please—I mean what makes it sell for $12,000, or a walking . Average Charges Over the. ashes This is the house for and such.- dollars cane: L and Sale unless window or bitious cur- Taxes— builder's Land gleaming white science wall cabi¬ nets, sink, cooking range and re¬ frigerator in the kitchen with an all-year round supply of hot water, pretty little bedrooms that furniture mated to have been $2,635 and the labor, $1,865. Let us take a look at things which must be added to very or the $4,500 site cost in 1941. cost then is esti¬ Total Total nice tiled bath and upaverage quality fixtures, to-date the Supervision and Design Interest conditioned . and 45% material Material and gadgets, it's more its than The get into talk¬ we ing about how to manage the one inch. Steam temperatures have been increased to But the carry, square station Branch & Michigan 2400 with of the respectively, in relation to selling price and is 95% higher New average Twin though Analyses of Construction " Steam For all its critical An .address by The it has at, modern part site is the 1948 site cost, which, in the aggregate, indicate the sales price —if we keep those over-am¬ a little more com¬ probably prettier > to It's the them down. smaller today, pact. but 1948 cost of material at 30% which It's a bit just under $12,000—the sold in 1941 for $6,000. The labor chasing, the demand, quite so aggressive. Sort of seems to me like attempting to shoot a gun s-l-o-w-l-y. Anyway, it's supposed to reduce the dollar supply thus discouraging further price increases, if not pulling they long enough and that at the end of such period the house will still be standing. We will talk about the house which sells today for so been 60,000 kw. unit of 20 years ago is dwarfed by Commonwealth Edi¬ to * itself changed in design and size. ord, its unassailable financial po¬ sition has greatly turbine, by the turbine say is theirs—their provided, of course, up the payments keep 5000 hours and this 56% factor is security to presents story. and won't be have not here¬ able This cane, a to comparatively simple dream house. our the and conclu¬ which own, average of refunding. that for of re- to rebuild on old admit also us hobble along with has to introduce it* becomes dissection of construction costs of that it so — easier the handle have too many dol¬ much demand, not Too the rency* we foundation of the dollar program. more near¬ securities of volume com¬ ultimate The figure may prove to be ly $6 billion, a yearly about $1.5 billion say on. Last year, utilities • ago. billion aside from $4 panies - only capacity ing Let — turned Take a few of the supporting credit-bricks out of the one time, it seems, foundations. culprit has enough supply. oping the sub¬ ject., We will, sions 1 — - real the emerged Is there tofore been way to ease the fi¬ They are cer¬ definite ly nancial problems of the smaller tainly an inpinned down fluence in operators by fitting them into —matters to newly-created systems? having made which but In 1929, it was possible to show steam and wa¬ fleeting ref¬ that five top ter power the corporations con¬ erence is cus¬ Myron L. Matthews trolled virtually all the power tomarily made. p referred business of the country.To what sources of We will talk about home building extent this concentration, so much electric enerDavid Cowan costs— not housing in the broader the target for attack, was in the gy. '.i ': sense, which includes rehabilita¬ hands of investment As their part of the franchise companies tion, modernization and repairs to contract, utilities then must be rather than holding companies as existing structures, and apart¬ we understand the term, is prob¬ ready, always, to give efficient ments and large scale apartment ably immaterial. But as an old public service. How are they projects and temporary emerg¬ equipping themselves to fulfill saying goes: "Desperate evils call ency housing. We will talk about this obligation over the next few for desperate remedies" and in a that dream house every man and years? First,' let us look at the period of reform, the industry woman and child has a right to reaped the whirlwind. Now is the assume he or she will one day be magnitude of the task. and ——— that have some being cut loose are ing divestment technical. regroupings future Companies ple fact. They are cerning <♦>- other • • to add much of . diate the ■' costs * ' SIEGEL & CO. 89 Broadway, N. Y. 6 Teletype DIfby 4-2370 NY 1-1942 10 (606) THE COMMERCIAL . & FINANCIAL CHRONICLE ' latter Buffalo Bolt Company Thursday.,., February 5, 1948 saving consumers than$700,000annually. more nounced i '■* > - Gruen Watch Fuel Company High Bridge Shortage Cripples Phila. Industry DuMont Laboratories Joseph According Data on to Hudson W. Reed, President of Philadelphia Gas Works Co., only the fullest measures of public cooperation can pre-* vent a complete breakdown and shutting off of gas service of 4,000 industries, 5,000 commercial users and 480,000 homes in Philadelphia Request BUCKLEY BROTHERS Members New York, Philadelphia and Los Angeles New '1420 "in Walnut Angeles ^Pittsburgh, Pa. Hagerstown, Md. N. Y. Telephone—WHitehall 3-7253 matter ' than cipal hike the second cent cash straight record-break¬ ing day last Saturday, the com¬ Wire System between Philadelphia, New York and Los Angeles warned that it pany the bottom scraping its perilously short of was oil supply. Fuel reserves were re¬ ported at about 3,000,000 gallons, with daily consumption exceeding 850,000 gallons. The company is Philadelphia Bank & Insurance pressing for quick delivery of its February quota of 9,000,000 gal¬ lons in order to keep the district's giant production plants in opera- Stocks tion. Philadelphia Transportation Co. 3-6s 2039, -v j Last Pfd. A Common H. N. NASH & CO. Chestnut / WHitehall 4-2400 Teletype PH 257 Power a pro¬ Philadelphia via the Big Inch pipe line to be mixed with manufactured ^as, thus re¬ ducing the fuel oil cost of pror- New York Phone Locust 7-1477 Federal approved designed to bring natural into gas Street, Philadelphia 2 Phila. Phone the "Commission gram 1421 fail • during the mixture. - oil shortage present works gas Before the developed, spokesmen thought that requirements could be met without natural gas for enrich¬ American Box Board ing purposes Botany Mills - fall. Empire Steel Co. Empire Southern Hence offered the - the Federal Nazareth Cement not been pledged to Warner Company PHILADELPHIA view would give foot of Stock Exchange Bldg. Phila. 2 gas Teletvne RIttenhouse 6-3717 PH of the emergency, an earlierr order OFFICE Telephone The on.; 73 be far feet a current is sought Philadelphia available from Feb. 9 pipeline extension will from its 50,000,000 cubic day capacity at that time chairman decision.- Said re¬ Leland D. cents Jr., Commission, perior to Court has is the - and He - something like $7,000,000 greater <• rate base," Oct." 31, Mr, Siggins an allowable $2,393,379 per year." The schedule is estimated to said, "would support produce approximately" $500,000 f:; The PUC, Mr. Siggins said, has^ been abreast of developments im the Pittsburgh Railways Co. and Commission at were acted hand had thoroughly studied. permit rates public a to in¬ do not produce return in a for been fair rate," lie,.concluded.., r ■ Water Rate Raise An increase of into enacted law has be¬ and effective.jFebi 20. y '' ;• / 1/ Warner C o m p a n y, s a n d, f gravel, (concrete and lime prod¬ . ucts, income reports ; net taxes of $1,580,534 ^equivalent to $3.33 previous share. after per common This compares with 391,791 and $2.92 $1,in share per // /: •*/ './/V. ■•'/. Cement Giant of 30 have received and common added Port¬ „ titling Jhe *://>?■■ an additional at ;/•/'/'•"/ warrant holder $2.20 to crease share of 1, ; 10% in water rates has been asked books, was 11% an 1946. over dividends. in¬ income Net / - ; 1 common The 1951. "j subscription price of the unit is approximately the en¬ ti>. .purchase Oct. to year business new ■f amounted to $13,912,316, of which $11,200,000 is earmarked for 1948 rights to buy one During the $273,626,959 in units consisting of two shares of of president. •son, . ; Spencer Trask & Co. 86th $4.10. V;- Anniversary Spencer Trask & Co., New York Co., serving 100,000 families in Earnings of Pittsburgh Consoli-; parts of Delaware, Chester and dation Coal for 1947 are estimated; investment and brokerage house, Montgomery counties. If granted at about $6 per £ hare,mof e than • Feb. 1 celebrated the 80th anni¬ versary of its founding. Organized by the Pennsylvania Utility Com-; double 1946 net. ./■ shortly after the close of the Civil mission, the new rates will be-, relation mands 2 N. Y. Phone 7-6814 of to the other needs and in come Philadelphia Electric in serves adjacent 156,000 Chester counties, announces not faced gas Delaware, gomery, - de¬ communities Appalachian area." which Exchange with a that / ■ ■ Hi $ as it cannot costs continue the to It was that com¬ but never turned is sold. the The Stock to the in aside" about adopted Spencer One its of the Trask, Trask & as present /:;7;/:\y*z* for name /v/;./ /•; interesting most chapters in the early h'story pf Spencer Trask & Co. is the part question -is" played in the commercialization qf be re¬ the electric orig¬ : a by ago,- years should $240;000. 1868. firm, first known in, 1881., Steel estates of the " An appeal from cial | an was backers while Mr. lower court light.; Mr. Trask of Thomas A. Edison's finan¬ one during the 1870's Edisop was .perfecting -incandescent lamp for com¬ decree in favor of the company ; mercial use. brought bv Provident Trust became President Electric Illuminating Co. of New was Co, of and trustee r Philadelphia, Abraham . Available Publications Lukens inal holders. Current market value reductions have been made since 1932, the shares originally "set employees 32 whether . rate 10,000 sale; to pointed out that rates five the Pennsylvania Sup r e m e! Stone, Court is pondering the disposition;' have not been raised since 1920 and " y The render .. War. Tlve $64 jQuestion - adequate and satisfactory service at its present rates." Higher Fares in Pittsburgh Jersey Municipal Bonds ; stock greatly increased The increased schedule of fares filed with the Pennsylvania Util¬ and New '• customers of- pany by¬ \ to the conclusion that in the face of com¬ -'■■■' mailed consideration, which have led to is • * effective March 29. letter states "This action has been taken crisis. a Suburban Water only after careful study and1 due. Bucks similar "■ .. A Mont¬ and is manufactured product of coke. Co., users The gas distributed by the pany Pennsylvania } the of F. executor estate Huston, of In 1884 Mr.^ Trask the of Edison York, the company formed to dis¬ tribute electric .current in" New former president, who died in Joining in the appeal are Telephones: Philadelphia—PEnnypacker New Bell 1930. Electric executors of the estates of Ben- which jamin ratus for Edison's electric system, ^and was on* the executive corn- .' Miller, Huston, RAILROAD EQUIPMENT CERTIFICATES and Teletype—PH Charlesanna Robert B. if 4 299 f Valuation and Appraisal : CITY OF PHILADELPHIA BONDS L. Haines,, 3d, Mary H. Haines. 5-4646 York—HAnover 2-9369 System Valuation and Appraisal York. He . Dolphin & Co. company . Fidelity Philadelphia Trust Building PHILADELPHIA 9 Harshaw *Nor. Ind. Phila. Price-Earnings Ratios and Yields dec. Com. Chemical Pub. Com. Serv. Elec. Co. Common Co., ■* CORRY, Pa.—The Corry-Jamestown Manufacturing Co. has an¬ ■ A * Offered Incorporated -•///' Copies on Request ; * 1528 Walnut St., Philadelphia 2 Boston / Chicago ■San Francisco PHILADELPHIA 9; PA. PEnnypacker 5-7330 CHAPLIN • V ' and r Pittsburgh REctor 2-6528-29 PITTSBURGH 22, PA. Lancaster Scranton attention Electric COMPANY Members 10th Floor,.Peoples Bk. Bidg. • ' appa¬ present -;• / joined who and became' a also devoted much to the the 'Edison early Electric Light Co. and the Edison General • , €1 Broadway f -j Bowling Green 9-3987 4«3 a He represented the director of a number country's major public util¬ J ity (corporations, among them the j NEW YORK, N. Y. Bell System Teletype—PG Co. as of the Pitts. Stock Excb. ; New York Curb Exch. (Assoc.) NEW YORK 5, N. Y. 1881 He and operations -of Issues N. Y. Stock Exch, 120 BROADWAY Grant 3900 Allentown in firm Incorporated 123 SO. BROAD STREET M/ Bulkley, house the firm; Direct Wire to New York City STROUD & COMPANY concern the -contemporary of Mr. Trask, time >!. ,•; "> , PEnnypacker 5-0100 York v Western Pennsylvania Mander Common £. H. Rollins & Sons »• ■ / partner in 1887, is still active with Trading Department Active in only by prospectus Bought—Sold—Quoted New on '* the Co., predecessor of the Electric- Co. - Edwin Utility Common Stocks. trustee of Edison a manufactured General :; ; ftichmotid Cedar Wks. Com. Roberts & 123 Public Com. was Light mittee of Edison General Electric #■■ the Atlantic City v 194?; for at the /:1946.://./' were Scranton> ordinance tax ,„«•//. .• land Cement Co. of record Jan. the ; . excess y Jit Giant Portland Stockholders ;; its rates if such increased company ; a utility // / 1 - "We cannot, by law, refuse to crease detri¬ any sales.) :[ been ,//, /<•;/ income comes $29,336,257; the Export sales had on highest, volume in the history of the company. It is/planned that Penn Mutual Life Insurance; approximately $1,000,000 will be ; Insurance in force of $2,540,947 ■spent for plant, improvement and 422 at the year-end marks a new replacements in 1948, comparing high f^r Penn Mutual Life Insurswith $530,000 so spent in 1947. ; ance Co., reports John A. Steven-; figures on and Co. son have SCRANTON—City of 1 % according to David H. Har¬ shaw, president of John B. Stet¬ less than is "allowable." that at above to mental effect year, return of present reported - 43% were con¬ outlook appear . Sales for the fiscal year ended than the current established value: have ;// John B. Stetson ; « sales advances, ranging from $100 to $700 on truck chassis, do not , bar the erection of Commission reported that receipts of $18,107,133 were the greatest in the; bridge's his¬ tory. The previous record was $16,886,413.in 1946. ' \/(, .es¬ and is further bright-./ by increased prices posted by the company recently. The 1947 and prove a rate-making base of about $36,898,147, which is, a Output ened construction ■ share, compared with $2.40 1946 period. a tinued upward trend in January $4,75 pound. a high were share in the a tablish "Such $3.26 'i: The Pitts¬ burgh Railway!* system could ' another bridge for "eight to ten established > that 21 cents production the 9 months ended Sept. 30, were , yard to $51 structural from and ,/■ Counteracting higher:material costs wage increases granted em¬ ployees last June/;"Earnings for that .-yeare.>/ 614% on the fair investment.v ' "V ■' believed to costs would public utility is entitled a value of its It a return of a oubic a and advanced thought that 4-page letter to all interested parties pointing,/ out that the Pennsylvania Su¬ that has sales and risen r , expenses. factors > steel . < in Samuel K. Phillips &Co. COrtlandt Siggins, the 1926 had use ; • by Philadelphia the Philadelphia John of has addressed ; chairman, "The needs of Philadelphia for emergency gas supply will have to be weighted Hershey Creamery Com. Bldg., plaints, underwater equipment. Olds, Lehigh Valley RR. Annuity 4% 375 com- > j 1 for a and company's program to 1 reduce tunnel .or construct V Autocar Company ;- I trend construction, said that concrete from $16.75 since City's help Philadelphia substantially, is believed. served A. M. Greenfield 5-1954 Teletype deliyer enough, The Power Commission has Phila. Transportation Issues Stock every the bridge and other increased : new creased cost of be - Answering which to 1500 Walnut St. 6-1950 Philadelphia critical it Cambridge Bldg. 3s 1953 Packard com¬ amendment of the but will be able to Members other schedule a '-/"Mr. Ccstello, in citing the in¬ rescinded, but, in so doing, has brought to light the fact that even higher fares might be justified. • the H. M. Byllesby & Company PH Power munities. In ; was Philadelphia should receive only the natural gas that had Sterling Motor Truck / coming objection Commission's order of last Oc¬ tober that, prior to Aug. 1, 1948, Gas Pittsburgh Rys. Co. to until no rate; City of Pittsburgh, fighting the fare rise, has petitioned that new made, was bridge or, jn the al¬ ternative, the widening ' of. .the present structure from six to 'eight lanes. Cost of the latter project is estimated at $3,000,000. ; The the : $37,000,000 . tion of will According to C; R. C. Custer/ vice-president r. and treasurer; of Autocar Co., earnings improved in the last quarter as the result of ' at a .meeting of the Joint Com¬ mission:; which discussed the erec¬ was in a straight 104 fare, replacing the for¬ 3-tokens-f or-a-quarter mer > i of ; The statement it River states cost in 1926. became effective Jan. 5. The prim* 190,000,000 cubic feet of gas into its mains for Delaware the with its actual cost of Appeals^ being made ity Commission by Pittsburgh advertising and ra¬ Railways Co. last December were more , that the ,replace¬ the present span would be $100,000,000, compared ment approved by the Commission and Pouring of Bridge, are . K. - manager of -days." newspaper dio. Los •Private conservation by Street, Philadelphia New York a for Stock Exchanges Also Member of York Curb Exchange /. • ture Costello/ general! ' that $1,000,000 plant; here for i the manufacture of metal Office furni-y Portsmouth Steel Corporation ! i. Detroit Edison Co., Cleveland Electric Illuminating Co., Milwau¬ kee Co.. Electric Railway Wisconsin 'Edisen North American Co. and 'Co. Light and Volume 167 Number THE COMMERCIAL 467Q This Talk About Anti-Inflation ' By WILLIAM WITHEftSPOON I . Statistical and flese&rch Department, Newliard, Cook & Co., Members New York Stock ' Exchange \ f & FINANCIAL CHRONICLE at least not be reduced any faster th?n bank loans are expanded. What do nea; to Government's if, because of income million people The President has addressed the out occasions during the past week and'each be 'ff'ff --.'l-iff''-** Congress three on different time called for anti-infla¬ tionary legislation.. But why? Way is the spirai of innaiiou so dangerous to the welfare of our nation? "Is it because of the large segment of ?'-—J—- _ receipts en t s i their budget being squeezed beyond nition? V; V Yes — It is probably ino tivated by tv< desire to art ' f i ei ally verse nue. re¬ this up¬ ward trend in the eascning is win the plaudits of t he nublic and possibly the number of necessary votes to continue residence in the White House for additional an why reason net reduederr federal more ire rev- expanded bank loans, and the retirement as of. a the aceorapl shed at rapid rate than bank loans the main support will be weakened, jf our economy its strength will be impaired and amounts xpans on. of •. Could Administration resppc* contraction it and be that -the is not gware that t program of anti-inflation, or eflation, will bite the hand that .is feeding it with tax revenues? -,y this, the writer* does not wish four year s. terms dolla; of els revenue at more i rates. The might be main¬ than adequate lev¬ in the face of lower tax even argument, course' of demption would cause This a re¬ decrease permitted in advance of date of registration. iSecurities and Exchange Commission, who is now a member of the law firm of Gordon, Brady, Caffrey & Keller, recommended that * i 5- ^ Ks •»,*•*+ bankers ii v-' enter cated the requirement of the filing reports with the Commission by large corporations whose securi¬ icn- upon a ma of wide publicity a m p a i g p similar to that ties undertaken by cue are New York Stock Ex- in the un* restriction of con sum ei bus rsesej its red.scoum rate from 1% to 1lk %. This las dysaem . development is almost inconse¬ quential at the present time, but any credit reptrict'ons, beyond the 'normal restrictio.ns of sound bank¬ ;he writer wishes to make is that a- federal debt held by banks should keeps people in jobs. large volume of business and What better the function in vest was C. J. Devine & Co, of m en t James J, Caffrey James J. sociated Mr. Caffrey criticized the if sales of securities" York prac- and "bunching an I the also offerings stated quired in and the thereto was SEC Of dn Pont BOSTON; Homsey Co. Darling' has ciple of money and the votes will president take care of themselves. Congress¬ Co., 31 Milk Street. politicians, attention! been of du elected Pont, have had a decided effect may legally offer tjiese Shares in compliance 'with the securities laws of the respective States. If •?* ''M,l'Ct,H'S'i•. ou: on A- reduction of $35 tc $40 billicn jn Federal debt in i few years' time, without a canes economy. res ponding increase in bank loans might reduce our money supply a level where it would have 1 difficulty in supporting business That Is, it would have difficulty to ip support'ng business at its pres ent annual volume as measured by 4.3% Preferred Stock $240 billon of gross national prod- upt.. You cannot expect a defla¬ tionary reduction in the money supply without a contraction in . the dollar volume of . Examine also conditions in (Par Value $100 .prevailing the re,ta 1 trade in? Price $100 a Share not part'cularly worrie - about their inventory position th's Janu¬ ary. "Business Week" says, ". stocks are just about are . in not much money slow-moving items or tied up be obtained from Ifl'fffi-fi'f mark-downs to sell inventory . may only such of the undersigned legally offer these Shares in compliance with the M'.securities laws of the respective States. about post-Chr st- worry extended V seeonov relieved these stores of their per* ma6 \ and .. rate merchandise.". The public has ennial and accrued dividends . in line with current sales there's Share) business. the It is reported that stores dustry. per Vr : . as ' ;: - t an -over* Of course; the buyers were wary in 1947 and held inventory ; to a minimum MORGAN STANLEY & CO. (possibly sub^miiumur,r), but the important factor in this healthy inventory position was the spend¬ ing of the public. sible because supply. Such could ness of a not This THE volume of bus* been . .existing BLYTH & Jn. -this country prior to the .wjwv hut cur- in circulation and bank de¬ posits were s'welladbwtbe rapid growth-pf and-, partial pion.etizgtion' of the Federal deb.fr-.during rency the war years.; \ KIDDER. PEABODY & CO. , CO., INC. W. C. LANGLEY & CO. ff STHNE & '■ GLORE, FORGAN & CO. ■ MERRILL LYNCH, PIERCE, FENNER & BEANE WEBSTER Mrr/?/n£X : •.Now the President w?n'.s to s*od the demonetization vi the debt "by the further retirement ofthank-;: -held issues through-ah excess of up . FIRST POSTON CORPORATION sup¬ ported by the "$00'to'$65 billion of moneysupply HARRIMAN RIPLEY & CO. Intxurporatvd. the large money have f:-} Iff*f f 11 SMITH, BARNEY & CO. pos¬ was Februaryr--f ?l>: l! 11 ■ '(ii.»'.! c " . -'11: U H H m j,. «nn ipfijinmiin m ^ '>*'i nu' »■ 'i . ^in.imiw.ni Homsey with the firm for many years. - ' I ' 1 fn.minwi i n»i M. vice- He has been JThisM-ii ummeim ent 'is neither -an offer to sell nor a solicitation of an offer to buy any of these Shares. f' The offer is made only by the Prospectus. This is published on behalf of only such of the undersigned as the MASS.—Rodney ■ 4k Inc., with Rodney M. Darting V.#. pay to understand this economic prim* and Co., securities. He changes -are re¬ rules, and advo¬ is therf envelope: and vice versa? However, votes or nc votes, the public should be made men trading de¬ & of that good a prior of Lobdell Guaranty Co. of New York. vote-getting propaganda than manager partment of un¬ willingness of many underwriting concerns to handle small or mod* erate as¬ bond department of C. J. Devine &. Co., Inc., 14 Wall Street, New; City, it is announced. Mr. Ryan formerly was vice-president "the distribution of secur.tiej oinvestors for purpose cf raigng paoital needed by business." > ices of underwriters in Ryan has become with the municipal in the money supply, just as it did from early in 1946 to the'raiddU of 1947.. At that time it did, hot' do any particular damage to ou economy, but if the reduction Ix ' dCvt had continued; for severa years at a faster pace than ,tb' expansion in 'bank loans fe fe crease in our money supply wouic permit¬ James J. Ryan banking. This function, Mr. Caffrey" emphasize! a also favored tration. tenjng credit to prevent further p'iee ad¬ vances and the Federal Reserve ex¬ wide¬ and numerous He the be adv¬ principles on shareholders ting oral solicitation of sales be¬ fore the effective date of regis¬ M r, sa'd public Te listed whose fairlv spread. chaise. Caffrey should not but are changes, der lying ..... debt could be redeemed. Feb.. on public should he Wants oral solicita¬ luncheon interview held at the Bankers Club of New York 3, James J.. Caffrey, recently resigned Chairman of the a applies to the anti-inflationary jkaracter-stics of credit restrieio"5. The Admup'stratic n s fps ' However, what do you :o imply that the expansion of the ing practice, will at least hamper think would happen if, like King' federal debt is a desirable method the further expansion of business, Midas, the President's desires- if increasing the money supply, to say nothing of its effect on the were granted and deflation re¬ aven though it is based, upon an money supply. V*v idequate gold stock. The-. more placed inflation? Would this be good? No! Then we really would: iconomically efficient expansion k:U there is something that should >f commercial loans would prob- worry the President, it is the pos* have an economic headache! 's ; sibility .of deflation in the event ■J Consider, -for example, the con¬ .bly.,result in a better balanced that some of his I anti-inflation tinuation of a high tax rate which fponomy. However, the expansion policies be enacted. Inflation of produces an abundant income to )f the Federal debt is now an ac¬ the type currently existing in the the Government—so abundant that complished fact. The point that United States at least produces a" substantial block of the Federal tion of sales At ocated ;■" same says informed of functions of investment bankers. , brough the more rapid tuinove" will increase personal and' Corporate income so tha, the >h tained .economy in Caffrey, former SEC Chairman, 1 an evej business of Yf ;nicn:y, debt ..is expanded, enlargement volumes' when viewed our otuea a is .dollar ilireei'proportipndb the thereby Witherspoon a me on possible further enlarge¬ ment" cf the money supply through the fallacv rf t seen to vhole. .If cost-of- '.•if * ivc living and William However -clat'nn a one disburse-: the dollar .airourt of tax n recog¬ is This over does not want e hand, rreater people who are finding brought down into lower tax brackets by their relatively lower saaaneg.; rxowever, James J. few thrown were a Investment analyst warns proposed anti-inflation measures might ; of work? Even if present tax rates were ma'ntained, is it not to lead to disastrous deflation and cause loss of employment and ;> be expected that the taxes paid income and lowering of government revenues. Seps need of exby thesh: persons would be cut panded bank credd offsetting national debt reduction, if business ff Off, and that other persons would volume is to be sustained. Campaign deflation in money a supply and.buying.power, 11 Recommends Investment Bankers Publicity think would hap- you the (607) pui i m 12 THE COMMERCIAL- & (608) FINANCIAL CHRONICLE Thursday, February 5, 1948 Congress and the Materials Shortages A. By W. ZELOMEK* Economist, International Statistical Bureau, Inc. Mr. Zelomek, in commenting on political situation, predicts unless prices continue to rise vigor¬ ously into second quarter, there is unlikely to be action by Congress on further domestic controls. Says trend of general business in 1948 will be more important in most markets than government action, New York Central had another notably poor year in 1947, with the December results particularly disappointing. It is obvious from the figures that at least in part the showing for the final month was aggravated weather conditions. The transportation jumped to3>—— — —-—-—-—-t 52.9% which was even a little erating costs although in railroad higher than that of a year earlier accounting they are not included and more than six points above therein. Last year Central's net the November 1947 level. The debit for hire, of equipment and November transportation ratio, in joint facility rents was just nom¬ turn, had increased more than inally below $20 millions. The two points over that of October, net result of the heavy direct and reflecting incidence of the in¬ indirect costs of doing business creased wages for some of the was that the company was able tc operating brotherhoods. < carry only 2.6% of gross to net Even allowing for the influence operating income before Federal ratio for by the the . December on results the of ex¬ New York Central last year gives little encouragement to the road's security holders. It is true that the company reported a mod¬ est net profit in 1947 in contrast to a net loss of over $10 millions in the first postwar year. This 1947 net income, however, was realized only through the expedi¬ ent of a credit adjustment for 1943 Federal income tax accruals. the For there 1947 year was a as a net credit of whole $6,072,- 223 for Federal income taxes. In¬ cluding this credit net income for the year amounted to only $2,306,082, or $0.36 a share on the out¬ standing stock. For the year as a whole the transportation 1 ratio stood at This 45.4%. somewhat better was r< income taxes. traordinary storm costs, the record of There is ' to hope that the reason will show some im¬ provement in the road's operating performance although severe weather probably also affected results in the opening month. The road will be reaping the cu¬ current year benefits mulative stallation of of a the from in¬ substantial amount equipment, and,delivery of other units still on order. More¬ new transportation ratio of c47.1%, but was still signifi¬ cantly higher than the 40.0% in¬ dicated for the industry as a whole. The overall operating ratio last year was 86.2% which was about eight points above the estimated operating ratio of all I carriers. Had York New Central's operating ratio been in line with that of the industry as a the whole been have $56 million. pre-tax would net increased than more The extent to which Central's status in relation to the industry orated that as is a whole has deteri¬ apoarent from the fact during the 1930's its operating ratio running only one or two points above the Class I average. the net Federal income tax credit more way ed the than $6 million, total rail¬ tax accruals in 1947 amount¬ $52,435 502. For one thing road has a relatively high to labor factor which involves cor- a respondinglv heavy debit for pay¬ roll taxes. The full year's figures are not yet available but for the 11 months through November this item albne amounted to $29,153,837. This was up more than $8 million from a -year previous. There does not appear to be much hope that these rates will be re¬ duced significantly. The second factor is heavy property taxes, of them some on bious productive Aside from facilities of du¬ worth, taxes v any corresponding Even with costs. in crease in¬ these debits actually represent must be considered as what direct op- bright and resump¬ Bonds Special Securities OHIO CINCINNATI, — Chester the two I how A- w- Zelomek great compliment a invitation had been. You had on to me Washington will tell do, what because no you in Washington knows. Well, gentlemen, I don't either, but I am willing to one You know, answers. Now I know guess. they know all am not afraid and I am not ashamed to but I don't like to pick can has masterpiece. And naturally, since this is my home town, I feel that nothing less than a you or Controls by believe our first as- Chester T. Terrell of the the world's markets. to be last late expressed in This is the the Annual impossible, in view of conflicting forces at work in nomics, to predict price trends for the coming year. Bache & Co., urges executives that in planning their inventory programs, they raw not of only of radical quite sincere when they view the that the express President has exaggerated the inflationary dan¬ gers, and that the price level may turn downward well before elec¬ tion, particularly if world weather conditions remain favorable. But regardless of what I think, of what Republican spokesmen #r actually believe, they had no choice, politically speaking, but to line up on the other side. They may choice no a that chief but to tell the buying cause of grain of high living costs; that he had not used all the powers he already possessed; and that the situation did not require and drastic controls. for heavy, in prepa¬ Fall' and Holiday were the selling period. (4) A declining trend of retail sales continued until was reversed when ments, .were made August, but heavy to (5) Building activity increased after restrictions were to assure supplies adequate Speculation (6) was renewed and intensified. As of these de¬ velopments, the economic climate was entirely different when the special session met, from what it had been when Secretary Mar¬ shall first made his statement a consequence adverse the-risks price move¬ *An by Mr. Zelomek Purchasing Agents As- address before the sociation of Rochester, Rochester, i N. Y., Jan, 28* 1948. * first What the will commodities, ip can our purposes. Government be summed agribe affecting two, 1 u r a lumped together for influence this field can be in two statements: up (1) Purchases of farrh commod¬ ities come the Department this under the influence of of influence Agriculture, will continue clearly in the recent past history of the grain markets, In ordinary commerce, itjs consist¬ ently true that the large buyer has a distinct advantage in the market place, especially if sellers are widely dispersed and relative¬ ly small. During the past season, the Government has been the big¬ gest single buyer of wheat and flour. Its purchases, iri fact, ac¬ counted for about 35% ; further action by Congress on question of domestic controls. any Even if prices should continue upward, I am inclined to believe that Congress would go slow in voting really strict controls on materials. I believe that it might be more in tion likely to take new ac¬ field of credit con¬ the trols, with the aim of controlling demand rather than supply. i »' This has a certain amount of We found out in our war¬ time experience that simplified controls over supply were worse than useless. The only real suc¬ logic. cessful ' materials control of the No one wants to go back to that, even of the to¬ tal crop. But instead of using this buying power to keep wheat prices at around the support level, which last Spring was $2.10 per bushel, it bid the price up, higher and higher, until it reached the present price of $3.00. The record is clear that least, wants the Department, at high price for the a (2) Nevertheless, The politics of the not removed. the farmer. qses^ajnd -because non-essential uses were strictly limited. ration orders And rather pay¬ by retailers new prices. line with the real economic pros¬ pects for 3,948. I believe that some of the Republican leaders are .veterans in September and October. (3) Third-quarter materials, but also to, pro¬ tect themselves against ments. not period was the Production Requirements Plan, developed pri¬ marily by purchasing executives to overcome the failings of the earlier systems. That worked be¬ cause it went all the way in con¬ trolling and allocating a large number of materials to essential both the domestic and world eco¬ step protect to war •: •: second is in support and order the mentioned The cult controls; dustrial me Marshall The publication contends that it the do I The agricultural to favor high prices for the farm¬ er. I think the record is written v With is virtually earlier situation in¬ dicate that this position will not be changed unless a change is forced. A loophole has been left to institute meat rationing. But unless prices continue rising vig¬ orously into the second quarter, it seems unlikely that there will be first relief. believe, person¬ ally, that this position is quite in -new At the time, business was experiencing a mild recession. In¬ success view Now was guess Metals-1948 The in powers President Congress production declined l}k % between April and July. The several other wholesale price average declined Cincinnati firmc. He is one of the founders, and on several different fractionally, and some commodi¬ ties were off rather sharply. But occasions has served as a trustee between late Spring and the asr of the Cincinnati Stock and Bond Club, an affiliate of the National sembly of the special session, there was a rapid succession of Security Traders Association. Ar¬ nold is a past President of the stimulating developments: (1) Bad weather cut the size of Association and Hall, head of the the corn crop at the same time firm is a recently elected member that the Goverhment increased its of the Executive Council. purchases of wheat. (2) Coal mine wage increases led to price increases in coal, steel and the mass production indussocated new a masterpiece will satisfy justice to me. was since, been create removal of that he would have to have broad Spring. the Herrick Co. in 1928 and Good Congress has already taken its stand, which will be changed only if circumstances force a change. Here is what I mean. The Marshall program as such the of air. that Cincinnati of¬ fice the Or will it stand pat? The answer seems to be¬ in ness' of must be about what Congress may do. Will it pass new restrictive laws? of extends out gress was responsible for prema¬ ture buying of wheat, first! thiJdessential materials. strategic is stockpiling'of and the the domestic economy. forecasters some science and that the had inflationary pressures had strengthened; that European aid would cause further sharp ad¬ vances; that the Republican Con¬ of realized fully President One is the flour arid other food products for move, and chose the position that the Doubtful men themselves 1-1063 left The the oracle that! I yond 40 years. Mr. ' Terrell entered busi¬ of Teletype NY had presence New ex¬ perience CBAtAHTEED KAILKOAD STOCKS-BONDS Telephone" BOwling Green 9-6400 only J. Arnold. The combined Republi¬ of ; - the moment, there are three phases of commodity pur¬ chasing carried on by the Govern¬ main following line-up: it was after I men, had ing, as Assistant to Henry and Democratic know, gentle¬ get do Build¬ Trust the can an art. And as in any art, you must have good materials as well as inspiration before you Terrell, nationally known in trading circles, has joined forces with Clair S. Hall and Co., Union issue, ment. to so Commodity Purchasing it. And do you mined „ only under the pow¬ already posseses. '■ \ it ers Congress took opposing posi¬ tions. The opening of the politi¬ cal campaign brought about the guesses T. this —.———:—— it will do At the day. Administration deter¬ was guessing is With Glair S. Hall sible New York 4, N. Y. I guess, must of necessity take every pos¬ 25 Broad Street issue of the On you and the do¬ nearer; truth, and nothing but the truth, and to guess, Chester T. Terrell months was some mestic situation became the main a appear Metal Review published by Bache & Co., Metal Department. Guaranteed Stocks six you not- Plan in aiding in the on knew don't like that word guess. They like to pretend that economics is rehabilita¬ income, the company has tion of war-torn economies abroad large debits for hire off equip¬ will be an important factor in ment and joint facility rents. To a considerable degree these net governing demands for metals in those I The date of wanted the considerations, however, the pros¬ tion of dividends seems remote. can accepted the I headed straight for the source of -—~—:—_-— about European aid. the Presidential election itself. pects for development of any sub¬ stantial earnings on the stock do than other mouth — ■ horse's the called without likely to be effective, but export allocations invitation, I caught the first plane for Washington. all knowledge, your the second emergency in¬ freight rate increase went into effect early in January and will materially bolster revenues not are ; I considered it quite a compliment when you asked me to come here and tell what the Government would do about material shortages. As soon as I had over, was On top of its high direct oper¬ ating costs, New York Central is also traditionally saddled V with other heavy expenses. Even with of voluntary domestic allocations and will be used to hold prices down. terim than the 1946 Class contends and severe month the Administration. And Congress, I believe, if it is forced by circumstances to do anything more, us likely to calculate that a reduction of over-all demand through some new restriction on bank credit would be a lesser evil real there whether doubt ment will be as is '■> a factor in the wheat market in-1948 was are in to a as it World 1947. off a the Govern¬ important good grain crops start. Unless weather deteriorates quickly this price move¬ ments seem more likely to be reversed than duplicated. Stock-piling of strategic and critical materials will probably be a more important factor in the supply situation than it has been in the past. Only $11 million were spent in fiscal 1947. It is Spring, last year's that expenditures will million in fiscal 1948 and $305 million in 1949. These amounts are not large when spread over the great num¬ ber of materials that will prob¬ ably be accumulated. But their expenditure may have a dispro¬ portionate effect in some markets, estimated be $110 since will it v secrecy.; be shrouded" iA -vV . On the whole, stock-piling ac¬ tivities will help to keep tight the supply of many industrial mate¬ Sellers Will make the most rials. of these activities, arid rumors of purchases may be as much Of & market factor at times as the ac~ tudFSbuying is. * We have seen during the last 60 days or so how this encourages buyers generally to come in and take a little more just in case. ^ ■ '-' X"X"" The ERF ^ , This program will determine the extent to which domestic al¬ locations are needed. I believe personally that this need will be andx a simpler mechanism than the'bureaucracy of supply con ¬ small, particularly if export allo¬ cations trols. My first guess, therefore; is that the Government may indeed in- fluence the. supply problenrdur^ mg the next few months, but that are properly made. Your guess may be as good as of I mine, regarding the amount hinds Congress will authorize.; (Continued on page 29) „ Volume 167 Number 4670 THE COMMERCIAL & FINANCIAL CHRONICLE (609) The Problem of The Economic Outlook By ALAN H. TEMPLE* By 1 Vice-President, National City Bank of New York Professor * Chairman, of Marketing, Nystom Council Columbia National of University Retail Associations Asserting inflation will continue is in its last Rising Prices PAUL II. NYSTROM* Central Holding peak has not been reached in either business or prices, Mr. Teriiple contends, however, there are indications present boom 13 as long as purchasing power increases faster than production, Dr. regime of self-imposed economic austerity to stem the tide. Recommends (1) restric¬ tion of bank credit and loans for consumption; (2) instalment credit controls; (3) encouraging of thrift; (4) sharp reduction in government spending; (5) careful scrutiny of outlays for relief, phase and financial changes portend in long run a de¬ cline in capital expenditures. Says banking system is strong and liquid, but foresees brakes on bank lending which increased by In either physical terms servative corporate dollars, business activity at the open¬ ing of 1948 is the greatest in our peacetime history. This is contrary to majority expectations a year or even half a year ago. Then people were expecting high prices to check the movement of goods and the or volume- of *>- Whether they for in drop a exports, for a •v. have jobs people and money. will have jobs and money in the second half as well as the first half of 1948, .depends halt to inven¬ primarily tory increases the Present Inflation The national income has risen as Many looked (6) encouragement of imports; (7) reductions of exports; (8) con¬ (9) public resistance to price rises; and (10) granting wage increases only with increase in productivity. > dividends; The Extent and Trends of —— construction. fas a pensions and social security; $7 billion in 1947. - urges of the than three times what it as business volume the upon sharply since 1939. In 1947, according to the estimates over $200 billions, or more in 1939. This national income is made up of dollars. But, Department of Commerce, the total income was well was knows, of oncv^ every properly and vigorously, we stop it. Let us be realists in the dol¬ of value can | carried out by the Department of Commerce, under the law enacted spending for plant and equipment, the amount of home lars clining capital building, and clined sharply also be expenditures. ports. since 1939. ing what to do and'then resolute program The wholesale in tions will be the result of volun- and for de¬ These pre¬ dictions went The wrong in part of too ex¬ ^ boom end may businessmen because they the volume of decide because that the equipment is high in relation to prospective markets supporting in¬ H. fluence of the Temple great strength and liquidity of the financial sit¬ uation and of the tremendously expanded money supply. They also went wrong because develop¬ ments around the middle of the changed year tions. business The short corn expecta¬ country and short wheat Europe started in this crop food in crops prices up¬ ward. The second round of wage increases was passed on in prices. Expectations of falling prices dis¬ appeared. Development of the Marshall program diminished pectations of an Business went ahead with capital investment, merchants went ahead with commitments, went ahead The of- with builders and construction. 1947 acquired a momentum shows in continued large which unfilled ume orders and heavy vol¬ a of construction contracted for The strength mobile of steel demand premium is prices and auto¬ reflected for second they had better get along with what they have rather gone in hand far as curring is as debt they have prudent in in¬ in relation to the capital they It end through tightening of insufficient saving, and may credit, have or attract. can consequent inability to finance capital expenditures. It may end through a decline in the export surplus, with demand In and obvious E\re now appearing. These the most significant are business developments of the past few months. Cash and liquid held declined owner's by corporations and the have ratio of- debt to capital has increased. difficult more even to n borrow. strong now offerings. The banking system is and liquid, but banks are carrying softie $7 billion more Public utilities and the loans that a year ago and the Fed¬ oil industries are in the midst of eral Reserve and Treasury author¬ great expansion programs. The ities have made it clear that they railroads urgently need equip¬ believe the brakes should be put ment. •and Farmers have Housing written the continues by machinery to to Mr. it. buy be Federal a which program called need means under¬ financing Eccles "possibly the has infla¬ most tionary factor in the present sit¬ uation." goods Even, of .some industries, the including your It is hardly conceivable Ithat general state of activity which is so strongly supported can change much in the first half of 1948. a This state of affairs constitutes boom. The fundamental ques¬ tion before people who must make business dicisions today is when the boom will end and what wil it. stop It incomes may of too end because the people lag many behind the rise in prices, thereby shutting them out'of the markets, while at the same time the filling of pipelines and the satisfac¬ tion of accumulated needs reduces up the of demand. boom would urgency thought the 1947 for these reasons. Many in end The fact that this expectation proved mis¬ taken in 1947 does not mean that it will be wrong through all of 1948 also.' . Certainly further shifts in; consumer one expenditures line to another will 1948. and them will occur suffer sumer expenditures may pected to continue heavy be as • v■•From an credit H. Paul into the last phase of the upward ex¬ long address by Mr. Temple forum and dinner On the hand, other indication every phase will cooperative be there that controls under government this it always trends does behind the prices, on In other 1939, -as measured in terms of retail prices, is at present worth only about 600. Nov. 15, stood at 164.9. words, the dollar of in measured As of terms restrictions The This is inflation. Its trend is still into tion can The end is not yet Most people hope that be curred stopped. Nothing has has nor done to stop it. anything '* , e inflations, is dangerous. Inflation has a way of ending in an inflation been successful in the deeper the do not inevitable. cur. If inflation is stopped this nation to disaster. this we think that set about it are some in emergency. It correct promptly, economic an seems strom address by a before the National Potato Chip Institute, Jan. 28, 1948. New ing a We them.- enforce City, York are to wake tragedy incomes deep loss, with mere loss to come. Every purchaser a see (Continued modified version of such controls, last The available for capital pur¬ in 1948 will be second only 1947, and they will be large enough to support a huge volume business spending. The export surplus, while probably smaller of When you want to than Firms in the United States and Canada, in 1947, will continue huge throughout the year. The support CIRCULARIZE the Investment Remember Us! given by housing, augmented by local government and institutional construction, influence. to the not will These be a powerful things lead been yet business reached in before the produce within Probably about as 1948 of the the indexes will high in 1948 1947. as ::Y;V • and not list and is charge States year. or SPECIAL selected accepted average All they have We / • Cities, Our reces¬ . stencil In metal our mailing department bank listed In "Security Dealers firm and arranged alphabetically by States America" the within daily revised by Cities and offers firm names. the most you up-to-the-minute service available. appears calendar of a every North This any will considerable most, business in end any have for of either prices;, and that or declining tendency which sion We me opinion that the peak has at N. A. States addressing can a also complete addressing for Canada) Is D. S. or $5.00 per LIST per completed within supply the list small additional charge. thousand. (main Cities $6.00 on (United list only) offices or thousand. 24 hours. gummed roll labels .. Schafer 50 Years NYSE Member York the members have held tile Merchants of New 50 years. the York, New City, Jan. 30, 1948. - Herbert D. Seibert & Co., Inc. Myron Schafer, member of the New Stock Exchange, ultra-exclusive of the their has list Exchange 25 Park Place who He has boosted to eight -'•/ - ; •M* New York 7. N. Y. REctor 2-9570 of membership for half-century roster. T'Vfi sill sal 1' :V • ^ .(1*1 M .-.c. U i" -i • produc¬ . of regulations by Professor Ny¬ the behind, such as white collar teachers, civil service employees, hospitals, schools and churches. Everyone who owns anything bearing the dollar sign, whether money, notes, securities or bonds has already suffered a law, creating a govern¬ setting up a number and then appoint¬ few thousand prosecutors to passing than lag ment bureau, *An faster workers, to disease so increasing hardship to all who live on such as pensions, income from savings, relief funds, insurance and all persons and in¬ stitutions whose income generally risk easy so its and application of totalitarian con¬ trols for the sake of meeting the oc¬ its as fixed ex¬ would who just The tide of the inflation will leave countries, totalitarian inevitably nation tion of useful goods and services. the is disaster Calamity need not in there Unless it will carry I peftce times cept crash. will and to spread this the increase are fact that such controls have never crash. The higher a goes, in In the present some who think that we, should again go back to price controls, some form of rationing, or at least priorities and allocations. In spite of the there difficulty to rise over dollars, purchasing power, form of salaries, wages, profits and government spendings long or should help us out. oc¬ been v, This inflation, like all threat depression, there are many who believe that the government advance. inflation continue a as on and This Controls nation, we get difficulty, whether of infla¬ Whenever, upward. Every month and almost every week since 1939 has shown it business, employ¬ prices, such as price controls and rationing, but rather by removing some of the regula¬ tions that still hang over our' economy, and which are actually contributing to the inflation. I shall come back to this again. Fallacy of Looking to the Government for opinion, by placing further ment is, too little production. ...;.■/SyOW::: sight. "help stop this inflation, but not, in my prices, it is worth less than in to mys¬ whole¬ sale an nothing They may be They are due to the fact that there is, on the one hand, too much money, pur¬ chasing power, which people are trying to spend; and, on the other hand, to shortages of goods, that wholesale of is terious about them. poses to possible without are vThere are, to be sure, some things that the government can do are easily understood. prices, lagging as There inflation is the one. long a - the approval of the Department of Justice. funds York de¬ swing of this business cycle. annual of the Association of Cotton Tex¬ *■> and of this causes simple. consumer Nystrom expan¬ judgment these fi¬ nancial changes portend for the long run a decline in capital ex¬ penditures. They mark our entry joined before overall my any this business in from though others gain.' In the aggregate, however, con¬ ; In of , The index:of from even some sion. soft have heavy unfilled orders own. further on out are causes attempt to make this kind of approach. an It has -long'been difficult to raise equity capital and of late it has become 24, However,' come cooperation rather than of police orders. Don't for¬ get, however, that no voluntary an Jan. stood at 224.3. on influences tary may of priorities and alloca¬ have been its these when December. good that termined, to correct the evil by removing its causes. This will be The - degree these restrictive some seem then, 500. effects prices here. in determin¬ an find out what ing than pay such high prices for new homes. It may end because bus¬ that last us the week end¬ people who want houses de¬ decide let - • evil, any evil, it good sense to try to meet would but 1935-1939, for that inessmen 100 constructive doing it. To index, danger, the average for the years cut cide assets upswing in the second half and cause ex¬ decline. export earnings,_ ognizing represents the their programs accordingly, or be¬ the and de¬ which in construction and underesti¬ Alan price cost mated has rec¬ j J • m- m •* - of a war on page 22) bond . 14 THE COMMERCIAL (610) & FINANCIAL. CHRONICLE Thursday, February 5, 1948 TABLE II : • • Equivalent Price as of Jan. 30, '48 Bank and Insurance Stocks Jan. 30, '46 j i Price " i;v v By E. A. VAN DEUSEN Manhattan!. of . 25% 1 Bank of New York Eankeis Trust This Week—Bank Stocks 1 370 + Chase r Table shows 1 as I Price ; for SI 1-30-46 B. V. B. V. 12-31-45 3..utk of New Ycrk__l Bankers Trust Central Chase 35% 47.77 Hanover 112.63 National B. V. B. V. $ 40.57 32.24 25% 0.80 6.5 0.81 4.6 0.80 5.2 121.46 92 3.76 7.8 1.18' 43.52 53 %> 1.34 43.26 31% .94 58.81 22.67 234h- 1,04 24.5 G 67% 1.27 Corn Exchange first'National Guarsnt.y Irving 347.42 Trust ^National Trust XT. 3. 0.82 8.3 13.8 53% 0.92 1.13 48.18 1.15 107,33 1.02 , 54.25 813 1.06; 0.0 2.5 1'5.3 3.7. 9 4 _ increase in average 41 t771.82 0 85 8 1 86V2 0.31 7.5 __ 1 Trust S. | l'l'.O 19.5 0.74 0:5 +7.2 B. value X? the of v;KY:: stocks over the "The should to public con¬ cern. The rapid growth of unions during the last 15 years makes the right to belong to a union a mat¬ Up of an Employees Retirement Fund to which was contributed from capital funds art amount equivalent to $40 per share. ratios to current ter of public the "book values they bore two years ago to the book values of Dec. 31, 1945, they would have to appreciate approximately 39%. The calcu¬ lated percent increase for each of the. 17 stocks under review is as shown in Table 2. ■•./>.. admission be affected and concern rules with a of Workers. (Special LOS ' ter to The Financial With G, H. Chance & Co.. chronicle) (Special ANGELES, CALIF.—Wal¬ M. Bohme with C. is A. Botzum Seventh connected now Street. Co., 210 West He . was pre¬ viously with Livingstone & Co. I to The Financial FRESNO, CALIF.-—Thedctore Wiberg has joined the staff G. H. ing. ing Chronicle) The act E a oi Chance & Co., Helm Build¬ He was & Selland. •%v would by makes CIO this, and also to divide be the the ap ex¬ practice economy into two parts—one part made up F* of L. firms buying Lorn and hold a will surely vote to reject the employer's 'last' offer, because to do otherwise would mean repudi¬ ating their leaders. Tne proce¬ dure puts the government in the ridiculous position of conducting a vote on the. question of whether the national health and safety shall be imperiled.: That is bound to be interpreted by the workers as government sanction for their strike. to- v\ "The government cannot afford be in this position when the national health and safety are at responsibility of protecting the national health and safety.. If the men reject the em¬ It has the stake. ployer's 'last' offer, as they un¬ will, the act provides doubtedly that the President shall submit t<? Congress a full report of sive selling to only other A. F. L. and another part made up firms, and the comprehen¬ proceedings with such recommendations see imagine a he as fit. One can scarcely better way of making relations football a of politics' than to throw important unsettled disputes into the lap of Congress. No body of 541 men can be expected to deal with such an issue." v / ' ; . NSTA Notes BOSTON require¬ SECURITIES TRADERS ASSOCIATION The following committee oupointments have been announced by the Boston Securities Traders Association: ••. affected with a union public in¬ a terest because there Oitr r are 11,060,000 jobs in American industry which may be held only by workers who are in good standing in ^unions/ . ■■ i Year-End Comparison of Operating Earnings and NEW JERSEY Ratios The i | SECURITIES 20 New York City on to Members New York Stock ■ regular union pay that J. S. Exchange Rippei & Co. Established, BROADWAY, NEW YORK 5, N. Y Telephone: BArclay 7-3500 Bell attempts to protect meri losing their jobs because of establishment Request Laird, Bissell & Meeds 120 act from loss of good standing in the union" for any cither reason than failure Bank Stocks Circular • made of A. affected with are interest." right to remain in is also .■( r- i public "The yv-i,:"' n i, admission example, refuse of is directed to Continuing, Prof. Slichter stated: formerly with Bailey ,v*! the Board industrial extension dealing lockouts which im¬ or among may an the parts of the provisions for of public interest big step forward in recogrizf that are unions which practice it to damage suits. The logical result that the act goes too far in respect, but I think that act ments of unions ttnion. goods think a men poses to act," he continued, "is its attempt Maximum calculated potential appreciation, on the basis assumed,, to operl the doors of unions to all is the 58.8% of First persons | without discrimination. National; comparatively, this vis ap unrealistic The act attempts to protect work¬ figure in view of the banks' slim divided coverage and the consequent ers from being denied the oppor¬ drastic decline of its stock during the past two years. The potential tunity to work for any reason -percent appreciations shown for each of the other 16 banks appear to other than failure to pay regular be fairly reasonable, on a union dues and initiation fees, i comparative basis." /v/rv'Y :, is boycotts or to. free to unfair labor practice "One of the best features of the this strikes used one or handle to ; . or be Labor unions, for causes unions leave another matters of as not and to join punish them; for joining the* 'wrong' union. "Some American Federation of Taft-Hartley Act," Prof; said, "is not its specific provisions but the matters which Slichter it treats the form on ; important" thing about the Ul S. Trust is distorted by reason of the setting same , t Act, ers Congress on strikes or lockouts affecting na¬ they?>%^ days, is j flict. .This is also a step forward of making industrial For example, economic coercion m o s the the workers on the employer's 'last' offer. This is a ridiculous proceeding. The work¬ President to report to value. prices to bear the 39.3% — political football. relations "a football of politics."; -by peril the national health of safety. Taft-Hartley Act permits such strikes or lockouts to be enjoined for 60 days. At the end of that period, if no settlement has been reached, the National Labor Rela¬ tional health and safety, after have been enjoined for 60 the best way of defects the worst vote it coercion The Addressing a campus forum of the University of Cincinnati ;on Jan. 30, Prof. Sumner H>. Slichter stated ' that although the TaftHartley Act had commendable features, the provisions requiring the includes V. of tions —22.4 from employers." act and .30,1 $0.32 -at¬ with strikes 30.1 — is 37.6 , 776 __L_. whether .coercion, 42.8 55% _ 570 economic of 32.9 1231/2 401/4 "One measure as opening union's doors to all protecting workers against discrimination, but warns provisions dealing with strikes affecting national health and safety may make 24.5 0.74 Exchange, Manufacturers Trust and Public National, made well above-average gains in book value, and moderately below-average declines in mar¬ With C. A. Botzum Co, - to choose from Slichter said: Prof. 38.3 - or Regarding Y 38.1 v, Act, but Wains of Abuse Guaranty's book value shows the greatest increase, with a gain of 15.3%, after adjustment for 11.1% stock dividend, while the mar¬ ket decline of it's stock was well below average. Corn In order for bank stock 44.5 - Harvard economist lauds was 7.2%, While the average decline in their asxed prices was 22.4%. Maximum decline was the 35.3% of First National, whose gain in book value Was the lowest, after U. S. Trust. oook value of 1 + " 21% them unions '' Slichfer 18.2 86% 40% 570 , . book } __ Trust--__^- AVERAGE 21.1 two-year period The 541/2 25.Q O.ST. Trust. ket 72% City York 393 v 0: free regardless economic tects 37.4 ."58.8 52V2 20.1 0.69 "Adjusted for. 11.1% stock dividend. ; fFor comparative purposes, S4o-transferred to Pension PUnd. includes City Bank Farmers The 25.9 v* - ' 2,065 , 41 35.3 0.75 $1.14' , 73F8 11,300 Trust I AVERAGE 251/2 53*% 2 0.4 0.95 1,300 5i'Vu 50% , 19.4 60.03 114% 767.74 20.0 ' 302 15% 1.21 50 20%-* 33.1/ 22.3 7.3 20% . M00.70 44.59 Trust—___> 7.3 8.1 0.71 2 2'. 90' .66%' 48.89 0.84 C.99 41% 1.367.46 v 99.82 Trust._______ Bublie. 36 Va "43 58,12 1.51 1.39 21 54.85 < City York 2.010, ,1 378 22.08 Manufacturers New 53.34 1,333.79 __-_i.__ Trust " ! coercion ;; entitle^' ar unions with only ers only against interferences; by employers with their freedom, of choice;, the Taft-Hartley Act pro¬ 34.9' . 55% 24.6 47 T;\' . 18.3 1.08 34.32 & 42.7 56" /-v v v - : -21,6 40 40.02 Ik. iJi% 43' dealing tempted by employers o.; unions. The Wagner Act protected work¬ 38.4 % 27.2' 370 50.25 Commercial "Continental . 1 ' 456.03 CheQ'ical Bank & Trust National:— •' 92 15% U. ; Mkfc. 1.08 122 ■ 501/2 I Public % Change- 1.17 55:! 4 & Trust : their that 46.9 + S 1.17 472 436.20 _______ for $1 H $ 30$26 Manhal'tftiw. Bunk* of Price Price 1-30-48 r (272 New B. V, 33.1 58% . I National 12-31-47 36% 41.I/2'- ■ _> Manufacturers A-ikcd . • Irving Trust Market.' Price- 492 %. Guaranty. Trust—: ' Market i National ___Y First National ; .TABLE + . Continental Bank Values and market, prices of; 17 New of today, compared with two .years ago. Askrcl ! Corn Exchange book the C.ty bank stocks Hanover ' 40- • Chemical Bank & Trust--1 Commercial 46.6% " Nationak Central Not everything has moved up' in- price tinder inflationary ptes* For example, book values of leading New York City bank stocks are selling nearly 30% lower than they did two years ago. Currently,- ode dollar of book value can be bought for an average ci $0.82, compared with a cost of $114 on Jail, 30, 1946. ., siife. ' firms "Workers Appreciate 37% ' CIO other CIO firms. Potential • ' Bank York of Asked •A 'r».* 1891 18 Clinton St., Newark Teletype—NY 1-1248-49 principle administration of disi* pline by unions is affected with a public interest is an important step 2, N. J. the The dues. the of forward. to limit the The area law Benjamin attempts of industrial A. Baileyv John L. Shea, Jr. Sumner R. Wolley con¬ MArket 3-3430 (L. A. Gibbs, Manager Trading Dept.) N. Y. Phone—REctor 2-4385 Royal Bank of Scotland Incorporated by Royal Charter 1727 WHOLESALE MARKETS IN BANK and V' INSURANCE STOCKS HEAD OFFICE—Edinburgh Branches throughout Scotland LONDON OFFICES: 3 fiEl'ER CO. 8 West 49 .INCORPORATED NEW YORK 5: 67 WHITEHALL 3-0782 BOSTON 9 CHICAGO 4 SAN FRANCISCO 4 231 S. LaSalle Street 210 West Seventh Street tyUbbard 2-0650 FRAtiklih 7535 Michigan 2837 YUKon 6-2332 BS-297 CG-105 LA-W6 SF-573 Russ Providence, Enterprise 7008 . > ' ASSETS Portland, Enterprise 7008 Detroit, Enterprise 6066 £141,823,667 Wilfred Associated ; „ Williams Deacon's Day ; . % Banks: Glyn Mills & Co. N. Membership:' Benjamin A. Bailey, Dayton Haigney & Co., Chair-, man; James A. Morrison, Baliou,- Adams & Co\ y -1 ; • . * v • • v Quotations: John L. Shea, jr.LSftea: & Co., Chairman; Frank S. Bre*eh, Schirmer, Atherton & Co.; T. Edmund Williams, Hooper Kimbali;, Mc.; LR>yd B!, Waring, Kidder,' Feabody & Co. ; % ; « PRIVATE WIRE Hartford, Enterprise 6011 TOTAL Building SYSTEM CONNECTING: NEW YORK, BOSTON, CHICAGO, CLEVELAND, PHILADELPHIA, ST. LOUIS, LOS ANGELES, SAN FRANCISCO TO: . , 64 New Bond Street, W. / NY 1-2875 10 Post Office Square TELEPHONES Smithfield, E. C. I Charing Cross, S. W. I Burlington Gardens, W. I IWall Street LOS ANGELES 14 I Bishopsgate, E. C. 2 * Bank, Ltd. , . . v" .National; Comrnitfeemeri: ' Sumner R. Wolley, Coffin & Burr,. Incr.y Ahtqh E;< Homggy,.; du Font,I Homsey Co;; Paul B- Monroe,. Hunnewell t & Co.; Wilfred N. Day,: Chas. A. Day & Co. „. ',, ' ... t >. ' " '.f »■.'* f, r '< >..f ■ t ' «* . " , Volume • 167 Number 4670 " THE COMMERCIAL & .jj£ S. Senator.from- MassachusettsSenator Saltdnstall cites 'c the pressing issues as 1'jy; * \ - r*1 • .< before ; Ok : i not for." • ^ ^ - , '' " ' • favor, our of from the endeavors of the Federal now? ased -his very treasury i 11 b e your i w be to . . I ask you guess Sen. L. Sa! tons tali ed u h w I authority to act my ihdiviiuais ja-t, dis- as that affect der Thomas Ralph. A. Young - i the lished.1 could System Founders have not estab¬ System all the was the of foreseen system, government can-; exigencies with which monetary It was not and must not make all tne:de- policies would have to deal during ng on the ji i^io. s for a*I of us on all subjects; the -years to follow. They were floor of the Senate Jan. 6, 1848, For ill is we thanK God' impressed with the needs for an 100 years ago, ' We were then at ji.A>7 h"hlWv elastic currency, for the mobiliza¬ War with.Mexico.. Yet, how truly < tion of the scattered reserves of do his words apply to present-day ,i ; the banking system, for reducing Whal Xe conditiors, The government is ike reliance of that system upon \ h' t must be imade? by ^ asked to spend than 1948, it but wasn't. our . heavily before in peacetime; the de-. more V ; ever mands crnment in the aid Tinge ' ; upon; our industry our; stock-market credit 1948? LongEurope aah GhKia,- to heney are ihese purposes serve System our > and Sicily—insurrection in ;/;• Prague and Rome. ill appropriation possible fer -our Berlin,, Prussia was at bills making .it government 3^to 'to* create * preparing; / forwar ■?\±:eagainst Austr ja/candV-^herewere were disorders :in rlreianct;; 'made were that- toward Federal given money; This was- Re power power through; the lending and ' investing activities of the Federal? Reserve ■ > J For. ieo paper \y Banks: t . wh ich 7 . -vV-' .S-, description of this development a the serve ;" "Three Decades of Federal Re¬ Policy," by Karl R. Bopp, the hrs in this pamphlet. * • .he U. In consider'hg these problems to. remember that ik something government our live to Federal Reserve System. present-f the general, thinking behinc followed by the 3 stem during recent years, although the Explanations given are those of the it aims to of ■many the policies c greater political unity and greater UNDER and not ON. authors and- should not be considered as #V-f freedom - in: Italy<$ France, AGer; Last autuhmi -as' a; member of ,-epresenting the official views of the Sysem authorities collectively or individually many, Austria and Hungary, and t^e Sciate Committee on AppiOr-A: the events of-1848- had "the effect .^riations,.. i ; v i:sited England, ;:'Reprinted from "Postwar Eco¬ ..' of contributing toward the resur¬ Fra ice.: Germany, / Austria,,, the nomic Studies, No. 8;' November, gence of political unity and indi¬ ree city of Trieste- Grbece and vidual freedom. 1947; entitled. "Federal Reserve What is under Ttnly.v;-V'In all these countries";we debate in Europe today is not en¬ talked with' the Prime Ministers Policy"/and issued by the Board tirely dissimilar. -nd other officials. of 1: ; . , ' We went into * 1849 Europe the immigration from America* was at the to rate of 1,000 a day. People wanted of Europe 100 years to ago • ... I get out AND COME saw TO AMERICA. plenty of people in Europe last autumn who want to America in ' 1948., come '? ..."~ ?;/ ' - to ^v' Two1 hundred years ago, in 1-748, the Peace of Aix-la-Chapelle was signed; the : 7 ; Spain and Prussia only gainers by that were war. i i carried off 40,000 ? In the year say. Experience for serve '48,; for the past 300 today- ''history repeats itself.''; that effective limitation commercial through require- to reserves, as notes, and that collateral for types of assets to be System was also given The certain discretionary in the fixing It appears of powers, as rates. it is formulated discount Federal the the from discussion preceding and accompanying pas¬ Germany failed to ; v -. " . , work out and/Austria date.' 'We We are country : a and We of came chatted women horpe to the on where our men we we government., If i are want we with of Governors the Federal Re¬ System. serve to free to to run don't like total Jail."'15-,:i'94'8-. by the authorities for of bank credit and money,: as well Reserve Board, that some degree of judgment and discretion was credit expected to be exercised in the determination of the System's pol¬ icies and that the general objec¬ of tives of these policies were to be the maintenance of sound banking by the Federal Reserve System in efforts to meet the ever-changing and monetary conditions in the 'interest:of economic stability. It requirements of the credit system has brought about the develop¬ Was widely recognized at the time ment that the Various previously existing bank¬ ing and. monetary system in* this country had intensified the devel¬ opment of booms and depressions bid had been responsible for the Spectacular panic phase of cyclical variations. : , those ; ; tations in the Act apparently were with/ the thought tors, that, Federal discovered to credit expansion practice, and at¬ eliminate or moderate found expression in many amendments to the Federal of the said Taking the history as its that the in Act. Act /'oTars through the months rf half over to" carry System , cold this the ■ ■' the be prevented. Federal History Reserve System of a proved Interim. Aid knew that would be no on recovery i" , a id has shown,: however, that these me¬ chanical limitations have in prac¬ tice not operated in that They have often been strictive when restriction desirable little or no restriction have and manner. most re¬ limitations We restraint at times when the of in not, chance for a - Plan,; before us.. - we We we there specialize in and offer our ■_ ifi. ,f, t1 \■ . for the ■' have that On. the Senate M "V' '* of all these- great problema^ sonally; -t; feel- that; ment must aid our- /I*'/ banking a way of defects 1929-33. was " a Banking the Acts Securities purchase and sale of BANK Our Per¬ , ■ STOCKS? an year-end comparative analysis of country's leading banks is un¬ y; that is now sent to you upon a request. of the group in- print. A recently; jhihg that is really hap-? pening, therefore, is that through of the descendants of European immigrants,! the divided, uneconomical, conflicting of Europe';; have brought together in a " been common en- tPiiHricp that hn-o-nncci-hilifi^c terprise that haspossibilities ?s.'••••. (Continued on page 34) o\'7c>n even ;i. •• \ r •9 14 Wall Street copy will be ;;;v*|;; inv. New York 5, N. Y. Telephone REcto.r 2-/000 Reserve powers, as not dealt with of objective these- the of 1933 and 1935 and of Exchange ^vct of 1934. 1 facilities New York "Times" wrote initiative initial mechanics^ Correction major (Continued administratively the the these structure ■ govern-: Europe in derstanding way-f-ii Reserve previous legislation, were sharply dem¬ by the financial and banking- ; side it is being actively considered imder, .the leadership of Senator in Federal decision long-range European plan; Now by in¬ authority onstrated needed. 'As a con¬ was on ap¬ because did- we making the be been well as in the scope of the System's dis¬ cretionary authority and in certain aspects crisis was un-r contributed defects hungry > can has Federal implicitly 2 Critical countries winter. of explicit to billion a these whole, it a evolution direction of unsound effec¬ policy have been in have granted would , policy. the on them creasingly and Reserve limitations tiveness of credit tempts y of discretionary powers use of reliance limitations. and The main rather than fixed !: System, iby setting bounds to the exercise discretionary power, excessive the be must the rules Reserve , Automatic and mechanical limi¬ designed the specific availability of bank in particular strategic sec¬ as Congress and approved an-ap¬ propriation of nations i:'An address by Senator Saltonstall be'pre the Econolhic Club of York, pursued of special session a " New provide sage of the Act and from its grant of broad powers to the Federal have Vjothing; "r- As James.;,Restore of tbe yet live in a. we to influencing the supply, availability, and cost streets. treaty with Japan/ V;; J'The big proud that choose the but have and Reserve purpose . •' impossible specifically in-any credit and mon¬ etary statute for all future con¬ tingencies. Consequently, policies ■ '7 exces¬ on sive and unsound bank credit ex-; w ' ; demonstrated as and ; financially 7 -i's; f. M jl 94&'w4?h a vie?^aeexti^attes; Found—over i the nexf; few [years.: signed with' Italy, ;;Bulgarihi ^Ru-i X am firmly convinced that it-is a >' mania, and- • Hungary. Wei have far better .risk tor attempt'1 to tried to work but treaties with ahead with some plan; than to, do ; statutory limiV banking has The years; peace, and. war .have been viV the vital .issues.; Soy we can truly rn factories .', and men . yandenberg, who has proved" himVelf ; to |be a- truly patriotic, thoughtful and : understanding revolted ; and, American citizen in the handling prisoners. J Ukraine Cossacks defeated the- . the in 1948 Three hundred years ago, in 1648, the Peace of. Westphalia was/ signed, > and ;pfinciple of the bal¬ ance of poweriin' Europe was fi rst recognized; yet the Khan of iCrimea raided Russia and Poland and ; - > base these . • In reserve which in tations to meet changing conditions.2 - ; This paper,- represents the results of study- and work by many persons within ?Beginnings -welwanf'- year / new the exercised S .;'f?.war with,JDenmark-tThe Hungary; ;vA,:-ians '£ market, and for avoid ng panics, . To accomplish money ^ - the central as year agriculture and ;'he strength bf our-Armed Forces, the greatest in n particular the future size of history. Let's take, a look at pur j - ir arm, taxes, the. whole question Vr; ''the; year; '48 inv f . One hundred f inflation^ rent bontrol, miniyears ago; in 1848, mum wages/, housing^ health: and ;,V: • we signed' a treaty of peace with Mexico on Feb. 2; yet in. that same Jadrcutional programs,, reciprocal v?year there were1 revolutions in I rade agreements, protection/ of V- Vienna, Budapest, Poland, Frahce j:'n lividua! fights and nece^safily,i'/ terations • Senator; Calhdiin, speak h funds field. which i/nust be made by government and in tmust be made'by individuals. Ufn- the United States Senate in Janu¬ cost of rnents all us with eral Reserve Act Woodlief this statement ary sequence, during the life of the System there have been many al¬ to., their re¬ the Reserve pansion under changing economic and banking conditions must be ";v,y accomplished primarily by the ex¬ Certain largely automatic limi¬ ercise of discretionary authority tations upon the System's opera- gather than by automatic or me¬ ions were imposed by the Fed¬ chanical means, for the reason free to think and are decisions balances the - e n It could have been made. was perform the public duty for be can bank credit. one- .an ever add to or and was - Statistics, to the-lending and in¬ vesting activities: of commercial banks by regulating the supply the Governor. Thus,, in. a year of dei /ion in a country where such a to j cvernment still exists and where where and because y a plurality of less t kird of 1%; yet no one drained to the h lpttom. true and System influence can Governor of Mass ichusetts - e cted . , authorities banks. 'The-Reserve banks in turn -the i'oy great; danger ; that at ; last t - Reserve by member banks to obtain serve we have always abided will of the majority .with, a drain; whether it is a big majority or a both ways / h->"e:y small one. I personally.know;" is Reserve currency We-Likewiie stan di n o w there Federal . in • ' the make available funds that .at'jNVhgt. t'lesedgovernment officials X ' the .other. But, o, .we can vote-td kick them out I' Ahpw stands the ,s of all-ice .without fear of violence; case of I Federal Reserve policies have-evolved from experience in coping with the chang¬ ing problems of the 30-odd years of the System's existence. This evolution has developed money market at present? An unfortunate famine in Europe agricultural products. .The' balance of one end of the sub"it -^"7... V-: * .V treasury, ;V poured Governors YOUNG* , If money poured out ' 5 Board ■ H. Research analyze financing policies in transition period and consequences of low interest rate policy. Discuss proposals for additional credit controls/ and conclude credit situation in postwar period is likely to ;;; be unstabilizing influence upon the economy and some further credit controls arfe required. h "Now, sir, what is the condition of the of trade was in RALPH Research officials of Federal Reserve Board review System's credit policies arising out of war finanwar loan drives and wartime expansion of bank credit and money. They ; Asserts necessity of Marshall Plan, bat it must be backed ; up with our armed strength and economic might. Last year it? was most flourishing. ; created a great demand for our 15 icing, stressing the effects of ■ J:>- /* ; ; , I;;'; AND Director and Assistant Director, Division of / V govern-;* v' ffyi mailtLong-range aid to Europe and; China, strength of our Armed .Forces^ taxes, inflation,:rent control, minimum • wages/ housing/ ; t trad? agreements,' and health and education; in settling of which vj we must remember that "government is something to Jive undel' and? (611) By WOODLIEF THOMAS : ; our CHRONICLE Problems of Postwar Monetary Policy |i; By HON. LEVERETT SALTONSTALL* FINANCIAL .. I on page 36) of . 16 THE COMMERCIAL; & (612) FINANCIAL CHRONICLE Barbour, Smith Co. Adds (Special to The The Change in London Stock Exchange Organization Chronicle) Financial LOS ANGELES, CALIF.—Bar¬ Smith & Co., 210 West Seventh Street, members of the Los Angeles Stock Exchange, have added Dorothy J. Reilly to their bour, By A. M. staff. By HENRY HUNT $1,311,000,000 to increase of $98,000,000, despite a shrink¬ age in market value of portfolios (after distributions of some $22,000,000 in security profits) of $80,000,000. Gross sales of hew shares totaled $267,000,000 as compared with $370,000,000 in 1946. However, liquidations reduced net sales to $178,000,000 as compared with $226,- your the two upon request from or from NATIONAL RESEARCH & SECURITIES above average growth: * - Fund—- % Increase 1947 Year End Sponsor— During 1947 New England :7:;.J: Fund : Lord, Abbett 49% W. L. Morgan 34 *$32,877,000 48,908 000 Fundamental Inv. **Hugh W. Long 27,589,000 E. & Hi Balanced Eaton & Howard 31,408,000 Putnam Fund Dist. George Putnam 23,062,000 Nat'l Securities Series Nat'l Sec. & Res. Corp. 45,538,000 Boston Vance, Sanders 27,987,000 Tnvestors Mutual Investors Syndicate .108,612,000 Manhattan Bond Hugh W. Long 26,673,000 Chemical Fund /; F. Eberstadt & Co. 23,365,000 * ORGANIZED 1931 " *ExcIuding $9,000,000 bank loan. .7 **Sponsors distribution of shares only. ; General Distributor ; best Incorporated 1947 . BOSTON i 7'' NEW YORK funds PORTLAND BANGOR the In number posi¬ tion, Affiliated Fund is currently invested in one stocks, and the only mutual fund with direct leverage, i.e., bank loans. Wel¬ lington Fund, the runner up, is an ably managed, fully adminis¬ common Bonfl fund Here's to continued INC. 1948, growth it witness the Mutual may in Fund business. Required Reading "Let's E. Wilson, by of Charles General be may obtained from the company with¬ out cost. The following is an ex¬ At: S T11T NE W YORK 5 is cerpt: x HUGH W. long & CO. V. N "What what Americans this have with Fund; a statistics an area population on 2% see the compara¬ U. times some 50% S. S. ours R. and greater than that of the U. S. Chili today and hot tomale. investment funds 16 . 14 14 * 12 CSeries B1-B2-B3-B4) preferred stocks is the has sea it past useful purpose to the Ex¬ bers could in mem¬ to the value to the Stock Exchange mem¬ bership which would afford more or some way gamated it would give be amal¬ capital a security to engagements between the members and assure a greater community of interest and more year A. M. Sakolski don Stock solidarity to the institution. Con¬ has already Exchange, which is said to have siderable progress toward this been formally organized in 1773, been accomplished but whose activities as an organ¬ end by the requirement put in ized body does not go back of force that each Stock Exchange 1798, was meeting in the Rotunda of the Bank of England or at the Stock Exchange Coffee House on Street. Because of trade member subscribe to< shares in the owning and operating organization's premises. At the present time there are 20,000 company the shares with a par value of £720,- 000 ($2,880,000) but with a market value of around $15 millions. 90% of the shares are held of the Exchange. ; by members / ■. , - / Though there is still no actual accomplishment of the London Stock Exchange reorganization, there has been a practical merger since 1945 on a provisional basis of the two traditional bodies—the "Trustees and Managers of the "Investors, too—whether they ture. A* group of the Stock Ex¬ Stock Exchange" and "The Com¬ mittee ior General Purposes" into Jarge or srtlall—are charged change members having acquired with responsibilities. new Times have "a centrical location" in Capel a general administrative not nor will they change Court raised £20,000, which they body, known as "The Stock Ex¬ for them. For always 'these divided into 400 shares of £50 change Council." 7, 7 be strange waters' in which they As stated in Harold Vincent's each and founded what is today . . sail. . Even courses the . and the struc¬ own . most beset are shoals, adverse ing currents. familiar with tides and hidden known the London as change. have of increased been and recently published little book on the London Stock Exchange, "The venture Stock Exchange Council is the full Stock Ex¬ capitalization The chang¬ number of shares "We like to think of those who the from time to time, as the size of the quarters body cisions responsible for major de¬ on policy. To deal with enlarged. Moreover* the routine matters; it sets up a num¬ were distributed/among ber of committees, which handle matters as admission of the members as well as outsiders.. such These shares have paid relatively members, j commissions, country handsome dividends. 7 - 7 ■ v >£ exchanges, the Stock Exchange Lists, new issues, disputes and* so The shareholders are in effect on. Finally, I must mention the the proprietors and operators of Share and Loan Department. Thisthe building, which is occupied by "The House" (the membership of oddly named department does a mass of routine work, the volume the Exchange). Through initia¬ of which was greatly increased tion fees, assessments and dues be mine. But I know I need a obtained during the war years by reason from Stock Exchange of the securities control duties pilot aboard—some one to help members they operate the struc¬ guide my investments through the ture and pay the wages and sala¬ undertaken on behalf of H. M. rough waters and ill winds.'" ; ries of the employees of the Ex¬ Treasury and the; Bank of Eng¬ land. But it does a great deal change. /;■/:'•v>:/; ■ '///. more than routine work. .Its Sec¬ College English "A"; invested have Putnam Fund in shares of The as was shares . . According to the New York The Government of the Exchange "Herald Tribune," in reply to a The general membership of the survey among coeds as to why Exchange has its own separate women go to college one wrote: organization and has been gov¬ "I came to college to be went erned by a "Committee of Gen¬ with, but I ain't." eral Purposes," 1 consisting of 30 of 99% stocks Chicago, it if or we are a bear The historical odds beginning to favor termination, of the some time this year. Keystone Company in already is longer than of the preceding 12 and is a As of Dec. 31, strongly'a down-trend Secretary. more cer or less a The Secretary permanent offi¬ and handles the affairs of the than one. To He is, among other ture a a somewhat disconcerting in¬ fluence in their interviews! Cooke it is who maintains contact with the Press, handles Stock him ;'s "The Dual Control" Exchange nothing Francis sleepy about Major Reform Cooke." This "dual sovereignty" the system has been called has been attacked on a number of as No occa- As in 1948, The New England Fund reported net assets things, aplications for membership are made and he public relations generally, and is responsible for 'ideas' at large. promulgates and executes the He has a habit of blinking ,at you rules and regulations governing sleepily through horn- rimmed the members. spectacles.. But, believe me, there organization. average bear markets. are Francis .Cooke, is £ sur¬ prising young man in more ways retary, connoisseur of pictures, and he hangs his favorites on the walls of his bffice/l.At orie time, they included a portrait of Joe members that are elected annu¬ Notes Stalin, of all people.. Hardboiled ally. This committee elected its Tory stockbrokers found the pic-, in market value < of own Chairman, Deputy Chairman, longer. the Prospectus from time some be market (Series S1-S2-S3-54) for of the shareholders and the mem¬ of According to "Selections," pub¬ common stocks been taken to abolish it. ever However, has been held that if the interests Threadneedle history of tradition lished by Selected Investment Co. bers of the New York Stock Ex¬ already the stated, this change London administrative Stock structure Exchange is hot a $2,855,000 divided as follows: change states: "In our opinion, the measure of reform nor does it governments, 23%; other open-end type of investment trust ind;cate any pronounced change bonds, 1%; preferred stocks, 8%;- provides a most suitable security in the present British Labor Govunder current circumstances for ernment's attitude toward the m* and common stocks, 68%. In a recent bulletin on mutual the average person who has idle j stitution. It may lead to the inI (Continued on page 40) funds, A. M. Kidder & Co., mem- funds." of London Stock Exchange as a selfgoverning body, no definite action at tion to build (Series K1-K2) Boston 9, Massachusetts al¬ century half, which policy. to interfere as little possible in the affairs of the as 1802, the Lon¬ now held by M. I. T. paid dividends last year and over 81% have paid dividends consec¬ utively for the last 10 years or Congress Street for a ment ex¬ a In /7./>/'''' "Old as the itself the bonds 50 structure which has ■ Over in of Boston slons during the last century, but in line with the British Govern¬ public. ■;// /-7V investing their capital tke <S>- change an original plan bers 16 The following is a good exam¬ ple of the facile writing of Charles M. Werly of The George Putnam accom¬ Mexican Weather Report Certificates of Participation in local investment dealer This proposed reorganization should It is merely a "reform measure." change 17 Fund: 7* " the present time serves no having taken a For whether their of the world's area and 7 % of pilot aboard. savings be but a few the world's population, we have invested 46% of its electric power, 48% oi hundred, or many thousands1 of its radios, 54% of its telephones dollars, they have in effect said I have59% of its steel capacity, 60% of this: 'This is my cargo. its life insurance policies, 85% of gathered it not only for myself Its automobiles and 92% of mod¬ but for my family. • I know my destination—my course is planned. ern bathtubs." The security of a safe harbor can We would like to ian Oustoai of record plished sis compared with the res of the world? Briefly, with 6% tive your reorganization. interpreted as to move and 22 Taking the Pilot 'Aboard . Free," President Stay Motors, copies of which Prospectus from your Investment Dealer or a a be way unsatisfactory facilities, the mem¬ 'taking bers decided to build their own the pilot aboard' while traveling structure for transacting business. in strange waters. Actually, to But it was necessary to obtain the tered fund (bonds, preferred and shipmasters charged with the re¬ necessary funds for the purpose. common) that has maintained for sponsibility of« their cargoes— As the Exchange itself was an un¬ everal years a sizable cash posi¬ representing in many cases great incorporated body, it could not, tion which it is now beginning to fortunes—the sight of a pilot clam¬ as an organization, erect the struc¬ invest. Fundamental Investors as bering up the ladder was a wel¬ ture or borrow money for the a rule is fully invested in com¬ come one. even in familiar chan¬ purpose. Accordingly, a plan was mon stocks and has an excellent nels. But the sea is not alone in conceived of forming a corpora¬ long-term performance record. this tradition. Manhattan ■i-j 28 the^——'—"■ showed quite dissimilar in char¬ were acter. HARTFORD which largest percentage growth during undergo no and Generally speaking, balanced and income type funds enjoyed the demand last year. However, it is interesting to note that the three A Founded 1898 in most ' Coffin & Burr soon isted Affiliated Wellington 120 BROADWAY, NEW YORK 5. N. Y. administration structure. Reports are coming from London that the stock exchange, there, probably the oldest organized securities exchange in the world, will of Net Assets at CORPORATION measure a and compact an 000,000 in 1946: Although the overall gain in net assets was only 7%%, the fol¬ lowing funds with assets in excess of $20,000,000 each showed well investment dealer, proposed change in London Stock Exchange to reform it, but simply to merge governing bodies operating it and to effect a more efficient Organization is not Net assets of leading mutual funds rose from $1,409,000,000 during 1947, SAKOLSKI Dr. Sakolski points out Assets Gained $98,000,000 During 1947 Frotp*c*n Thursday, February 5, 1948 cash and THE COMMERCIAL Volume 167 Number 4670 First National Bank of Boston says staggering, so we are National Debt and Budget are vulnerable than quarter century ago. more CHRONICLE A. S. D. District 11 Budget National Security Threat N. Calls Swollen FINANCIAL & "stagger¬ been elected chairman of District ing," and holds "every conscientious effort" should be made to trim No. 11 of the National Association items, or our national security will be threatened. The bank con¬ of Securities Dealers, Inc. v \ tends our fiscal capacity will be^ J. Murray Atkins, R. S. Dickson so impaired by the size of the magnitude to spend beyond our & Co., Charlotte, N. C., was chosen and Martin J. budget "that we might not be able means in peacetime only to find vice-chairman, to meet the financial requirements that our fiscal capacity has been Bayly of Philadelphia, secretary. so impaired that we might not be in the event of another war." The District also announced the Commenting on the budget, the able to meet the financial require¬ election of Richard P. Dunn, Auin its latest issue scores the Administration's 1948 budget as "New ments in the event of another war. England Letter" states: "The1 President mitted recently sub¬ budget of nearly $40 bil¬ a lion for the fiscal year beginning July 1, 1948. ' It amounts to about $2 billioa more than for the cur¬ rent fiscal year, and is more than four and one-half times in as the fact, the the amount In spent in be to much as 1939. year We have reached the stage where Parker & Redpath, quirement, namely, the credit of Washington, and C. T. Williams, Jr.*: C. T. Williams & Co., Balti¬ more, as members of the Commit¬ tee representing the district for three year terms. They succeed George D. List, Robert Garrett & Sons, Baltimore, and James H. Lemon, Johnston, Lemon & Co., the nation.'" Washington. fiscal policy is inseparably linked with national security. Or, as Sen¬ ator Byrd has not allow perpetuated devour the phrased it: 'We wartime in time primary can¬ extravagance of to peace military re¬ > Model, Roland & Stone To Be NYSE Members Formation Co., 44 Wall dealers, & Co. in the Butler, Moser & of as is Street, announced. firm are Herman securities Shepard Principals William J. and Butler have been for in over the Stone A/Cone the and firm of of New York bers are in¬ of City will become the Leo exchange. Model, Herman H. Rolf Stone, . R. Herman Frankel will continue with the new company as trader. Joins . Two With Hutton Staff (Special LOS lene L. to The Financial ANGELES, Du Four and Groszkruger ; Chronicle) Bailey, Selland Co. (Special SAN t. to The Financial Chronicle) FRANCISCO, 'CALIF.— Ellis O. Thorwaldson has become CALIF.—Ar^ associated with William F. Bailey, Selland & Davidson, 155 Sansome Stret. have joined the staff of E. F. Hutton & Company, 623 South Spring Street. 131 J was Co. and Blyth & Co., Inc. : ; to trim them down. ►V "It is to be expected, of course, jthat Governmental costs will be (Considerably the higher u before tnan because of war interest on 1' huge debt, international tensions, and the vailed Similar conditions after the close of World War smaller although scale. on that At (j* pre¬ nation's finances m much a time, im¬ on . i /*:•• sound a of thermore, 1922, than or j ^ •' . / t jr- * • de¬ a 80%. ~ fmy ■■ ,j! Fur¬ indebtedness Federal reduced was by more a ■■■> Federal expenditures were reduced from $18.5 billion in 1919 crease i pi/ ' basis. >to $3.4 billion r\\j ' tne first mediate steps were taken to place the ■r* providing of aid for world recovery. qgN^t y . irlipf a almost 40% during the period 1920 to 1930. "It is debt gering, and we times burdens our greater. mucn our that true changed, that in are have are now inasmuch But budget are much a as stag¬ so more vulnerable position than we were a quarter should of ago/ We fiscal century a therefore our realistically problems face and chal¬ lenge all items, with the objective of eliminating waste, extrava¬ and non-essentials which in gance, the aggregate run into several bil¬ lion dollars. In the make-up of the next fiscal year's budget, about $31 billion, or nearly 80%, repre¬ sents expenditures for defense, veterans' benefits "cWANE and services, foreign aid, tax refunds, and in¬ terest on about debt. $9 able' items and are real any getting If are we progress financial our pur¬ 'untouch¬ interest charges refunds. tax make other only the to toward house in order, it will be necessary to shave IRON PIPE COMPANY, McWANE tons special achieved That leaves only billion, for But poses. CAST incorporated in Alabama in 1922, has now pressures, per day, a production of approximately 300 and is nationally recognized the as and leading producer of small diameter cast iron pipe. The Company developed the manufacture of cast specializes iron pipe than pipe, any and currently produces factory-made pipe: with for suitable various which greatly facilitate, installation jobs particularly are equipping in joints, helpful shortage and high wages. in times of labor - 2-inch The such more Company's 10 sales offices, strategically situ¬ ated other foundry in the world. throughout the distribute nation, pipe to all the other items. McWANE'S huge Birmingham plant National Defense 1 "National the largest defense state in every the U. the of S. and to many its Utah and foreign countries. In little constitutes item single practically than more a quarter of subsidiary, Pacific States Cast Iron Pipe Company, a manufacture pipe in sizes ranging from century McWANE has become through Byrd of Virginia has said: 'There leading producer l^-inch of cast iron pipe, budget. It is placed at $11 billion, 28% of the total. As Senator a with an annual output valued in and special castings. or 12-inch diameter, together with fittings the millions. And the Company's growth continues. At present it is vast opportunities for econ¬ omy in the Army and Navy, and while we admire, respect, and have great confidence in our mili¬ tary leaders, yet we in Congress are The Company's underground for cast iron gas, pressure water is pipe other and its used liquids. adding Provo, Utah, a new and modern plant to properties, which will result in still greater productive capacity. must realize that these leaders are accustomed it 'and is waste, even in degree, to the waste of war, Another continue such though it be in lesser to easy time of peace.' Southern ern advertisement industrial industries, is in the series developments. ready to do its by Equitable Securities Corporation featuring Equitable part in has helped supplying to finance others with many capital South- funds. The Senator goes on to point out that in 1947 the Army and Navy had times five i as ployees as in average cost many civilian em¬ 1939, and that the of maintaining a NASH VILLE N DALLAS HARTFORD KNOXVILLE GREENSBORO BIRMINGHAM CHATTANOOGA member of the armed forces was much Furthermore, NEW ORLEANS two as and one-half times before the war. as the over-all cost per man in the armed ex¬ services—including all penditures for ships, planes, am¬ munition, and all other items— was only slightly below that of the war period., "It would' be folly of the first MEMPHIS Securities Corporation E W Y O R K AND JACKSON BROWNL<£E O. CURREY, PRESIDENT 322 UNION STREET, NASHVILLE 3, TENN. He formerly with Livingstone & n " "" Roland, Frits and spent staggering that tney must be subjected to the closest scrutiny, and every conscientious effort be made mem¬ Partners 20 years. our ' Model, Roland & Stone, 76 Beaver Street, in the first 124 Republic. The pro¬ posed Federal expenditures are so was years 10 Feb. on Exchange membership of Herbert Can- dee, George A. Butler and Edna Moser, the latter a former partner of Shepard & Co. Messrs. Candee vestment field H. will acquire the New York Stock to successor fiscal year is 62% more next than prewar chincloss, 17 Formed in New York BALTIMORE, MD.—W. Carroll Mead, Mead, Miller & Co., has The"New England Letter" of the First National Bank of Boston, . Butler, Moser & Go. Names Meade Ghm. > (613) TWO WALL STREET, NEW YORK 5, H. Y. 18 .THE COMMERCIAL (614) Bond Club of Chicago (Gels Slate for Officers CHICAGO, ILL. seventh annual .*/ . U, I ' • • u , v I » ~ ♦ CHRONICLE FINANCIAL & I , '1 < . Proposes t Securities Salesman's Corner dinne^ and meet¬ ^ ' Rep; Sundstrom introduces bill in Congress calling for exchanged of present dollars for new currency. Treasury officials view pro-; r By JOHN DUTTON ing of the Bond Club of Chicago ' Posa' ' will be held at the Chicago Club Are ' Wednesday, Feb. 18. i At that on time members will not vote the on for cers and If any group of citizens should know and which lie ahead it is those of us who are in the investment business. If organizations which represent our in¬ dustry such as the Investment Bankers Association, the Security Dealers Association, the various Bond Clubs and Dealer's Associa¬ tions, the Associations of Customer's brokers, and the Organized National Exchanges, do not realize these dangers—WHO IN THE WORLD CAN WE EXPECT TO GIVE US LEADERSHIP? year: ident: r e s L. Martin, Burns & . r n e, Co. Treasurer: Cummings L. George Parker, Glove, Martin s ■■ Officers, to Doyle, Leo and one serve year: Doyle, O'Connor & Co., Inc.; Perry Dry- den, Paul H. Davis & Co.; Austin Jenner, First National Bank of Chicago; William D. Kerr, Bacon : Whipple & Co.; Nathan D. McClure, Harriman Ripley & Co., In¬ corporated; Nelson M. Utley, Hal•sey, Stuart & Co. Incj A proposed amendment to the constitution and be voted by-laws will also on. The Club does not plan to have guest a dinner. the at speaker mation, Key to America's Prosperity." It is not an alarmist's docu¬ It has been written by a group of leading economists, and based upon recognized source material. The con¬ clusions are definite and the logic unassailable. UNLESS TAXES ARE REDUCED SUBSTANTIALLY ON INCOMES ABOVE $10,000 findings are WE WILL CONTINUE TO HAVE A WIDENING DEF¬ FORMATION IN THIS COUNTRY;- Un¬ circumstances inflation can only become more violent annum, per ICIT NEW CAPITAL OF such der production will decline, and an economic debacle combined with flight from the dollar, is the final end in sight. This report makes no such conclusions—but anyone who knows history, who has seen the results of France's version of our existing New Deal economic real a who knows anything about the way England destroyed ability to produce through her refusal to accumulate better tools and machinery, can come to only one evaluation of the future. UNLESS OUR TAX LAWS ARE AMENDED SO AS TO EN¬ COURAGE THE INVESTMENT OF VENTURE CAPITAL TO A MUCH LARGER EXTENT THAN EXISTS TODAY, WE ARE GO¬ ING BACKWARD AS SURE AS NIGHT FOLLOWS DAY. ' policies, her or own . generated and intramural enter¬ enlightening figures taken from the NAM report. Do you wonder why the new issue market for common stocks is in the doldrums, or the stock market here's your an¬ tainment" has swer. However, will which dinner, be at 7:00 at Members 6:15 . . of incomes with the Dean the Union Trust G. Hamilton & Beasley VP f V( . /v.; • of consumption and 80c of savings. practically all VENTURE SAVINGS. risk-enterprise But these 80c of savings are In other -words they go into (common stocks). - to over U. foregoing the The source government. S. Bureau of Labor Statistics. * is two studies made by the s a • t Street and South CALIF. G. — Street, Spring So go . . Exchange, charge of give vice-president in the underwriting de¬ as of the private capitalism, continue with their destruction thing that makes American capitalism work. By your silence, consent to those who keep on saying, "SOAK THE RICH." is what they are doing soaking everybody with an income very That . . . $10,000 a year. Soak them until they have no incentive left, And that day is almost here . . . LOOK AT YOUR NEW ISSUE MARKET .> LOOK AT YOUR STOCK MARKET! partment. of over to fight back. even . Are For Profit Preferred 85-year-old New which stock of an England com¬ a dividend has of $77 share. a Earnings over the previous ten years have averaged $21.30 a share. of years, nine of the past covered annual divi¬ years dend are number requirements by a you Write to Ten-year the • "Europeans and Asiatics always, hoarded American" dollars, both while; in their native land,. strengthened"" There ing them atic to Frank L. the accuracy ability $4.07 Recent a share. to Democrats WHY DON'T YOU MEN THAT HEAD . . ASSOCIATIONS AND EXCHANGES waiting for? ? ? the NAM and / ask them for a industry? *=*'■"''; i"'"V. copy " ■ ■'.;v of their report on Their address is 14 West 49th Street New York , ' it States government would huge a otheiwise • i N. Y. Telephones: aud culation. No them knows how much one of this amount is time over to new private pointing hoarded abroad by and persons our HAnover WHiteluill business interests. partly Estimates work of aVe Established ^ . supply bl well as the engvaving v/ould present 1 ,,/: V Stephen M. Foster, Economic Advisor of New York Life Insurance Co., holds $800 million of amount will come from sales and demptions of government bonds and remainder from excess of sums over to mortgages, building operations and loans to business. ;>>•/->■ V 46 Front rere¬ Sees large payments, together with interest accruals. committed -y./; ■ . Finance of the American Manage¬ ment Association in New York City on Jan. 14, Stephen M. Foster, Economic Advisor of the New York Life Insurance Company, gave a Speaking at the Conference on favorable estimate of the role of life insurance companies as a source «>of new (funds for is business expansion. In discussing the situation, Mr. Foster "I during year Of sense, other 1948. the life insur-. , investors. Accordingly, it to distinguish disposal rof assets important -seems between business ance difficult. vestment; estimate the more providing funds for rein¬ (/However, such sales normally have the effect of di¬ minishing the investible funds of a stated: that little a course, to the extent to which we sell some of our assets, we are, in for able means, the our and s .. municipal ■;■; Street, New York 4, N. Y. San Francisco voluntary one bonds, curity that we dispose of is bought in or extinguished by the obligor., • "First ( and as to mortgages. The life mortgages, for both new money and refunding, some¬ thing like $5,0 billion. But. since this figure is somewhat higher than most estimates of the avail¬ insurance business held about $8^ insurance invest¬ money, I should like to it down to show .' you its amortized, matured or otherwise repaid, - one would; expect that something in the neighborhood of $1.0 billion might be returned to the life insurance industry from estate real ability of end of life have new in¬ funds beetween being the the life in¬ for all purposes In in the Judging by the rate in this group , past few years been source, for reinvestment in * capital markets during 1948. "Next, as to bonds and stocks L the - ■ other than of those the Government., At the end the State Federal; of insurance/business life almost $18 and 1947 held1 billion of corporate, municipal and foreign few stocks. We might bonds, and billion; in 1947, it is estimated at $3.2 billion; in 1948 it will prob¬ have, from this ably be much the same at about $3.2 billion. ■" "The question of how to handle, available for the purpose ernment security of this discussion, the liquidation of existing assets • this It represents insurance business has to 1947. at which mortgages life is very simple. , billion worth of mortgages at the merely the new, funds which the difference 1913 other or the call, prepayment or other causes our control, where the se¬ t ock s,; v;1 Stated and sale on beyond Stephen M. Foster • Chicago the that out Estimates 1948 Life Insurance New penditures 2-7914 dollar for unpreceded difficulties. pre-War Ameri- on industry's total receipts from all sources and its total ex¬ 3-9030 government and currency, the necessary paper, as foreign surance Teletype BS 259 : My dollar, in exchange therefor." Y ' v; Commenting on - Rep. SundCongressman Sundstrbm said: V > { strom's proposal Treasury officials : "As of are reported to have termed it Sept., .1947, $28,567,000000 in U. S. currency was in cir¬ highly ( impractical /. and costly,' vest—these For 35 Years price 7 request : confi¬ quired for European relief. ..In making his announcement; break Over-the-Counter Quotation Services St., Boston 9, Mass. Tel. CAP. 0425 v nationals.; be. turned receive re¬ constituent. parts. NATIONAL QUOTATION BUREAU, Inc. State which unreserved own 1946 this excess amounted to $3.5 148 today require that, within :a limit, these hoard¬ into the-central government,: which would turn; ings sum be the its Asi~: or would certain of selves; and would save the United ment t Descriptive analysis of this special situation mailed on of States; European a should 'plan would rob no hoarder, but these governments to help them¬ which not here, United ; .government dence "The first part of the total fig¬ Common is commands Sundstrom Corn-.,, munism and help to avert a Third World War; would determine with ure in enter1".; the they more arrival after :and hand, and, on the other hand, our / disposal; through h- amortization, maturity, wide earnings of :,J,, * ' N;y:■„ through you price 37 average this to make avail¬ . margin. Recent that billions should be able , You are SUPPOSED to be the leaders of our Capital Formation. 20, N. Y. . BROKER AND TELL THEM? What paid for a earnings in ten Republicans alike. DEALER into leaders of the , predominantly believers in our enterprise system—both and believe run represent Wall Street? going to do anything about this going to send some qualified, men before the Congress you v have ■government thereby enabl¬ greater will dollars. . explain what is happening to your business? Are you going to tell purchase: of hem what lies ahead for this country if PEOPLE REFUSE TO BUY- new issues erf COMMON STOCKS, OR DO NOT HAVE THE MONEY TO BUY corporate THEM? You have a Congress today that is composed of men who are bonds;,'loans dividends have been no you various Associations and Organizations who Are While amount ceipts ... conclusions are based upon what would have happened to the dollars, the various groups paid in taxes, if these ax dollars could have been retained by them, instead of being paid The members of the Los Angeles Stock accumulation authorities effectively •■ |' change manipulations. Competent na¬ sending resist : ■ . tions to which $10,000,..the fax dollar < represents 20c V ABOVE Co., ANGELES, pany, ****** the those, — Capital Absorption at $5 Billions Hamilton Beasley has become as¬ sociated with William R. Staats GF Wm. R. Staats Go. $5 oD 1 „■ properties;.(military expenditur'es by our government and, by our overseas military personnel in World War II; current tourist exh penditures, and international ex- g.o vernments v:. ahead if you like it that way ... sit tight and do nothing go to the meetings of your various associations-. . . but be sure to sit still and keep quiet. Let the New Dealer's, the Reds, the Pinks, the Commies, the left-wing, politico-economic advisers, who sur¬ round the President, and all the rest of the congenital haters of Wall The nancially currency and give new cur¬ Mr. Sundstrom claims that if the ■■<$> Pig>; can Would greatly strengthen fi¬ . McCormick, ■Savings Bank, and T. E. Hough. 640 it - States - • , $5,000 and $10,000, the tax dollar rep¬ consumption and 60c of savings. Again all of incomes On new Kebbon, McCormick & Co.; James First 40c savings are NON-VENTURE. nominating D. LOS United below. $5,000 incomes between On resents slate were .into .{.'law,. based -v--'; •<'. .• the' PERSONAL INCOME TAXDOLLAR, represents 80 cents that would be spent, and 20 cents ? that would be saved. BUT ALL OF THE SAVINGS GOES INTO NON-VENT,URE INVESTMENTS, such as savings banks, insur-:ance companies, postal savings, etc. Cocktails p.m., presenting Feeley, ■;;; On the p.m. committee P. very .... served dinner some are . greatly enjoyed. Din¬ coats will be worn.; will at Here directors the which and arranged announced be feel will be ner been "self- of program a in all exchange.therefor; . ment. the Forgan & Co. Directors Treasury to call rency equal in" bill is enacted comprehensive, fair, and unbiased reports ever dollars in aid; issued by any fact finding organization regarding the dangers to our :w q u 1 d i neconomic survival as a free enterprise society, was issued by the crease confi¬ National Association of Manufacturers. It is entitled ''Capital For¬ dence in these Harris, Hall & E. a One of the most Hempstead Washbu Congressman Frank L. Sundstrom (R-N. J.)'on Feb. 3 introduced bill in the House of Representatives directing the Secretary of the y/e are Corbett, Inc. Secretary: 7/ ;S: Do you care whether or with the follies and the foibles up impractical and costly,, as you understand the dangers rectors for the P depression catches Are country? your washed down the drain? di¬ George your future of business? day and age, and as a result, even the basic freedoms which Americans have come to take for granted may some day be we offi¬ coming the of this following slate future a future of in the interested in interested you New lb S. Currency to a VlV- The thirty- — •Thursday, February 5, 1948 like issues. ~"I •*.: am ysis in a source, something * additional $200 milliori an to put •■' • going to a into new capital * come to the Gov¬ part of this anal¬ moment, but while I am THE COMMERCIAL 167 Number/4670 Volume that the life is how in-] the life insurance business appar- its loans to as a of j whole may very properly and dp- ently in the process of increasing policyholders, whereas for the past many years such loans Nazism and second a World propriately give up, either through War had. we not dilly-dallied. maturity,/call or sale, something Even^the subsequent loans were like $800 million of' Government !nOt sufficient to counterbalance the bad timing. With this lesson One would j securities during 1948, and that it probably expect that only about may do so without having the de- 'of history before us and the ex¬ cline in its holdings' of Govern¬ plosive dangers that surround us /< ' $100 million of the total: funds available, within the life insurance ment securities any more rapid at present it is imperative that ;,.,o business would be required for than the decline in the balance of our/ legislators must once again the this particular purpose.'/ In addi¬ privately held Government as- they did patriotically during have been decreasing. V ' , tion t.K fr.i- insurance apparently operations . own iir life the will - business require ■ for v its in the field f of residential ,a.nd other rental prop¬ ' • $100 million in 1948;' "If these various estimates are some from increase in assets, plus million from reduction $1,000. of mort-: gages, plus $200 million from liq- uidation /other stocks' minus $100 bonds , million for in-r in policy loans, and minus crease $100 million for expenditures on enough formed we coalitions ahead crisis instead of after. General man Staff been too realistic known ever the - large of the The Ger¬ would have to attack had it be able; to/supply to 'the capital mostly for the financing markets to receive Mr. Stalin at any time in of homes, other construction, new plant, new equipment and new capital Washington improved have could if upon been neutral point a would be chosen where both part- other Vies could explore differences with kinds—for improving the stand¬ a sincere attempt to get back to ard of living of our great country;' the pre-Stettinius fairiy satisfac¬ "One further point. While it is tory:: relations with Russia," he requirements of - 19 poten¬ confronting it in advance. We could have stopped the second World War cold had we made a defensive lateral treaty guaranteeing the in¬ dependence of Ethiopia as sug¬ gested by the speaker in the New York 11, "Herald 1935, would Tribune" of Sept. which if carried out liquidated Mussolini have internally with corresponding percussions re¬ the Hitler regime on Manufacturers Trust Promotes Ohlmuller Manufacturers York City, in Germany. Staff Co., New that Frank Ohlmuller, formerly Assistant Secretary has been made an As¬ sistant Vice-President and in charge of • has placed bank's the Security Analysis Depart¬ ment. - • Mr. Ohlmuller was associated with George H. Burr & Co. from 1926 to 1934 when he came to Manufacturers Trust Co. He was an Assistant Secretary in made -1942 and Collateral placed in charge of the Loan Department. He later made was Officer Trust in an charge Investment Assistant Trust of bank's the Division. For the past two years, he has majored in investments at the Rut¬ gers of University Graduate School Banking. , ] , This time the Rus¬ sian Trust announces P. been eventual tial . to the and of had envoy, treaty with Great Brit¬ debt. '• / ' •"« the War" achieve fast and decisive ain during the phony war period ."If the $800 million proceeds of action,1 proving again that democ¬ as suggested by this speaker at the such moderate disposals by the racy can successfully meet the test time. We likewise could have re¬ < tarded it had we made a multi¬ life insurance business: aroadded of crisis. $4,200 million amount that ,,v: As. a second remedy, Col. Mur¬ we had previously accounted i l foiv ray- jacoby suggested a direct 'Ti'/i correct, then thus far in the dis¬ we arrive at a grand: total- of about meeting between President Tru¬ cussion we have accounted for the $5.0 billion as the amount Which man/and Marshal Stalin. "The following funds:'' $3,200 million the life insurance business may implied invitation by Mr. Truman erties (615) would arise ip; Central Eu-t tions if ; we are pressed to it rope with all the danger that this through the course of events, and implied. "In other words," said only then. Col: Murray-Jacoby, "we could :"We could have prevented both i, ave prevented the eventual rise World Wars, continued the former §till on the subject pf the pccrual;-securities as, likely, to "be reduced surance; business FINANCIAL 'CHRONICLE tents pf inve^stito.':Xurids'•:'Joj reasons by. something like. $800 million.or other than through the voluntary | more during 1948. / 1 sale of existing assets it is only ' "It seems logical to expect that fair to point out & in General advance should With Hayden Stone & Co. know just what the poten¬ [ Hartwell P. Morse has become. "" rental properties—a total of $4,200 true ihat ':>•' million.: \'•■■■'I'. ably become ^ "That brings us finally to the question of'the amounts that the insurance life ically for to expect the business available make purchase of log¬ can private new securities, mortgages, bonds and stocks—through the disposal of billion $20 only prob¬ stated. a better climate. for mortgages, building .oper¬ ations and loans to business; Some estimates the to are President ally it million due were these of during the next 12 months, theless there is, I think: a might jump conclusion the immediate ability or never¬ of life insurance real think the into :as;Tb inability coming are perience which (1) proposes: (2) the Col, H. Murray-Jacoby, about in swift and unemasculated former U. The former envoy vantage be to first The move he felt of the tion would measures type.",, Hungarian - "This of Europe moves loan to Smith engaged income the as in that Charles and Dewey the of doctrine his ievel." v. on "Under the external of circum¬ these "the prediction of Congressman Eaton and Sena¬ Ball tor cannot that the Congress before ominous." June or index Plan from fore in hope for street of themselves. mere feeding will not do trick. / Just as in the early '20's, Europe is now a vast, ma¬ chine without lubricating oil and with After led in its plant partly*-"destroyed. World War over a Central I, the Quakers million children Europe and a day the full a in¬ Stalin in got himself his Stasserr the off such and po¬ side have interview, with beam bit of a his We should confidence efficacy of the Sermon if in principles of the on the Mount, par¬ alternative is a an attempt at reconciliation would fail and end up here one are then ; Suppose each' bag contained ten every make $1,700,- — vestors have; furnished for the two years; "In , with top speed create a system of pro¬ the tective quasi-alliances among the democratic powers. / / The conduct of Miv Bidault at the recent Lon¬ regard to the timing," Col. don j Conference and the recent Murray-Jacoby 'continued, "the Harding Administration blundered courageous statements of Mr. . Bevin and Mr. Morrison would in¬ the Central European the New Aug. 21, dicted tion a York if were -not a vast army of of the United Section a function under 51 the Nations, of two-thirds ex frame¬ the majority Veto; i.e., i or we ings by direct diplomatic user a in reason- - Every telephone shares the benefits in and better and j telephone business has been built by the savings of the many rather than the wealth of the few. The < large sums that have been put into new facilities in the more telephone service. some idea of alone give you the cost of provid- ing telephone service. The instrument in your home and the few wires small part see are only a of the $257 invest- you ment behind every telephone. can could negotia-] every just like yourself. The Charter create these concrete understand- imme- malcon¬ proceed money telephone business in the able return. where stabiliza¬ out their the either invoke "Times," dated carried Investors put the of last two years \ hope of security and work statement of his currency ' We Armstrong Plan within the 1922, in which: he pre¬ that . could currencies have been successfully stabilized." " The former envoy then read from 1 dicate that this could be done. could still in year. * Further substantial being invested this walk of life and in women expansion and improvement of amounts are' r should we hundreds section of the country—men i the amount that in¬ 000,000 System, the term means thousands of small investors in million dollars. That would the Bell investors telephone service in the last - ■ In hundred and seventy bags in this picture. in another Godsberg, to believe that TI slaughterhouse. "Third," continued Col. MurrayJacoby, "if we would find that such telephone facilities in the last two years acknowl¬ attempt at reconcilia¬ an $1,700,000,000 from investors for new realization exist can on national economic renewed human curing and stimulating poten¬ Ex-Presi-1-diately, together by they have always done and ticularly period . put back on the beam of prosper¬ the million . ' the by sending Dawes to Europe in be 1924 instead of 1922 at which time ity, and 10 the by the end The Europe has to Russia just its get systems as tion We have there¬ reason to different Mr. but low of around same can highly successful provided timing is right." ' v " j ; / principal hope," continued keepers, business men and farm<ers in Western Europe could see a new every the how your the the former envoy, "is that a large main in 120. new in gen¬ economy hardheaded with edged agricultural-industrial to costly a Hungarian adventure. other words, it dou¬ those eight years. The rose 80 a to tials of the Marshall Plan will be July is / •. ' • entrepreneur group of small shop¬ in from dollar a Russia, cannot afford so of that In composite expected to get out of be "Our Marshall 1928. bled stances," he said rose of /'And litical Index 60 in 1921 to above 120 duction is go afford terest Number, published annually by the Cambridge Associates and of test have one. as stated, "and a which annuities, savings from ? which the speaker was then a co¬ author shows that European pro¬ expect would our would side 100th anniversary of the inauguration of ; Communism by Karl Marx,"/Col. Murray-Jacoby we can us depression due size .ubsidiary functions. is tatives in the investment depart¬ ment. .1 that basis, were on such basis Hungary; the loan to Poland * world." alFsources recovering Jeremiah Jacoby-Stillich naughton and * Claude Z. Hilmer have become registered represen¬ suffering doctrines from dead for the League of Nations spon¬ to Austria plus earlier "The A. another war, credits; the Dawes the still hovering and haywire. That if we, the wealthiest of all countries with a steel capacity three times French short- Germany; loan :. to ■ wait to Robert C. Cease, William G. Con- the ex¬ recent our that all eral undertaken. had of billion deposits and the sored loan the . other most miraculous ever term industrial the year of such against the Communists, thus in¬ counter program correspondent / department. road of equivalent of the total of one war, Yet, the fundamental reconstruc¬ auguration of the Marshall Plan. "We can expect," he said, "new pressures vin the • spring when fighting in the Balkans is apt to accelerate; and particularly if the Czechoslovagian elections would, as they are likely to, go viting Hoover relief the swift and unemasculpW in¬ a Herbert the greatest and danger conflict with Russia. open dent believes that as dealer this showing and our $260 billion debt we would now pile up an¬ . could be made to ad¬ the passing period of tem¬ on a .he U. S. ■"■■•-x~ avoid moves of income; and that if in addition to Ambassador-at-Large, in Delray Beach, Fla., --■on Jan. 20, on "A Policy With Respect to Russia," suggested three alternative moves that could be advantageously made to avoid danger three Exchanges, theoretically to return to such conditions, not a living person in President S. Russia. peace a'prostrate over and Stock manager we address at the Delray Beach Women's Club, of conflict with channels, with into sounder, Boston assistant liberalism protects impact buciget of $40 a Stalin; and (3) if reconciliation should fail] formation of protective alliances by democratic powers. ; middle and porary despair. That we now have Truman and Marshal an applied incidentally national meeting between of practical years in years and Murray-Jacoby process and an and not ahead of us; that we have enjoyed 154 War With the Soviet inauguration of Marshall Plan; hufnane eventu¬ through with Hayden, Stone & Co., 25 Broad Street, New Yorlo City, members of the New York we Suggests Thiee Moves to Avoid H. evolutionary of itself was as Franklin and Thomas Paine; that have our revolution behind us • resting Col. ally.'stabilize not the country of we are against IT. true of the Mexican one, person¬ feelings revolution could, associated the robber barons but the country of Thomas Jefferson, Benjamin at their possession." that dollars that say companies to in¬ vest possibility that we should of our holdings of Government Russian munist Chief, and its burning de¬ sire lor peace. Where he could I offer this1 filial you erroneous some callable or lest could the American main street to the Com¬ as months of 1948. remark Truman Interpret be already : they become avail¬ able, through the first three to six that appears A meeting where that effect most of the funds may committed harm," no Colonel, "but might clear atmosphere and produce a the already commit¬ are "This could do said the considerable very . $100 some will ted of- Government While securities funds available,5 it is also to extent, they of 1947 the life insurance business held that true Government securities. At the end securities. these tials ^re; for in that manner the BELL TELEPHONE SYSTEM 1 20 f THE COMMERCIAL (616) r (V A ryj /, r<TTV. y,*y & A-!"''. •.f'TVf V FINANCIAL CHRONICLE sales of the proceeds of bond re¬ demptions on the one hand, and purchases for fresh industrial in¬ Canadian Securities vestment in Canada In the final analysis the maintenance of the existing sterling parity is in the best interests of Canada. Similarly as far as this country is concerned the stability of the pound and the avoidance of a world-wide currency war, is also of paramount importance. The question of British financial pres-^ tige and the mixed blessings pool would prevent the collapse which would result from devalua¬ of tion would the vast foreign trade area consti¬ tuted by the sterling and dollar ing suggest that the hold¬ the of sterling would line likewise prove in the long run to be beneficial from the British groups of sustain now the proved Woods week the external to impotent internal sections of the ket schemes remained Free funds cope dull movements exchange stabilization and it is logical in consequence to endea¬ cross-currents represented to rebuild dom-Canadian has created an As matters tion is drastic would choice tion in connection with his request triangle but ful Secretary Dear it valuation of the pound, and same time assure smooth a of trade between the dollar de¬ sending this $10 the United In inscribed States Treasury accordance the or you with at at - 12818 Coit state¬ me Very truly yours, A. F. You fined DAVIS. in first rency series of artificial situations, the establishment of a exchange Service Washington 25 United States •? A. ! "• 11, 1947 F. Mr. Dear Davis 1, Ohio of Federal Reserve one United for ) Davis: closure dollar ten of en¬ compliance as GOVERNMENT of The V , your re¬ legal makes of the Resolution coin States other tender of or currency The types $5 United States note is returned herewith. M. E. SLINDEE, Acting Treasurer. BOSTON, MASS.—Vance, San¬ Shaw vy Carter, Jr., Herbert I. Kimball Valentine to and partnership in the firm. All have been associated with Vance, Sand¬ Service Fiscal Co., Ill Devonshire Street, Thomas A. Baxter, A. John Acting Treasurer Treasury Department ers & Co. for some time. two which' letter ful $5 are we States interpret we • . notes, from to be considered money Are United your as to infer from this that the Federal Reserve notes are not lawful money? I NY-1-1045 am notes note enclosing which you that it states —The urday : NEW YORK 5, RECTOR 2-7231 MONTREAL, has 1933 should one of the on me. Montreal I the face: "The United States of America also resume ing sessions on the difference, form $1,- of. U. S. and The so- 'free' gold, carried in the general fund of the Treasury, was $1,027,782,071.17 on Sept. 3, but even this, is really not free since it is an asset item helping to offset in part other liabilities of the Treasury. the gold certificates held by the Federal Reserve Banks, the latter, on Sept. 3, had State of New tion York has been that "a gold standard is the satisfactory monetary system the standpoint of the Amer¬ most from ican people as equivocal and However, your lieves that advocate is un¬ uncompromising. Committee be¬ is it the whole'11 a to gold premature return to standard at this time. the The mone¬ tary systems of many nations of the world are fraught with un¬ certainties and confusions and, with the U. the as S. dollar principal now acting base, currency change that would upset the any present money situation must con¬ sider the effect such action would have the on Another currencies of other direct the past year, many recom¬ mendations pertaining to the gold have made been by officials. Sats. Some seek the immediate return to this sys¬ tem by the take U. Government; S. the view the that present is too uncertain; and a few believe that the gold standard •should be abolished.3 Jan. 22, 1947, at the direc¬ tion of the Chamber, the Commit¬ tee on Finance and Currency began study of the feasibility of to a gold standard. In the months following, much time a return a sober and given to thought have been responsible answer. a The basic philosophy underlying recommendations the for a use of confi¬ in our monetary system.4 implied lack of confidence in dence Stock Exchange U. S. money seems to stem from resume Sat¬ starting Stock the misapprehension that there is 1 Letter National of Dec. Committee Resolution by 9, on fidence in over the govern¬ and abuse of the public our a gold; individual every to approval power has the approval or dis¬ the government's express of - management of fiscal affairs. : The basic right of the people to register their of confidence or lack confidence in the dollar is not t to be questioned. Committee However, believes that your the res¬ toration of this when privilege at a time dollar is being sought the world over, and the United efforts to control inflation the of money supply not yet. demonstrated, would be unwise at this time. The question of whether the United States should go back to its former basis gold standard, but on the gold values at $35 an is constantly being brought of ounce, forward by those who have been monetary position. However, with the conditions which prevail in the world at the moment, it would seem betted to studying our hold this matter up tion until made in eign some for considera¬ headway has been straightening out the for¬ exchange relations of' the principal countries of the world it is entirely possible that at such time, action United States taken as some by the in connection with its gold position might be tremen¬ dously helpful in stabilizing the whole world monetary position. Respectfully submitted, Committe 6, - gold-coin paper money, it can gold-coin standard so register its doubts by demanding under 1947, Economists Monetary Policy. Colonel Proffitt, March 1947. a purse. This system provides the people with a choice between gold, silver, other coins and paper currency. If the public lacks con¬ pres¬ gold-coin standard re-establishment that control ment's States' In is standard provides the people with the countries. standard increasingly prevalent observation of Commerce The morning sessions, Toronto of Chamber CANADA it has been announced. $5 will called urge now on Finance and Currency, > ' 2 Exchange Chamber 3 "Monetary Notes," I. Parkinson, November 1933. Dec. 1, 1947; Commercial and Financial Chronicle, Oct. 30, 1947; "Find¬ ings of Discussions -with Government De¬ partments." 4 "Monetary Notes," Dec. 1, 1947. Saturday morn¬ Feb. 7th, except during the months of June, July, August, and September,, ^ ^ , 5 The JOHN M. Bulletin, Thomas sent to the $20,534,115,gold certifi¬ ad¬ been the champion of sound money for nearly two centuries. Its convic¬ is Feb. 7th and until further notice, The in "Against fol¬ standard QUE., law¬ and Curb Market will •' TWO WALL STREET N. Y. gold ent return to a Sir: Can. Exchanges Open Receipt is hereby acknowledged of the the Washington 25, D. C. Dear The On have admitted Mr. M. E. Slindee v.r. return to this system. a others ders & Cleveland, Ohio , suggestion government Admits Four Partners Cleveland ties economists, monetary experts and Very truly yours, yours, Dec. 23, 1947 INCORPORATED re¬ M. E. SLINDEE, Acting Secretary. "Plain Dealer" MUNICIPAL A. E. AMES & CO. May and Aug. 27, provides for the exchange of States notes Mr. Russell J. Weisman CC: ■ CANADIAN STOCKS Act Vance, Sanders & Go. PROVINCIAL CORPORATION cur¬ amended by the Joint (s) CANADIAN BONDS the States Joint transmitted herewith. (s) States ceived with your letter of Dec. 23 with Very truly legislation. It prior to 1933 of sVich coin or currency, the term "lawful cur¬ rency" no longer has such special significance. ($10) Note. quest two $5 United are term use Since 12, 1933, 1937 is acknowledged letter of Dec. 9 with In dol¬ not was United Receipt your the Resolution of June 5, 1933, all coins and currency the Coit Road 12818 that United some <, replying please quote JLS:mw Dec. into reserves. Office of Treasurer of^ Cleveland five de- legal tender but could be held by national bank¬ ing associations as lawful money TREASURY DEPARTMENT Mr. of a ' ' Federal came flow 'exchange stabiliza¬ tion. In place of a global plan based largely on idealistic theory and involving vast expenditures •• advised are when In payment . on of form Even on Reserve outstanding $24,622,738,000 of Fed¬ eral Reserve notes and $18,236,215,000 of deposits — a total of the many organizations and groups $42,858,953,000 which is more than that protested abandonment of the twice the gold stock of the United gold standard by the U. S. Gov¬ States." The ernment in "lawful money" has not been de¬ . the Road ' the on the in States Federal vanced from various sources1 that $5 United States Note with ' • lows: States Receipt is acknowledged of your letter of Dec. 23, transmitting one lars. however, The text of the Committee's re¬ Mr. Davis: Dear $10 in send to proper. port 1, Ohio mand*for , this money. : 1947 United the 230,885,000, is not 'free' gold at the disposal of Congress, since there are some specific offsetting liabili¬ Text of Report replying please quote JLS:mw Federal Federal Reserve Bank." lawful Dec. 29, Cleveland ment, will sterling and K.-Canadian is note United In were the Treasury notes of 1890. its approval of a return to the gold standard when conditions Mr. A. F. Davis world-wide S.-U. herewith via one at the By thus placing once more on a working basis the old U. S.-United Kingdom-Canadian exchange tri¬ angle a long step forward would be taken towards the goal of U. 000 cates. Committee, Washington 25 is redeemable in lawful money any DAVIS. Fiscal Service > you Mail Fiscal a 1947 is legal tender for debts, public and private, and the F. 3, Banks held claims John M. Schiff of fol¬ lowing a fixed policy of the Chamber in past years, expressed The of Sept. principal countries are nor¬ mal, the privilege given to the public to exchange paper money for gold coin "would be unwise - Office of Treasurer of areas. to bolster up 9, "This note therefore that re-establishment of a a stock in- rnational operations TREASURY DEPARTMENT Sir: am On appear obviate unstable, until 'free' gold at its dis¬ Most as confused e as of the gold held in Treasury already has claims, Treasury liabilities, against it. Against the $21,7-35,000,000 gold are and writes the at this time." A. follows:— following: tend to divide two competitive also posal. hereby demanding $5. law¬ Reserve note. all would "in University, "The U. S. Government has lit¬ exchange re¬ dollars." am York tle so-called Very truly yours, I of the Treasury Registered step in the direction only the practical currency arrangement between Canada, the United King¬ dom, and this country would suc¬ cessfully solve not only the imme¬ diate Canadian exchange problem five . I groups. but New follows:5 relations t will pay to the bearer on demand Washington, D. C. the contrary would would Treasury Federal Reserve note be a Honorable John W. Snyder of freer multilateral trade but on It the that among the na¬ tions of the drilling results in new the Yellowknife area. $10 Federal Re¬ redeemed Dec. into promising Cleveland, Ohio^- a correspondence of these solutions moreover would world be of* sides both on and economic drawbacks. Neither the rallied assisted money" at the Treasury or'at Federal Reserve* Bank. The any accomplishment. Likewise the participation of Can¬ ada in the sterling area at the present time has many political a by also was movement —• wide gulf between our dollar and our gold reserve. Such a gulf * does not exist. Walter E. Spahr, Professor of Economics at was on States to United 1 a standard. ground the <£> currency Treasury arising out of note serve early represent the his request that the border is still too great to per¬ its of has much in its favor course opposition mit F. Davis from something approaching an econo¬ mic union with this' country. The latter this time for at present that has sent to the "Chronicle" copies of letters sent to and received outright associa¬ sterling bloc or the feasible or coin taken Currency of the Chamber of by John M. Schiff of a year's study, that it Feb. 2 reported, after on the A. stand the situa¬ pressing to permit a change of policy which involve an embarrassing with and the to and issues gold this deemed in lawful money as stated on its face. too between return the A. F.Davis furnishes "Chronicle" with correspondence with urgent problem. now not advisable was Finance on ; State of New York, headed Kuhn, Loeb & Co., and S.-United King¬ exchange of the This view a paper, the time-honored U. Return to Gold Standard on Committee substantial rally led by liquors, and utilities. Following the French devaluation staged Seeks Test of Status of Federal Reserve Notes Canadian standpoint the breakdown of the From by the The • Commerce world of previously successful exchange systems. markets foundations the on governed by the were stock Urges Group, headed by John M. Schiff, advises action be deferred until some headway has been made in stabilizing foreign exchange rela¬ tionships. Sees difficulty in world-wide scramble for the dollar. gold Canadian The inactive. and with the problem of international vor mar¬ irregular and the were nificance. the and Bretton have that nations. During point of view. The systems esting to note that as a result of mounting apprehensions in this country concerning the possibili¬ ties of acute shortages in basic in¬ dustrial requirements, the recent important oil discoveries in Al¬ berta and the vast potentialities of the Quebec-Labrador iron deporits have taken on added sig¬ Thursday, February 5, 1948 Delay the other. on '. N. Y. Chamber of Commerce Committee In the latter connection it is inter¬ By WILLIAM J. McKAY the "V Commercial and Financial Chron¬ icle of Sept.. 11, 1947. ; , • , V JOHN E. ^ SCHIFF, Chairman, BIERWIRTH, ALEXANDER C. NAGLE, JOSEPH P. RIPLEY, - - •I,:'" ERNEST STAUFEEN,.JR. < • Volume 167 Number 4670 COMMERCIAL THE CHRONICLE & FINANCIAL Bank Club. William H. Moorhead, continues as a Cashier, formerly Vice-President of the bank. * 4: •Charles Diehl, City Empire York Trust Company will be operated the Lincoln Rochester Trust Company.. Plans for the merger referred President of the Savings Bank, City, and John S. New Roberts, Jan. to in issue our Jan. 12. on 4> $108,000 to $100,000 it also same day took further ac¬ tion vfhereby tne capital was in¬ creased elected Chairman and Vice-ChairThe death W. Feb. 2 of Thomas on Lamont, Chairman of the Board of J. P. Morgan & Co. Inc., removes from outstanding an the financial figure business and Banks the System on Jan. 21. Robert Matherson, Jr., Walter R. Williams, Jr. meeting to three trustees. He paper financially un¬ til he sold his stock in Jan., 1922 to over backed the paper 0, Mr. Lamont was of Mr. in the American School of Classi¬ Born 1 8 7 77 Lamont took Mr. years age. syndicate. a appointed of the paper 30, Sept. on dent and cal Studies at Athens, in was his at sleep 11:55 had 1945, he was a mem¬ ber of the Research Committee of His 8. meeting of the Morgan which he had attended Lamont's ;\ Mr. spent in directors on Dec. 17. boyhood, Claverack, N. Y., where father, Rev. Thomas Lamont, A his was Methodist minister. A sketch of ago, year destruction He was by no finance business. figure conspicuous a con¬ means and noted that in the world of affairs his career application two effort through and numbers of and great constant of one was wars, booms and panics. In Mr. 1903 business as of urer Bankers Less the than organized newly Trust Pierpont 32 entered the banking Secretary and Treas¬ old, years (hen Lamont, Co. of seven later years Morgan York. New J. him a made partner in J. P. Morgan & Co., and in short time he became a the 20 world's stock. became latter's Chairman he Board • and from Harvard in 1892. In his college holidays he took jobs on and after his gradua¬ newspapers, in reporter une" on After and he 1893-4 worked as a the New York "Trib¬ serving Treasurer as - Secretary the of Bankers Trust Company from the time of organization, Mr. Lamont its later became the end of two years he there became Dec. he a Vice-President. At 1908 National First 31, was bankers a 1910. ■ as financial and after Vice-President, Morgan partner on In the 1907 panic of the under Davison worked the the entered Bank, one who he on of the younger Henry P. directed Manufacturers Magno. He held honorary degrees of (LL.D.) from Union College (1921), Rochester (1929), Harvard (1931), Columbia (1932), and New York (1934). Trust Company Frank P. as Potts said fered the real a Bishop's bank has suf¬ through Mr. loss entrance according made by President. "Research, additional become director of the Planning and Development Board of the btate of South otted Carolina", present * * Corn New York, that announces Ohlmuller, formerly As¬ Secretary has been made sistant * Exchange later. made was married Corliss in are Thomas Florence Trust S til well, bank's di¬ a later was 1895. His chil¬ Officer trust rector and Vice-President of J. P. For Morgan & Co. Inc.; Corliss, wellknown for his activities on behalf majored friendlier of between relations the United States and the Austin, a Assistant Secre¬ daughter, married to C. C. Cun¬ ningham, Director of The Wadsworth Atheneum Art Museum, Eleanor, Harford, Conn. his 15 grandchildren, one, Thomas W. Lamont II, was lost in the submarine Snook during the Second World War. in department. charge two A years, he has at the University * Brand been : * New Graduate ^ ; 4: booklet new the of division. investments in ' Assistant an investment past Rutgers made School of Banking., physician and research kins, Baltimore; and one the U.S.S.R.; worker in medicine at Johns Hop¬ Of an of the collateral loan Mr., Lamont Haskell dren He Company. < entitled "A Mortgage Plan" has Savings issued of New York City. The plan, known as the "City Savings Mortgage Thrift Club," explains in simple language how regular savings money may be combined with mortgage pay¬ ments. The announcement says: v!■* Albert J. Egger, years a f:!'v \ for the past 14 Chase National Bank of New York was home owners are eligible join the club whether. City Sav¬ the ings and Loan hold the mortgage of Vice-President "All to appointed Vice-President and or not. While dividends and Cashier of the at bank by 'cushion' by the directors on Mr. Davison1 and Mr. La¬ mont, under the younger Morgan, were largely responsible for nego¬ tiating and handling the loans made by the American public to came, the of ; War board Jan. 28. Mr. senior of¬ Egger, and be time, any ficer of the bank, has been a member of savings draw may be withdrawn it also acts as a for emergency National of for home repairs, education, medical other purpose." pense or any ' / •, * *.. ex¬ I .., j Through a stock dividend of $300,000, the First National Bank of New Rochelle, N. Y. has in¬ entitles additional the stock. a Ac¬ cording to the terms of the trans¬ subscription which accompanied type of check a new records o'clock noon, Sale of this for lieve income tax rights be other or Officials of the bank be¬ purposes. that the the check "plus" book be of in some bank no the on 'visable unusual stubs, as binder. Iowa-Des glance for a check-back a Des leafing through ment on run-down previous conventional check and surplus ot $3,000,000. The un¬ sis resources as $57,842,- 4i Jan. 28, Moines Moines the the of name National Bank National Bank. An¬ by the institution of being made simply for name the convenience of ; ■' •• 4s The of customers. our 4s First Omaha, pay¬ by check. in 28. will change states that the opera¬ tions of the trust department will not be affected, the shortening of are many pages a stock the This minimizes both the carrying forward of balances and the need stubs for data additional nouncement previous checks. on Feb. on & Trust Company of Des Moines, Iowa, has been changed to Iowa- de¬ as a stubs 12:00 (EST), 4: check of .15 as must before or $528,096 and total Effective Through positioning many visible at principle same record' letter Feb, 2 all of Dec. 31, 1947, stood at 781. in¬ is and on to creased goodwill toward the bank. 'STUBFAX' the warrants divided profits of the bank amount The bank further says in part: "The new checkbook, for which named the exercised the prac¬ of measure under warrants on )ring the capital features of will help to individual depositors particularly, and that its usefulness'*to the depositor will be re¬ 4s National Neb., Bank of increased has its capital from $1,500,000 to $2,000,000 by a stock dividend of $500,000. by The the weekly Office bulletin of issued Comptroller of thet Currency at Washington re¬ ports that the increase became ef¬ fective Jan. 20. books \ sis',' ■ J'' 4s "... ;4: • , ' .• ■ Instead, they are confined to oneAccording to the St. Louis the overall depth of the "Globe Democrat," W. M. Harlan, When the last check on a Jr., was recently elevated from page has been used, the blank Vice-President to the Presidency perforated section at the lower fifth of page. left is the stubs 'STUBTAX' all of its * 11 4< elected liam the offices. Trust annual Company was Vice- :'V Kennedy and :-yr. ('./'i''1 W. ' * Wil¬ Clyde v,'": r ,:;V ' were Cashiers: 4« * stockholders of At the annual meeting of the Directors of Mercantile-Commerce meeting of Land Title Bank and Pa. Assistant ran Assistant E. Johns^' • At' made was President, and the Following deposi¬ tors in St. Louis, Directors, Elmer J. Nonnenkamp check books available at cost to of elected Chairman of the Board of are visible at a glance. Exchange National Bank making Bank succeeding John S. Wood, who for the in the unit The Corn Manchester of detached, thus uncovering following page of checks. When the fifth page is reached, the stubs of all 15 checks Bank and Trust Philadelphia, Company, of St. Louis, Mo., on Jan. 15, Joseph C. Jan, 26 Van Horn Ely, Jr., Ganser, Jr." was elected Cashier elected a director. Mr. Ely is and Treasurer. Mr. Ganser has on was • Secretary and Director Philadelphia Surburban the of been employed by the bank con¬ tinuously since 1916. He was ap¬ Water Company; Director of the India¬ napolis Water Co. and the Ameri¬ Water can New Works York, and Board of Medical ■■ pointed 1941 Co., Inc., of member of the a Trustees lowing Jefferson of Assistant an and promoted Vice-President in Cashier to 1944. appointments in Assistant The fol¬ also were confirmed: College and Hospital." J.' 4: 4: 4: \v was ■ Henry E. Jenkins, Jr. appointed Assistant Cashier. . The Board Bryn of He Co., of having Bryn Farm on Jan. 27 the election of William R. Mooney Chairman DeHaven came to the bank in Directors of The Trust Mawr Mawr, Pa., announced as , al- purchase one-fifth of simplifies the finding of bank balances and facilitates the keeping of simple as purchase been ferable recently depositors purposes if the individual elects, modernization, may, used personnel Great Britain and France prior to the entry of our country into the the stockholders sent to stockholders of Boushall, to have the by the City Borough Rights shares to share Dook which it states an share, an¬ availibility of and Loan Association, of Jamaica, Queens, C. to ' its nounced is per announcement an Thomas Philadelphia, Bank, is , at $33.33 to Feb. on a owner , Trust on sale on pro-rata basis, where¬ by each share of stock owned by his native state. The of Jan. 31, Bishop will field of endeavor. Mr. of Virginia at Rich¬ placed was another into The 'STUBFAX' an Assistant Vice-President and check book is made up of a series has been placed in charge of the of units consisting of five pages When Mr. Lamont was 75 years bank's Security Analysis Depart¬ of checks, with 3 checks to the old, he wrote his reminiscenses of ment. Mr. Ohlmuller was asso¬ his childhood. "The Atlantic ciated with George H. Burr & page. The stubs for these checks however, are not placed imme¬ Monthly" published them in ab¬ Company from 1926 to 1934 when diately to the left of each check breviated form under the title, he became associated with the by World Mr. or him the Grand Cross Order of Saint Gregory the details of rescue J. Pierpont Morgan. When the first 1937 stowed upon tary in 1942 and placed in charge Mr. Lamont graduated from Phillips Exeter Academy in 1888, tion offi¬ an of Honor in Pope Pius XI be¬ Legion May, 1946, with Harpers to bring them out as a book some months death the of In 1918. made was 2 to the 743 stockholders of record signed Rutan, Executive Vice-Presi¬ dent, Bank for Savings, New York City; William A. Scott, Executive Vice-Presidert & Treasuier, Cohoes, N. Y Savir gs Bank. 4s Vice-President, effective Feb. 15. of The Bank patent application has been made, Manufacturers Senior Officer. and the ' 4i 15,000 shares of additional stock mond D. late -v.r , 4s Bank, Rowe, President, Kings Highway Savings Bank, Brooklyn; Harold For leading bankers. the Lamont of cer the President, Oneida, N. Y., Savings Bank; Ralph J. Mills, President, Yonkers, N. Y., Savings Bank; Daniel T. the :/;,y-■ >,r •• McCouliff, The $100,000 to $200,000 $100,000 of new of of Philadelphia, Pa. announces the resignation of Louis W. Bishop as flected J. sale the Potts, President of tical "My Boyhood in a Parsonage," in before the death of the late J. P. Morgan in 1943 he was second only to Mr. Morgan in shaping the policies of the Firm, after 1947, by necessary wrought in H. Coleof The of one years and ■ . Mr. in different fields. It is further many war.- f* and Diehl A. Philadelphia National Thomas $500,000 for the fund for restoration of Canterbury Cathe¬ made partici¬ The Western Savings Bank, Buffalo; George C. Johnson, President, The Dime Savings Bank, Brooklyn; of sun activities were 4, banks System, in are: William Vice-President stoqk, placed at the disposal of the Arcnbishop r of Canterbury, the dral, to Feb. on Messrs. to Roberts, R. Markle He frequently inter¬ Mary he the son's career points out that his fined addition drives, cational participating Other Trustees of the ested himself in welfare and edu¬ was he was born a parsonage; at a and Foundation. the lowed John the Thomas W. Lamont the South fol- of pating employees. dent of the Board of Directors of for departure : trustee of The York home, on re¬ Vice-Presi¬ Executive and 700 in the number of He was active as a Academy of Politi¬ cal Science and of the Metropoliton Museum of Art, and as Presi¬ velopment. gone were Treasurer, number Committee for Economic De¬ the from his New Jan. War, from 1942 to home, at Boca Grande, where he World second the During p.m. Florida his at a of respectively. The Trustees reported the Sys¬ tem's assets, as of Jan. 1, 1948, of $6,100,000 and participation in the plan by 76 banks and 3,600 em¬ ployees. This participation repre¬ sents increases during 1947 of $1,850,000 in assets, 11 in the of which he trustee dnd Vice-President. Lamont died Trustees the Treasurer, Secretary and Assistant keen interest a of and William W. Sullivan He sold the bonds that he still held to Cyrus H. K. Curtis of the "Satur¬ day Evening Post" on Jan. 1, 1924. world. respectively, of The Savings Retirement System at a man, Vill'ard. He turned the direction of the news¬ Garrison Oswald Frederic were re¬ from by * President of the Flatbush Savings Bank, of Brooklyn, N. Y., the on , H» Dec. 23 on from of Corning bank approved the plans reducing its capital in 1, page 19. The stockholders of the 21 District National Bank of Chicago oy were * , (617) of the Develin in the Administration and Agency in Wash¬ ington and President. The Philadelphia "Inquirer" states that Mr. Mooney had been Presi¬ Credit Federal Security and Board as May, 1947, previously served Lieut. Colonel in the office , of Air as a of /The Assistant Chief Staff for Personnel. Her¬ dent since 1935; Mr. Develin has man- A. Orlick ; was appointed capital from $300,000 war in. April,'-1917. been connected -with the bank 38 : years.' He to $600,000 effective Jan. 22, it is Assistant Cashier. He J has been since 1931. " Following the- ending :of the vj pined the learned; from the weekly bulletin employed by the bank since 1924; ; jg. first World War; the Secretary of :r\J ■■■ •*. *•. • E q u i ta b I e of the Office of the Comptroller the Treasury asked Mr. Lamont to•The Western National Bank of Thomas L, Ray was appointed As¬ "Tr ust^Corh- of the.Currency. V " * •'* go to Paris as; one of the two * "* V- "• •York, Pa., has increased Its capi¬ sistant Manager of the bond de¬ ^pany as a representatives of the Treasury Lincoln Rochester Trust Com¬ tal from $225,000 to $540,000. Part partment. He has been with the junior clerk upon the American Commission to in 1910, was pany of Rochester, N. Y^, absorbed 'of the increase was brought about Albert J. Eggerbank since Dec., 1945; .WiUi&m R. negotiate peace. Later he was in¬ appointed an the : Corning - Trust Company of by a stock -dividend of $225,000 while the additional $90,000 was Mclyer was, advanced from As-j timately associated 1 with the ef- Assistant Secretary in 1924 and Corning, N. Y. on Jan. 14,. the forts made under the auspices of became Equitable's first personnel Board of Governors of the Fed¬ realized through the sale of new sistant. Cashier, to- Assistant Vice-r the Allied powers to finance the stock. -The. Bulletin of the office President. He came to the bank officer. He was elected an Assist¬ eral Reserve " System has an¬ recovery of Austria and strengthen ant Vice-President in of. the Comptroller. of the Cur¬ 1930 and a the staff for creased its " - ■ .• . ' . - the Germany of the Weimar Re¬ public. In 1918 Mr. Lamont "Ncw York nounced. Vice-President of in 1934. He is Chairman of the bank's personnel committee and of the ad- bought the Evening Post" from' visory Chase committee of the Chase r In connection with the ^absorption, the former main of¬ fice of. the Corning'Trust Com¬ pany merly as well as operated the branch for¬ by the Corning from reported that the enlarged capital became .effective Dec. -17. the pany in rency ' ; . „ -Following * * the * ;v, f action of . , the pointed Cleveland' Trust Jan.,'1945, an Jan.,-1946.' Assistant - • —. Conn and-was • ap¬ Cashier in \ 4 .-yr 22 THE COMMERCIAL (618) * FINANCIAL* CHRONICLE & Thursday, February 5,; 1948, the in The Problem of back in the war days has to date value of $4U in robbed been ment spendings sooner or later as purchases that com¬ pete with current demands and are, therefore, inflationary. Sev¬ on $100 bond by this inflation. There a're at least 10,000,000 and reappear each probably more nearly 15,000,000 people in this country who have already been seriously hurt by these price increases. Their nor¬ mal purchases have been sharply curtailed. They have been "priced out of the market" for many kinds of goods. If this inflation continues, if it as not stopped, others will find their purchasing power restricted. Those who are hurt will go to 20,000,000 and then to more. The demand for units of goods will decline. Costs per unit of produc¬ tion will go up. Prices will go still higher. Unemployment, will increase. Unemployment insur¬ ance will reserves be used eral such; If of offices of comes begin with a shall we fidence in will be likely to wane, Expenditures for this purpose should, in a time such as this, be kept to a minimum. Every one who can do any productive work, even only a little, should do so the Russia retire of we WPA in build¬ ing up long-time credit balances against this country. Every nation that ible people ( /) j .: If the respons¬ the the demand, will have end. before. come If, to after . in increases tional are now minimum Such inflation. Exports should be curtailed bare necessities of taking of of the most urgent needs by law no of The rate. Minimum Wage fers current Con¬ and in several of the States for an increase in the /minimum has c wage and bearing a a M deserves seeking are to present minimum wage States. Where No minimum j efficiency of, or the worth Z0*/ the^ employee. A minimum JS ^ compel any from 40c ?, / wages and/ per hour. j0., former em-the l to 75c, or at least to 65c, The same influences are at work in the made any powerful raise / the the c w W^^er marginal/.em- • the enactment such of Clearly, laws. if there is a all employers are ancing of our own stimulate further an or economy from ily inflation. There is much more to a mini¬ the by increased tinue to hold their jobs. may »- mand and the supply sides of the present situation. First, let us seemed fixed ' at of the things that would restrain the inflationary ef¬ some a law . f . ■ , . , in the the minimum employees en¬ adjusted more, feel some , . , , * . (4) Government spending lines, have gone up. When wages ential is due to factors of value rate." After; the establishment of un¬ while others than the propor¬ un¬ employees who /that-whatever in¬ they might obtain arte in¬ adequate. Consequently an en¬ tirely new set of arguments about inequities would arise accompa¬ nied by employee irritation and industrial dissension which would require considerable time for rection. cor¬ V:'//// /' , Finally, ■■ -V''' there would certainly be black market violations of the minimum basic wage law.as have been in the past and as are at will there there the present time; There be evasions of various also kinds from creases think paying the proper in¬ in differentia,Is./ Don't there/won't'! be. The that reports of the Federal Wage, Hour and Public Contracts annual Division for the past two years, the years of greatest employment and highest wages we have ever had, shows that more than three? quarters of all the employers op/ erating under the Federal mini¬ mum wage of only 40c per hour, a 40-hour week and time and one/ half for half overtime violations more are and guilty more of than of "major violations." One be very sagacious that raising the mini/ wage by more than 50% wilj desn't have to to foresee mum increase the violations. you want, fiasco? another Or will this What do prohibition law be fol¬ lowed by the establishment of an overpowering inspection and en¬ forcement i, government. depart¬ ment? u - , j creases only/ 25c ^per hour, in prohibiting employment at Spite of increasing demands for any rate below a fixed minimum* goods and increasing employment, fects of too much purchasing wrong. .;;• /; • ■ 'I wage, a wage high enough to' there'• were,, according to Elmer { power. j Andrews,, then Administrator, of j (9) There should be every pos¬ cover the necessities of life. ; /^ sible resistance to price increases the Wage and Hour Act, from 30,- ' How Purchasing Power May Be Unfortunately this idea has not on every hand and at every inch worked in just the way that its 000 to 50,000 persons thrown out Restrained of the way. out of work because of the mini¬ If you are going to advocates would have liked. The; (1) Bank credit and loans for fight inflation you can't do it by establishment of a minimum mum wage. If the minimum wage consumption purposes should be were now to be increased at pne raising prices. You must keep severely restricted. A beginning prices down. You must resist wage, particularly if widely ap¬ fell swoop by 50% or more, it plied and enforced, sets off an en¬ lias been made in such restrictions every unnecessary addition to tire series of effects which in the seems inevitable that this would by the Federal Reserve System. costs. This is the time for serious be accompanied by considerably long run leave the intended bene¬ This type of restriction/deserves review of every expense of do¬ ficiaries, the marginal workers of greater disemployment. national support. ing business and the sharp elimi¬ our 7 Another inflationary effect of economy, as badly off as they (2) Installment and credit sell¬ nation of every burden that can the establishment of a minimum were before, but with. other ef¬ ing controls should, I believe, be be justifiably cut out. Ransack fects that hurt a great many other wage at a higher amount is the Teimposed, but preferably by vol¬ your business for possible econo¬ Consequent necessity for adjusting people. untary action of those engaged in mies so that you can sell for less, other wage rates to this new base Here is the way that a minimum' the credit business, rather than by or at least so that you can hold to rate. When a basic minimum wage, or an increase in a mini/' the government. i your present prices. This is not Wage is increased from 40c to 65c Both of these controls may slow only good business, but it is also mum wage actually works. / A minimum wage, however it may per hour, it also becomes neces¬ up certain types of sales some¬ patriotism. 1 "' * /" be set, whether by law or :by sary to change all of the previ¬ what at present, but in doing so, (10) All wage and salary in¬ the processes of, market bargain-' ously existing differentials above this will help to preserve the en¬ 40c per hour to; higher rates of crease? that are not accompanied ing, constitutes the base wage tire country from further infla¬ by more than proportionate in¬ rate. This is the wage of the mar¬ ;pay/';//.///;'•/•> ' /,/;/ '■ > 'i tion. .' / .,/:/ creases in productivity should be ginal worker. All. wage" rates" //whenthe. base - rate has been; (3) Widespread thrift. should discouraged, The drives of or¬ above the basic minimum I wage moved up frpm/40c .to, 65c. per be encouraged by urging in¬ ganized labor for higher wage rate constitute differentials/paid hour/employees who; formerly re¬ creased purchases of both public? rates at the present time without for differences in skill, experi/: ceived 45c,: 50c, 55c, and 60c per .and private bonds, stocks and. in¬ relation to present or future in¬ ence, efficiency, dependability," hoirr,/are- entitled to: have :their surance, and by setting aside creases in productivity are purely responsibilities carried/ / special; Wages , raised .-not merely to 65c,. more money as savings in the inflationary, > . abilities, and so on. •'Yfhef^vef/ but /to: s differentials above :65c,;. regular banks, savings banks, pos¬ Ever since 1939 wage costs, per there is a wage that is/high,er; correspbndiilg td -their/ differen¬ tal savings, and so on. / unit, of production, and in piost than the basic wage tiie differ¬ tials abbve! the preceding .base, enumerate even as less get would ) easy that seemed necessary was,to pass, com¬ differentials would doubtedly be solution;^ >^^ai^^eian(i Hqui/La^ih4Sf38,/ problems of low paid workers. Alf | Wben the minimum wage /was an uneven¬ tionate increase. There would . policy, at present, to force corpo¬ rations to pay out a large part of each year's profits in dividends. For an economic period such as we are now in, this policy is dead to would - look at both the de¬ be doubtedly get . us less concern. Some rate. titled „ "Let would base But under .conditions of a buy-/ (8) Corporations should pursue mum wage regulation than apinflation is checked, production1 a conservative policy with refer¬ pears on the surface. The original ers' market, when customers are i continues to rise it may be rea¬ ence to payment of dividends to purpose of the minimum wage indifferent as - to making pursonably expected that the ordi¬ stockholders. This is not time in was to increase the incomes and phase's at present prices and un¬ nary forces of competition coupled which to increase dividend pay¬ to improve the standards of liv- willing to pay higher prices, then " with improvements in technology | ments. Corporation profits should, ing of the least skilled, least em-; it is inevitable that some, if not will thereafter lead to a gradual so far as possible, be held for j ployable, the lowest paid, in other,: mqst,/ of the marginal workers decline in prices in line with the use in making needed extensions words, the marginal workers, inl whose wages have been arbitrar- j historic trend of our econpmy. ;|j in plan and equipment, exten¬ our economy Most people qf ily. -raised by regulation will be Let us consider now some of sions which may in turn be used good-will have been favorablly; thrown,out of work. j the things that can be done to to increase production. The impressed by, and are sympathetic; Within three months after the' stop this present rose. to some it nas: inflationary Bureau of Internal Revenue has a to, this purpose. To sdme li has effective date of the present Fed- trend. to proportion same con¬ ' more or concern rates subject to the; law are Not all of the differential wage levels, economic effects. effects graphic area to area, from munity to community, and sellers' market, such, as there is at the present time, and if goods can be sold at higher prices, then, sinces they are passed this, will be followed by the setting of minimum wage rates at or about the same as the Federal If and when Economic ly operative / / < •,/■////; /. ^/.\ There will, of course, be a time lag between the establishment of the basic minimum wage rate and the adjustments of all the differ¬ entials. This time lag would cer-r tainly vary somewhat from in¬ dustry to industry, from geo¬ already have minimum wage laws-ra fc^ePenc*s entirely upon whether the employer ^an the effort is to increase the mini¬ ih sbme way secure increased mum, wages for marginal workers productivity from such e mup to 75c, or at least to 65c, per hour. In the 20-odd States ^ in ployees, or on whether he can se¬ cure increased prices to cover the which there are no .minimum increases in wages fixed by the wage laws you are certain to see ■Jaw. ; an intensive and concerted drive for actness. nearly always the results of pres¬ sures more or less unevenly dis¬ tributed and will be ^employed at a States level, increases would have to be all along the line up through the entire wage structure, i It is not to be assumed that these far-reaching adjustments in wage differentials, following the adoption of a new or a higher minimum basic wage rate, occur witb the precision and accuracy of a mathematical formula. There are very few, if any, economic situations that may be described with complete mathematical ex¬ wage ad¬ trarilydoes' not increase the pro-' inflation attention. / At Federal level there interests on guar¬ are gress relatively a short time, following the increase in the minimum basic wage wage law of¬ protection. Those who employed at the former rate may be laid off at the new rate. Raising the minimum wage arbi- . in demand provides employment. increased. * Within i arbitrarily antee The Inflationary Effect of the The rate vocates of minimum wage legisla¬ tion say that it provides protec¬ tion. This is obviously' inaccu¬ wage ; An increase in the wage fixed productivity the most important cause further of employment. are purely inflationary. increases without propor¬ tion, Wage ( of inflationary movement Not care the care excess This movement both at law, even though competitive in the Fgdpral arid the State levels [ all other respects, they will ^11 l^not something merely incidental; raise their prices to cover their or sporadic. It is well planned increased common labor costs, set up and put to work in this and carefully organized. If it goes Under these conditions employees country merely postpone the bal¬ through it will have far-reaching . whose wages have been arbitrar be turned the other way. If and when the production in¬ sufficiently to take be of household equipment, of ex¬ pensive textiles including nylons, of food products where they are not actually needed, and of mech¬ anical equipment that should be every can creases money people elsewhere, and for the pur¬ pose of maintaining our interna¬ tional position among the nations of the world. Exports of automo¬ biles both new and second-hand, em¬ country will effort to the restraint of purchasing power and tc the increase of production, the tide country gold. to of this "feut bend their this or urged to pay its debts by the shipment of goods rather than by the shipment of cash or ployers, employees and consumers simply will not follow the dictates . owes should world communist economy. , None of this needs to happen. common sense. ex¬ as increases should be discouraged. purchases elsewhere, but this seems to be just what they would like. If and when our economy goes to smash, the Soviet system expects to be on hand to pick up the pieces and to build a ■of for workers to take ports at least for such time as will permit productive mechanism to catch up with demand. Imports should be paid for, so far as pos¬ sible, with American dollars and with the understanding that these funds should be used in making to Soviet will be because time for men to in Of the minimum,, basic wage rate and more per hour. : | •. paid to such employees constitutes '/ But following these adjustments they have done since 1939, they for the wage earners who previ¬ become inflationary. Pay foils, in the economic meajure of need, de sir ability, or productivity the manufacturing industries «"-ah,btv «r-nmd.ict.vitv of such ously earned more than 40c, but r»f «.ri less than 65c per hour, it would which may be taken as typical for workers, as compared to marginal all employment are now.over 3 workers. There are always some,' also be necessary to raise the of; those who formerly times as high as they were in 1939. and there will always be some, j wages Wherever wages have gone up employees who are worth twice, earned more than 65c per hour. faster than production, production or ; many times, as much as the After marginal workers have h.ad their wages increased more than in units of goods have gone up, marginal workers., If you want prices have gone up and inflation them. to. work for you, you will 50%, and after those employees have to pay them what they are who formerly earned from 40c to has been increased. / worth. 65c per hour have had their wages '//// V The increases in wages since Let us consider the effect of proportionately increased, it 1939 have not been the only cause changing the present1 minimum would be neither fair nor practic¬ of our present inflation, but they able to expect workers of higher wage rate from 40c to 65c per have been an important cause. hour. Such an increase means competence to continue their em¬ Further wage increases without the raising;of the base wage rate ployment without similar in¬ increases in production, or what more than They, too, 50%, (62%% to be ex¬ creases in their pay. amounts to the same thing at in* act). First there is the effect on would have to have their wages creased cost per unit of produc¬ productivity, than faster rise (6) Imports should be encour¬ aged. Our tariff laws should be revised to permit increased im¬ predicting for this They not only believe are headed for a smash, If it does it or no tended vacations. are now country. that economists This is now. pretty picture, but this is just what is dollar for .this purpose every spent for essential human welfare. the crash will be due. This is not a their and reexamined to make sure that financing and then government where helpful in raising (5) All relief expenditures now to be carefully examined had then. Con¬ we gov¬ need much larger govern¬ ment debt than of production. and have stores and work would be had back in the 1930's. as we that sort some thousands employees should resign their government jobs and go out to work on farms, in factories, in exhausted. The govern¬ ment may then attempt to bolster the vanishing standards of living of the unemployed by the estab¬ lishment hundred ernment finally ' ferentials dfi wage rates should be sharply restricted to the most urgent needs. All govern¬ (Continued from page 13) new base rate, such employees would,. therefore, be entitled to Wage rates of 70c, 75c, 80c, 85c production for which the em¬ ployer is willing to pay. The dif¬ / r When a new t- and higher mini¬ basic wage rate is, estab¬ lished, it simply creates a situa¬ mum tion that makes.it, persistently logically necessary < to v pay similar increases throughout the entire wage- structure. When con¬ fronted < byi-ane w/minimum; wage regulation .^intelligent - and ' fair/ and minded -employers-, wil.1 promptly, recognize the-logic as; < well as the , Volume <167 Number 4670 rieecUor of & THE COMMERCIAL * tively raising wage differentials highly skilled workers if they possibly do sq.> If they fail to. do so, their better .employees will, sooner or later, seek employ¬ j can to. dangerous >t_heir. more V competent/ and jeconomy. " >/.' entire ^our / all* agree that high real wages, are desirable. One of the most important meas¬ We can wages, since tion made 1930 take CHRONICLE. (619) - that, care are Ji I hesitate to estimate the this 20c increase 25c to cost of in "Dire capi¬ extremities inevitably is the.large' increases'/in" inflated money, The need is very wages/real wages, that have been great. : /;/ 1 y./ y, „/: -by ' American /workers. The money with which to re¬ Real wages are/now at a higher build our capital equipment must point in this country than uiey be found. Whatever prevents have ever been before:' - They are such accumulations of capital and at a higher point than'in any expansions of plant? and equip¬ other country in the entire history require bold action and we are definitely faced with dire extrem¬ ities (in Europe). This is no time for equivocation or 'pussyfooting.' The challenge facing us is unmis¬ takably clear. Either we meet it now or we postpone decision to alater .date which may f be too establishment, of a higher minimum wage rate is, in fact, a powerful and effective lever for of late. hoisting the been ment not in the adjust¬ differentials are wage corrected themselves, try by- the .employers theneed ^ for such CIO and the AFL. this it From will be that seen the marginal workers but "workers/ throughout the wage structure. After wage rates been have all persons who of all is It our common achieved always by increased pro-' increased, been is It increases no man-hour ductivity that has made no h)ffn natvwe pro¬ possible ebr -an: nmm A -1 It is man-hour rate. in need now. us never forget this. differential wage rate will, un¬ der the new condition, have a logical claim for a wage increase, which may be effectively urged How -ProAuction > The either individually or collectively. wage demands, based, as they are, on what is both logical granted. The minimum not are later have or most fundamental enough less food, fewer tomobiles, ,J/}:/,;/:■//'./; ;//,■/■•';; : , fact of present inflation is that there our Such May Be Increased fewer motninp sk goods, We have houses, fewer au¬ refrigerators, Ip.qq anq almost oi law is, in of the most potent de¬ wage everything that people want to buy. Consequently, prices are too securing, high and they are going higher. wage increases, not merely for The real answer, the only answer, marginal workers, but also for all to this problem is more produc¬ other higher skilled and better tion. // = v//:/;///•;, paid workers.This, r I suspect, -If this country is to get out of may be one of the reasons why this inflation safely it must pro¬ the unions, especially during re¬ duce more than it has ever pro¬ cent years, have been so eager for duced before. We must distribute minimum wage //legislation.: It more-than we* have ever dis¬ makes their job in bargaining for tributed/before, We must sorhe/ higher wages much easier/ /,/;//// how do this more economically X"' Higher wages without, increased than we have ever done so before: productivity simply mean higher This is the way to cure this1 in-? production costs. /Higher produc¬ flation:v.'/ '■: :/ // fact, one vices invented ever for tion costs must, in turn, find their (1) In order that there may be „way into higher prices.v. Every •increases in production, there is increase, in wages without an in¬ feed for large expansions of fac^ crease in. productivity tends to be tory plant capacity. There is need purely: inflationary. The mini¬ for a great deal of new and more' mum wage is not the only cause efficient equipment.-J For most of vof the present inflation, but it is the past 19 years, especially dur-. a s .contributing factor. If - in- ing the war years, the capital in-; creasedfrom40c to ,65c. per hour; vested Jn productive enterprise in it will become a major cause, v his countrv was used uo :faster.• : v It is few! amazing that there other are than than it could so be replaced./, Plant and labor inadequate production, it is at only capital need. / Such present can from savings. A re¬ duction in the tax rate would per¬ mit come in increase an should savings which be ductive capital. There into turned then tax reductioits for those who and their savings make for building save available the nation's up pro¬ should be cap¬ ital. yy/■'./// "(4) One of the most the device of the minimum sale wage. are really would be. It is even amazing that there are so business have of men effects on The their following typical appeared is textile as of asked by mittee the before ed a business "f ing the know what you mean," the facturer replied. /. • ,1 Total was and 65c; per ended, so y, new financing in stock bond issues during 1946 and averaged financing back in the latter of the less 1920's. than To half be of sure, long enough to adduce some 000.000 in and men women industries directly this Act, - Who another in and and trades 10,000.000 retailing, agricul¬ even petition with interestate indus tries, are now working 40 or less hours per week. It is absurd to ssume that our productive econ¬ can 40 on turn out hours they could with much goods as less or - We per week as 48-hour work told by the Bureau Labor of are a Statistics that manu¬ we have employment, As a matter of fact, it is only full employment at part-time work. ::y ,y/ is There greater serious danger than the surface in the 40- work hour law. week There is question, that no one re¬ sponsible for the short work week has tried to answer, whether the this country, or of any other country, can produce enough goods on a 40-hour work week to take care of the needs of its own people. In this country there is qdded responsibility for it is not only supposed to - pro¬ duce enough for itself, but also to supply the needs of other people. //■ ////yyy/y; \:/y economy of y: A repeal of the 40-hour-week, time-and-a-half provision in the Wage and Hour Law would open the to a much needed inin:, production and at the way 'crease of business con¬ same c ' time men provide opportunities earnings to millions and employees working only 40 women plowing / back their, who are now earnings into their own /busii : hours per week or less, but who nesses. y There may be mote:, of would gladly work longer hours such .intra-company ' investments? at,reasonable straight-time wages. than there were in the 1920's, but; This law prevents such employ¬ even so, the totals; of capital out/ ment./ It is time, to get rid of lay are still less' than - they were/ •this, handicap upon our productive Don't forget that capital equip¬ capacity..., . ment during, the past 19 years h^s y." (5) On/the chance that the 40 cerns/ ,// are , • being advocated will really do what is expected engaged ture^ whose hours are set in com¬ omy evidence and some solid argument to show that what is covered by are/ engaged service well individual and the present for increased as Senator, the like new-financing may not' be the full story. -Many / corporations,as don't hour. war production dur¬ part his'question by. asking whether it would make any difference to the manufacturer's/operations if the minimum wage were to be raised or so the such The Congressman then clarified from 40c to 60c do of 1947 was v:'/;/:/ not It has not done war. since the a ///;//Xs;.-, don't /.understand.? - I did depression ment for civilian by the minimum: wage provision in the Fair Labor Stand¬ % It now. the a affected ards Act of 1938. This helpful if the Standards Act of 1938. About 20,- inadequate appears on 1930's It certainly did not make investments in capital and equip¬ member of the Com¬ whether his right during In the discussion, he stores. be . others too, would leave off talking in catch-phrases about "too little and too late," "bold action" and pare country is falling far short of making the capital investments that are need¬ manufacturer witness a more than in 1939. / a probably Congressional Committee. retail and minimum A few weeks ago case. well-known course more many businesses. own so stores Our crying need is for more capital in the form of buildings, machines, equipment, trucks, lo¬ comotives, box rears, warehouses understanding the retail condition today than <hey were,in 1929, and employers who of the and worse ticularly the business economy, or wage on even and apparent no the plants in would It serious production at the present time in the short¬ age of labor due to the short work week fixed by the Fair Labor causes/?of full munity leaders who have in the past favored the application of the minimum wage device had any real knowledge of what its effects * as to seems in the Congress and the Administration to get to¬ Irvln« M. Ives gether in resolving questions of differences which may exist (about the so-called European Recovery Plan). There appears to be a determination on the part of the leadership, in the Senate at least, that Republicans and Democrats alike—as many of us as possible—shall be granted the opportunity to reach agreement of this program. "The great effort of Senator Vandenberg and Senator Connally is already showing results in the plan of administration suggested by the Brookings Institution, which may/well be a plan on which most of us can agree. > / ; ;/ y / /"The other big stumbling-block of contention is the amount of money to be appropriated for this undertaking/ Even here, however, there seems to be a growing feeling among the large majority in the Congress that, without adequate appropriation, no plan can succeed."—Senator Irving M. Ives. present, the case is altogether dif¬ ferent./.:-More /capital is the tems^ the warehouses/ the whole¬ It • more ; * in Revisions should be prompt¬ our tax laws so as to make it possible! to use some of the' money now going > to the government for capital pur¬ poses. Normally, high tax rates are preventives of inflation, but when the cause of the inflation is economists, who may be sincerely " doubted whether most liberal minded com¬ . for should be liberally for pro¬ purposes, ly made in understand and properly evaluate < restricted be sis, ."A concerted effort . duction and distribution of goods. week. leaders and their I should extended equipment on farms, in fac¬ tories, on the transportation sys¬ persons, * be under way loans, (3) productivity Let : which and credits- / :- s , consumption had production. employee who formerely. earned be encourages the formation of such capital should be permitted and urged ever there basic formerly received and fair, will sooner ment should be eliminated. What¬ "/(2) Bank tional wage rate increases. Every to equipment over what we had in the 1920's in terms of present ductivity. There would have been no wage gains in this country if differential wage rates are en¬ titled to and should have propor¬ a world. real wage gains have But entire the the hope that this trend will continue. wage rates not merely of tal gained corrections will very soon be ex¬ plained to them by-representa¬ tives of the of the progress of this coun¬ ures elsewhere.' V If ments , 23 being by other nations. us upon to and demands the of • FINANCIAL . ^No.- Not at allr'X the manufacfurer replied. ;"i am already pay- ,suffered great losses due to. wear hour, time-and-a-half provision .and tear, to depreciation and to ing all of my employees more ;may.not be repealed soon enough obsolescence./ ,-: than 65c. per houL"/./-:./*-•'Z/"■ •. to-help solve the present inflation, -'Our y provisions y 'for //capital With-: all due/respect to this Congress should, as an alterna¬ equipment for nearly' all forms of tive, be urged to change its immi¬ and to other businessmen" for civilian uses have fallen far be¬ gration laws at once so that per¬ their .ability to run successful hind. We must not merely re¬ sons who are idle or inadequately businesses/ their thoughts on the build what we have lost since-the employed in other countries and 1920's, but we must also build an who are competent and willing to mininum wage, if like those of eries and it way an the on farms. Jn be possible to may increase in labor this secure power; and of production so much needed in this country at the present time. There is something economical¬ ly simple-minded about proposals now being made in this country to been made, production pendent greater labor productivity. There something wrong about a trend which, for example, accounts for a brick layer who back in the is draw upon our supplies of goods 1920's laid to the take countries other same no of care time needy who in persons are at the unemployed and have immediate prospects of secur¬ ing employment. We should bring them over here in sufficient num¬ ber to produce at least the goods equivalents of the goods that are to be exported under the the or Marshall, or some is almost sure y other Plan that to be adopted, desirable effects. It would help this country to increase its many production and so put an end to the inflationary trend. That would be for every one in this Such working immi¬ grants might, after a period of service in this country, be re¬ a in a gain country. turned to their former homes with their savings of their earnings at American wage standards and with their, improved work knowhow from experience under American conditions of produc¬ 2,000 bricks day; m day; and. a 1930's 1,000 bricks a 1947 laid less than bricks 500 day. X We must in this country somehow learn that the final solution to the present problem of rising prices; squarely upon securing more production per man, more pro¬ rests duction per man-hour,' and pro¬ duction at lowered unit costs. We must immigration would have Such is still de¬ work,efficient* competent, intelligent, willing, "hard work. There is need for upon all more no learn that there to will be- than is pro¬ consume duced, and that every obstruction placed upon increased productiv¬ ity whether that be in restriction of hours of work, in loafing on the job, or in demanding more money except for increased production, is injury an to The are - inflationary trend that I . we experiencing is danger¬ now ous. must minimize not tragic possibilities. It its end; could in disaster. This is what the mies of our economic system want tion. This, in turn, would, no to see. However, it need not ef.d. be in disaster. doubt raising production help to end the threat of a permanent United Na¬ tions' WPA to be supported by this country. Such changes in our immigration laws should be en¬ acted at once. ' / : ? / V (6) Credits provided by this Country to other nations under the Marshall; or any other Plan, should so far as possible be used in helpful abroad and so . by those nations in making their needed purchases in countries than other sion of our demand own: ene¬ It will not end in dis¬ aster, if the people of this coun¬ will * but exercise common, sense, and if business people, errrployers and employees, will but consider their long-run rather try Above all, work, than immediate their than interests. what is most needed i-s work, more before. ever more work Our national for the next 10 years should be, "Let's go to work." slogan This diver¬ will help us to Four With Capital Securities ■ this industrialist, represent sheer economic ing, or illiteracy, ; Such think- lack of-thinking,-is posi-' increase the of from 20% to 25% in care work admitted to this raise production not only in the factories, but also of the increases dn popula-/in the forests, the mines, the fish¬ physical productive plant and equipment of this country to take may be country to help accumulate the stocks of goods we need which for our own people will take the pressure from rising lightened by countless technological with all0 the improvements, "advances that but have to E. CALIF.—Oscar E. Llewellyn J. Reese, James Smith have Chronicle) The Financial OAKLAND, Baan, prices here. At the broad base of pro¬ duction is labor, human labor. The burdens of producing goods (7) have been (Special and off and been Capital , ojr. economy. Frank added to L. the Securities Broadway. Mr. staff Co., Smith viously with Waldron Wilkins was & Co. of 203ft pre- 24 Thursday, February 5, 1948 CHRONICLE & FINANCIAL THE COMMERCIAL (620) lacking either the ability or the willingness to produce this way, they can not possibly escape this.consequence and As We See It (Continued from first page) - relationships are but an which deranged currency symptom. in outward relief after which the "necessity" matter of course. It of thing which happened repeatedly in the such manipulation that such devices and it was to prevent epidemics of currency as the International Bank and the man's be those reasonably well-informed, helps to adjust prices to intrinsic values. We can not pussyfoot on this or straddle the issue. We have to take a stand that speculation is International Mone¬ great help to Europe. It may be that neither the people of the United States nor those of Europe will attain the created, and numerous "agreements" or "understandings" reached about currency management. position of economic abundance easily enough attainable It was obvious from the first, however, that all this con¬ in other circumstances, but our shortcomings are not likely cerned itself with symptoms, or at the most superficial¬ in the long run tp provide a way out for France, Britain and the rest of them. ities, only, and that the various countries which entered These are, of course, matters which must be borne into the arrangement (with the hope, of course, that carefully in mind in arriving at any conclusions con¬ largesse from the United States would make it worth v their while) had no intention of doing anything which cerning the steps taken by France, Italy, Britain, or any would oblige them to take the fundamental steps really of the rest of them to "protect," to "stabilize," or to do something else with their currencies. They are also necessary for the cure of the ills responsible for currency f difficulties. considerations which must not be neglected when the Remains to Be Seen . of the rest of them can bring themselves to do that which is necessary to bring real relief or to save them from the "permanently lower standard ■ living" about which so many pseudo-economists in Wash¬ ington and elsewhere are so fond of talking. This is hardly the place to undertake any extended or technical analysis of the factors which fix the value of one currency in terms of other currencies. Volumes have been written on the But in this modern . ' . a "closed curred economy" day and time no folio devoted vestments well „ • people can thrive rather silly efforts in mind it is possible identify those factors which will determine whether the franc, left to its own devices, will presently settle down at to fairly solid and stable level and whether it will remain that point indefinitely. There are all too many, or at least it seems to us, who in their just advocacy of a free some at so If you took away from markets what little is left of speculator's activity, the nonspeculator type of securities buyer could hardly expect to have his business executed as cheaply as he now does, and as thin as the the markets presently are, they would jnuch thinner without be that the speculator. ' The Role of Salesman alternative only that the investor would ized both further, would be be penal¬ buying and selling, due to wider spread be¬ tween bid and asked prices un¬ ■ compensation were to go out and numbers to narrow those markets; in either event, the absence of the specu¬ lator increases the investor's cost of doing business. Even though less higher to salesmen stockholders and bondholders to¬ million Under present tax laws, those may far outnumber. labor union other members, they have not organized states, and possibly savings banks, groups who have supplied most of themselves to a point where they the risk money in the past are no so that they might be permitted to can hope that even under the most longer able to do so. A good bit put a part of their assets in equity paternalistic schemes of our plan¬ of England's troubles today stem capital, j Jhis is not a departure ners,; they are going to be guarfrom her high individual tax prcfc. from reality!' In the first place, it anteed a minimum price for their gram since World War I. Had can be demonstrated that a port¬ to "save", their currencies. With such considerations as these our from page talling between 15 and 20 4) companies in New York and — by such foreign countries in their his of the respected for is he country. The Responsibility in Flow Investment Capital (Continued least of all those nations whose currencies are today most seriously in question. Nor is there the slightest likelihood, whatever may be the superficial appearances or the. hopes of foreign politicians, that the United States of America will or can meet the deficits in¬ in that contribution to the economy Brokers' Of Suffice it to say here very " see find investors in greater reading./'- simply that the exchange value of the currency of any nation is fixed, certainly in the long run, by what that country has to offer the outside world relative to what it demands or bids for from the outside world. Any country can have any exchange rate it desires if it has no dealing with the peoples or the economies outside its borders. Any coun¬ try can fix the value of its currency at any point it desires if it can find some outside party able and willing to make good the difference between what it is able to sell to the outside world and what it buys from the • . ■ illegal. or paid of outside world. be futile. legal illegal, let the laws come out operations of the ternational Bank (or, rather, the French people) or any subject, and some of them will repay If it is and say so and let them close the Exchange if this is their wish, but if it is legal, let us uphold the good name of the speculator and either International Monetary Fund, the In¬ or the so-called European Recovery Program are studied. Any attempt to appraise any of these undertakings, or any other related to them, with¬ out careful study of such factors as these will inevitably '"V■ ;/'*■ whether either France camera, tures, etc., might have been delayed for years. Normal specu¬ lation, when well balanced be¬ tween the bulls and the bears and tary Fund were It still remains to be seen speculators, inventions like steamboat, George East¬ the moving pic¬ no Fulton's petition which the European exporters are required to meet in the postwar world may for this reason not be of the most vigorous. All this may be, and, we suspect, is true, but it scarcely has the effect or can have the effect of bringing of further devaluation comes as a • will There furnishes temporary early and middle 'thirties, had doubtless who will say that we ourselves are not engaged in any miracles of productivity, and that despite a high rate of activity and of production at this time, are not in any position to throw stones at other economies of the world. They may even add that the com¬ experience shows one thing clearer than any other, it is, perhaps, that currency devaluation without appropriate supporting action in the domestic economy of the country devaluating its currency merely at most this sort risks, but we going to destroy our roads just because a few people are in¬ jured or killed in automobile acci¬ dents on these roads. If America are not Shortcomings Not Helpful Our If was States does or does not do, and all planned economies, all the rest. regardless of what the United and equally regardless of any foreign supplies of capital, and Of course, there are exchange market, appear to take it for granted that the (and any other currency left to itself) will find some level short of practical zero and stabilize itself French franc to fixed income in¬ will as one not always do so containing some equity since investments, investment errors the inevitable not be com¬ can taxes not been so of of trustees seems to cries textile her saving devices in order that she could compete in the world mar¬ kets. With tax rates as they were, most individuals hardly felt it Furthermore, the portion wealth and savings in the securities plants, her coal mines and other industries by the introduction of modern labor- ize pensated by bonanzas. This ad¬ mittedly is only a partial solution becaues the type of stocks these institutions would buy would only be the highest grade seasoned issues. high she might to modern¬ have raised the money hands be continu¬ ally increasing and funds that are channeled into the debt form of was has market high-grade bond recently '■ years. Bank and, become Borrowing Inflationary therefore, that their cause of the things they buy with the proceeds of that dividend, is preserved at the 1932 level or even at the 1939 level. People should not be even slightly encouraged to believe be¬ listed on the Exchange they the protective temple whose priests cause they buy stocks New York have Stock come roof of some under going to see that their capital preserved, but on the other terests and it is up to the brokers hand, I question whether it is good and investment fraternity to lead economics or sound business prac¬ tendency of /The Industrial Securities Com¬ mittee of the IBA stressed the fact parity, so purchasing power, be¬ increased prices of justed to some 90% of a the de¬ mand on the market for equity securities are not only new yearly capital is likely to become greater. savings, but the savings of former Now is the time to reverse the "sticky" of Amer¬ stock that their $9 dividend, which today is only the same as in 1932, should be ad¬ Needed for Progress The long-term, have we heard any the holders ican Telephone worth the gamble. Speculation nor from the penalizing equity in¬ fight in creating a favorable are is tice for the Exchange to take over venture capital. the role of investment advisor in that the reliance of business on Doing this need not invite a repe¬ advising people, even by impli¬ capital markets for new money is tition of the practices of the '20s, cation, about speculation in things not in the long run inflationary because the healthiest thing for like low-priced stocks. since such a move results in tap¬ While I do not question the mo¬ our markets is to see that they ping the accumulated savings of are entirely free from manipula¬ tives or the sincerity behind such individuals. It does not result in tion, such as painting the tape, statements, I am fearful that good background for bank de¬ spreading of rumors, creating ac¬ intentions such as these may be hence, an increased misunderstood. Pepsi-Cola once tivity to induce others to purchase money supply. When business or We are, of course, quite convinced that in no other practices of any such kind. We sold around $1 and only a few cannot raise new money, it is should want the capital markets to years ago, aside from things like way is it possible to find out how much the franc or foced to curtail expenditures or Missouri-Pacific bonds which sold perform their economic function borrow from the banks. Bank any other currency is really worth in the foreign mar¬ and I insist that risk-taker will at 1% of their face value and are borrowing does have an inflation¬ kets, and no other way of setting up a currency system generally lose interest in the now worth many times more, you ary aspect in that this process enterprise when it has become had any number of stocks selling which will work out in actual practice. But, and this creates new deposits and by build¬ successful and sell out to more around $1. such as the following: is the main point we wish to make here, such a step ing up the money supply, puts an conservative investors. American Power and Light. Amer¬ inflationarv squeeze on the level while necessary for such a result may or may not prove We must do whatever is neces¬ ican Water Works and Electric, of commodity prices. Within Curtis Publishing Company, Engi¬ sufficient to produce such a result. It can do the latter sary to educate the people to have moderate limits, when loans have neers Public Service, International a respect for stock and commodity only if supported not by market manipulation, but by been subnormal, the expansion is exchanges. .Never for any pur¬ Telephone and Telegraph, etc., an economy which, vis-a-vis the remainder of the world, desirable and natural. However, many of which, even after the poses of appeasement or political when loans and deposits are is able to stand fully on its own feet. long decline in our securities mar¬ reasons should we take the.atti¬ already at high levels, further tude that we do not encourage kets of the last 15 months, are increments become undesirable their The Real Trouble normal speculation by those well- selling, roughly, 10 times and inflationary. Creditor or debt informed and able and willing to price of a few years ago. After The real trouble with France and even more so with financing is at present encouraged take the risk. Only if speculation all, there's nothing sacred about Britain is, first, that income they were at one time able to by the Federal tax system through reaches such heights that undue the fact that a stock is high in the deductibity of all interest pay¬ remember use of the nation's bank credit price, because we all draw on to help meet their bills from the outside world is ments. Since dividends distrib¬ takes place should it be curbed, .when Electric Bond & Share sold now not available to them, and, second, that there is no uted are not deducted from cor¬ 180, American Super Power but that condition hardly exists at clear indication that the French people, the British people, porate net income for Federal tax today. Speculation is what made at 70 and Radio at 500. A high purposes and interest payments to America and if speculation ceases price does not insure the virtue of or the other peoples understand that they must work more there. increased posits commercial and m diligently and produce more effectively than they have a century or reconcile themselves to a "lower standard of living." And wanting such an understanding, done for half bondholders are equity financing is over so deducted, discriminated against creditor financing. to be in the blood of the average American, then, in my opinion, we would be suffering from dry rot. any stock and I think the uninformed that while should not be en¬ couraged to come into the stock Volume 167 Number 4670 THE COMMERCIAL market, if ;the public will- follow the. Exchange's slogan of-/'Inves¬ tigate Before You Invest," that from then on they should be al¬ ■ -f; lowed to risk their money as they fit,< : - see ,. It might be well to compare the inactivity of the stock relation dices. , to broad Whether production economic pr , indices, the rate of stock trading wires New to York, the stock 16% and, buy or sell 1,000 shares/finds it quoted 16-17 Va, 100 side. each on Last to year's turnover in listings only was about 20% of that of 1926. 1926 is the year used as the. base in the of wholesale commodity index prices by the U. S. Bureau Labor Statistics and it'is less looked upon our of more or period when as a economy as a whole func¬ was tioning well. In i929, the sales of Montgom¬ ery Ward were $267 million—last they year ran at a rate of about billion and buck sales quarter; Sears, Roe¬ up from $355 mil- a $2 billion last Motors sales since over General 1929 a are lion in 1930 to year. have doubled from approxi¬ a half to mately $1 billion $3 billion. Electric kilowatt-hour and urged to "Get the facts before invest," they do just that and the facts too thin for comfortable are opera¬ The thin markets have dried up point where, a large block of stock is for if any sale, it usually has to take the form of a secondary or a special, with no similar machinery devised for the man who wants to buy a large block of stock. A person is almost afraid to buy at the market 5,000 shares of anything today for fear he will run the stock up unduly and, therefore, subject himself to a barrage of questions the next day as to why he bought it, etc. If traders had latitude, this more shouldn't happen because the traders would probably make the stock available within reasonable limits, if they had to go short, but why should they do so when short-sale profits, since they even always short-term, are figured at 100% for capital gain purposes? Of course, we all realize the are about but $85 billion in 1929 to roughly $200 billion today. Trans¬ actions on the New York Curb Ex- change have dropped from of 476 ure million million shares in in 1936 fig¬ a 1929 to 134 and last declined further to only 72 million shares—just about 15% from where they were 18 years year ago and almost half of where they were 10 years ago. Forgetting the boom days in 1929, the value of a franchise to business do the on New York Stock Exchange is only 35% of what it was in 1936 when seats still sold at $174,000. are now They / .This is Do is to tax as should try to do something about—not only as an obligation to the people employed in this industry, but for, the sake of our customers and the whole American, economy. High-speed tickers, electric boards and with 1 bids and offers from hundreds of Cities all the over world real the at least the the all England, through gains. such any legislation as It deduct losses your put tax capital nearly so on be were in taxes never matter no gains screwball wouldn't devastating rates of the tax what the if you could against ordi¬ income nary or, least, against dividend income and interest from securities, ally looks as an individual natur¬ upon these two sources to at least offset losses which are bound to occur. Take a with a capital of $50,000—if flowing $100,000 during the year, spends $20,000 to live and pays $70,000 in taxes, he has $10,000 If he loses $50,000 in securi¬ ties during the year, practically all his capital is gone because he can only deduct $1,000 of his losses—whereas, if he could de¬ duct the whole $50,000, he would on $50,000 income instead of $100,000. only pay an income tax Speculation and Venture Capital (Continued from exchange members and their part¬ ners are the principal buyers and sellers, on exchanges. For the past eleven years the New York Stock the Curb exchanges have ob¬ tained a volume very . and sales by their partners. shown that have participation in the total of the slightly about 932 member dents reports member corporations, investment trusts, 217 banks, 220 foreigners, 296 specialists, floor traders and odd-lot dealers, purchases members These non-financial 187 dealers and market and 171/2% on change and 16% . fluctuates has the averaged Stock why stock market volume or prices increased or decreased on a given day. The opinions and requirements of too many thousands of people are in¬ volved. But the we do know each day simple facts of whether or not the volume of stock market specu¬ lation, or the price average, is in¬ creasing or is decreasing. It is possible, I believe, to show the direct effect which the stock mar¬ ket has on the raising of venture capital by charting, tive basis, new stock on a compara¬ the monthly sales of issues, the volume of stock market transactions and the of stock market prices. average Such charts different and indicate that in months between 1947 the sales volume of comparison months. These months of marked increases in the sale of issues almost rise a in market volume of or a rise in price average, or only three instances out of In the 71 months of marked prior deecline in both a and price. Ex¬ and and and non-member their wives, depen¬ discretionary accounts and 732 unclassified accounts par¬ ticipated in purchases and sales or both on that day. It was a day of heavy volume, but there is no to believe that the reason variety of participation would alter mate¬ both volume and price had is, of course, not always followed by an increase in the average, flow of sale of venture capital. But the capital issues almost new invariably shows crease, only after volume marked/.in- a price has first led the or Such charts, of than furnish more semblance of a banker. The stock market reveals the public's attitude toward whether not or to venture and thfeir bankers whether little A reflection will indicate why the flow of venture stock that market. the I should of use the point word ownership is ac¬ capacity the was same as usual the day on Exchange mission concluded a study single day's trading on the York Stock Exchange. This of a New- study ever made to assemble and tabulate all the details of one change. Even this day on one enormous of work, which took about prepare, reached ex¬ piece a year only part of the information about the Studied. It does show, one day however; that 17,603 domestic individuals, Stock Market ment of capital is smoothed out into convenient averages, it gives the of appearance flow (or funds into continuous a perhaps a corporate trickle) and use Stock even cation as to able market more however, venture capital goes to work in separate groups'as par¬ ticular issues of securities are of¬ as transactions to motive than origin. to are But it assume they seems that are reason¬ most pur¬ chasers buy stocks because they believe they will increase in value and most sellers anticipate a de¬ cline in price. In seeking out what effect stock market specula¬ tion may have on the raising of venture a a sign is offering work to another group of venture¬ investors, some be decision a made capital, it is fruitless attempt to sub-divide stock ket whole transactions as a decision matter of impossible of classifi¬ to mar¬ into purely theoretical degrees of speculation. The important fact of se¬ curities into private hands. In fact, This Transactions re¬ Com¬ represents the greatest effort Motives of of way pic¬ turesque than accurate. When the spasmodic character of this move¬ by the prospective ployer and his advisers. studied. specialists and odd-lot dealers. maining 83% of the stock market purchases and sales which are made by non-members. Recently to centage of member participation in¬ more percentages is per¬ "flow" savings and wealth into stock Ii&lf counted for by members' transac¬ tions in their professional the out describing the transfer of dividual new factory, that capital is dependent on conditions in the Before the Securities and they can go forward, or must wait, in their plans to raise equity capital. sold. the its capital. It flashes the green or the red lights, which tell companies at of no statistical proof of facts which are self-evident to every investment out sources do course, and available of movement other soundly will depend on a correct appraisal of the attitude, at that the thousands of ture of on people pany is not must em¬ simple deciding that the com¬ needs more ployment they owners want. capital to work the can of afford to offer the capital they They must decide whether the terms able. The likely to be accept¬ banker, who will buy are securities from the company and reimburse himself by resell¬ ing -the issue, is particularly in¬ terested in whether the offer will attract buyers. If he misjudges conditions, he will find his own capital tied up indefi¬ nitely in an issue of securities, market obstacle which an But there Fear possibility of loss of capital in the hope of larger income and capital may future. We remove these answer make current or guess at information of source The away. they have accurate and broad, a this barrier. Both seem to working in that direction. There is also the brush pile of many false doctrines to be cleared unless answers, available banker questions, intelligent an oppressed by our responsibilities. Only good statesmanship can are world new time and be the \ uncertainty as to what happen in the world make it against loss of capital in exchange cannot be reduced. can other obstructions, are and for their dollars? even availability of difficult to be confident about the increase? Or will people only ac¬ cept securities providing a fixed income and maximum assurance their the on our of teaching that become static years has economy and that growth is behind us must as be overcome. Leadership, which ' "public" is thinking. has failed to encourage thrift, and The stock market provides this hard work and self-reliance, must information. It is continuous, be forgotten. Here again only time moment to mcment, expression of can clear up this rubbish in the opinion — a Gallup Poll on the path. //■'.//■/, ././■ ' V../, ' scale of Paul Bunyon. It is a There may still remain the ob¬ highly reliable cross-section of the stacle of mistrust of our financial" to what their prevailing opinion group in which the the of very machinery, although great changes and time have already gone a long way toward removing thia can express his opinion in the once serious impediment. Wise stock market poll without backing leadership in finance, earnest ef¬ it up with his forts to spread knowledge of what property.; Selling opinion must be shown by actual the machinery is for and how it sales buying opinion must be works, and a continued demon¬ supported with real purchases. stration of fair dealing are the its banker company and interested. No are one — The price level rises or falls under the aggregate pressures of people who best risking their property in support of their opinions.' /; / The record makes it clear that though even bankers There I securities imposed government. The high wall these its take advice. stock for stantial body of opinion from of pression capital demonstrates new this. We have record of not were no the equally complete securities sold; but, if had, I l | lieve be it will most poll. There direct is beyond question cause-and-effect a relation¬ ship between the volume and price trends of the stock market and the so-called flow of venture difficult stable or market, either a re¬ relatively rising price level, is a a condition precedent to any active movement of capital into new stock issues. When public interest the stock market is "at low in ebb" be it as was in 1947, there need surprise no that capital new not raised in sufficient quan¬ tities. There need be no astonish¬ was ment that such new obtained in 1947 capital as was 73% invest¬ that the way of ven¬ speculation, it is astonishing and ridiculous that tion of evil. I sulting -.in of of the capital is the inhibition word stock one one which has been instilled in people against taking a risk. In an econ¬ omy which is based on individual risk, which has grown up on actions the be- political obstructions across capital. A broad volume of trans¬ in I that me intangible and ture stock ex¬ must and when But it seems to the most has fallen the It considerations permit. against of market. reduced market offered were advice the eventually be which we in would expect it to show that these the by of. sub¬ a to period of increased sales of every restrictions excludes best record The on exchange consistently their wholly artificial, and unjustified barriers, in/ are believe stock market tells them, they have done keeping this part the form of credit restrictions companies and hot like what the may for means of the path clear. are should give the we "speculation" Russians ulation" Foland, the using the to drive of "spec¬ cry freedom to support or connota¬ understand the can tion of the ruble. out of devalua¬ a But rely on we the willingness of people to risk, capital. Our whole economic system would collapse if people their ceased to speculate — ceased tor take risks with their capital. Yet politicians seem to court preestige. by calling their rivals >»/• "specula¬ tors" and demanding bonds, and only 27% venture capital willing to accept the hazards of a they never stock interest in the such people is that they are either ignorant or hypocritical. But, since they build a psychological ment While it the prices the seems business. clear that level are in¬ of stock market conditions precedent to arising of venture should broad an in stock market speculation crease and was capital capital, it be equally clear that speculative interest and a an optimistic attitude toward the fu¬ ture of business are prerequisites rising stock market volume and prices. The stock market reflec¬ to tion of that interest and after may. a attitude protracted rise, protesting owned loudly . The best that barrier which is can against our the • be inclined to consider them more traitors to the system that ports them and all of us. must, of course, continue to provide all the data necessary for an informed which are opinion offered or on dealt decisions will stocks in so that buyers and sellers may spec¬ ulate intelligently. We*must en¬ people to base their business sup¬ We ulative that for risk taking requires, one economy courage fidence of VY*//.. said ingness to speculate and the con¬ that share a stock. magnify their size; but the will¬ a in its business. The directors must first decide what terms of em¬ the attitude toward the future capital to risk. Our tax system is certainly a major obstacle, per¬ haps the major obstacle, and it is stocks? Will people accept the risk of an uncertain income and the directors and crush¬ incentive to speculate* on our our and indeed who may have capital which they wish to put to work. Is that atti¬ tude favorable toward purchase of The Capital discuss;the ing effect of the present tax strue- made time, Venture will securities way. hung analyzing the market stock fered practical not exhibited a prior increase. A rising volume of stock i mar¬ ket transactions, or a rising price proof is Others the • , rially at lower volumes. At least no volume In only eight instances period. About is in¬ the stock market exhibited crease, the Curb dur¬ There stock transactions, on as stock new invariably followed the year these new substantially with preceding ing the eleven of 71 1919 stock issues increased in in 6) page 346 weekly report of the vol¬ of financial power. No one can know Obstaoles to nancing issues. Whether the decision is people, and that they result prices which represent the composite appraisal of so many people that they are beyond the powers of control, or even predic¬ tion, of any special interests or groups regardless of political or Venture Capital and Stock Market Stock Market ume num¬ ber of earns left. orders in both. capital tax a of 25' (621)' instead of being available for fi¬ an the stock market holding period. heavy have they the on indeterminate an problem the of core eliminate or With he something that, brokers,'/we placed by number venture, the man Should daily transactions CHRONICLE stock market are the result of usually quoted around $59,000.' What Brokers . that the markets are lion and the national income from ' r i. the deterrence such things as high in¬ dividual taxes and double taxation of dividends have on risk consumption has gone up in this period from 90 billion to 200 bil- . *' fool are trading to relation • We can't tion. stricted. '• sees the last sale of when he goes to important element in providing liquidity for the revolving fund of risk capital, is being severly re¬ i who that is FINANCIAL indeterminate consolation no customer poor been declining so that the breadth of the market, which is an has .i are you in income, volume other economic thousands of miles of pri¬ to some little corner over vate public forever because, when they in- measured terms of national of market in in in & grow not profitably must be present first. If the raising of venture capital, so essential to our national health, is depedentf on increasing stock market speculation or rising stock market prices, and these in on spec¬ knowledge, out turn -depend fidence and ulate, what these the vital on widespread willingness to con¬ spec¬ be done to restore ingredients and start can moving? There is, of course, no one reason for the un¬ willingness to risk capital and the uncertainty about the future, process which across are the real barricades the path of venture capital. But rumor. we should speak bedly, not in defense, but^ in commendation of the speculative motive — of the willingness risk capital. Until the revival that we work are to a of to confidence growing nation with be done and profits to made, until the-resurgence of the speculative spirit, the willing¬ be ness to calculate the chances of profit and the dangers of loss of our venture capital, interest in stock market speculation will not revive and the movement of ven¬ ture'capital-will be held ing for the green light. ' up • wait¬ /:p»u 26 & THE COMMERCIAL (622) FINANCIAL afford, pro]-; by the Federal Government figures, that is the expenditures unless they are essential and hot. ■for promotion of the Merchant Marine, but if this item is ex¬ being well done in other research cluded, these expenditures would laboratories? It would be fine to; remain almost constant up to 1946 have the luxury of undertaking : with an upward trend thereafter. research on any idea or any proj¬ Omitting the item for promotion ect which the imaginative brains in A Reduced Budget Before Tax Reduction business stimulate the until come sufficiently and in¬ raise government total would exceed that which revenue allowances other of armed the ex-members to forces for which it is admitted had nection whatever with causes no con¬ serv¬ war to take the ers. one was item There people's $81.4 million. which distorts bills risk, rather than being charged up in the the American of received be the by present ices, so "Times" the says , expenditures for veterans should they have different functions as like an individual or a corpora¬ be just and the public will ap¬ set up and the Export-Import tion, must adjust its budget to the prove these expenditures and will¬ Bank is our own creation, but all essential needs and eliminate un¬ ingly pay the necessary taxes as of them lead directly to the same as these expenditures are purposes of lending and spending necessary expenses in the budget, long and the government services re¬ administered carefully and prop¬ American taxpayers'1 money sulting from the war, and luxuries erly distributed to deserving vet¬ abroad, to stabilize foreign cur¬ erans. It is certainly not asking rencies, to provide capital, and to which no government can long afford to charge to the taxpayers too much that a thorough account¬ finance international trade. An¬ in a democratic country. ing and examination be made of other question that seems worth •r By comparison the budget items the items both in the best interests raising is whether or not many of the various departments and of the veterans and the taxpayers of the functions being performed services of the Federal Govern¬ who must foot the bill. by these banking and financial in¬ ' for ment government, the But grounds. 1948 and 1949 when astronomical set so are down by items in the the side of the same budget of 1930 or even the conclusion drawn that on perform government ditures for national defense really did the for the best interests of those who before never its respon¬ sible tasks, or the present expen¬ are excessive luxuries and receive them Is welfare? of the national and not it for the best ditures interest of the veterans and all the They seem all the more unnecessary and be¬ yond our ability to afford these operating expenditures when we rest entirely unnecessary. Federal debt still realize that the exceeds service $259,000,000,000 and the charges at this date at the present low rates of interest are than more $5,000,000,000 per an¬ num. ; / , Briefly, let us examine some of the present budget items. One of the largest items is for national defense. The budget for that item this at But time?' at the vote some a present time, and de-: our energies in re¬ of learning how to restore' and healthy economic and: sound financial of structure production distribution which will make make In spite of the useful¬ . proj-' search to budget which have been increased beyond what seems reasonable or and services of the Labor De¬ of these luxurious some ects and ness it Would it not be better to cut down taxpayer ought to get a break. There are many other items in the necessary. conceive,. can afford we American to it possible for every in his own way and. keep that freedom which has1 made possible all of these devel-r opments and; American progress.: living ,a At the present time there is a partment, the Bureau of t Labor Statistics, the Bureau of Internal great lack of sound research and: Revenue, the Department of the application of sound principles in Interior, the Department of For¬ our money and financial practices. eign and Domestic Commerce, it The impaired relations of our ex¬ does seem that the proposed budg¬ cessive money and bank deposits ets exceed all justification at a in relation to our production and time when the government should consumption, as dangerous. This There are many other embar¬ stitutions could not be performed cut expenditures for the best in¬ can create an economic explosion and with less costs rassing questions that could be quicker, terests of the people who pay the which will impair our ability toasked. Are these expenditures for through the already existing pri¬ taxes in order that a sound econ¬ pay taxes and carry on the develinstitutions which veterans and some of the expen¬ vate banking omy may be restored and tax rev¬ opments necessary-.for',, our na¬ have their 1939 that quickly be must Americans can work¬ New York are dence has been made available to (April 1, 1947). Why to how "far we can go without tax rates. me that justifies this increase in should these outlays be con¬ impoverishing our own people. the government expenditures for Sharpening the Budget Axe tinued at the public expense and Do we need the Export-Import transportation and communica¬ There is no expenditure that also at the expense of the really Bank, the International Fund, and tion. Here is a place where the disabled war veterans? The the International Bank? It is true cannot be defended on some will we ects and of Can money; to add to these new research these of the Merchant Marine, the ex¬ penditures amounted to $423,000,Some "foreign expenditures 000 in 1939, $466,000,000 in 1944, No evi¬ essential, but there is a limit $1,053,000,000 in 1947-. socialized tax 1930 "is Administration's 1949 budget pro¬ ity it seems quite probable that (Continued from first page) A business depression at the pres¬ poses $6.1 billions. A careful anal¬ the expenditures for capital would ent time would cut heavily into ysis of these costs is called for. be more easily met and cost the the government revenue. It is Then there are millions of dollars American people less if placed in the hands of those who are willing readily plausible that a reduction in the budget for pensions and of 20% in taxes would Thursday, February 5, 1948 CHRONICLE of that us we build a sound America with thriving enterprises, steady em¬ and strong business ployment regular and order that we may be the in taxes emergencies afford we income in able to pay to be enue in every country in stable and continu¬ more tax-paying public vitality of the and business enterprises in order to overdo what seems like gener¬ the the well-intended American purposes, but sible • service in this our Federal bi#£it seems also quite possible ning to wonder when he is going tfegg* the ways and means of col¬ lecting way any revenue might be over¬ hauled and become more efficient - with reduced budget. A a in the- dollar buying , to power about* 50%. of-its buying power in H)39;i'rv<This rise in and: costs department, prices taxpayer is begin¬ war veterans? This in no to get a handout. .: suggests that we should avoid The Budget of the Department obligation to the veterans, but alone is more than $11 billion, in keeping our obligations to the kk '■') t ! ■ V of Agriculture/ 1 -•«: 'p-more than 10 times the amount veterans we should also keep in ? It is rather difficult to compare spent in 1939 and is one of the mind our obligations to help the the present' budget items with items that may indeed be fully veterans help themselves as real those prior to 1939, because of the We owe it to rearrangement of items, the break¬ necessary; but in spite of the needs American citizens. for strong national defense, it re¬ the veterans to help them get an up of departments and general ex¬ mains a fact that each succeeding education. We should help them pansion which seems to have war has been fought with differ¬ get jobs. We should help them grown without limit in recent osity to While tional welfare. ous.:/One can easily present a debt is over 535% of what it was^ good /argument for the services in 1939 and all other items in our. of such departments as that of financial structure have been in¬ these countries that understand Labor and Commerce, but whether creased out of proportion to our, the needs local perhaps better these services should be expanded production and distribution, prices* than governmental employees can ancf" charged up to the taxpayer and costs of living have only par-* ever understand them. at this time when tax charges tially adjusted to this unhealthy; The budget for international have reached the point of discour- condition. These rising prices and, affairs and finance in 1948 was aging production is doubtful.*, Jn costs have-reduced the value of? Moreover, these private institutions have a personnel in and " meet estimated at $5,533,000,000 and the the case of the Department of In¬ they occur? Can proposed budget for 1949 is $7;- ternal Revenue it is easy to un¬ sap the economic 009,000,000, and no one questions derstand the need for the best pos¬ future as branches and financial connections the world. . revision of the methods of collecting many is a tax indirectly upon; every producer and consumer.Out of such maladjustments and- spirals great depres-, developed. If a depres¬ sion ^should develop out of the- wage-price sions have government; conditions, present , and instruments ent tech¬ new While large expenditures niques. for defense purposes may be nec¬ at reasonable costs provide ways and means for places and them to take their rightful brains as armed essary, the best research in the government and the homes build years. combined received resources 41.4 excise taxes well might ?to save the government money. In many of, these taxes it is quite possible that -the cost of prove collection much as amounts the almost to revenue. * . as . r By Research - Expenditures the Government * Proposed million dollars. In Everyone approves expenditures 1948 for scientific research and educa¬ the that the results of the large pres¬ whether the economic effect upon ent our not going to are be obsolete before there is another emergency. v Navy Are the and Army enterprises in which the vet¬ must earn a living may not erans ultimately cost the veterans more and expendi¬ than they are. apparently gaining the forward look¬ from the present government ex¬ ing needs of the best interests of penditures? The most important the country? No one doubts that service we can contribute to show organization tures keyed to this is the intention, but it is to be self-satisfied and while easy there is and luxurious pleasant jobs that have no use whatever in no war perpetuate future national defense. In 1939 the armed per expenditures of the forces were about $3,600 These expenditures, of increased rapidly during the gratefulness to the veterans is help them properly find their our to places in a sound, stable, economic society and help them get produc¬ tive jobs through which they can have the pride of earning an in¬ come in their own way and de¬ veloping their own way of life. man. course, Expenditures for International Affairs Should they not decline dur¬ war. ing peace time? But the estimated Our proposed budget expend¬ expenditures per man in 1947 are itures for international affairs only slightly lower than 1945 and are, of necessity, much larger the expenditures per man in 1948 than before the war. While were increased to a figure even genuinely help the homeless and hungry people in the war-torn that if the expenditures per man countries to regain their rightful could be kept at the level of 1947, places in society and become pro¬ more than $1,000 per man could ducers of the goods they need, be saved and a budget reduction this is an expenditure where care¬ item of $1,600,000,000 saved to the ful control is necessary to see to taxpayer. it that the funds are used to help higher than that of 1945. Upon careful examination it will be The expenditures for veterans' services and benefits in 1948 were the second largest item in every wishes American to seen the the needy and to further produc¬ tion which will help the people 000,000 the estimates at mid-year. help themselves. To what extent expenditures should be made by the government beyond that which is for charity and to what The estimates of expenditures for extent veterans should 1946 these expendi¬ tures exceeded by about $1,000,budget. ~ In these $906,000,000 and $1,626,000,000. In considering these items we should we in present proposals comparison with expenditures research already developed. examine the 1946 began at $4.2 investments me It: it would be the part, ment which are so r agreeable and do. expenditures and pleasant research financial stabilize on our government inconje, production employment" and all •. of us.;•; Tax Demand, for The been titled and' for ;.: }■ * Reduction,! * has! taxpayer feels that he promised he Moreover of economic; which will system to the a tax a reduction.- feels that he is en¬ reduction because tax hardships he has endured high taxes and reducing his standard of living ever since industry World War II began. At present a with a substantial budget for agri¬ spends well over a billion dollars large percentage of the people are culture and the preservation of annually in scientific laboratories unable to pay their bills. This natural resources. for research. This research has includes those in the high income: The American farmer certainly been generously shared with the as well as in the lower income: deserves all the help that he can government upon request. Any¬ brackets. Where the established get in a sound way from either one can name leading American costs of living cannot be met prop¬ mil¬ erties Federal or State governments, but industries that appropriate ; are ' being abandoned and* is it possible that some of these lions every year for research. The debts created that will never be government is already appropri¬ paid. The loan sharks are doing aexpenditures are unnecessary, have outlived their usefulness, ating large sums for reasearch big business. The government taxare duplications, and greatly ex¬ through the Departments of Agri¬ take and high prices swell their' ceed any service or usefulness to culture, Commerce, Interior, Navy, business. • : ' ' " either the farmer or the American Army, War, and the Atomic Energy With the present high costs of people. Are many of these serv* Commission. In addition there are doing business the incentives for' ices political creations which the large sums appropriated by the risk-taking and new/business en¬ self-respecting farmer wo u 1 d Federal Government to aid the deavors-are being v, destroyed as' rather not have? How can we research being carried on in the indicated by the decline in new:. justify the hundreds of millions, of Departments of Agriculture and businesses incorporated.! ; Many1 dollars in the proposed budget for experiment stations of each state. going businesses are in danger of sustaining farm prices and regu¬ These/'include all. forms of J re¬ a rapid conversion from profits to" lating farm production when farm search from that of soil fertility losses. ^Reserves for depreciationprices are at an all time high arid to product improvement, chemical are not adequate, >. reserves for the farmers' income has broken all analysis and a great variety of contingencies are/too Small, ade¬ records? It is the belief of many projects too numerous to .name. quate surpluses have not been1 farmers, and I share this belief, Then there are research depart¬ built up, new capital for the small that most of the present subsidies ments in every college and uni¬ business, and even large corpora-1 on farm products will in the long versity worthy of the name.- Isn't it fortunate that we have so many tions, is almost impossible to get run boomerang on the farmer and under ' today's uncertain -money at the: present time are an un¬ research departments actively en¬ market conditions. A small de¬ necessary burdensome tax cost to gaged in new worthwhile discov¬ cline in business, or just a decline, the farmer and • all other; con¬ eries? - The results of these; re¬ in prices will remove many, busi¬ sumers and producers. '. ' searches soon become public prop¬ ness enterprises from the tax pay¬ erty. The present /expenditures Transportation and for research far exceed that which ing class, and multiply the list of also has remember a that department of state agriculture every for At the present paying time . _ Communication and loans seems possible by a government In the budget for 1948 these by private indi¬ such as ours which has known billions and were increased to viduals willing to take the risks items are $1,563,000,000, and the no limit to luxury and; ambition $6.2 billions in August. This item involved is a debatable question. proposed budget for 1949 calls for for 1948 was $6.6 billions and the But beyond the necessity of char¬ $1,646,000,000. A comparable item when it came to spending other in to of wisdom to cut down on govern¬ their important and useful citizens in budget for respective communities. The agriculture and agricultural re¬ tion where the public receives forces should be summoned to question I am raising is whether sources received $614,000,000 and the benefit of such knowledge in overhaul thoroughly these expend¬ the present ways and means of natural resources not primarily the form of increased production itures and see to it that there helping the veterans-are really agricultural $1,179,000,000. The and useful services that raise our is no deadwood being carried and helping them as they should and proposed budget for 1949 calls for standard of living. But suppose expenditures seems some • would decline sharply. revenue and New But in the budget of 1930 agriculture and natural the of failures. it is United all most / \ . , Above be made . - ' considerations! important that the. other States a sound and There is a def- keep healthy economy. Volume;. 167 inite limit Number luxuries the to THE COMMERCIAL 4670 of, spending needs sonably to work and produce, with unbalanced high prices andt costs are danger signals pointing'to a readjustment which may bring reduced incomes, deficit financing on the part of the government, rising interest rates, declining bond prices, unemploy¬ ment in and retribution general tive with effort all the resources at hand, and abandonment regulations tion and abroad. ital of silly produc¬ restrict trade both at home and following rea¬ economic policies sound will the having that Countries - any to are. need. A little, money the right ideas of gov¬ ernment, work, thrift, investment, and honesty in meeting foreign obligations might save the Amer¬ ican taxpayers billions of social¬ on ized the funds, whether domestic or foreign, whether to pay a salary check or 15 past of harm to Any years. events would such do a prestige and foreign our relations than all the Communists do. ever can Foreign losses. Every more make a countries ■ ... Federal of use gift to charity, should be with the U. S.; Tax- labeled "Paid seeking our help have .other needs even greater than gifts of Ameri¬ the fact that dents calls attention to assuming that the with one-half a share of such community property it is in flict with the con¬ Declaration of Payers' Money and Labor." in this same, detail, the as the stitution. Con¬ owner complete. conflicting and incon¬ sistent' in its provisions, that it is and be held to be and as to number a of issues, .♦Origin In 2) page , The proposal to establish of Community Property the Eastern States there is Political expediency always had be to dictates that the greatest number voters be satisfied. So a law of was allowed which enacted the but small understanding of the married citizen to elect whether community property system. Sev¬ ■he would report on the community eral -years ago students in the or individual basis. This contented writer's classes in taxation were the politicians but it did not con¬ queried as to their knowledge of the subject. A majority had never heard of it, others had the vaguest tent the Commissioner of Internal ideas to what it really. was. people think it is new. If as Some will turn you back the pages history for 40 centuries learn that is record it existed found in of will you then. the > The code Revenue and the invalid. of which laws is B. C. Community property appeared in Europe early in the Christian era. The Spanish ordi¬ nance. gothic codified as code in the about the Viso- middle of Latin' America. > Subse¬ quently -it reached Mexico and ' constitute solid a belt ex¬ southward along the Pacific and along the Mexican, line eastward and the Gulf to the mouth of the The States include Idaho, Washington, Oregon, Caliornia, Nevada, Arizona, New Mexico,Oklahoma,gon and : Oklahoma community Texas and Of these all but Ore¬ are property original States, but these two may be logically re-! munity property States. It would garded as members of the group being geographically contiguous appear that the Louisiana system had its origin in Germanic cus¬ and entertaining, to a considerable tomary lawr Thereafter it was in¬ extent, the same social philosophy corporated in the Code Napoleon,; as their neighbors. '!77!:7yv In* 1947 four more States joined 'after which the Louisiana Civil was patterned. In it is apparent that the any case, community concept is purely a creature of the stranger to the com-; law, which is the basis of the I legal system of the Eastern and Middle Western States. " •7 civil and is a mon this just group.* These mentioned, were Oregon, alsoNebraska, Michigan and Pennsylvania. These all sought the tax ; advantages relief families to ; ar.d why not in any case control devolution of property in various states. It institutional provisions. would be the effect of Yet a the reduce taxes. If a Texan had income of $25,000 he could each report an and his wife to the statute case was declared invalid in a by the Supreme Court of the State.1 i In its opinion the court stated "at the outset that the man¬ Federal their income combined tax incomes and his wife, would on taxpayers uniform a in basis. all Curi¬ Mississippi, although bills to this purpose in¬ were Special Tax Study 'sufficiently an Federal large > to render- the' commuilitypi an notably attrae, Willcox, Jr. v. Penn Mutual Life insurance Co. (Supr. Penn, (11/26/47) Ta. St. •/-' J'" the amended was property In 1942 provide spouse. the Federal amendment to mary to in that pri¬ perience. was ; in entire value property of the community includable in the was community that his wife. That was state not a deserted But news. the deserted wife asserted and en¬ forced her right to half his wages. That was news. The miner was both surprised and aggrieved. He his grievance in a big That did not help him. He confronted with the law of y."-'7 . Then there for the pur¬ of the Federal estate tax. The legislative history of the chal¬ lenged statute, as disclosed by the committee hearings and reports and the Congressional debate, can being to better the ation of the criminated structure tax oper¬ and to "Examination of the against." The that the was the couple who started married life in. Texas. The husband c worked hard and ac¬ ' purpose enacting of what it was be¬ was unequal distribu¬ burdens of estate which taxes led Congress to ap¬ community property the principles of death taxes which it report then continues: "With the present scale of taxation we have put the ply had already applied to other forms of joint ownership on the death men's on dangerous that in effect that was miner in the state. the community property on the husband's death had all been accumulated through the husband's efforts, the wife having contributed nothing. The Supreme Court decided that the provements in the tax system, the purpose ' The court stated: incentives to a • the .Pennsylvania assorted until state death. break •, the brief period property law by priof the continued and pose itself In residents married husband's The challenged Texas. A two case live Government. was and husband's tax estate concerned degree piling by heavier and heavier burdens upon them It as they climb describes up the as one tax problem "the equitable ad¬ justment of tax rates and exemp¬ tions" and economy must we that states Ls to survive and to see it that encouraged to work * * * "if our prosper are men and produce We recommend a reduction to of the joint owners." The the ladder." number just report, referred tate taxation, husband and wife living 1 in community property states enjoy a preferential treat¬ ment those over community is due to living property the fact erty after that efforts in by the through community a state is treated non- all marriage balance of in states. acquired all, with due regard for the cost of living of those in the lower in¬ come tax groups and for the need of the to, contains this significant statement. "For the purpose of Federal es¬ of individual income tax rates for This prop¬ husband his own property if one-half be¬ as the economy." longed to the wife. In non-com¬ Next it notes that the Treasury munity property states all such quired a competence. That was has described the various possible property is regarded as belonging prior to the present confiscatory methods for solving the problem entirely to the husband. The dif¬ rates of income tax. The wife died but has nof definitely recom¬ ference in the amount of Federal leaving a will by which she gave mended any one of them for estate tax is enormous." all her property to her mother. adoption. Five methods are listed. It is also noted that "the inThe husband learned to his sor¬ The fifth is to grant permission tc equity spouses in all states to divide the combined income' between them¬ spouses selves. The tax of the two spouses is the sum of the taxes on the than considerable number of the Amer¬ ican a commonwealths have had Even community as Governor late as of New unless of here remarked: to the income. It is the only one possessing a con¬ siderable popular appeal, and that majority of those presently clamoring for the community sys¬ tem envision this system as the practical workings of the com¬ munity property plan. A measure has been introduced York plan and it is reported to stand the titled. V "The Tax Family Income." serts that the. Treatment The report of as¬ present income tax states counterparts id Congress by the Ways Means Committee embodying and this a large chance of adoption irrespec¬ tive of the attention would be states other on occasions." Finally the court concludes "that -f the here tax laid fate of the other proposed recommenda¬ avoided. This plan in¬ dicates no tendency to subordinate the lowering of tax rates and with respect to community property infringes constitutional A eliminate income and the non-community has not neither act might inequality between tax legal nor in community Why states. Congress acted? pediment to no provision like Congressional then There is constitional im¬ such legislation. To repeat, why has it not been done? The amendments proposed. Other other has been brought to Congressional the property law. 1947, the asserted inherent in! allowing in community, property to bear a lighter burden "The last solution us in Nov. is by all odds the best." It might have been added that it seems under consideration the enactment of halves two munity law emanates in its funda- 1 Mark handed marily with major structural im¬ in many cases unsuspected un¬ the citizen has learned his lesson in the hard school — ex¬ that income1 of Committee, chairmanship of Roswell Magill, was appointed. This the community states he would cause tions of the Committee involve the ^pay a tax of almost $6,500, while, a community property law for the method of taxing trust income, the mental concepts from .Spanish ..the : Oklahoma couple were re¬ state to be introduced at Albany. averaging of personal income over quired to pay. in excess of $9,000,! sources, and that the effort to en-/ Probably he has no such intention, a period of years, a system which ja. difference of nearly 29%. (This graft it upon our own system nec¬ but the political effect was good. has worked well in England, and .amount/ it is .to be noted, results essarily results in fundamental However, the Federal government the elimination of double taxation "in the highest percentage of sav¬ has not been idle. Last June the of dividend income, whereby the conflicts with principles !of the ing.) Oklahoma . was disturbed Federal treasury transmitted to taxing of the same source of in¬ common law. centuries old." Here the Chairman of the House /by the migration of hei; wealthiest; Ways come in the hands of both the /citizens. 7 However,; everyone in: then is succinctly; stated the basic and Means Committee a study en¬ corporation and the stockholder -Oklahoma did-nobhave the law Louisiana purposes, placing under such Federal govern¬ 'Government $12,500 with a conse-' ifold instances of the problems ment enacted legislation which here involved arise largely 'quent saving in taxes of approxi¬ by would abolish discrimination be¬ mately $2,600. That is the man reason of the fact that the com¬ tween the community and non- Trom. Texas one-half eliminate manifest inequities in community property system really it. "Since the tax burden is so leave no doubt is. It may, and in fact usually does, reduce the tax paid by married heavy it is particularly important of Congress in that like incomes should bear a the elimination couples, but it does not stop there. lieved to be an It creates new obligations as well like burden; that no taxpayer and no kind of income shall be dis¬ tion of the tax as new privileges. The obligations was Court belonging to each Louisiana a offend demand which has swept the country, for a community tax law has rested upon an insuf¬ ficient knowledge of what the way. decisions two generally that community prop¬ erty is within' the taxing power troduced by Senators from several of the Eastern states. Also, in 1947 The which months after its effective date the to Supreme basis of report effect community property law. coal inhibi¬ constitutional no according the Committee would : community property State. They did more than envy. They Jmoved across the line in order to of an - a tions of the the were supposed to inure to row that he had lost not only his the' inhabitants of the1 community.; wife but half of his hard earned States. •" savings which, under the com¬ It did not take the inhabitants v As already: indicated the re¬ munity property law, belonged to surgence of the community prop¬ long to discover the truth of the! the -wife. Most of the people of aphorism—legislate in haste and the erty idea has occurred during the country don't want the com¬ :!last decade primarily, because of -epent at leisure. Soon there came munity property system, although the income tax plague. Oklahoma; Qiutterings from Nebraska, mur- a large number think that they Was the first of the non-commu-; murings from Michigan. In Neb¬ do. "What they really want is to raska it was proposed that a spe¬ be placed on a basis of tax 'nity ...States to adopt the idea. equal¬ cial session of the Legislature be Many citizens of Oklahoma were ity with the residents of the com¬ called to repeal the law. Pennsyl¬ making large fortunes in oil. They munity property states. r > 1 'saw with envy their Texas con¬ vania did not wait for the slow During the past two years a freres across the border who lived legislative processes. Within three ;in presents these save ously all these states/with the ex¬ ception of Illinois, were west of per¬ reasons good are may It That overlooked. taxpayers about down about two years ago.2 Here average of $150 an estate tax was involved. Prior for each family, which is much to.1942 estates of residents of com¬ better than President Truman's munity states were taxed on the states is this may not be done. One is suf¬ ficient. The Federal government tending from the Canadian border .then Texas and other of the com¬ Code Fed¬ til Today the community property States Louisiana. considerable 12 or a law are fundamental law. of of made Community Property Belt Mississippi. part again. community system obligatory upon the citizen and the Treasury Department smiled approval. the Seventh Century, was prob¬ ably brought to the southern por¬ tion of this hemisphere by the eonquisadores and #became 1 the a law a of about dated tried which Oklahoma ■ enacted the Hammurabi, that Babylonian code 2100 highest court of the land held the elective feature She less feasible. There haps 10 .But something community property even tive. million wife, been disregarding the community system and taxing those in the community and non-community states on the same basis. This plan lation Community eral / , afford in¬ of has come is by and as¬ serts that during 1947 eight states requested Congress to enact legis¬ Property Law done. considerably • rom division a method bringing about equality with¬ diminishing the Federal in¬ fested in the plan to grant spouses in all states the option to divide must inoperative Proposal for Federal : five would for (Continued to would indicates, however, that the greatest interest is mani¬ void." Community Property and the Split Income Tax looks between husband and which Equality simplest equally consequently * * * it ; may subject of criticism. Further, various plans of tax saving are discussed, chief of which is that The judicial enforcement or This statement suggested $40 allowance. incapable of either rational inter¬ pretation out splitting. well become to the Strangely of readily more $750 million, the law is "not only vague, in¬ definite and uncertain, but so 'in¬ A Plan to Bring About itself nearly without due process of law. Finally, the court concludes that , states. income; and (3) because invested income lends come ing of private property from the elimination the to inequality of tax burden on married couples in the several invested and which prohibits the tak¬ This Federal com¬ reforms of the property States; (2) on the basis of different treatment of the 14th Amendment to of other 27 munity earned statute actually vests each spouse (I) between resi¬ non-residents and fami¬ between respects. These were discriminations not for bad economic management for turn The court-then discriminates lies in three Rights of the Pennsylvania Con¬ trouble to get the cap¬ stitution which is substantially the recover they spent, law and- stable are (623) CHRONICLE capital. These reason why the community system political govern¬ may not be adapted to those States ments/stabilized currencies, a re¬ the jurisprudence of which has an turn to the maximum of produc¬ essentially*;. JSn g 1 i s h foundation. dollars can the " taxpayers' money here at home and giving it to the foreign needy/ That limit is> the point - where the- stability and soundness of our own economy is impaired. Many would say that we have already passed that limit. The present federal debt, scarcity of risk capital, impaired incentive , FINANCIAL & cynic will perhaps reply: in¬ taxes come come out the of pocket-books of living men, death taxes of out men, and the — estates dead men of dead cast no votes. 2 Fernande ??6 U. S v. 340. Samuel G. Wiener (1945) f6 Sun. C. 178; United Henry Rompel, Jr., ad'm. (1945) 326 U. S. 367, 66 Sup. C. 191. In the latter case the point was made that when States Texas, v. then annexed to an the independent nation, was United was States there that the local laws, including the community property sys¬ tem, should continue without impairment. a solemn agreement V--^ 28 THE COMMERCIAL (624) Thursday, February 5, 1948 CHRONICLE FINANCIAL & Table III Demand Performance and the Stock Market—The Finale BUYING Median sentiment business reversed fact was Therefore, since we con¬ that neither the foreign aid 17% than rather 23% A. in order.* would appear to be : 2,400 17% 3,350 + 1% 16% 900 $4,000—$4,999 8% 4,400 + 3% 12% 1,400 $5,000—$7,499 6% 5,500 + 20 $7,500 and over 4% 10,250 + 100% $2,300 3,220 which the United export balance enjoyed since the end States has All income groups Mean average . , No. of Classes % 13% 2,750 ? 26% 7,250 + 15% 100% + 40% Spend Units Under $1,000 7.9 15,400 —18% 11.6 9% 27,900 + 7.9 + 14% 26,100 $4,000—$4,999 3.7 + 16% 16,300 + $5.000—$7,499 2.8 + 22 % 15,400 durables. $7,500 and over 1.8 + 28% 18.400 46.3 + All classes being the other the coin of effective de¬ Consumption, bust or side of Change 1945-46 —100%, +15% tion? 35%. —13% $3,000—$3,999 + 9%': + Savings 1945-46 $2,000—$2,999 —15% + Median Change $4,800 —14%' $470 AM C Income 1945-46 — 2,350 Median Change 2%. 4%, 2%, — 3% TV/nili Income •83% — ^ $420 85%; — 5,600 + 13%; 7,100 + i5%» 19% 5,100 + + 22% 7,700 + 24% + 28% 13,100 + 30%, $39,020 + ii%; 10% ' 1% " $124,300 Aggregate personal income/holdings 177,200 $52,900 10% 136,100 Difference boom — ■ 480 - 17% 25% $3,000—$3,999 of durables, which, since January 1946, increased 37%, con¬ trasted with a 13% gain for nonBut, what of consump¬ $40 11% 3% + —100-% $97,080 + 11% . i buying power, a sec¬ mand ("desire—accompanied by NOTES—Figures are for calendar 1946; figures are rounded; figures exclude cur« tor which has traditionally pro¬ means of payment"), is controlling cency; "Mean averages" are post-dated on 1945 relationship to "median averages." "» vided the overwhelming market in the situation today. The steady for our industrial output, usually wearing away of effective demand amounts are held by such a rela¬ year 1946 were closely similar t<> through declining real wages be¬ tively small part of the consumers' the indicated intentions of th® over 90%, and which in the final analysis has always determined gan in late 1945 and was accele¬ market that they cannot be con¬ surveyees to purchase such goods, of In the first piace, the enormous v; 1,450 Change 1945-46 Average 5% ;• __ 10.6 must be looked for in the economic sector to swer metaphysical effects $600 . % of Total $1,000—$1,999 output spring, there can be do tend dispute. However, for any realise program nor domestic capital ex¬ tic appraisal of foreign spending pansion can be relied on to sustain as a "new economic factor," an the current high rate of business appreciation of its actual physical activity throughout 1948, the an¬ last late 1945-46 $1,000—$1,999 the greater accounted for by Average Under $1,000__ (Continued from first page) set of economic circumstances capable of deferring into the in¬ when the tightened relationships definite future the inevitable day of money demand to money sup¬ July bottom (178 FRB Index), of reckoning for present excessive again stepped up to where it at¬ prices and unprecedented profits. ply force Treasury bonds below tained a new peacetime high in To the extent that psychologically par, a development that we be¬ the month of November 1947 (192 the announcement of the Marshall lieve can only be avoided by an collapse of commodity FRB Index.) Most of this increase Plan visibly strengthened and in early prices. —Liquid AssetsMedian '* * Change % of Total Income Classes $2,COO—$2,999 V ; LIQUID ASSETS—1946 Income- sumption of durable goods. Total industrial production, after de¬ clining from the postwar peak in March 1947 (190 FRB Index) to a policy is responsible for the sharp decline in government bonds will become painfully clear money POWER AND of the War has been financed by consumer , the Government grants-in- S. U. aid to the extent of four fifths for world as a the trend of real present American wages since 1940, the last prewar prosperity is the maintenance of a high rate of production and conyear. . k_.t tf/iuLf Recovery Program will not, as commonly believed, provide new support for our internal so which 47.5 50.4 53.8 . 1 culable 146 135 153 1,800 187 141 133 1.890 196 181 108 1,910 198 186 106 the medium gradients. The decep- 1,940 201 192 104 tiveness in this apparent improve¬ 99.3 109.4 113.7 112.8 58.0 ^Calendar tOctober (est.). year ?,7 (latest). Index—Dun Price Food Component of the for & Take of the problem crux of de¬ most living and wages and salaries. As the footnotes under the table real wages its and of their on a low more starting increases and th^t development emphasizes. It un¬ the fact that since 1940, important is what Col. 6 nummerical basis in personal income status is by the reductions that have been for buyers' market. a trial durable equipment to producers' '.{which,:?in addition to its impor¬ would index (Col. 6) about 100, indicat¬ improvement over prewar tance dollarwise to overall capital ing formation, has in the past exer¬ cised a peculiarly decisive influ¬ ence upon the economy as a whatsoever.; whole. , ; no table Not only does it appear unlikely any significant expansion of and having bank deposits at the beginning of 1946, 42% sustained reduction in their holdings by a the end the' year, of topping numerically the 38% that enjoyed increases. have probably declined The eyeopener in these (about 3%-4%) be capital can be expected from cur¬ historically high levels, but the contrary the rising trend £©i interest rates portends a severe contraction ahead. During recent 'months, and as commercial, consumer, individual It of can over also that from 1945, total "take seen salaries have 8%, whereas the price index (as ad¬ has risen 49%. For the and wages increased only consumers' justed) of consumers, this trend sig¬ nifies that their aggregate ability mass loans have suces- to purchase goods and services out highs, together of income has fallen materially below what it was two to three with the record-breaking flota¬ tion of new capital security issues, years ago. As a matter of fact, on a the resulting pressure on the mon¬ per-employee basis, due to mortgage sively risen to ey new supply has become increasingly evident throughout the en- .more ,tire credit structure. flationary-ihspired That this in- expansion of private capital rather than a de¬ liberately contrived managed the increase in the number of people employed, individual buy¬ ing power has declined even more (Estimates of - , the PRIVATE drop DOMESTIC ' in salaries and wages per INVESTMENT ■■' V - of dollars) 2 1 4 3 9.5 10.4 7.2 8.7 8.9 9.3 equipment--- 9.1 11.5 13.2 15.7 16.6 17.8 18.0 Change in business inventory— 2.3 2.0 4.9 5.4 2.7 1.5 2.0 18.6 22.2 27.0 30.4 29.6 28.8 30.4 construction Producers' durable & Totals ——. liquid assets, in the top 10% of the Spending Units by Table III, occurred Published sales Bond one in figures vs. on Savings redemptions lead to believe that a net increase mass ownership is being these units gain most in income but also in savings. The in, we submit, lies the real ex¬ planation for the tremendous gap between postulated Personal In¬ come and Personal Holdings, based on medium averages, and the ac¬ tual figures for the year (see sec¬ ond half of this table). contrast If nothing else, demonstrates appliance nounce prices 10'x t. to an* sensationally the cut in much of the Sometime appliance falling this year, a later off in the fantastic increase in build* to A ing costs that still continues. six-room standard house frame cost $5,894 to build in 1939; today, it costs over jump,' $13,500, 132% a This factor, combined with a gen* erally tightening money supply, the ever increasing credit and hazards; of jnortgage loans, will bank enthusiasm to pro* accommodations, regardlesg of the desperate need of the ap* plicants. ,, V V , dampen vide . Inflation.and Industry Break* Even Points ; The lack of to at consumer capacity absorb, current peak production present price levels raises the question of industry's ability t<j> adjust to even a moderately lowei*; level; of output. Thd ' degree ot flexibility in this respect varies - How* ever, the constant rises in operate ing costs due to the leap-frog; at*"; from, industry to industry. tempts,; to have wages ' catch up with mounting commodity' prices * T-W ' •, 1 i t £7 l'l the Actually for all of 1946 and since ; in Financial Position and Buying of Consumers (October 1947 issue of the Federal Reserve Bul¬ Plans letin) /th'e^vwormal^ymdst • fields/ Consumer Buying Plans The Federal Reserve discussed what the effect of present efficient' concerns as well'/'if; hi lessor degree. The rise - Sin^e^pref war? in basic excise taxes, social security' taxes, pension fund;' exf' pense, etc.,-but most; of; all' the ••■? laborf injectf ai ' strength of union high prices, for durables particu¬ appreciating how larly, has had on the buying pub¬ earnings (40%) lic's future intentions. This is one and liquid assets (67%) are con¬ of»the most; important subjects centrated in relatively few hands treated in the overall 1947 Federal Reserve's Survey of Consumer Fi¬ (18%), thereby in actuality se¬ verely constricting the size of the nances. Its dependability as an in¬ dicator of actual - execution of mass market for consumer goods. Put another way, the great differ¬ consumers' plans is attested to by ence between median income and the recheck made on the 1946 in such of 'r' a sales situation should volume fall off even 10%-15%. has. been afjib '-hs cbg* taken nizance, of by. the stock "market since, mid-1946.v If normal unit o| production profit ratios were, Survey's figures on this aspect of and hand, and actual personal income liquid assets on the other, in of durables and houses of the va¬ capitalization v ofr actual effect is immobilized because these rious power liquid assets the on the study. The actual purchases Spending Units during the - ref established, the current stock pric$ one median level would and be seen to be: a-high earning nsk-potbntial./ Uhfor«- '7 3 *•»*,. 'in' *" 1 " seen. April of 1947, a net decrease in Series "E" holdings was experi¬ enced. Most significantly, monthly ■ i manufacturer so on the rate of construction of new housing can be anticipated. This is due chiefly '? 1 i or slow turn* ' leading electrical a of < • in-» have caused break-even points to jump to levels never before seen in industry at a peak volume of converse is true of the lowest in¬ The inevitable drop in output. come groups, numerically almost the profit ratio per unit of prof twice that of the top 10%. Paren¬ sales of the $25 denomination of duction has been progressing thetically, it should be noted that Series "E" ("the poor man's bond") steadily since fearly 1946? This apf the difference between the more have declined 84% since the peak plies not only to the innumerable popularly quoted "mean" average in 1944, while the $1,000 denomi¬ marginal producers that postwar and the lesser known "median" nations have declined only 11 %'.r inflation, hUs brought' into -all average figures is striking. There¬ Not only did -1947- 3 2 10.3 New first article. income and their $25,000 an much individual -1946l in importance thanthe aggregate fig¬ imply because of the actual Seasonally Adjusted Annual Rate by Quarters * our expenses on annual incomes. The most notable changes since 1945 sharply Department of Commerce in billions v length in ures Table GROSS living shown 1948, the decline a 32% in buying power. home" on r k' . the that shows sustained that rent '■■■ ,■ 1945 to January From has , ... real wage the make caused line. bonds months, It is statesmanship over sharp holding government some teresting question whether indus* have occurred in liquid assets. Of changes is contained in the mo¬ instead of rising tivation for these reductions. Over substantially the amounts pro¬ (to the 30%-plus levels), as 57% o'f all such income posed, the net economic effects indicate, we have adjusted the groups ■would be no more inflationary food component of the BLS Con¬ many are led to believe. used their liquid assets for gen¬ sumers' Price Index, since from than has been that of our postwar Rises in the level of commodity eral living expenses. Naturally, foreign trade to date, Thus it is 1940 to date this index fails ma¬ prices since 1944 have been breath¬ most of such spenders are con¬ reflect taking in speed and sharpness, tained in the below $2 000-a-year apparent that this important ele¬ terially, we contend, to actual changes in food prices in most notably since the start of the ment of capital formation will at level, 67% of which so expended best remain approximately un¬ the interim. Moreover, the other third quarter of 1947. That this their savings; 55% of the $2,000components of the BLS Index, has left its mark on the purchas¬ $4,999 group joined them; and, changed throughout 1948. of the Similarly, the other compo¬ particularly house furnishings and ing power of the mass market is strangely enough, 34% nent^, of capital fomatiori, "as the miscellaneous, are viewed almost evidenced by the further erosion $5,000-and-over level also had to as skeptically. Our preliminary in the reserve buying power and cut into their .slowing rate of expansion in the liquid assets for liv¬ researches show that if these two liquid assets of the Economic Man ing expenses. In this connection, ^accompanying table suggests, are later components were properly (i.e., the most typical individual the January 1948 "Fortune"# dis¬ unlikely to appreciably better the reflective of actual price changes, for each of the income classes, in¬ .1947 third quarter rate, even un¬ cusses under "$25,000 Year: A.D, der a continuation of the most fa¬ the estimated consumers' price in¬ dicated by the "median" as against 1948" the situation of seven typi¬ dex for January 1948, shown in the "mean" averages), whose vorable circumstances. This is cal executives who cannot meet the table, would be about 200. plight was examined at some particularly evident with respect This be absorbed at prices. Miscellaneous dur« in • i 400-500 thousand can and those employee in the interim. This lat¬ ship between the trend of the cost Program, Index Price Large Cities, ap¬ Recovery European Food to Actually, far occurred Price Index for Moderate FRB Br.'letin, December 1947, p. 1543. Home Pay—Wages and salaries less Social Security taxes, etc., of income taxes withheld by employers. in Families proval by Congress anticipated in the of favor basis. ment in Wholesale Bradstreet the BLS Consumers' derlines in solely revealed NOTES—Consumers' The re¬ due p.- (est.). JJanuary ter solved grades gained most,, but that was 206 59.2 than number 1,990 be to be the C- 105.1 political risks, domestic as were in 52.8 57.7 to be. produced at a 4.3-* are ables—washing machines, ranges, vacuum cleaners, and radios, have come levels but the lowest two. already attained all-time record Percentagewise, the two highest output rates. Most of these are, increase 1945_____ 55.2 /■ Automo* of individuals contained in all in¬ 155 amount foreign, a 130 '*;? biles 4.5 million pace, current There has been table). 202 1946_„„ time in mid-1948. some more cars 1,950 *1947 Reserve Federal the on the various income classes (second 1,810 if all of the incal¬ as within occurred 98.9 clining real wages is reflected in Col. 6 which shows the relation¬ well has during the redistri¬ 105.2 Income can that in 54.0 substituted the current year 1947." it 126 129 bution seen 54.5 tl948__.__ foregoing, 114 123 be can 1944 than levels which have been reached during even 111 155 The effect of wage rises 1946 1943 substantially less the 126 •: Based mass mar¬ purchases. Individuals can July 1947 Survey of Consumer In* only own and enjoy just so many tentions, it is our belief- that at houses, cars, refrigerators, wash¬ present rates of production, real demand for durables will be met ing machines, etc. 188 equal and most of the time will that 108 99 107 1,210 80.5 tl947 From 100 Wages Col. 4 + 5 100 available for as ket general Real Price = 1,500 60.9 1942 = $1,030 $48.9 1941___ Council concluded "will at no time seen Employee 1940___— nomic Advisers, be Billions Employees Year Per sidered half of 6 Index 1935-: 1935-39 Total would, in the authoritative opinion of the President's Council of Eco¬ produce a maxi¬ mum export surplus of about $12 billion a year, a surplus which the THP Ind. Take Home Pay < -»§ Index Consumers Marshall Plan the under : 5 3 2 Furthermore, the maximum amount of additional aid contem¬ plated v? TABLE II but rather continue one it is already geared. economy, shows which of keystone pean to This by the table below illustrated is it-should be clear that the Euro¬ a demise of OPA in by the mid-1946; it still continues. generally agreed that the It is •grants now almost fully exhausted, it is rated American Buying Power these from resulting balances economic health. the state of our and two thirds for the whole. With the dollar Europe *» ? •.•T: uv- ?-"^ Volume 167 Number 4670 tunately, the of reestab¬ process lishing such ratios does without fect drastic a net on THE not (7) income. Even the in Summary ness (1) The Marshall Plan (E. R. P.) support for a new internal our economy, for even under the most favorable circum¬ stances, it to only continue can which the one the rate of in expansion the ciated expansion bank loans U. S. continue of is tinuing the boom driven below \;.v\ '/ V ' (3) Due to the inflationary-in¬ spired expansion of private capi¬ tal, the rising trend of interest rates reflects the tightening rela¬ tionship between money and an supply. money (4) V demand Contrary to popular belief, study of all com¬ ponents of the cost of living indi¬ cates an actual decline in real since wages 1940. > (5) Contrary also to popular be¬ lief, the once insatiable market for consumer exists durable goods because no reserve longer buying power of the mass purchaser of •durables has been vitiated by the need, due to runaway living costs, to finance living expenses out of Wartime accumulated savings. 77 (6) Consumer intentions to buy durables fall far short of the op¬ timistic 1948 production plans of industry in general. As stock market of break probability at time some within first of April new pressure on agricultural prices, asuming that the world crop outlook continues as favor¬ began in Sep¬ tember 1946, which indicates a major adjustment of the economy is in the of able it is as (Continued from large it will be will the $6.8 billion requested as for the first fifteen months, and I -do not believe it will be ready by the first of April. It is certain, therefore, that to¬ tal exports will be less this year tharV last./ The decline in net ex¬ ports may be even sharper. >/It is more difficult to estimate made, and the State Department worked amount out considerable a of detail about what it Would like to get for Europe. None of these programs, be final its work. however, can Congress finishes until In general, however, the potential impact of ERP seems to have been exaggerated. Insuf¬ ficient allowance is made for the following: (1) In ( 77 7 great a many cases, pres¬ ent plans do not visualize any in¬ crease in shipments to Europe. < (2) In great many cases where Increase in shipments to &n a Europe is planned, the additional of this port allocations could put continue and men I worried inclined to were amount at bankers point of gray talked about with it, and estimate market the supplies fairly high levels. No exactly how steel, for example, has been moving in the gray market. A trade publication estimates the to¬ tal at two million tons or more. I believe supply that gray market redistributed, if probably this would eliminate what appear to be now taken from ^domestic supply, but from ments to other areas. -7// ship¬ many will 7;In.the not be :. / of steel, for example, increases in export and no few case {decline in domestic supply were Visualized by the Harriman Com¬ mittee. Yet have already heard a great deal about domestic allo¬ cations and reduced supply for we some purposes. When I look at It some seems to me, of last year's export ■ figures, that the whole thing is bolstering the seller's po¬ sition to an unjustified extent. If ere are a few facts: (1) Shipments of finished 7 tnore than ada a , more little steel 35% of the total, Can¬ than more demand, 15%, and Europe ,7- than 25%; ] (3) Quarterly shipments were {ess than two .million tons, or the they argue; it makes little differ¬ whether ence gray or market chan¬ one another. / , It seems there are sidered. market to other Who things to be are - however, that me, con¬ the chief gray buyers? I believe you will they are smaller con¬ that sumers who for one reason or an¬ other lost out with their custom¬ ary source war period. of supply during the In many industries, for example, vertical or horizontal integration took place, with the result that certain large sellers now control a larger portion of the supply than in the prewar period. Smaller were resources absorbed in in many cases these-integra¬ was as as doubt premature to forecast the making its top, last ... year. . . . being held in cash or with more venturing into the l/£s due to and certificates, slightly firmer in / .. either are ones of some the courageous t 1950, which have been stable market that has been a being put are a ; street— one-way straight to the Federal Reserve Banks. The closeness of the price of this security to 100 and its definite maturity are apparently responsible for the minor interest in the lM>s due 1950. . . . 1 , j ... Scattered buying is beginning to appear in certain other eligibles [ at slightly above pegged levels. The partial exempts have been in fair demand at advancing prices. ... . McCABE FAVORED . . | 77/7/" The selection by President Truman of Thomas B. McCabe to be Federal Reserve Board in place of Marriner S. head of the who carries on Eccles, Vice-Chairman, created plenty of discussion in the as financial district. . . The announcement of . new a Chairman for the Board, however, was viewed with favor in the money markets, although it is not believed that it will mean any important change in policy on the part of the monetary authorities, for the time being least. . . 7/7777/7/A777'77/;/7/^^ . 7/7/77 ''-7;/7''7' DECISION BELIEVED NEAR The New speech by President Sproul of the Federal Reserve Bank of York State Bankers Association, was York/before the New looked upon as a very clear presentation of what the authorities trying to accomplish in the money markets. the task is reduction be in larger a list of Voluntary • domestic are allocations likely to be too effective. not Business and the government con¬ fer together to establish a short, preferred-use list, and the pro¬ ducers then attempt to meet the of these using fields, standards in There is . On customers their in own and thankless one, with a great deal of hope waiting for the "breaks" that might come in the a the other . upward spiral . . should continue 7 despite the action of the authorities, it is believed in new controls will have to be obtained from Congress, if prices of governments levels. . The . . indications of trends should some . . . be 7 : • FAVORABLE 7 / I The increase in reserve requirements in New York City and Chicago should not only offset the inflow of gold and the return of currency (which will probably slow down soon) but should also tighten the credit base. This is a favorable development for the monetary authorities because the funds that would be used to offset , the effects of these two in the retirement markets. ating . . . reserve of . . building forces can now be employed which will further restrict the money reserve debt, While the member banks still have the means of cre¬ balances because of their large holdings of government securities the monetary authorities can neutralize this action by re¬ tiring Federal-held securities with surplus funds of the Treasury. .. largely certificates due Jan. had $2,100,000,000 and time. . Producers of oil equipment farm and equipment ination of gray than preferred same will :now treatment. Elim¬ markets offset any would increase in 7 7'/ uses. and 1 bills of . j } . 1, and Feb. approximately 1, amounting to about $400,000,000. . 1 » . By increasing Treasury deposits with the Federal Reserve Banks using government surpluses to retire Central Bank owned se¬ curities the powers that be have tightened the money markets through the redemption of more obligations than they have bought in supporting prices of government securities. More of the same can be expected as long as there is a surplus of Treasury funds which . unlikely that major supply changes will occur year because of government will be action. All in all, it seems • During the first six weeks of 1948, it is indicated that the customers. receive the ; 7 railroad a ; appearances " , . < j long in coming since making their government has retired about $2,500,000,000 of public debt, which was owned by the Central Banks. These redemptions were In the case of steel, equipment firms have preferred postion for some /' to be held at pegged are should not be too answer in the next few months. : the if some¬ then considerable will have been being followed. measures, program now hand, If the ... quarters that some allocating the re¬ mainder of their output to other the unabated are doubt no minor recession in the general business picture. that be are able to cut down the inflationary forces through monetary gained by means of the may for . a what total strengthened to the country quotas are where . difficult a interwoven with form of not commodities. : used to pay held by Federal. . . off all or . . part of maturing . or 7 7 this callable issues ' • • , does not SPECIAL RESERVES may not important think is what buyers believe. Within the past month or two we have seen many buyers larger primary reserves are topics of con¬ money markets at this time, with many holding the opinion that these or other restraining measures will have to be sought in time from the Congress, if the money managers are to regain control of the money markets. . These views are held despite the indicated opposition of Treasury Secretary Snyder frightened by talk of stock-piling and New York Federal Reserve Bank President Sproul. mean the supply travels through nel m un¬ substantially greater than supply. Therefore, amount estimated, to be moving the gray market; ." -;v/ 7* 77 exist was does chance that export con¬ a established more market could not find products last year were about 11 % of total production. (2) Latin America received markets. Many people object to this viewpoint. ■ They contend that a gray less Europe requirements knows one much now widespread as . and can lites. During the next few months Fall, when I the country's major very from stop the ship¬ ment of some luxury goods, or of supplies to Russia and its satel¬ trols will were to any there is cities, at the extent of gray mar¬ ket activity. Most of the business¬ no bills Some strategic stocks up allocation? shipments, but a shortages. I believe this is true, not only in steel, but of amount suggest naturally, export allo¬ visted most of small. taken ended. whatsoever amazed last was but probably will be used to hold prices down. Requirement of an export license on any shipment ex¬ be used to Black Markets I While it is . into powers cause funds involve period of domestic/scaH- Export sort, cations can be used to redistribution of trade. be be building on cities has Latin America has been shrinking. But if exports to these areas do not decline to may until the help the domestic buyer. Supply of dollar exchange in Canada and the probable effects for individual items. Various studies have been has situation a also purchases, abroad under the ERP. but in any event real pressure will not be 12) page In as . the amount of these has been and depression of great magnitude. Congress and the Materials Shortages that will commodity some supplies Ho not believe now. Stock-piling . mediate-term maturities. at offing, and which because cost inflexibility has the po¬ tentiality of developing later into a cause, a ward that confused as long, long time with bearishness ... direc¬ prospects down¬ crop easily begin to may The financial district is about . coming increase in reserves in Central Reserve Cities, is bringing in some selling by New York City banks, especially the trust companies recently, which have been subjected to the same reserve requirements as New York City commercial banks, by New York State Superintendent of Banks Elliot V. Bell. While some of the longer maturities have been disposed of by New York City and Chicago institutions the heaviest liquidation has been in the inter¬ not like¬ Polidy of the Department of Agriculture will continue to be stimulating price-wise. However, the actual movement of agricul¬ tural prices will depend on new crop conditions this year and less on government buying. By the (4) We are about to enter the distressing phase of decline in the market the . a The individual markets. the next six months. bear main influence . in been. ever time when the market tion of the wholesale price trend, but will have an effect in some distinct a has been it has These are to uncertainties. it existing authority, the government's actions anticipa¬ is me restrictive more ly coming events is tradi¬ tionally superior to the commod¬ ity markets', a major break in stock prices preliminary to a com¬ price to seems sharply into the second Under its of modity any By JOHN T. CHIPPENDALE, JR. Liquidation of government bonds continues but at a slower pace although trust companies have joined the commercial bank and in¬ surance companies in letting out the more distant maturities of Treasuries, in what is now termed "playing it safe" in view of the selling in the intermediate and long Treasuries, the fact that nearly all of the so-called experts are on the bearish side could be a very favorable sign since this same group was just as bullish at the quarter. major decline in general commod¬ ity prices. -7 /-; 7^ 777-7-,■ -.7 ■ (3) pass to advance supply of money within six months, and the-initiation of • a tion it up, Governments on end of legislation unless prices continue the objective summing will present exhaustion an gray /,■■'• than government action.' It seems doubtful that Congress the expansion of bank loans indicates pay activity in 1948 will be a more important factor in most markets in the interim. which, if continued at the rate, prices. to that the trend of general business Timing of the collapse in general price level depends upon may even Conclusions In will on longprobably be par' or of The other is forced and pressure bonds rate will ahead Reporter con¬ type of however, has lost his resources, has short sup¬ market (2) „ the . 2y2% far excesses. Our in care supply viewpoint and a covered plies, and the find we commercial reversed, they this consumer, despite the efforts Treasury to maintain in¬ the violate tic capacity to absorb current pro¬ in Government terms, duction.'-. we conclude of One is well taken prewar other components of Capital For¬ mation shifts the buiden of con¬ onto the domes¬ be (1) Until such time as commod¬ ity prices collapse and the asso¬ on (2) The unmistakable slowdown foregoing, from have 29 customers, markets two classes of many (625) were result a sumers. that: is already economy geared. in From the former CHRONICLE full a As Conclusion Will not provide FINANCIAL frequently not share in the. supply now furnished by the integrated organization. sales, underlies the unwilling¬ process. deflationary & Their given of the stock market to capi¬ talize at normal ratios historically high earnings. operations in the black during that - tions. however, high break-even points and rais¬ ing the risk of deficit operations upon only a moderate down turn most [ The, inflexibility of most costs, causing record production occur transitional ef¬ highly regarded companies in practically all industry will have a difficult time maintaining COMMERCIAL have This, that an however, such impact Psychologically and action on markets. "Special reserves" siderable speaking, the domestic allocations into '7V..-'7.c interest to or the . in¬ It is being . . . . only way the monetary recapture their lost control over the money marpointed out that the creasing their purchases. This has authorities been true | kets is by getting new and adequate powers to limit the creation fairly generally in the non-ferrous have been metals, and similar buying from time to time in some there These of the bulges in demand, how¬ have not improved the basic position of these industries. But in some cases — reserves i by the member banks. waves fats and oils markets. ever, of can certain brass prod- ucts, for example — we see the paradox of manufacturers looking actively same for time new that orders at the they raise ;the The price. Purchasing agents, will continue past, to base their policies on facts, not rumors, but to recognize the part that rumors can play in temporarily tightening a market. as I am sure, they have in the next few months, will be a I am sure, great period for rumors of this kind. 30 THE (626) & COMMERCIAL Thursday, February 5, 1948 FINANCIAL CHRONICLE examined, given Utilities Face Their Greatest Test * their quota of wor¬ and their utilities had (Continued from page 9) 5 years. It is obvious that the central station has traveled far the past them lookT to must we money, mainly for debt absorbing ability. Without appearing to over-sim¬ ries after World War I subsequent experience may be a guide for the future. One lesson was already learned. There was a common Tax authorities have been of forward. entered World War II with a sub¬ kilowatthour. Of * there is very good that this long time course, possibility of economies has bottomed trend out. cost The the cost f of money generation and transmission of inching are have However, it is a great and fitting record that at this very moment we less for pay shows I an retail value of commonly appliances. Their average price is considerably above 1936 levels—a large part of this may be due to improved models, but used fortable margin of model improvement or no model improvement it costs ma¬ them now than Do we know anything comparable in our daily lives? Average cost of a vacuum cleaner has risen from $56 to $76; its' average cost to operate has cents a rators nine year are $9.58. mal means years Cost to down from 70 cents than half dollar. a proposition is sound in a com¬ prehensive way, the impact is much less severe if new, more ef¬ ficient units displace the old, which will then become the re¬ a a Do giving have to to many were in for hard times. Their problems, freely aired, have gained a wide audience and we are not going to minimize them; placed on the market and their ating the securities now or to be but let us see things in proper focus. Station operating efficiency is the highest in a 65year history. Rates are the lowest they have ever been. Credit is of the best, with Aaa utility bonds running close to governments. is word, a now sound very healthy industry. and , have not' panies raise their sights on utility quarters. preferred holdings, which are now about. $280 million, .or only slight¬ ly - over one-half of one percent of their total assets? Where nec¬ industry , of the Problem very In The growing, instal¬ immense figure by any stand¬ It ard. never was exceeded lations permitted during the war, therefore, accentuating the shortages 5 years later; and it also is traceable to fore postwar level of of our economy, Many industries are only back to or only slightly above prewar peaks. power In comparison, electric output of 255 billion kilo- watthours in 1947 double the was us now margins of safety, the preferred can be a very worth¬ while instrument for both sides of minimum a the output, all in Previously, it had taken 14 years. year to double the output. Since It is refreshing to recall that our the big are TABLE insurance life certification of property as an (2) do '' ... good sales appeal but ducks the point in the sense that it is worth 11)36 Consumpt'n 1947 $56.00 $76.GO ; Cost . 159.00 66.00 240.00- 164.00 Vacuum Cleaner.... Radio — — Washing Machine Refrigerator 10.50 Toaster 130.00 230.00 ♦Computed from 80 $0.61 , „ in appearing: 2.46 0.74 ■1.12 14.50 975 V 9.58 1.96 2.98 0.70 - 29.93 >- "Electrical Merchandising:." Load ' Generation '-r'i '4 1 Peaks Factor (Million kwh.) (000'skw.) <%> 1939—.... 1940_—— 28,750 V .127,642 141,837 1941 164,788- 1942— 185,979 1943 217,759 1944 228,189 1945 222,486 1946 223.130 1947. 255,394 ♦Estimated. :■ 30,800 34,650 35,850 40,100 40,650 39,550 45,000 *49,000 Data from Edison of the system. That is the acid test. If used to excess, earning power discouraging any play in the common it defeats itself. Pur¬ chase warrants exercisable above the market are something else. More in mind > is the long-term debenture which is not so bad as some made it out to be. American Gas & Electric 5s of 2028 had an deep record, depression. even during the virtue of keeping capitaliza¬ tions simple down the line; One the Year-End Capacity Total fundamental the tem, the long-term debenture has Contributing to Public Supply Non-Coincident than Upon the holding company sys¬ TABLE II All Plants more no enviable 0.46 45.34 15 Range data $0.93 .3.72 .20 24 Irons 17.00 . (3.07*! kwh.) 64 4.50 5.80 . Operate 1947 312 _ to 1936 . k 4.65*1 kwh.) (kwh.) Appliance— 67.00 55.00 ex¬ % Reserve of Peak —(000's kw.) 50.7 38,863 10,113 35 52.4 39,927 9.127 there 7,755 54.3 54,7 42,405 45,053 62.0 47,951 63.9 49,189 64.2 50,111 50,304 51,647 9.203 56.6 — of be Elec. Institute. *2,000 may find it seriously inconvenient. To with the draw a parallel again past, the theory of- re¬ earnings could be re¬ sity f actors be changed and inter-connection between make inde4 pendent companies less desirable? It is not worthwhile to think of reassembling the piece* into per¬ missible integrated holding sys- which allow Companies to terms still keep their local identity and the benefit of central plan¬ ning and, very likely, lower cap¬ reap ital costs;v ■ Ohio .'Power ' 4 Appalachian and jointly > a each to own Power ' are t building ' -25.0.000,-k.w, half the station * It is projected capacity. that way very likely for the econ-* omies it>; achieves. Separately could companies managed pre¬ do the same, but it is simpler to effect where, as in this case, they are u n d e r common parent ownership, r sumably - Conditions need for dictate todav modif'ed a the * of system holding company, now resting on a solid base. Property valuation^ have been to the bone and oared synthetically from the pieces after passage of the Act. 12 years V .To summarize, the power indus¬ has its operational problems. successfully met previous of pretty large dimensions: try has It ones The •*11 elements: Federal on their own initiative rate increase may be needed a full study of the facts. The burden of proof would rest on after a consumers to prove otherwise. it is the company which been on the defensive. . Until now, has always Electric Potomac serves original cost of property. Its se¬ are highly regarded, yet a recent bond issue was sold at a curities price than many had ex¬ pected.5 - Previously, its bonds had been re-rated from Aaa to Aa. lower still, of course, which; is quality high order. To what extent the severe earnings restriction in¬ fluenced the change is a matter of a if these are clouds, the horizon no bisger than a of opinion, but on man's/ hand, prefer we to have bank story is often told of how runs have been stooped local merely, by showing, plenty of bullion at the teller's window. The Holding Company Can Be Reconstituted r, 1 Remarks made were , companies have proven when properly man¬ Holding their worth aged and where interests of the investor are rightly and was- emergency power up as and if pools were set efficiently as they were, the ostensibly and Co¬ especially of the firstis needed for raising large of equity money. operation. two, sums The industry must this _ had 1930. breaking up, disavow cer-i but hold to former practices, tain certain princinles firmly and with, conviction. To do so may reauire. it take to stand indeoendent an and administrative fiscal on mat¬ ters and not merely trumpet other, neople's notions. Utilities are a fourth estate, so to speak. They, cross boundaries.. political many What's in their own best interests is in the best interests of the pub¬ lic and industry thev are to tor the obligated, that,' I sincerely believe serve. record this pomt proves it At so. might like to know we is tion policies and on on anti-infla-r material allo¬ cations. Much which Electric Light National! the: old Association had to say can be said today, but with the assurance that it will reach a: wider earlier about the need for regrouping now isolated operating companies. This- ;is not- a backward step. * Government^ rate-making agencies private lending institutions. short ; new what their stand they stay there. The of the capital of the nation. Its rate of return is 5¥2% of depreciated and more audi-; receptive Twenty vears of brilliant chapters, have been added to a ence.: ' long story of achievement. r j finally, while we believe the holding companv system has merit, cnis does not» whitewash ! . And many of its former abuses. tain- companies today -are order dissolve to or to Cer-* under narrow, their circle of influence.-Compli¬ ance some has been slow. securities are It means that suspended in a' largely fog of doubt which balks discern-1 Though ing analysis. Their market gyra-i holding tions are not .1 calculated to i ti at help- .and companies Were the dominant fac¬ finance tor pressing needs of operating. Com¬ - invested Will load diver-? station location? suggest responsibility and '"v been completed by (3> Virtues of Reinvested Earn¬ ings: planned affect that that all too much" framework for - V; - will ;How pattern is de4 same raising of perhaps $6 billion money in the next four' years will need the cooperation of voice their dual The war record of The smaller company veloping. * Illinois, In others. and somewhat the up sound discouragingly like a stretcher case. Better, it would seem, that with the plain facts of higher gen¬ erating, transmission and capital costs before them, Commissions outstanding 27 5 signal benefit. Emergency rate increases safeguarded. preferreds. on power utility stock prices are well de¬ flated, not I ke the 38 times earr¬ ings of 1929. American Gas & If that looks politically inexped¬ Electric, New England Electrc ient, though economically sound, System, Central & South West, then something like a public dec-" others also, have been given' a laration < of policy to indicate clean bill of health. But we still awareness of the problem would have to see a maior system built utilities in that direction. 12 V fully is by rate-making bodies and they might well take time by the forelock by suggesting rate increases where found necessary have 9 bond issues and 4 series of The tendency now is 21 ' The set consumer 20 10,561 5,304 better time than now to large operating company may find it not too inconvenient today to 26 . 7,851' 8,539 a implement these views? of facts described here 30 22 War tion Of Rate Commissioners. by Average Annual Annual Power the con¬ type, or" the "doublefeature." Convertibility carries companies lenders of long-term Estimated '' not necessarily mean vertible (1936 and 1947) ; When Use of Debentures: think of debentures here we we Average Retail Sales Value of Popular Home Appliances Compared With the Average Cost of Electricity to Operate Them ■, channel worth a knowing how much of a security is held in the^ territory^''; v " which provide sinking furids, alternative, and which forces cash outgo when cash is most needed. Straight-line depreciation is it¬ self a very effective protection for the preferred. I ♦Avg Retail Value This without the need of quality class, the best bonds fetching 5% compared with 2%% today. matter of 8 a deal. no in the 1939 under to preserve The budget, be¬ looks like pretty alone any circum¬ Cloaked with restrictions paper stances. 4 years, Capitalraising as you can guess was also a problem then. Our population was smaller, national income and savings were far less and installed capacity a third of what it is to¬ day. Interest rates were high and besides, utilities were not exactly business baffling the experts. We hear about stepped-up production in other sectors From 1924 through 1928, $4 billion. often good of $6 billion in the next one 12-month period less. than are earned 7 to 9 times which is the cumulative total reached more were charges dividends ferred un¬ til 1947. ratio of covered after taxes" obscures the fact that pre¬ utilities an re¬ used commonly "over-all 1924, the capital expenditures reached $908 million, of be vised to favor this. the Financial Side on could state, laws essary, Comments that only urgently needed a pro¬ known ferreds. Could life insurance com¬ nancial" and second "Regulation.*' , stopped in few of the pos¬ a doubtlessly are Suppose We start With a few. They come under the class first of "Fi¬ The pressing needs for expan* sion are due to the fact that utili¬ ties ideas and welcome diagnosing what we are a views examine us (1) More Institutional Holding of Preferreds: No one knows for sure how much the higher yields will stimulate buying of pre¬ right to be articulate on this topic. To them falls the burden of evalu¬ In would _ sibilities. Security analysts representing both buyers and sellers have a suddenly occurred that utilities vide but it is this all too many cases. The banker is still ' very much ' interested in Let utilities meet the test? Within the last few months, it* : seems Service foi has almost faded into oblivion in a ^: tice, but with perhaps enough of an outline to fill the canvas. Will Where We Stand Now ~ to-Cus¬ decelerated govern¬ view of However, debt is not all. Pre¬ ferred and common may have to be sold to the tune of $1.8 billion. incomplete to do full jus¬ far too their power, away .. then for the picture, much So why some people think companies are of the future. serves wonder we - knows could be made for allowing them to ; buy The Regulatory Aspect ^ more preferreds and v common.4 The 1947 year-end ratio of 14.3% | " -That regulation plays ah im^ has been exceeded four times since portant role in utility affairs is sc 1940 so that, actually, expansion, eyideht as!to; need:no laboring in utility holdings has not kept the point: - State Commission^ pace with their asset growth. If have made it very plain that their the 16.7% ratio for 1951 looks duty is to protect the interests not; high, compare it with the 19% only of the consumer but of the once held in farm mortgages, 30% ! investor as well. Words to that in "other" mortgages, 25% for¬ effect appear quite frequently in merly in rails and 40% now in individual rate cases or in pro¬ governments..;: ■ V;,■'. ■. ■: ; ceedings of the National Associa¬ the toaster is year to less use much one in utilities of ; assets. 16.7% ; be then invested and a good case of getting back to nor-, more idle plant. While the process cost to operate, down from $14.50 to $60 -bil^ - 1951; and. a how sure Company No * of these,• to¬ gether with Public Service of New Jersey, having formerly been tied in closely with United Gas Im7 provement. Now they go;, their separate ways. In Ohio, seven or eight independent companies will be, supplying power following di-» vestments by Columbia Gas, ComT monwealth &Southern, Cities • Sales: * / from $164 to $240; up 35%. In 1946, Some, therefore, argue that all the capacity now going in may not necessarily earn its board, for from 93 to 61" cents. Refrige¬ in say of end Direct tomer financing, it would in fact be interesting to know where these life funds are going to be rebuilt. be must placed af the ment margin dropped to 12% and last year it was 5%. This reserve use rate-of-gainyiotal assets (4) 1, ploring. Somehow the customerownership phase of utility oper¬ ations, once so widely heralded In the it did 10 years ago. at would kw., leaving a com¬ million If allowance is $10 billion investment peak load was figured at 28.8 million kw. next to a capacity of 38.9 be nngnt lien the still, dropped for slower 14.3%v ^f made constituted- ., their assets. physical reserves above peak loads in addition to allow¬ ances for greater use of installa¬ tions around the clock. In 1939, average terially less to common, capacity; that is, reserve actual than power our Table before. ever stantial depended for -its Philadelphia Electric, tive to the special needs of power the costs 12% like has recep¬ been mounting and now with its 1882 of station St. load factor and 10 lbs. of coal per effect the ahead, is • hard to In the East; a company Delaware Power and Light measure. well stand pbstponed income. very lies broken " relationships stocks have appeal might companies and could relax Sec¬ plify, we may look to the life tion 102 of the Code in their favor, companies putting away $21A bil¬ f Kept. within limits,-y regular severe power shortage during lions of utility bonds through 1951: stock dividends can furnish inves¬ World War I; not so in this war. They have never stopped growing in 40 years of which we have rec¬ tor income,' if income is needed. One reason was that in 1914, fac¬ Its use was demonstrated by North tories were supplying 85% of their ord; thpy have been. expanding American which became one of power needs, buying only 15%.. their assets lately by over - $3% the soundest holding companies in The balancp has now tilted far billion yearly. At the end of last the nation.v Today its operating year they owned around $7 bil¬ over the other way but the process lion of utility bonds; ^thaty with companies are being handed over of shifting was one of the major in the finest possible condition. A headaches of the 1920 decade. We modest amounts of preferred and since Edison's Pearl in efficiency which lustre. The utility new class of investor for whom during the In the war,.. period of rapid expansion the e g n> e* panies, "or build up confidence in Volume 167 Number 4670 THE COMMERCIAL & FINANCIAL CHRONICLE (627) v .holding: company Issues,given the ■green;, light. ■ :'y v/The initiated, may,! know around, way In Use of potential buyers of utility equii-1;, '>; '■ ;•; V;': •.'' I*>• '•:' <: ';/ I. •,! The public utility industry faces commercial' or a real problem in raising addibanks themselves of of their prop¬ some WithouL belittling this problem, the industry has on its side an extremely high credit standing, an. enviable record .of meeting the abnormal needs of erties.. . , the war the and nostwar periods the unique ability to have cut the price of its product in the face of general inflation. It perhaps and . J gives the industry i degree than it . today a greater nationwide of : ^as had before and ever this is worth goodwill preserving, I v Hold Annual Meeting Association Inc., will be •Hotel ' ing New have of held Wall Feb. | Yorker. Street, 7 The the at follow- been selected; by the i nominating committee for election *as officers: Robert J: Humphrey, & Co., president; Godfrey H. Maurer, 'City Service Corps., 1st vice: Jr., Francis I; du Pont • * president; John J. Boyen, Joseph McManus & . * & Co., Co., 2nd vice-presi- 'mond Inc., secretary, and Ray- Brode, Blair & Inc.* Co., {directors < Marvin are: W. as Wald- billig, Halsey, Stuart & Co., F. Wi \ Q. Birtwell, Stone & Webster Se¬ curities Corp., Thomas B. MacDonald, > 'liam • Blyth S. & Co., & , Co., Inc.; Co., C. and F. Russell •Berger, G. A. Saxton & Co.f Now 1 Scheffmeyer & Co. Effective Feb. 1 the firm name ,.of Scheffmeyer, McKinney & Co., ,20 Broadway, New Yoik City, members of the New York Stock "Exchange, meyer Edwin was changed to Scheff¬ & Co. Robert McKinney, S. McKinney and Eva Moody McKinney having retired from the firm i : v With Newburger, Loeb & Co., bers of the nounce New that Reserve banks/ "When is held the the debt being net result is about when it is owned as retired by the commercial banks, Reserve the same by the Fed¬ banks. The taxes ■>f the banks will be sustained and the Treasury will have less funds with ury's account at the Federal Re¬ :his, the bank states, the deposits which to velopments Federal off pay cleserve-helcl debt. "Whatever de¬ be," the article bankers : have srepared themselves by having a may concludes, "most backlog of short-term Treas¬ arge "The latest budgetary receipts for the plus ,of i $7.5 six months budget full text • of ;;j ■./■/ estimate of Federal expendi¬ and fiscal next June 30 shows ending budget sur¬ year a billion. In the first surplus was billion in the current six months, /an. l-June 30. Since tax re¬ ceipts much heav are in the the er :irst three months of the calendar than year in the second quarter, nost, if not all, of the surplus vill be realized in /the current quarter./ -/-//I'M - "The cash surplus of the Fed¬ is usually larger eral/Treasury the budget surplus. Some budget expenditures, such cruing interest -eries as ac¬ outstanding on banks. banks have of /funds not series 'C' tax notes are used to income taxes, or other Treas¬ obligations are used to pay 'nheritance taxes. Cash The to by commercial this drain some asset, meet selling chiefly U. S. Government securi¬ ties. The assets liabilities of vVnen well as the banks the as down. go tne Treasury then pays off maturing debt held by the banks, the banks change the type of as¬ sets held but deposits are not thereby increased. The money has disappeared. York mem- Stock Ex¬ is the; debt / heing/ retired by i investors other than held the commercial banks, Federal Reserve or however, the does not disappear., The Treasury col¬ lects money from taxpayers and pays it to holders of maturing debt./ These proceeds in money holders deposit the the banks the deposits recover portion a and of lost reserves when tax checks were cleared. In effect, deposits have been shifted from the accounts of taxpayers to the accounts of holders of matur¬ ing debt. invest The latter can the money as spend or they see fit. "Thus the ownership of the debt being redeemed is of the utmost importance. A large Treasury cash surplus, used to retire debt, is not necessarily deflationary. It is deflationary on the money sup¬ only to* the > extent that it is ply receipts, Federal Reserve banks, the money tually will simply disappear. The Trea-: •Street. iither in the form of payments goods and services, or by reieeming debt held by the public. 'or The Tie office ' In the at the 57 firm - West ^past he 57th with was :S»rtorius, Engel & Co. it,« at \ Treasury will accumujate the in ^onev its Federal then ties pay held banks.- - deposit account Reserve off banks at and government securi¬ by the Federal Reserve When this is done the •kinds-do not go back jt'o the public but vanish, being used to cancel iff liabilities of the Treasury to he Federal Reserve banks against labilities those of Treasury. banks " /■' to the •//■ \« "Last year, also, the Treasury large cash surplus, amountto $5.2 bilLon in the.first quarer of 1947. This surplus was also used to retire maturing debt. But -ad a ng ' Concept - of - the Corporation— -Peter F. Drucker—John Day Com- •.pany, New York, N. Y.—Cloth. ' / New Departures in Freight Rate .Making—G., Lloyd Wilson—Simt last year the effects were far diferent from those that will occur his year, if the Treasury retires •lebt held by the Federal Reserve banks. Last year the debt retirenenbwas accomplished deeming., all .mons-Boardman 'ssue i30 Church certificates, Publishing Co., Street, New York, N. Y. .—cloth—$3.00; ' : held Fibers Industry, The .—Volume VIII of An Engineering Interpretation and of the Economic Financial Aspects of Ameri¬ can Industry—George S. Arm¬ strong & Co Inc., 52 Wall Street, Tiew York 5, N. Y.—paper. , and a them. $2.6 Synthetic Sec¬ billion, by-re¬ maturing note portion of maturing irrespective of who of a The .or result 44%, was that of the $5.6 billion of debt redeemed in cash rn the first quarter of 1947 (in¬ cluding the April 1 redemption) was owned by the commercial serve banks. investors other than and Federal Re¬ Another $2.1 billion Federal Reserve banks would deposits thus and counter-influence. the money to invest in then the demand for use securities, cantly shifted. On the other hand, j if individual an pays heavy taxes out of funds that otherwise would vested, own have these and the of some the corporation or flow money been taxpayers in¬ also maturing debt is not vitally changed in passing through the Treasury, although the taxpayers the are poorer. They have some of the sets money back but their as¬ in the form of government securities The less. are the of cash surplus, and the difference in ownership of the debt being re¬ deemed, may make the situation this year far different than last. The demand deposits of the com¬ mercial assets, banks, and their earning likely to decline more extensively. A cash surplus of $8 billion used entirely to redeem debt held by the Federal Reserve banks are could cause 9% a in the aggregate demand of individuals and decline Thirdly,, of the maturing debt by them to mature. Cor¬ holders may need the porate in their business, or other attractive opportunities for the Treasury and Reserve authori¬ ties may change their policy and decide to pay off a portion of the is quite will be just indicated. gold imports money in unlikely as that severe Continued and a circulation as the that heavy decline would having large a commercial a banks less are year ago, caused than by debt retire¬ (those year) buy New Era of less than a New York City banks must prepare Chicago ments similar announced actions to term - in themselves not only for the tax drain but for a possible additional 4% increase in reserve require-r use cash short larger. are the accumulating of maturing to the 2% Jan. moves 24. are anti-inflationary increase Altogether tremendous a if used in force manner suggested by recent the authorities." of Prosperity Ahead (Continued from cage 6) countries stabilize their currencies and do it at once, dollars given to them will be of permanent aid. The question of administration of the aid ranks equal in importance to the the amount and character of aid furnished. administer it is the State De¬ partment, which fundamentally is a policy making department and not custodian a of Govern¬ Nothing would be further the truth. Ours is still a country, it is capable of development. Between souri Certainly, the last organization to tically ment securities. no River and the there is an empire oped; the from young enormous the Mis¬ Coast Range, to be devel¬ Southeast, the South¬ west and the Pacific Coast are all susceptible of great growth and administrative department.: development. In our great Middle- an Our State Department is archaic in its own organization, it is full of west, much remains to be done. predict it will take all the inter-departmental jealousies; that un¬ I savings our people make, to fur¬ can til recently at least, it has been honeycombed with subversive fel¬ nish the capital vide the buildings, low travelers. ment and facilities that the Amer¬ all ican Whether they have cleaned out, I do not been know. less But I believe that, regard¬ the amount and character of of a'.d determined fartd I'believe should be learned the own amount substantially reduced) greatest of error his career many tion. after V-J Day, years budget calls for diture of greater our defense annual expen¬ an $11,000,000,000, than baF a sum that things If industries ture a for the have about our not do contin¬ ually replace and improve their tools, the industry or the company control. Two and require The example of Eng¬ land has shown how fatal obsoles¬ cence is to the economy of a na¬ American Our other great serious problem pro¬ equip¬ system. when he stated that the plan should be adopted in its entirety and left under his department's is that of Russia. will to tools, next 10 years. As a result of the war, we by Congress on that the administration of that aid should not be under the State De¬ partment. General Marshall made the people needed that fails vive. to The will so industry not sur¬ power and of agricul¬ the war, and the superb won tools do productive and equipment, managerial "know-how" and intelligent labor of America created this produc¬ tive power. To do what should be done for our expended by any nation in the world in peace time; and that does not include will to tries se'ven^biiiions'spenTon/jur^etIf did not have the erans. we threat of Russia, we could reduce our debt and our taxes substan¬ tially, cial and still so¬ the sooner nated, and live no or type of cold to adequate Not purposes. facts, I have but have for public works and for sums be termi¬ must war must either be able we on knowing solution to offer, later the present friendly Russia and reduce face or terms our with defense ex¬ showdown a with her. but for the public facilities, hospitals and high¬ ways for this new America. the schools, I believe the banking profession will enter into one of its greatest eras. The bankers of this coun¬ try were its leaders in the great development of our country in the past when we swept from the Atlantic Seaboard to the Pacific Our bankers have an equal Coast. opportunity in the future that lies ahead of ties us. that And the same were inherent quali¬ in our great Country Will Continue to Prosper The rapidly growing population, require immense amounts of capital, not alone for our indus¬ of recovery Europe, and relations to Europe, constitute two major problems, but I believe that in spite of these two, so far unsolved problems our country is bankers of the acter, courage and vision — are will be called for in the what past—char¬ next 10 years. our going to continue and prosper that will economy to gain our continue successful offering of an is¬ of debentures for the Federal Intermediate Credit Banks was sue to made Jan. 21 grow New apostles assured A and domestic stronger. The FIG Banks Place Debs. us ours the New solemnly in was there of a Deal the 30's finished country, were-no longer any York, banks.: of The by Charles R. Dunn, fiscal agent for the financing consisted $58,015,000 1.55% consolidated debentures dated Feb. 2, 1948 and due Nov. 1, 1948. The issue was ac¬ counted for by sale of U. S. Gov¬ ernment securities to the Federal Reserve banks. "It of Treasury Available figures indi¬ cate that although total U. S. Gov¬ ernment security holdings of the these that effects short-term it may be that the trust funds will that decline by backlog securities. maturing debt irrespective of who owns it, as they did last year. Or corporations the themselves may prepared and correspondingly, of have tained and the Treasury will have less funds with which to pay off Federal Reserve-held debt. Again Earning assets most bankers most issues deposits. with debt. developments funds, bank shrink Treasury to retire Fed¬ Reserve-held "Whatever be, avail¬ ment and other uses for the effects - eral This so. too would reduce the cash able to the holdings collateral would special obligations to do investment may arise. To the ex¬ tent that investors do this, the deposits of the banks will be sus¬ with inter¬ non- money more Treasury bonds in the open mar¬ ket, and they may even redeem a portion a owned deposits on in¬ be investors, instead of accept¬ ing an exchange offer proposed by the Treasury, may well allow penditures, size greater oi bank their banks and thus used to retire debt held by the however, include the excess of commercial and Federal Reserve cash receipts over expenditures banks. That portion used to retire of the trust funds, which are usu¬ debt held by other investors is ally invested in special obligations returned to the money supply. The of the Treasury. Unofficial esti- effect on the economy lies in the nates of the cash surplus of the difference in the way the new Treasury during the current quar¬ owners of the money use it, in the ter run as high as $8 billion. aggregate, as compared with the "This surplus and the use that way taxpayers would., have used is made of it will have a profound the money, if they had not had to offect on the economy. If, as now pay as. heavy taxes. If the tax¬ eems to be the intention of the payers would have used the authorities, this cash surplus is money to buy consumers' goods, ased to retire debt held by. the but holders of retired debt ac¬ with •associated branch an¬ Charles reserves public by the commercial "When 'C' to 'F' savings bonds, require immediate cash outgo. On the other hand, not all tax receipts are in cash, as when do are serve the fiscal year the of $1.7 billion, so that the Treasury expects to realize a budget surplus of $5.8 S.; Pollard, representative,is now -registered i by commercial banks. Only about $1 billion or 18% was owned by the Federal ,/■ ./•' •/': eral investors do that will collect the money from individuals and corporations and vill not give it back to them, Newburger, Loeb change and other Exchanges, * owned was ary 'it i :• Jan. 31. on 38% or he crease paid by customers of the banks reduce bank deposits as the funds are shifted from deposit ac¬ counts of taxpayers to the Treas¬ pay Daniel Breitbart, Eberstadt & , '■ To the extent that ury Hughes, Blair deposits investors, in¬ accepting an exchange by the Treasury, mature. Wil- Trust Co., Joseph F. increase -nay well allow a portion of the maturing debt owned by them to Manufacturers Vanek, Inc.* Reserve proposed than treasurer. Selected for election . Federal counter-influence. a Treasury Surplus (Continued from first page) • non-bank of aifer dent; Walter > Sullivan, Fitzgerald i . stead tures -The annual dinner of the Cash¬ iers - be Thirdly, ■ ury securities." The .he article follows: Wall SI. Cashiers lo%^ would thus ind cated by the need for the remain¬ ing holding companies to divest ; as banks. expansion of bank loans purchase of securities from and . tional capital during the next few years. ,v This is further compli- well as commercial ondly, ties. . deposits of' the but; at imputes toe knowledge by much ^specialized * crease their 31 in in- frontiers, that ours was a mature economy/ Lord Keynes sold of to goods our a President; placed at par. $41,940,000 like amount of debentures matur¬ ing $16,075,000 main the instrument for employment would ing. bonds and be in Government proceeds, the outlet of the people's savings must Government the bill be in Of spend¬ The banker would be prac- Feb. Feb. 2, 2 and used the was new to retire balance a of money. As of 1948 the total amount of debentures to was outstanding amounted $365,920,000. S2 THE COMMERCIAL (628) Thursday, February; 5; 1948 CHRONICLE FINANCIAL & stimulates and sets in process Europe in the Balance Western (Continued from page 7) women, believe that our country's vast achievements and incompar¬ due living are of standard able largely to the individual decisions efforts of millions of private citizens. "Free enterprise" is no and mere claptrap phrase: it is a prin¬ ciple which has worked in this country and elsewhere to produce the greatest advance in the mate¬ rial condition of man recorded in the history of the race. We all willing as are diers good sol¬ principle of the forego to private initiative and private en¬ terprise in time of war; but no¬ body has yet persuated the vast majority of Americans as to the wisdom of doing so in time of We assume that if these things are good for us they are good for others as well. Hence there is a certain .appeal in any criticism of the European Recov¬ peace. pri- Program which takes the ery principle as its point of departure. ' If Europeans are indeed pursuing policies which enterprise 7 vate believe to be unfruitful, we is it not true that they need why prin¬ cipally to mend their own ways than"; to receive from us rather subventions for their errors? Just here in my - cardinal which is of the criticism the based principles The application. opinion lies a the error of mis¬ error: may be sound as on Plan prin¬ ciples and for conditions we re¬ gard as "normal." (Although even in normal times we have accepted the modifications of necessary many How¬ of laissez-faire.) rule ever, to propose dealing with the devastated Europe of today on a individualism basis of free-for-all is farfetched as a war on as Surely some indispensable in a abnormal and impov¬ controls are situation as erished the as present European in order to spread as evenly as possible the available supplies of the necessities of life and to one, prevent the whole society suc¬ cumbing to the law of the jungle. This is not a question of socialeconomic doctrine. It is a matter of common sense in the handling A businessman may have some handy maxims tacked up on the walls of his of¬ of a crisis. grave When fice. confronted with a special problem, however, a sen¬ sible man pays more tempted to summarize sounds very hardheaded and realistic. It is, on the contrary, academic and theo¬ retical. Europe at this moment is a special and is not to be throwing the rule book case treated by at it, our rule book The In the or any other. Ravages of War first place let us recog¬ nize that Europe's state is the af¬ greatest war in history. What should be the most striking and obvious aspect of the entire question seems to be welltermath of the nigh ignored by most of the crit¬ ics of the Marshall Plan. litt, for "Will was instance, Dollars Save Mr. Haz- whose the book World?" mentioned above, says a few sympathetic words at the outset regarding physical destruction and other war damages, and dur¬ without the facts had r countries Certain than doubtedly : even and figures. fared worse countries have been able to pursue policies impossible elsewhere. Belgium others, and trade for this Britain. or One reason Belgium, happily, is that less devastated and economi¬ was cally sapped than either of those countries.' One must study and analyze the specific kind and de¬ of injury in each case and the concrete problems. gree It is impossible to appraise with degree of accuracy the any The conclusion one the which clearly from such calcu¬ lations as have been made is that the losses are of staggering di¬ mensions. An overall figure, if one could be established, would be enormous. For instance, Pro¬ emerges fessor and weather of last winter fol¬ lowed by the summer droughts. As an example of the effect of these climatic conditions on agri¬ crop ■—was Pigou, using figures from a White Paper, estimates the United Kingdom has cut almost in half. The As their own means. were be ac¬ not mental Euro¬ term By al. truism and if h a The by the figures recommended for amount first the pean months of the 15 Recovery billion. that for the four $6.£ the of years Plan (but since eliminated as a defi¬ nite figure) was $17 billion. The - and merely due seizure You do cut who man a ha? automobile that all is plenty of fresh air ana by he needs to tell not an down alcohol on and to¬ bacco. help them? V effect"- ad¬ to "moral for it*is visedly jnost important. above the material mentioned quantities of goods involved - are relatively so small that they can only fill vital and critical needs, provide a certain amount of plant and equipment and stimulate lo¬ cal production. Yet the United States'' evidence of interest and will surely give show of strength multitudes in their time heart to of -;-fi' trial. ;v The fact that the Soviet leaders bitter opposition to manifest the European Recovery Program perT not itself haps should ehlistvour support for it. Americans follow with difficulty the? workings of these men's minds and we do not know the exact motivation V of program^ indica¬ directed the to hostility their The Communist Drive fail would include I As effect of the Marshall moral Plan emer¬ an purely on the basis of what believe to be sound advice. been hit How could it be that the material and However, there is every tion that Russian policy is by to the enemy . Destruction of the productive capacity of all Europe was in part the result of military operations, including Allied aerial bombard¬ ment aimed at the enemy. Aside from this the conduct of the Nazis entire system of production and distribution. Cap¬ ital equipment was in many cases deliberately destroyed or re¬ disrupted; the the United States with son tle half over 'say a lit¬ that population has a cut rent 144 million) national income of about $200 bil¬ lion. Such calculations strictly reliable be used too ^uron^an? and literally. are no< mors than 20 times their Marshall Plan Communist controlled - is drive directed at Western Eu¬ and Americans find once again that the jeopardy of the Western European nations is ou. rope, jeopardy. world at Europe as well. There are indications of a great desire to do so on the part of the populations on both sides internally and with the large, but with Eastern the ment, in Curtain. An improve¬ economic conditions in Fascists, deliberate ef forts are being made to under¬ mine the institutions ard inde¬ Western Europe further movement formity Perhaps the oroduce can never should Moscow in As Nazis of the Iron the palmy of days and stimulate may lead to a receipts, or in any event more in development of i n te r c o u r s e terms of human satisfactions if moved. The war ended with the pendence of these countries. For throughout the entire continent. not in dollar values. However transportation system of the en¬ example the vigorous and well- That would be a result in con¬ tire continent in a of disrepair in the case and foreign centuated deplorable state and even ruin. As of Britain, shipping investment losses ac¬ of a whole. the impoverishment the European system as impediments to re¬ mistaken governmental Whatever covery policies may have interposed, Europe's main trouble is that it has recently been a battlefield. This is the first thing to remem¬ that may be, it is difficult to es¬ the conclusion that the Mar¬ shall Plan presupposes a great cape European effort on the one hand a modest standard of living and on the other. Communist financed in is France organized something initiated, ful and ruthless It is of French society fabric a assault included:• and the portion of the recipients' national production and national require¬ clude ments. aid. plete misconstruction Marshall of the program. * has been struck down by the impact of a calamity. We are dicussing an endeavor to as¬ sist it to its feet. This is a neigh¬ Europe If It the in will aid any case represents but a small fraction of the total require¬ ments—it is urged—why could not by the the harder whole matter be settled Europeans working 10% 10% longer hours and or producing 10% more? This never < v ly with them. If they should be into communist re¬ transformed gimes we to would not hand the emergence Communist-dominated Eu¬ On the other of a would be ominous in the ex¬ United States. That rope to con¬ the that policy Soviet Russia reappochement, not divergence. the existing French government. the United States American with all nations, from on Clearly, the American assistance will constitute only a small pro¬ For toward that desire and skill¬ conducted and outside the frontiers. present French government is of no interest to be, us because we disagree with some necessary for them to do most of of its regulatory policies, would the job themselves. The small be most unwise. The conduct of ber^ not the first thing to forget. "proportion of aid, however, is of the internal affairs of any nation crucial importance in generating This Is an Emergency is a complex matter, and circum¬ recovery. It means just the dif¬ stances differ from country to The second point I would like ference, materially and morally, country and from time to time. It to emphasize is that we are not between trying to start alone after dealing here with a chronic state a disaster or feeling the friendly is not the internal system of the U. S. »S. R. but its machinations of decreptitude but with an emer¬ pressure of a helping hand. and its subversive activities gency. This is a further develop¬ At the same time this does not ment of the thought that the en¬ mean that a little additional ef¬ abroad, which concern and alarm us. The governments of Western tire problem arises out of the war. fort on the part of our European Europe are ghilty of no such ac¬ There is no question of the United friends would neatly solve their tivities, socialistic or semi-social¬ States' underwriting a permanent problems. That is one of the mis¬ condition of European ineffici¬ leading arguments which is being istic though they may be.- They are friendly in their attitude ency and incompetence. Any such made currently against American toward us. One can live pleasant¬ supposition proceeds from a .com¬ the do not deal with You of It is a sad but plain fact that destruction national production between the Western of the 16 relations toward the continuation of con¬ have countries. That would mean that Powers and Soviet Russia have fusion and chaos in Europe. The been estimated as high as $21: bil¬ the nations included in the Plan deteriorated greatly during the attitude of opposition would themselves lion. Such damages do not in¬ would produce 26 past two years. Our friendly therefore seem to indicate Mos¬ clude capital deterioration due to times the value of their receipt. hopes of 1945 have been badly cow's fear that the Plan will pro¬ .' ' lack of manpower and raw mate¬ linger the ^lan. used by the Kremlin since the mote European recovery. If they do so, and if the result meeting rials and general dislocation of of the armies on the Despite the difference in am¬ aconomic relationships. The fig¬ be computed in dollars, the 270 Elbe. Against all desires of the bitions between the Soviet Union ure for France obviously reflects million people of the 16 nations vast majority of Americans we and ourselves, the program if car¬ only a portion of the total im¬ will have a total annual "national have been drawn into a diplo¬ ried out may tend to reduce some income" in the neighborhood of matic and political struggle by the pairment of the country's econof the tensions which exist. West¬ The ern Europe should trade not only $100 billion. By way of compari¬ leaders of the U. S. S. R. omy. losses entire -remainder of his borly undertaking, common and sounds sensible but is quite fal¬ again refers to the decent " among individuals and lacious. The answer is that what¬ war or its effects! Whatever one sensible among nations. Should ever Europeans do by their own our European friends find them¬ efforts -must be within their own may think of government controls, selves eventually unable to stand countries, and certain of their im¬ and I happen to be among those alone even after such initial help, mediate urgent needs can be sup¬ Who dislike and distrust their ex¬ we may be forced to take another plied only from abroad. They cessive use, we have to recognize view. At the present moment must have some food and fertil¬ there is no evidence at hand that izer, some critical equipment and that after all there was a war. that will be the case. machinery, some foreign exchange Anyone who saw the Port of On the contrary, practically to "get going." In the long run Naples after the Germans left it, every Western European country they will have to produce and ex¬ or who has had any first-hand showed an impressive economic port to acquire these things. * But view and comprehension of the comeback during the first period this is a short run, a crisis. As in Liberation. Industrial so many other crises, in the lives destruction of cities, ports, trans¬ following production and transportation of both individuals and commu¬ portation systems, industrial es¬ made good records and in some nities, it is the injection from tablishments and the very land instances came close to prewar without of a relatively small The picture would un< amount of vital substance which itself in Holland — must under¬ levels. ing book Nobody you includes the sacrifice of American official estimate is that an amount of assistance foreign investments = as well as such physical. destruction. The Herter would constitute only a small pro¬ Committee states that in France portion—some 5%—of the total figure short- flood con¬ dreamed of advis¬ long-term gency originally sum Administration the by ol ing the inhabitants of the Valley rely on free competition and the law of sup¬ ply and. demand forythe solution of their problems. ' - Euro¬ is Program total The rehabilitation-and skillful manipu¬ propagandists, decent people are are struggling valiantly to avoid fall¬ ing under the yoke of tyranny. in that great crisis, to truism it could easily a activities in Their master and Millions in large amounts not relief, but for funda¬ • and trol. demonstrated oroposed deprived of approximately 25% of its national wealth. This provided only for struggle for to salvation. This is British been have will the stated, already immediate the Their fate is communism. antagonists the Red Cross, Federal funds were countable for the weather. peans since. pro- democratic nations for the Europe will help them to re¬ lators ing from the Mississippi Flood of 1937 was handled with greater humanity and intelligence. Apart from matter, 7' s-'-.;-T > ■ sist country ever that economic the balance at this moment. re¬ Fortunately the disaster result¬ bui them cannot hold really we it from Similar sins, many the and for our War Civil fumbled, and the South have suffered gram was course gram quired a wise and generous pro¬ of reconstruction. The pro¬ governments European committed Of of well as , waste of money? a was Southern Our the after Eastern gram failures throughout Western Europe struck heavy and untime¬ ly blows at the recovery move^ ment. "'/:l have well. some States crop total amount of damage caused by war. terrible the for been not more set up a freer culture, France's 1947 wheat crop than that of either —the food-staple of the country regime Holland some it improved have has instance for1 attention to the problem than to the placards. The type of criticism of the Marshall Plan which I have at¬ this stand to try to fight that basis. the recuperative forces from within. Plenty of emergencies have arisen to perplex our forebears. Some have been handled badly treme for the way we indeed lie the dark risks. As learned from all our have dealings with dictatorships, it is in weakness that the lies, not in stiffen our If we can friends' resistance and themselves from preserve the And help them to save despotism, status and all with time, may we quo modify greatest danger strength. buy time. its hazards, compose rible issues of this hour. We or even support Western must may the ter¬ Eu¬ because wevdo not dare con¬ template the Iron Curtain being hung where the Atlantic Wall once Stood. 1" " ' rope . . Can Private Loans Save the World? The most unrealistic argument need five against the European Recovery Program is that the job should be ence.' ' 7:7. done, if at all, by private lending. Nor is it correct to assume that This idea seems to take no account assistance to friendly neighbor either of the nature of the trans¬ nations is bound to be futile. Cer¬ actions or ; of the condition of minutes recognize the differ¬ ■ tainly that has not been our ex¬ American capital markets. f; ;rr ,.,'i,, perience in the past. When we The program envisages that spe¬ were confronted with Nazi arid cific repayment be required to the Fascist infiltration into the West¬ extent that it is feasible and con¬ Hemisphere we sought by all sistent „with the objectives.,; On at our disposal to aid and the other hand it is clearly rec¬ support. our friends in Latin ognized that a demand for com¬ America. We sponsored vast eco¬ plete repayment of all items in all ern means nomic projects for. countries under from totalitarian quar¬ pressure counted not the cost; Who can say looking back at the war that that policy was a fail¬ ure? Who can argue that the ex¬ ters and pense of democracy Western backing the forces and freedom in Hemisphere, and of the the likelihood would be self-defeat¬ aid The proposal therefore is that be extended partly as loans and partly ing. as grants. Such safe¬ guards and conditions as may be adequate and reasonable are to be established. The United deemed States will seek its recompense * 95 • Volume/167 Number 4670 THE mainly in the^constitution of a healtnier wogld. \y. *y •• : Apart from the essentially pub- ..r, lie nature and . of -the grants; markets proposed the private well as tional Bank the as Interna¬ are obviously now in¬ capable of providing such funds in such amounts. The record of longforeign financing after the first World War, while, not so bad - term $s generally ; supposed, was suf¬ ficiently discouraging to dampen , make .. public program a would prevent cludes. ciown openhearths of pices nomic a 95.2% 9x4% neglect the pos¬ gradual resumption of engaged the in finance or should have the temerity to un¬ dertake to handle through private channels any such large-scale Program as quite out this. of The idea seems perspective, at least at the present time. - a •; •/' . The International Bank, by its nature, size and dependence on the capital markets, is also comPdled to play a limited,- though extremely; useful, role. .. . fact °f the matter is that country is contemplating em- : this barking . upon economic high : v a, ,, to mg and being. avoid to We are another preserve attemptcataclysm our by peaceful cost will be high in order one of The means. sense but /; small in comparison with the $330 billion we paid for World War II. /Thus regardedthe price of the Plan is not too great. -.There is . /only possible ,one .Which from source find the money: the States Government acting to United //in its financial capacity. i : Many words and v • Pcan being written spoken regarding the EuroRecovery Program. Its every its final action. That is ■ be. V . For the crossroads world as it should stands at a of destiny and today's decisions will travel through long future years. v. ;> . It will be wise . ■ not to be blinded in the heat of the argument to the background against which the • sues are displayed/There has the basic circumstances question is: what • do about it all? ... . s are ,' ; r and the going to r..///. *'1 • we The Marshall :plan is the reoly %o the circumstances and the question. ■ ./; /> , It is an attempt to break through vicious circles of want and weakness and to provide the needed margin for economic revival. „ nave It is instrument of American an • • .< ' 1 With Milton C. Powell Co. (Special to The Financial steel week's PASADENA, CALIF.—Fred Milton is C. now connected Powell Co., B. with Security Building. in excess of 94.8%, while was 1.3%. A month operating rate of or an rate is based the on revised capacity operating tons one year is equivalent against as ago 1940, the highest ELECTRIC rate castings for 1,694,300 the for tons tons SAN to The Financial DIEGO, Chronicle) CALIF.—Charles C. Leigh is now with Wesley Hall & Co., First National Building. The RECORD HIGH RETAIL AND .; • >• ft ft ft "*'• •*. •• - •; //•' ./ ••v • • ». 39,294 cars, or 4.8% below the preceding week. It also represented a decrease of 49,936 cars, or 6.1% below the correspond¬ ing week in 1947, but an increase of 63,438"cars, or 9.0% above the output of cars and trucks the in SHORTAGES United States and Canada'the past week amounted to 96,010 units, "Ward's Automotive Reports" states. This compared with 109,8b5 units,in the preceding •• ;./;■' / ••• Last week's total in the United ///,./ , comprised 69,096 ,/ its in cars and overtime work on. .» continued to Dun & Bradstreet, Inc., reports* week. Citrus fruits buying. demand. while • ••• Sv/• f.' ' • •/•■"<vy/-" sections sales seek moderately '• :•. • ances industrial failures men's suits week Bradstreet, Inc., reports 91 concerns failing, against 109 last week 65 in the corresponding week of 1947. Despite the sharp rise from the failure level in the past five years there were only a, third as many businesses failing as in the same week of prewar 1939. week's failures involved Totalling 69, failures of this size were liabilities less of $5,000 numerous a week ago when,* 95 were reported, but exceeded failures occurring in the comparable week last the than 50|large year//>/.^//-/ Small failures with losses under $5,000 increased in the week just ended, running contrary to the general decline. Concerns failing in this size group rose from 14 last week to 22, the most small failures in any week in failures predominated turing failures declined sharply. over evident in furniture favorable with handbag and jewelry Promotional and clearance was haberdashery stimulated the demand. in some the supply of branded major with demand areas and scrapers of most •' /. ' ../////::/ generally eager to obtain moderate quantities but considerable caution was displayed in the were goods, ordering of large amounts of merchandise. Wholesale volume that of the exceeded • •The Middle Atlantic States had the most failures in the week In nearly all regions, fewer concerns failed than a week ago with the only exceptions appearing in the two North Central Regions and the Mountain Region. /■/////■/ /y//'/;. / WHOLESALE FOOD PRICES INDEX DROPS WEEK 1.1% in LATEST Continued weakness in leading food markets resulted in decline in the general food price level. a markets throughout the country were well attended, ies were somewhat slower than in previous weeks. Department store sales a on country-wide increased with by 3% from the like period of last The chief function of the index is to show the general trend of COMMODITY PRICE INDEX FALLS RECENT PEAKS ////'' ./• weakness $':///• ///■/' developed in foods, grains and cotton last commodity price index, compiled by Dun & Bradstreet, Inc., continued to recede from the record high levels of mid-January. The index figure fell to 301.01 on Jan. 27, from 303.86 a week previous/ It compared with 233.95 on the corre¬ sponding date of last year. the daily wholesale markets nervous and irregular with sizable net After displaying a firm tone until mid-week, wheat turned downward despite sustained government buying of the cash article. From then on prices continued to work lower aided by reports of large supplies of cash wheat on hand and snowfall over parts of the advices Southwestern showing winter tour year in trade last New week, York extremely but the volume previous rates of gain over According to the a Federal store sales in New York increased 4% an increase weeks date above the of ended 5% cold sustained was year weather retarded retail at close to the ago. aO' Board's Reserve period last This compared with year. in the pregeding week. 1948, sales increased 3% -. ~ the four For and for the year to t Australian Found Discussed by £100 sterling. tion of the Chifley Mr. Chifley said: pound "Only in the event of the deprecia¬ sterling would^the change rate. British Treasury the on ex¬ pound. Press reports in Australia suggested that because of have the devaluation the French of the franc Government by similar steps would be taken here." Mr. Chifley added: shares the "The Gov¬ fear of the British Chancellor of the Excheq¬ uer over the decision of France to introduce the double franc. Un.- Ralph H. Weseman How With Goidwater & Frani Ralph H. Weseman has become with associated Frank, City, in where & New York trading department, the he Goidwater Broadway, 39 will specialize in real less controlled, it could be ex¬ tremely dangerous to international estate securities, all other unlisted trade. Government securities, and all types of liqui¬ when it de¬ dations. ment displayed marked strength most of the week* but prices sharply in sympathy with the weakness of the bread grain and department ;Prime Minister Joseph B. Chifley stated on Jan. 30 that the Fed¬ eral Government was not considering any alterations in the exchange rate of the Australian pound, which now stands at £125 Australian to In the closing sessions the decline was accelerated by the devaluation of the French franc and fears that other countries might join in the movement. index, City for the weekly period to Jan. 24, 1948. same (revised) Jan. 24, by 9%. rose made Corn 24, 1948, . wheat belt. fell taken from (revised) weeks ended Jan. 24, 1948, sales increased by 6% and for the to date increased by 9%. ernment were losses recorded in the leading cereals. beneficial as year. justment to the present rate of 25 shillings ($3.20) to the sterling SHARPLY FROM //, Grain basis, "This compared in the preceding week. For tlte increase of 4% an 1.1%, food prices at the wholesale level. and though deliver¬ the Federal Reserve Board's index for the week ended Jan, further A drop of 8 cents, or brought the Dun & Bradstreet wholesale food price index for Jan. 27 to $7.17, from $7.25 a week earlier. A fortnight ago, on Jan. 13, it reached an all-time peak of $7.28. The latest index figure contrasts with $0.18 on the similar date a year ago, an increase of 16.0%, week / , slightly during the week and moderatelycorresponding week a year ago. Merchandise rose a just ended. Decided appli¬ generally remain¬ floor coverings continued to sell well/ Snow and small plows were eagerly purchased, with very heavy demand for some automobile supplies and-equipment exceecN- shovels, Here during the week, while manufac¬ clothing remained in very substantial. very four years. In wholesale trade, the mortality decrease while little change appeared in construction and commercial services. • /;.// ////y/' // r ,«). • . , Branded radios with phonograph attachments were heavily pur¬ chased and the volume of records remained large. Nationally adver¬ and the and improvement was Retailers the groceries, coats and sportswear were sought^ proved popular. Activity in main resortwear and ing the supply. in suits, departments ending Jan. 29 and priced attracting considerable attention. of tised •/•iV • remained plentiful and reasonably priced, though* lagged somewhat. were Women's lingerie blouse floor 26,914 trucks built ///*■■//'■. ///■;/.;///;.• Unit volume ago. the demand for fresh vegetables declined slightly from the preceding week's high level, but exceeded those in the comparable week of any other year since 1942. Dun & rate showed year Smoked and canned meat/fish and poultry sold well with sligM the prices of some dairy products serving to stimulate Some BUSINESS FAILURES DECLINE SLIGHTLY of a declines in ing later CHANGE cheaper cuts of meat and meat substitutes. States. Two-thirds a year ago, trade for the past of survey \ Curtailment of industrial gas, it is understood, was not wholly unexpected and plants will be able to make up lost production with Commercial SHOWS LITTLE Weather-resistant footwear and heavy AUTO OUTPUT AFFECTED BY INDUSTRIAL GAS Retail Sales United States ■;///•// t^e corresponding week large Estimated /; ■ somewhat below that of week in 1946. numerous good demand but offerings were limited. Unusually cold weather and heavy snows continued to hamper shopping in many parts of the country. The dollar volume of retail traae rose slightly during the week and slightly exceeded that of Consumers ot more. Fine WHOLESALE TRADE FOR WEEK Loadings for the week ended Jan. 24, 1948, totaled 771,992 cars, according to the Association of American Railroads. This was a de¬ or last week with greater spot wools in the r>oston strong showing keen interest. .'/Imports of foreign apparel .wooite uoston, New York and Philadelphia continued in large volume. total for the week ended Jan. 16 represented 13,499,700 clean pounds as compared with 11,675,000 in the preceding week. / some was The FREIGHT LOADINGS OFF 4.8% FROM PREVIOUS WEEK ;• market the Australian wool auctions remained active with the record ' •:. ■ futures wool shown in distant months. buyers SLIGHTLY BELOW electricity exceeded the 5,000,000,000 kwh. mark, and the 12th such the history of the industry. week., irregularly downward last week. Medium readily, but offerings of lower grades were Easiness in the at PRODUCTION ■ same demand. tion of foreign currencies and fears that the European Recovery Program mignt be delayed for some time and result in reduced in week in crease but hogs and sheep registered minor losses. market continued in average Thjs was 7,228.000 high figure of 5,436,430,000 kwh. reached in the preceding week, but exceeded the 4,777,207,000 kwh. turned out in the corresponding week of 1947 by 651,995,000 kwh., or 13.6%. The Jan. 31, 1948 week was the fourth consecutive week that production ; liquidation early part of the week reflectert in other markets and liquidation induced by new profrposals for controlling inflation. Continued bearishness in later trac¬ ing was influenced by uncertainties over the effects of the devalua>- strengtn kwh., according to the Edison Electric Institute. ' under Cattle closed the week slightly Price-fixing against sales of cotton to the Army for export Japan and buying by mills against textile sales helped to check the reactionary trend to some extent. The amount of electrical energy distributed by the electric light industry for. the week ended Jan. 31, 1948 was 5,429,202,000 of bakers' sales. downward to and power kwh. below trend weakness the •/ ' prewar year. continued lag in a to volume of exports. 1,716,000 tons last week, 1,281,210 ana to crop With Wesley Hail & Co. (Special a week ago, better qualities sold off. worn continued Cotton prices moved and a year ago. ingots and 1,633,700 Chronicle) * Nicholas prices the Government consider any ad¬ Its central purpose is to tip the balance of Europe in favor of the forces of democracy and western civilization. / statecraft. from up scrap mar¬ a of Jan. 1, 1948, with 100% operations equaling 1,802, weekly output. as week in is- been / a terrible war; /A grave crisis is smoldering. .We are confronted by a harsh dictatorship. These are • steel firms feed. induced by weakness in fats and oils. -. of are facet will be discussed and rediscussed before this Congress takes • rate shown current This of our things - Nby both/political parties Who have sponsored the Plan that it is essential to protect the Occidental, civilization in which we /, have n dictated . of public policy/' it considered opinion of the Vleaders , program was now or never some reasons the vis international ,an Lard 476 net tons of It is greatly to banking pay from smaller feeding requirements resulting on recent easiness in wheat and con¬ would shut higher prices the cry of reduced livestock S3 Flour prices worked lower and domestic bookings continued^ a slow pace. Bakers were inclined to hold back due to the at . (629) of numbers of consumers scrap decrease of 1.2 points, ago, a indicated was industry lending under the aus¬ improved political-eco¬ actually some they would Knowing it week one the ago surprising, however, if anyone business "" The American Iron and Steel Institute announced on Monday of this week the operating rate of steel companies having 94% of the steel-making capacity of the industry will be 94.0% of capac¬ ity for the week beginning Feb. 2, 1948. This compares with The conditions. prospects prospects of softening when present essential be hoped* that such resumption will occur and that it will supple¬ ment the government's efforts. It would be before cold weather effects have That is not to of arose. hinted that was CHRONICLE Industry taken off openhearths rather than breathe new Lie into ket which has begun to show the ' sibility Wnen it "bluffing" private sub¬ scription of these billions of dol¬ of private / (Continued from page 5) ~ the lars. FINANCIAL trump card in the past few weeks, the above trade authority investors',, enthusiasm.- Th^e very political\ considerations which ; & The State of Trade and loans capital COMMERCIAL The a valued the had learned Italian similar at lira, no but the experi¬ good results." It is Canberra will be the Australian no move that consultations there between Government and been Mr. Weseman, trading since 1928, who has was for¬ merly with Pynchon & Co., Munds, Winslcw & Potter, and more re¬ cently with P. J. Steindler & Co*. tu- 34 THE COMMERCIAL (630) . & FINANCIAL in eminent; of A Year (Continued frOm page 15) in government notes and bonds. So we can't afford to have demand that nomically unsound. back that enter¬ we We should not have realize without now shadow of doubt that a make ands isolated prosperity in an supersonic instruments and atomic energy. For the protection our able citizens* we must be this plan is not TOO with dollars not up with but America—and armed it back to I Admin.stration and might. powers cision; only difference some domestic learn far so this is to : | by a Massachu- , tax those commodities vital to all must should Versus have HCL countries together in trying to solve the problem of the let partisan of not devastated Taxes ; taxes. We must not considerations the welfare of stand all the creased exemptions, I believe in the fairness of community prop¬ sell in should the be willing domestic market erty taxes. the President the overall tax suggestions that the President made to Congress. That the export control forego for a time the extra profit. If they are unwilling, then clearly should benefit of the American We do not want to use will for the power there jority in Congress has been much criticized. It is alleged that we are trying to hold back the mon¬ need of with agree this, .aToday the Ad¬ ministration to do much to combat has the more legal power than it has done inflation. "We in gov¬ ernment in our own the firture peace and the world. ( • f We must be that My present or ever, cut both ways. We all know that inflation comes when there is to buy things than there to buy. ! Handling debt is ; money things are ; great government of the vital decisions our one combating inflation. The Fed¬ eral Reserve banks in their effort to peg the market for government securities may have lost a great opportunity to reduce the supply of money in the possession of the commercial banks; yet we all fear price of a serious drop in the government The bonds. pull the plug—have no support of any kind for its bonds and let the whole structure its seek level—or own is such a policy failing the people who have been induced ings in the ment? Is to place their trust the of sav¬ govern¬ the protection of those government savings a continuing government responsibility? If that is so, government must maintain be met and must be dollar December Rent , Still fair try-out. a Credit and another must do continue must controls and production up about in com¬ credit form continue standard of controls until closely more we of rent believe I some by government {government method do can people market. What is to be effort to decision the spending? Administration made cut the Part a Has of Federal Government? In his ested. in mes¬ sions, of government. His plans anywhere from 10 to 20 bil¬ The government. just presented us President savings the it same is our the Federal Reserve Bank dropped their support price two points on long-term bonds minute billion assets of rememberwhen our after and two or wiped some half people. I well World Liberty Bonds lows 80's, our ture war. budget do reflect the effects of efforts to Yet there prevent are a War were because I sold I in the some of that the for almost are those of the $2 (effective 4 Want to bill'on current of our banks In followed war the part plays in in¬ our as see of ? octopus centers in initiative left to as possible. ?; We do not it centralized id/ an bureaiwhWcy{ ^ wlixeh Washington; I iyajiti the as the far as possible to be individual. f fiscal ment aid through government dic¬ tation to the State and the iridic vidual is all before hnve td tfot re- Voluntary assistance can be im¬ strengthened so that government aid- will be in addi¬ tions, all increase the big demands goods or keep the prices at effort and voluntary aid. an artificial level. Government tion to: not in place of, individual So far I have discussed decisions There, that must be made by your gov- - - must cam ^ in Our « r ; v* svs- X tem of government nangs on u e the fatigue of supporting it." Hard Work and Production : Needed In a decisions each that of one most - of decision there year must us as be are made by individuals. The important decision., with, the is fear o.f inflation confronting us deteinninatibn. to :.work hard the produce all i he goods, that we consume-- and-: thus- funda¬ . . th(, f the interest So it behooves n:aj0rity. think care- u t0 think and to fully and to understand as thor¬ oughly as we may the problems. that face us today in gpyernpaent, If we do this and do our part in. - to which is iri d 0ne mentally ^id;'Wrselves^of;the basic danger of iiiitationThe Uought help.ng . public our officials : te ; solve' them, then :we personally wilt have made- a wise decisionand helped m our government tq will be country. Grover make its decision one that benefit to of Cleveland, Pres dent, our Democrat ani a great in 1882 said": "Let us; a . guidance to the principlestrue democracy which are en¬ look for of immediately^^fpssesr y^F mind* as during because they afe right and; it does rnin^/Jibwv^n':w« do this invincible because they are just.'v when w^ haye >0-: tions to many obliga¬ :^e^^eommbdities manufactured 1929 many = goods ,/an d abroad; economists told us In that Commitee HJ DETROIT^ MICH.—Armin Vogel, A. H. Vogel & Co., newly) 1. elected Detroit Stock Exchange', President,; has just announced "the ;; heads of various Exchange Com-' / :; W8.; Paul [I. • More-; cause only initiative and foreInrki? Molbland & :Go., Vice-Presiifbt sighted planning and imagination denL (tf the.Exchange, 'will again /: ;/ lionr. can the can these figures be¬ I mention give this country continue to production which it needs and continue to make Us strong." These responsibilities are in your hands. roittees: for be. :C& airman./of V the sVn'Business' Conduct 7p ' Edward T. Ben- Committee with *, nett, Jr.,. M:. A. Manley; & Co., ;rsv'/- They are responsibilities V.ice^-Chairman.v,Samuel Hague, that come with the: privileges that Smith,s Haguef &' Cb4>wlll super-/ / ; we have as free American citi¬ Ivxte i.iO«r trading as head Cf theI do not pretend that our national income will necessariiy zens. be maintained at its present level, but I do know this—that Ameri¬ can ingenuity, American and American know-how, brains: if all continue to work together we Coimrittee on Arrangements and, / • i^s Trepsurer cf the Exchange, w IV be on Committee with- the Budget President Vogel dent. Moreland, announced were: and Vice-Presi^- i/ ' Other Chairmen1 / Max J. Stringer,' will Watling Lerchen & Co., Commit— tee drl/ Adrhissrons;; George McDowell, Mercier^ McDowell &. Co;, Committee on * Stock <, List^ ; think that the populat ion of this Clarence A. Horn, First Michigan: country has doubled in. my life¬ Corp.. Committee on Secondary. time. when I think of all the in¬ Distribution; Dan Byrne, Paine,ventions which have come in my Webber, Jackson & Curtis. Publiclifetime that we accept as com¬ Relations Committee; and W lliam. monplace, I am positive that opti¬ Moore, McDonaM, Moore & Co.^ mism not pessimism can and w:ll Committee on Trading. Fred J./I ! continue to make this country the Oppat and John O. MacFarlane land of opportunity. ; comprise the Committee on Audit.. We feel today a certain fear of 'j— ■' ——• give greater comforts to our chil¬ dren and our children's children than we have known. When 1 We witness it in the the future. actions of the stock the & commodity and market exchanges. ; tries to, get the last his ; investment or from his efforts/; That makes the cost of living increase and starts the spiral of inflation going again. We have seen this happen in the everybody from penny months/- If bdsine& labor petition are eliminated. sell America short. Individual ' v | ' ^ (Special to-Thb^ financial CiironicleV This is Must Be Let us / * h/ Respected truly a year of decision not only for our government bu* for each one- of us. But, neither , i : ' 'CALIF;—/ Jerome F. Hanshue - and' Forrest // ^ P. Moran have become affiliated: /. > with Conrad, Bruce & Co.* Russ: /if SAN FRANCISCO, Building. Mr. Hanshue tras pre-> Viously with Blyth & Co/; Inc. ' /;/ / > leaders,; together ficialsvof government./will never Two With;C6itfacL 5 >1 So us proved and /; nne to feel initiative withirt cqmmru'ty or '^y riven bus.ness m Govern¬ close scrutiny. Government subsi¬ dies, government lending through independent government corpora¬ spending adds to inflation. assets of the ^ not the We //;■ individual,^.-, We have got to, re- £act lhaj lhe dccision of the groat «heb b.asic philosophy^which . jorit' of our people, when they •T,e"-rnXeP ® 1801-when he said: "Those, who, understand a problem, is Correct with of wiselv in this year exercise the powers now at their year. The printed budget has 1,353. Of decision. I want the decisions pages, just 65 pages less than the command/! We? are bound tn take, to favor administration -by the Manhattan Telephone Directory. a long step towards avoiding States for the individual not .dic¬ It is now our duty to read that harmful"/depression. Everyone tation to the. individual ; from book page by page, column by must do his part to see thai, only Washington. We must carefully column and figure by figure. All legitimate business is conducted consider how far the system of these figures must come up for and: that chiseling and unfair com¬ asks above 50 % the of depression years We want to see this aid made for > present system of living. years that government President mine at the very bottom price on the very lowest day. Today over of compensa¬ dividual lives has much: increased. the about 990 the that will? im¬ measures, unemployment by the war fu¬ of all inter¬ the with the highest war, are our has expenditures whose a and welfare We to the blind and other forms of individual aid are part of our real protect, and can lead to complete control of our banking system by the government. On the other hand, on Christmas Eve out in of costs out tion, aid manned by an army of over 2 mil¬ lion divilian employees. The total desire to the 1949 in re¬ prove the health of our children. Government aid for old-age pen¬ expenses lions of dollars to the cost of factors high is the health, of living and: young and old. the sage oh ; the State of the Union the President called for increased add parcel of education sufficient exnerses these All ( and standard on the ultimately stifle the growth of the country; to world. duction. Government Expenses government cycle if we wish to enjoy the highest living in the history be carefully considered determining- the amount of tax government bureaus and agencies harm the to of must catches with demand. That will economic it the of support bond capital comes With individual in¬ this business controls rent credit controls. and Venture savings. itiative it made this country the greatest producer of goods in the history of the world. We must continue to give encouragement to Controls decision Plenty has been earn. from bating inflation is to decide what we we h.s best hi- I cannot state too individual that in written about the lack of venture passed in we the indefinitely ment and All these factors- considered capital. give the bill happens^ But I, for do not agree will be: maintained reduction in debt some individual freedom if government taxes continue to take out of our is "no." How¬ answer budget in peacetime. Over 75% of the expenditures called for in certainly that people's savings debt service will our be made. may I do not deny that conditions the market and hold up the price of its bonds regardless of what one, our research, foi* Euro¬ anced—that require some modification of this decision if any one commodity becomes too scarce. I certainly management of our national debt is one that is vital to all of us who have savings in this country. Shall government for may in the effect of security of want, to more sufficient funda for are • the:govern- we had reached the ultimate peak of consumption and the ultimate voting for peak of income. In 4hat year oui tioning with" all that it connotes. a tax reduction bifh* But, it is a national income ?87:4 billion I still remember the decision of nmple ?fact that we cannot long yet( in the second half of '1947'it the people at the polls in- 1946. hiaintain individual initiative and was at the rate of over $200' bil- help can to concerns the return of price control and ra¬ considering this ques¬ high prices and inflation must always keep in mind that policies of government can either They vital sure aid and the civilian func¬ tions of government. > We want to know that our budget will: be bal¬ / A top decision in 1948 of hurt. is economy evplutioh-iqf dictator- the individual serves in We must look all the facts defense, of fuel, but we must at all, times remember that the strength tion >'■ reduction a pean ster of inflation by a thread. I dis¬ , effect in the face. in learned^the^^gMh^|&^e, can taxes, consumer. fail not I do hot approve of ft' can very a tieCis on be strongly I.have always felt anci I /r- terest that to out increase;*; We cerely hope I will cont bureau I believe that people in the lower income tax brackets should have in¬ business step Con¬ turn, shife where go^ernmi^it ?1e:ad$/^ all is; I • hope'there reduction, some next expect to reap the blessings , of trcedom must like men, undergo bidding more than the fair and going domestic prices, I be¬ are; giving relief where we* must, to those people who are starving and in citizens. But, our Republican ma¬ .1 Personally, will be by w^$ us the have- watched, bu¬ we, upon tone in the ■».- A decision that affects what word""burei^ siderations in mind, : citizens, tellew his 1 analysis //.; " " the last which, will be against individual. and work /high cost of living. : ,of government expenditures must ke decided w^th all these con- our , to Cooperation ahead and lieve reduction top priority. We strength , forhlsr fnd.vidua! well sequently, mili¬ our . when they are in funds, when they are at a is, they 'phone Washington. world today. The ultimate amptanr power has been used to screen with sufficient care the exoort of economy and in short supply. I of Massa- 1 d0 not want, in normal times, to considered the restrict any business. But when the Marshall Plan and 9% think economic and problem of government which'; that- individual* irt ; / our system- of life. The dec sfonS of the government must be for thh 'best interests of all our citi-. *. ztfr.s>: The ' decision ''of the inTi- '//; is ^supporting: know to loss de¬ the When they are in doubt as what to do, section of reau increasing 'i. ave or against country tary that 47% Ten per cent considered it be balance group try. We cannot maintain our exports to 'here is very serious doubt if that real peace and i m must ore ing of the; problem of the indi- "■> v^dua,1 in bur system of'life chid? •" the ment. need of before the inflation for the whole coun¬ Exports ;.phusetts citizens high cost of living the most imj our own citizens are suffering for portaut issue facing their govern- ! want of much-needed articles and ment. of billion miieklv a conducted , reliable organization setts showed We sires $18 yeafof we also . poll 1952. opinion exist for , if it is not also for the ber efit of: - yesterday morning the report of the Presi¬ Committee on Air Policy calls ,'/,' vidual "may be benefit> butV; in believe that all their prob¬ lems,' can be solved by govern¬ Ration The President has have that, which the government complete control over exports yet miSnJv be able to afford if we had , A recent of that we are government nor we caa make our decisions'-,alone.'-' They must ber made with, a mutual understand¬ years Only dent's if. Too many people in recent wcrk. read you is another the great decisions in combat- of come'"to' disculs ''"Presidential'decision " esiuemidi decision. ' Handling can particularly' parti- we oroblems that other. the this point. cn mean— ' ■ When cne it needs to make this de¬ although I recognize that economic Nothing I have said considered Sav¬ has now and better sci¬ new weapons with' which ; to these forces, we must balance desirable ideal against an¬ know we govei at a entific arm our strength san. great need of as nment. Toaay too many peo¬ ple forget that "this CO untr y: has been made great on the principles cf: individual initiative arid hard Armed maintained be free to maintain our present system of strength than ever before peacetime, when there is the in it thous¬ institutions many individuals, ■ be for must . individual ,is greater are the strong a that by Forces our Washington in the These decisions must a system where the . . on ff Thursday. February '5, 19-13 freedom in this country But today wheii do. everybody knows that the foundation of our system of freedom. I believe that LITTLE and TOO LATE. We must be decision savings of to based be great many things that a 1948, year theoretically and idealisticaily desirable must industrial corporations. ings own that sure of and age of of careful a affects the can¬ we may be are Truly in .this the Administration instance prise. a , a completely free market; yet we can't afford a market that is eco¬ prosperity of our own citizens and Decision are , greater than the events of 1848." I believe that the future welfare " CHRONICLE With Crocker First Eiatkmal /;/; 1: ^'/(-Sjjecial .to-' ymV-'FiNAsNciA^ f!rSAN:;?iFEANCisCro..;CMa^^ Howard Locks, has been added to , the staff of the Crocker First Na¬ tional 1 - Baiik'i of::;San/:;Franci8eow?; Joins Eaton & Co. / ; ' Montgomery Street.>; Staff (Soecial to The Financial OhiionicleK SAN Reynold staff / /;: ' /, FRANCISCO/"vCALIF.//-: ^ Oeschler has joined the of Eaton gomery Street. & Co-:,- 400 Mont¬ / ; ; Veluwre f67 Number 4670' total dollar THE'COMMERCIAL page 9) essentially job for a under 45 men reflection wages im- cost will qualify for journeymen's cards come non-residential work. down. If, on the other hand, it is [believed that wages will hold or increase before they level building costs .where costs will they and be bearing costs drop, or prices are because it riods a 'lnately tied in raids be labor supply 681 / Little Hope For Cost Reduction in Second, be can -this to duction anticipate in that if reductions .they will! be general a Fourth^ there re- ' Wheiein rates, it is clear'1 wage the product of in¬ creased all* productivity per man-hour along the route from the un¬ claimed now J. these (3) Balancing, of supply of it is (notwithstanding talk in relation dropped, over 1915, and volume to the 1 question we leveling mind when soared what? That is ought to talk we struction costs; to the in keep about and when con¬ we an¬ alyze costs of other commodities, previously unheard of heights( disproving all the warnings that high building costs would seri¬ find we building high, are over their though costs-, not out of line. or the Tomorrow's a / and officers Market number of expect Of I course readers buy to the entire list. If they did, they wouldn't need this col¬ issues stabilizing with a stocks pointing up¬ On now 1 recession look like 1 A buy. stocks Last week I sounded off of word warning:, The stops weren't put in as fillers. They mean something. If certain have break and sinking a their wave they despite theoretically have no place in the changed market outlook a column supposedly devoted accidents can happen. on economics and politics which the to the stock market. But in final - stops, sold. More next (4) Elimination of cost-hiking aries and dividends, labor at site, hobbling the dollar),, and labor portion of material cost and this ;?j productivity clean-up/ and/or • competition-stifling pro¬ that will affect the market includes visions of buildirig codes. taxes on profits from material! management at all ; ./ft and the stocks that make it stages,- plus corrections of per¬ up. I (5) Encouragement of standard sales, amounts to 11.1% of today's sale price of a house when built centage mark-ups applicable to sized and I'm not so naive,, however,' designed products. total costs, wherever in groups of 50. The tax in 1939 indicated, at as to (6) Development of .concerning be to are analysis it is what happens,, or is being planned, sal¬ on category; don't By WALTER WHYTE s ward. buiiuers individual tax price umn's advice. < stockholder, s profits, find stocks that fit almost any Whyte Says— s His report 1939. prewar already larger than I usually give. It has one virtue, however; in it you will war Walter In fact the list is Markets 1941 $742 represent¬ . sinking pains but I can't mention all of them. $1,714—$1,215 * ,. Corporate ma¬ con¬ of one trades indicates that taxes upon terials with demand. said out 125% construction Hartwig,. that out, difference of against was priced takes more, Otto for studied. are 1920 it was Costs off at about clear the cost would be $1,241 for labor, not the 38% higher actual labor bill of $1,714 for the 7 trades mulated costs at each such stage, (2) Productivity per man hour. material to the ulti¬ mate purchaser of the completed raw structure the vulnerable, namely: ft vft^ft/ft v ' i In another study Mr. Hartwig (1) At the progressive stages of breaks down the impact of taxes percentage markups upon accu¬ we all have to deal with now as be expected can to ing increases in the hourly wage1 rate. Thus, if current productivity was as good as prewar it is areas costs cost the In market more, an increase of 243%. $4/5 of the $1,215 is chargeable to low¬ ered productivity per man hour, there limited are construction points $499, one In 1948 building dollar is worth struction Secretary of the Insti¬ labor illustration .reason 1941 49 cents. Seven Now it hours increase. tute, reduction the distress in construction costs until wages presents there I drop or productivity increases, or .remains some little hope for cost I both. Third, apprenticeship train¬ .reductions, and resultant sale j ing programs are not sufficiently .price reductions. Inasmuch as to- ' extensive to suggest success in .tal building, cost is the sum of all* higher productivity campaigns. wages and inasmuch as there is no Nothwithstanding *; similar discussed. Executive substantial no the about hours of these trades to hours—165 32% in by the commercial and industrial field. Let us reduce what has been stated to capsule size. First, total construction cost is wages form or another. here. 35 Today things high costs retarding con¬ struction activity—but activity is increasing, true to pattern. High building dollar in 1920 at ion' the cost peak was 36 cents. are house a have we stage for with wages as to inseparable. Construction cost the product of wages. Con¬ struction costs will not arop until wages do. '.is them use 516 build housing the upon trades took retards fair supply non-residential the are the 1915 analyzed: brick¬ layers, plasterers and tenders, lathers, painters, carpenters,, plumbers and steamfitters, tile setters and helpers. In 1940 it a manpower for woik and thus sets to basic on This has further of inti- so , uncr (631) suit of runaway wholesale prices." ously retard the industry. The postwar purchasing power of we1 are hearing the same ilarity of the cost and productivity levels prevailing during these pe¬ residential building upon quick attainment of supported Construction are.- sale CHRONICLE iy4J-194>V there is re^sonSblh . building FINANCIAL figures'prta^xi Leu of .years of age; and this presents ;wages.:: y, ' the probability of the further acj cumulation of production -t-ow then can there ba senility any hope with its inherent higher costs. It for an important reduction in sale .prices of homes?. If it is believed takes from 3 to 5 years for ap¬ a general prentices in different trades to reduction in :ptrads, & Building Costs and Trends (Continued from ; ;lhe ' And Thursday. —Walter [The views article do Whyte expressed not this in necessarily at arty " the numerous progressive large scale stages purchasing advantages for major where they are applied between process inception and culmination-. The latter becomes involved since good a , ■ft as part of it is* itself, home builders. , wages, modular schemes of construction, or attainment is not are scribe to the lished of one those distribution discarded. system take sub¬ in upon alternate end cost situation we 1940-1947, i , whose (Based . on the 1948— Pending formulation, if not hostility. ('ft' Tax large scale dential developers communities of to to - ' ■ Slowdown— balancing supply with demand improved degree for such short supply items as soil pipe, nails, ' millwork, hardwood floor¬ ing, electrical motors and elect trical accessories, plumbing fix¬ auguring for tures, * quotations. Amount Increase factors -ft 1 (. i, ( Apprenticeship training pro¬ thoroughly inadequate in relation to potential . quirements'iThis has construction upon volume) rea beating costs .3 There today perhaps 110,000 to 115,7000 apprentices m training throughout the United States,, or are about 5% of the total estimated cm-site • employment. 7'his rate is enough to counterbalance at¬ trition due to deaths,, illness, en¬ forced idleness or, not productivity impairment due age, The ■* and to the ravages of desertion of the trades. inadequacy of apprenticeship training is a double-edge blade offers;'little hope toward improvement", of productivity at for the it site of Would', stem vigorous construction from blood3, " new plying sucn , as young what •< is up. Only the speed, and the timing, would be affected. Sale PricT ? 1 981.00 /'ft-. I've 1; 187.0 J! ? •/ ft/; / UOo.U) , with duction Actual $1,076.40 $1,000 1,865.00 1,000.00 500 Increase of taxes & labor item Percentage Increase ' Items included ' land, an and $ft 76.40 86.3 15.9 ft ft,'.ft 1948 $ $ 3,148.00' 500 1C0 7.6 '' 'ft ft 8T.-0;' extra $76.40 to the build¬ labor, and materials. We are not currently in posses¬ sion of information with which to rationalize this last figure. How¬ in increased ft 90.9 be 85.0 What kind of general conclusion can be drawn from all these con¬ that most of It will be noted them point to con¬ tinued support of the present cost level. Some of them suggest even higher costs.; which we There are others of have not spoken which alsq belong to this group, notably the, very real, possibility of an¬ other round of wage increases at off site points thds year. Notwith¬ standing are areas of godd all this there some building cost which offer Opportunity to peg costs where they are—net, after some of the yet to .materialize factors have been met—or to slightly. very * all ' 93.8 any ^tangible result. As we to era '■:./;/1 ft'ft ;ftft ft,; way. from pass another ft ft we given are to firmer base predictions which upon upward notwithstanding forecasts their Humankind, to it resist cating return the time earlier always i seems, to what period, the dire economists. advance be to a at been a for by yet advo¬ seemed at desirable more Hellman, member of York the Stock of age member Exchange, He 71. Of the had exchange than 40 years,: more up stocks not with clear. But as of. I history dis¬ Soher, Walston, Hoff¬ Goodwin, San Francisco, & been has Feb. on the stay of two a ..ft: /V' ft./1,: ft;ft-ft With Blyth & Co., Inc. (Special to The Financial added to the staff of ftv B. Van Arsdale has been Blyth & Co., Inc., 215 West Sixth Street. stops Clark Davis Co. Adds care stocks advisable for Chronicle) ANGELES, CALIF— Nie- land following , i———» „ num¬ use York New in 6th, after weeks. (Special to MIAMI, consider visitor a City, and will leave fort the Coast ft I • Hubert J. show a which up than down, although; all important "when" is so v man LOS more the H. J. Soher N. Y. Visitor a of The Tampa is Clark Financial Chronicle) FLA.—John O. Perry associated with now Davis Co., Lanford Bldg. if* Buy Stop Amer. Brake Shoe. 38 Amer. Chain Locomotive. Pacific Coast 1914-20*4 18 Amer. -39 37 • Anaconda _____ __5_-___ Avco 18 -19 17 T Securities; 3114-32 (4 29 4 414 314 - Bethlehem Steel __ 28 -22 20 29 Boeing Briggs _L_. 30/ -31 21 j_ -30 28 Orders Executed Caterpillar Tractor 54 -55 -13 Douglas 50 -52 Dresser Industries. 21 -22 , * ' ■' "t '' 11 lookdubious 4 53 Ccnsol on Pacific Coast Exchanges i closes it never does. Only in retrospect do these things, which sert in the present (as¬ themselves. We hear today that building is pricing itself out of the market. Nationally, contstruction 104% 1941. higher The alarming reduee after costs 'Iffy" and it probably will of New died purchase as, and when, available at of the future,. And yet past specific prices:,/.. foundation which is unknown. seeks come of to making comparisons with the past. Probably because the past offers a I've ber ft)-', /ft' ft.:.-.ift / the "when" will be taken economic one E. A. Hellman Dead Edgar A. trying the on the "iffy" factors should simultaneously become possible an important cost reduction would follow, but it will not happen this The potential of this is even planning temperature ' for couple of weeks. considerable time before some there Will be If 100 through local supply outlets to the futures in relation to their pasts job site. ft.ft /(• ft j • •' ft'/ • '] .. have always moved onward and flicting; factors? am 52.5 . profit. a reasons. and ft indica¬ an Florida ft ____ found 297 04 | labor er, an extra $297.04 to an extra $2,274,56 for be two 6.00U.001 de¬ after was see I did this for First, because I like profits and, two, I'm just about fed up with the weather 9,148.00 $ the market over magnifying glass to in what there other $2,274.56 1939-41—taxes vs. : from gone a tion of $2,162.04 at $2 150, up $150 previous sale. ft one the last 1,jsO.Ooi 206.00 wages, marketing and distribution the producers'' level on grams, are ' Land Si,000 567.60 3 $10,333.00 costs iiom ' Builder $li,S50.0O 417.96 for 1939-41 Percentage 1 would Apprenticeship Training ♦ Labor " from the Whichever way I figured it, the trend would be House) |3>561.00 $4,909.56 V ' Chicago Exch. Membership while but then it would a go up too. $1,000 . etc. Also ever, in passing, it is probably ac¬ lower cost- are promises of future i curate to observe that much of it deliveries at today's to labor. wages $1,282.40 Areas of construction cost This would show, then, that the Whichoffer hope - for mid-1948 - remaining extra $3,148 sale price iurrds thereafter are: the probability: over 1941 is divided $500 extra for In some, for $3,143.04 - stay as I've $2,000 and and! (44.0) .< of material (32.4) /ft,. want to race things one way, prices eventually bound up. If it does things i another way, the price trend may be halted " | • V ■ ft/ 2,635.00 plan is an entirely different mat¬ ter and probably will receive spe-" <jial consideration. for $4,909.56' Deducted or If I rat I'd like think they as runs that (23.6), . be, things of the presented those of the author only.] are will dtte simply to 'in¬ prices increased 304.44 * be' builder - generalization are Dow Service "Test" ; Tdday's- C6st$ —Cofredbed, direct-J manufacturer Labor oi' 1939 in resi¬ ought given the (advantages of ft large scale purchases upon some - Costs—Taxes Cost The proposal that ' $5,214.00 invent Distributiont Today's pre¬ and testing of a betters system, we had best consider the proposition with some suspicion,'' creased are cost to this m' sounder explanation of cur¬ sale prices than is found a high costs j Materials MLfl. Taxds ndt sentation fer | alone in the are on should be. adaptations of which are applied New Taxes and Labor Loss Add $2V4t7 to Dream* House1 , * be whereas -the plan sale made figures rent |o stop to palatable is difficult to visu-; Today's Costs-- more alize. from a us r cause inventory of where for the would portray pleaded. While these estimates industry ought to be An area which should theory that the estab¬ construction Impact who- that the those with They got 'to CHICAGO, ILL.—Arrangements to the clinical house we are dis- figure on how things are and were completed Jan. 28 for the cussing today. While the result¬ sale of two memberships in the what they're likely to be. ant figures suggest what might Chicago Stock Exchange; one at have been, but is not, they do of¬ I Last week I said if Congress practical field experience in upon certainly important and desirable, are long-term enough to put them beyond any immediate hope. We have these by manufacturers and suppliers. II Productivity figures prepared by the Long Island Home Builders Institute during 1947 and based Peripheral fringe matters such cost-hiking building codes and whose correction a firm quota¬ future deliveries policy for of them We {*1} A return;*to ; tion 1.9% price. ' • to amounted coincide time Chronicle. war as years it I, are were in not is ' In 172% above the 10 pre¬ ending 1915, as 12 48 - 20 Lockheed 13 -14 12 G. L. 15 -16 13 No. Martin...... Amer. Sinclair Aviat'n Oil 7 - 8 , 6 14 -15 ft 13 Aircraft.23 -24 the re- United , .. 'ft,//1 New Members York Stock' There are a number Chicago Board of Trade 14 WaH Street New York 5, N. Y. of Private that stocks „ not In the list,, Monterey look like they've gotten . Teletype NY 1-928 Wires to Principal Offices Saw Francisco other Exchange York Curo Exchange (Associate) San Francisco Stock Exchange New COrtlandt 7-4150 r . Schwabacher & Co. 22 as 1920, construction seems. War eosts they situation World were than , Vultee —- — Santa Oakland Fresno — Barbara Sacramento 2( tary liquidity seems certain to persist for many years to come. (Continued from page 15) Federal namely, powers legislation, Reserve to use its discretionary in the public interest un- ance credit, ■ der changing economic conditions. METHODS at the tion CONSE¬ AND had the System been organized before it was faced with serious the problem This nance. task of been not had fi¬ war foreseen by the founders, but the country would have been greatly handicapped in prosecuting World War I had not serve System Also, the the Federal in Re¬ existence. adjustments following difficult as they were, war, would the been have been greatly aggra¬ vated and perhaps disastrous had there been /System. In r System aid - was Federal Reserve World War II the no called finance—even war again to upon ex- more acting in its development that the former effort—and again the now country is facing the problem of adjusting monetary conditions dis¬ torted by war to the peacetime needs of the economy. J 'One of the inevitable conse¬ quences of war is an abnormally "rapid expansion in the supply of money and other such as government liquid assets securities and savings accounts. Because of this financial heritage of war, the pestwar economy is exposed to the risks of serious instability from monetary causes. The amounts of new money and other liquid as¬ sets generated during the Second World War surpassed all previous absorbed Unless duced effectiveness in least, of recurrent infla¬ or collapse, at the worst, require well-conceived and firmly pursued policies of mone¬ tary and debt-management opera¬ tions. '''/ i'ty: V. a result of the heritage of finance, the Federal Reserve System is greatly restricted in its capacity to perform the functions As war which for namely, it control was established, exercise to effective an volume the over bank of credit and the money supply., The of the System's re-establishment capacity influence credit and to monetary conditions in the inter¬ est of stable economic develop¬ is ment lem. a, primary postwar prob¬ re¬ or by serious used a last resort and minimum extent necessary to provide the increased money supply needed by the ex¬ panding and abnormal war econ¬ omy. Nevertheless, the banks had to be relied upon to a considerable extent. A high degree of liquidity only only the banks tain to facilitate the producing and supplying goods that not available for general are War expenditures consumption. paid for currently. No country has ever imposed upon its citizens much tax a provide for half as burden war of that would expenditures as national —-the amount spent income by this coun¬ try during the war just ended— nor has any country in wartime able been between ance taxes. forts to borrow the of expenditures made in ef¬ war, this country as cost taxation and by borrow¬ people's savings. "In sive. much as possible of its Fiscal and monetary authorities Chart retrospect," the the 32d Annual of Board Federal Reserve order to raise the more system them cated the serves.3 the of to absorb issued Government by all curities cost the on (4) and very, 3 Actual ? the 1905 1900 1910 1915 1925 1920 1930 1935 «940 1945 YIELDS ON U. S. GOVERNMENT SECURITIES FER CENT Weekly avewaoes or daily figures 3 i! The interest-rate structure gen¬ is shown in the Chart (I), was characterized by very low rates on short-term money, a wide spread between them and rates on long-term securities, and the low¬ est levels of long-term rates in the history of this country. This un¬ usual interest-rate pattern came into 15 YEARS of recovery amount. Moreover, since nonbanks, which hold their required reserves largely with member banks, share in this process of credit extension; and since time deposits, against which required large time for are lower, may in¬ than demand de¬ multiple expansion in deposits may greatly exceed the ratio of seven to one. During the period from June 1940 to December 1945, the ex¬ pansion in total deposits at all banks, posits, gold of and imports new tainment local of acquired issues to banks. During drives, banks had excess re¬ serves because deposits against which reserves were required the by depositors of securities, while Treasury deposits, against which no reserves were required, increased.4 The resulting reduction in member bank required reserves and the investment of these freed drawn were the in upon purchase the increased reserves assets of banks. /}. consequence, a posits reshifted from Gov¬ were ernment Reserve to Federal the account, private to other was than interbank and U. S. Govern¬ deposits, was about nine times the increase in required reserves of member banks. For member banks alone, tne ment in same multiple expansion in total deposits over this period was about eight times the swelled bank increase in their required meet the higher reserve requirements. The net effect was an impetus to ex¬ pansion in bank holdings of Gov¬ the ernment securities throughout period. war /. wartime Money.—Viewing the period whole, banks as a expand their hold¬ able to were Bank of Expansion and Credit securities by ings of Government amount they could obtain be¬ cause the Federal Reserve System, in following its policy of support¬ any is¬ ing the market for short-term sues, serve, to permit a much further expansion of bank reserves. Thus under policies pursued in war fi¬ nancing, the banking system was not only permitted, but encour¬ to expand its holdings of States Government se¬ curities on the basis of reserves aged, United supplied freely the Reserve the struc¬ by System in maintaining ture of interest rates. Total funds raised by the Treas¬ in the period from the mid¬ to the end of 1945 ury of; 1940 dle to amounted 40% $383 About billion. $153 billion of this amount from taxes. Nearly $230 bil¬ or came lion obtained was by borrowing, billion came of which about $104 the banking system, includ¬ from ing mutual savings banks as well as commercial banks and Federal Some of this Banks. in¬ sales of reflected large securities during Drive the Victory Loan the end of 1945. During at and 1946 the to some Treasury use Most debt. were from of i the retirements commercial bank hold¬ ^■ MONTHLY WtillCl wartime The •>LU0« OF DOLL AM OF BOLT FIFUM* 30 .f'N.-F'" MONTH* increase Federal in billion RESERVES the of balances built up from the Victory Loan to retire maturing ings. -I•; BANK CREDIT. REQUIRED AND EXCESS OF MEMBER BANKS, AND CURRENCY 1947 extent in made large reserves. $22 of Reserve hold¬ ings of Government securities, to¬ gether with a decline of over $5 billion in excess banks^ reserves of mem¬ is shown in Chart II/ largely provided for increases of ber as $21 billion of currency CURRENCY in circula¬ tion and of nearly $8 billion in the total amount of required resejrve^ at member banks. This growth iq required reserves reflected an ex4 0. NOTE—Securities *rences to and data, 1945, p. classified their 1947 earliest call or due date. and composition, are given below. according to sources 1946 pansion of $44 billion, in United paper: U. S. Government A, Table deposits in 10, column 5, pp. A141-61. 1945, pp. Bulletin, October 1947, pp. see Treasury Bulletin, January 1945, p. 56, and July 1947, p. 59. at all 1942 RESERVES counts 1940 1941 1942 , 1943 " 1944 1945 1945 1947 de* tim& commercialiitan4 The growth deposits and currency ii in Chart III. Special wartime legislation enacted iif exempted war loan deposit ac¬ of the Treasury in member banks from reserve requirements. This exemp¬ tion expired at the end of June 1947... 4 1251-53. EXCESS position of series, total shown December 1944, Federal 483-90; for January 1945 through September 1947, Corporate high-grade bonds: data for years 1933-41, Banking and Monetary Statistics, p. 471, note 2; for 1942-43, Federal Reserve Bulletin, February 1945, 159; for 1944-46, Federal Reserve Bulletin, February 1947, p. 181. For com¬ Government /: mutual savings banks. securities: for January 1942 through JReserve Bulletin, May federal Reserve States posits, and of $19 billion in High-grade railroad bonds: Annual figures computed from, monthly figures g^ven in Frederick R. Macaulay, Movements of Interest Rates, Bond Yields, aid Stock Prices in the United States since 1856 (National Bureau of Economic Research), Appendix demandj deposits, excluding interbank an4 -HsU. for years 1890-1941, Banking and Monetary Statistics of Governors), p. 448; for 1942-44, Federal Reserve Bulletin, February 159; for 1945-46, Federal Reserve Bulletin, February 1947, p. 181. Commercial (Board are to 1945 1944 1943 1942 ■ re¬ reserves increased and sold sufficient securities to quired banks crease M CIRCULATION t V de¬ ing drives. Between drives,.as Reserve total 30 r\ earnings banks in*, creased their holdings of Govern¬ ment securities substantially durAs CERTIFICATES OF INDEBTEDNESS * sold quotas, substantial amounts of previously requirements rapidly the at ftUMM «r MUJUW »-lt in¬ in order to subscribe to issues and thus help the at¬ vestors, Chart II RESERVE Nonbank drives. loan war . from severe de¬ investment volume, expansion developed out practices pursued during the more crease TAXABLE savings bank to credit the reserve flation, when demands from bor¬ rowers were small, the flow of OR MORE of requirements; excess member being during the prewar pe¬ riod required of all mem¬ currently amount to about the funds thus pass to another bank which in turn can expand its assets. This multiple expan¬ sion might be less than the seven to one ratio mentioned above, if successive banks retained reserves in excess of the in war, as 1895 ad- 15% of total net demand and time de¬ posits, or a ratio of expansion to reserves of nearly seven to one. When one bank obtains a deposit, which at' the same time brings that bank additional reserves, it can lend or invest all of those reserves erally maintained throughout the J890 pre¬ of problems reserves banks ber levels have yields special levels. postwar low long-term sented growth in bank and other inves¬ tors' earnings from their publicdebt holdings. especially by banks, tended the yield on longerissues below prewar of Government's limit a depress The/ buying to As securities. short-term term curities; (3) to keep down the in¬ debt; stimulus wartime other cient, if resold to the Federal Re¬ to (2) to assure a strong and active market for outstanding se¬ war • long issues by all groups of hold¬ rates; terest securities would not be per¬ ; keeping down short-term rates, and facilitating war loan drives, made additional reserves almost automatically available to banks. The volume of short-term securities outstanding was suffi¬ - ers, (1) to of se¬ who might .awaited higher have long- of > Effect of War Loan Drives—An¬ banks and other in¬ to prefer long-term against short-term securities, and the shifting from short to by investors, otherwise implied An prices as fourfold purpose: prompt that vestors began Besides facilitating bank a relation consequence, securities not purchases of securities this policy served rates. interest institutions. dowed Wartime short-term in level low a in extent portant di stinction between longand newly other encourage some mitted to decline removed an im¬ levels existing at the beginning of war. the long-term rates also tended to a further decline in long- term to maintaining the interest-rate at approximately the the at assurance structure RATES maturity postwar period. of term investors. This decision involved the necessity of THE STRUCTURE OF INTEREST RATES purchas¬ induce Rates. sufficent to reserves to and Maintenance to them to continued rates the declared determination to volume of "monetization; of the pivotal Federal Reserve policy in facilitating war finance a process resulted in a kind of has essential to easy access re- securities these between groups, it automatic —One was this Banks Reserve such of public debt" - without regard to the economy's needs for addi¬ tional money. Such automatic monetization of the public debt justments. provide banks with volume Because yields of the cost of Interest for a de¬ the banking whole of six to ten by ing longer-term issues was occa¬ sioned by the differential in buy and thus compli¬ of a the basis reserves, provided selling ; short-term problem of postwar ad¬ Maintenance as the times financing procedures adopted en¬ couraged banks to purchase more have bank expansion posit through taxation and to restrict bank purchases of Govern¬ ment securities." Many of the was policy of keping short Since purchases was'thereby war securities than it purchased by by the Reserve System create ad¬ ditional the of were rates from rising. System, taken I LONG- AND SHORT-TERM INTEREST with their to quote Report of Governors short-term securities The by banks the Federal Reserve Banks in line "it is evident that more vigorous poli¬ cies should have been adopted in enable price inflation, redundant mone¬ sold and the to raise by ing the terest. exces¬ was of in¬ bearing higher rates sues general sale occurred pos¬ was securities and buy longer-term is¬ for that credit, because it sible for banks to sell short-term expansion , amount bal¬ the Throughout were out entire savings people's bank these reasons a of the banks' holdings of Government securi¬ ties and thereby in the money suonlv was necessary, the actual Although sizable depres¬ stimulated expansion of sion issues. new established' during rates market securities between long-term interest short-term and and active differential wide the purchases by needed to help main¬ were an and of interest rates later. Maintenance during the war of tion of higher sold securities for public, justment for life insurance com¬ panies and other savings and en¬ paper, as essential was to extent term to 1 the from Financing of war is inflationary because people receive incomes for be invested in shortpartly to retain liquidity and partly in anticipa¬ large financing through banks, which results in the creation of new money, should that , have to be 7 •" < records. interest rates, and prices, and will QUENCES OF WAR FINANCE Hardly the period ahead avoid¬ of disruptive fluctuations in During Available funds were to a needs. Policy agreed were current beyond far to reserves Problems of Postwar Monetary -Thursday, February 5, 1948 FINANCIAL CHRONICLE THE COMMERCIAL' & (632) Volume 167 Number 4670 COMMERCIAL THE & FINANCIAL • r- From banks, 1940 to as increased States Government the commercial seven securities $75 debt are much as before the as bonds and notes, than half of this more total, are redeemable on demand and, as long as the Federal Re¬ and retire¬ Banks serve and early 1947 bank ment in 1946 Savings which by billion, substantial times war. in Chart IV, their holdings of United approximately after 1945 is shown the stand marketable ready to buy securities, these freely convertible time bank loans collateraled same great significance from the mone¬ purchasing tary point of view. ment period loan expansion was to large extent to finance pur¬ of un¬ ber has serve banks increased substantially. curred their While additional Servicing the of To in more borrowing Banks at the for the holding or securities had finance. war the their These in¬ xk% of rate short-term Govern¬ securities. This preferential during put was into the to war to utilize their in effect the encourage banks purchase of shortsecurities, rather than to keep them idle. It was no longer needed, and its elimination made in the absence adequate taxes, could only be counteracted rapidly by direct controls demand, supplies, and prices services, since these over serves excess re¬ term of goods and est level be in equilibrium during war and its aftermath. In the war period serious inflation was avoided by applicable to such borrowing. Notwithstanding these develop¬ ments, expansion in the public's the of controls, as through the public's exer¬ cise of voluntary restraint and in¬ deposits continued to occur, al¬ though at a slackened pace. This expansion resulted in part from a vestment brisk market factors record. War financing was responsible for a very rapid and large expan¬ : sion of liquid assets held by the public. The holdings of total de¬ posits and currency by individuals and businesses increased from mid-1947 to by $100 ratio the to annual total value goods and services, of accompanying chart. total deposits and the ury The chart uals and shows that billion $80 of the in '• Government of be generating Early in a large-scale pro¬ to - retire debt from its ac¬ cash- balances, and by it year was project additional strained 1947, sure on regular possible debt further retire¬ downward pres¬ long-term interest rates. In of rate revival * of 1% bank lending to businesses, to property owners, and to consumers; and in part from the Treasury's retire¬ of securities held outside of ances banks, which involved the trans¬ fer of Government expansion during close postwar to record levels, financing re¬ mainly the of expanding production and distri¬ bution of civilian goods at rising prices, it also due, to was determinable tive and extent, excessive in¬ an specula¬ to commitments induced by bottlenecks and short¬ ages affecting The many further goods. . , to sell absorb would increase Re¬ these to to reserves an the attempt amounts in Re¬ purchase any bank the Refusal of or additional to in have short- situation with regard to Treasury debt-management op¬ erations, and to Federal Reserve credit policies. NATURE OF THE POSTWAR Whenever it could, without abrupt stiffening of money rates, the System made vigorous use of available the PROBLEM methods credit of influencing outstanding bank of amount selected of Superabuandance of money, to¬ gether with potential further ex¬ pansion in the money supply—• resulting from wartime growth in the public debt—presents a con¬ tinuing problem for the postwar period. types. It en¬ couraged the liquidation of loans tion to the total have and maximum made to powers quirements for these requirements market current its re¬ purchasing securities corporate of margin use determine listed by fixing at 100% of value of the col¬ lateral. It maintained, with some adjustments and revision, its spe¬ cial wartime control over credit, particularly sumer con¬ over in¬ stalment credit, until such regula¬ tion was ended by legislative ac¬ tion. Partly as result a selective of these significant measures, a contraction in bank credit for carrying securities took place and the expansion of consumer restrained somewhat. was whole, Federal credit On the Reserve policies left banks considerable in flexibility the transition accommodating credit needs business," of and commerce while bringing about contraction in over-all bank credit and some slackening in the rate of growth hands. ■ of money I::; v.." , in private ly normal working levels, making further debt retirement dependent upon current budget surpluses. transition. Pressure was other liquid the result of subject the" already volume assets war rapid to of ex¬ super¬ and money available as ing process the in and shifting Government higher returns ^ was substantially restored. By selling short-term further credit addition, the to assets the Federal stated as offering Reserve earlier, -banks obtain additional reserves of which six ex¬ use into securities basis In moderated banks reduction. quantitative restraints that could pansion. of short-term System, on thus was latitude from debt-retirement securities inflationary pressures generated by so large a volume of liquid as¬ imposed the from sets were altogether too strong to be effectively checked by any be bank reserves result¬ on finance and not The This by expand of amount credit ten times to such of on bank the may the Some reserves. ment close public In wide stable market values on this debt had become a major central bank¬ ing responsibility. In this situation there more the same ; \ V? ' ' , / ■ ' # an .70 maintaining orderly and stable market for develop¬ shifting into other higher-yield assets, the Fed¬ eral Open Market Committee current short-term rates to tributed, to a more rise and con¬ flexible money need would be pressures '• V ' * H*0 J • To prevent mone¬ tary redundancy from increasing and to re-establish conditions der which further credit un¬ expan¬ sion may be more closely related to the expanding needs of agri¬ culture, business, and consumption important tasks of fiscal, pub¬ lic-debt, and monetary manage- j are ment and now perhaps in the These tasks must be accomplished without permit¬ coming years. ting instability in the distribution and value of disrupt the operations. In the public view of this debt to financial economy's situation, the central problem that confronts the Federal Reserve System in the postwar period the System's is to re-establish primary function, which is regulation of bank credit expansion. At the time the same System must be able to fulfill its new responsibility, inherited from finance, war of maintaining , a stable market for the public debt* With the postwar level of com¬ mercial bank holdings of market¬ able Government securities at $70 billion and with $88 billon held by businesses and individuals, it is difficult for the System to exercise effective control over the total volume of bank credit holdings the Reserve Banks. tional bank be long as as be readily sold can reserves The that addi¬ thus can generated at the initiative of banks and basis for others could be in expansion an the bank credit and deposits of from six to ten times the newly created re¬ serves. A policy of maintaining shortinterest a rates wartime at differential between short- and long-term complicate of credit rates would postwar problem the control. It would con¬ tinue inducements that holders of short-term securities have, had early in the recent war to sell them and purchase longerterm, higher-rate issues. Further¬ more, the Federal Reserve System would purchase the short-term LOANS AND.INVESTMENTS OF ALL COMMERCIAL BANKS to * :■ f ■ . >r'«0 securities eo M40 ? v: . t, t— —L_.I . ! 1 -V • .r.i • 1 °. 1 f .-1,1,11 national product: For ■ 1-1- i ...f" are i„. i 'v/vk 40 xrviHo »t*ia r given below. 1916-18, U. S. Department of Commerce Estimates based on National Bureau of Economic Research estimates of the pro¬ duction of finished goods; for 1919-28, Federal Reserve Bulletin, September 1945, ■j»i 873; beginning 1929, U. S. Department of Commerce estimates in Survey of Current Business, National Income Supplement, July 1947. Figures are annual to tals for years 1916-38 and seasonally adjusted quarterly totals at annual rates thereafter. ' years Deposits terest and Federal Reserve figures for all banks in the United to exclude interbank deposits and items in Figures through 1941 are from Banking and Monetary Statistics (Board of Governors), pp. 34-35; for later years from monthly issues Of Federal Reserve Bulletin. Figures are for end of June, 1916-38;. for end of dune and December," 1939-42 ; for end of March, June, September, and December, 1943-46} 'for last Wednesday of March and June, 1947* Figures subsequent to Pecembef 1946 are preliminary. * • V U. S. Government >.securities held by individuals and businesses: Federal Reserve estimates based on banking and corporation data from various sources. For 1916 '.through June 1939 figures are from Banking and Monetary Statistics, p. 512; thereafter -from Federal Reserve Bulletin, September 1947, p. 1104. Figures ore for the end of June, 1916*35; for end of June and December thereafter. Esti¬ mate for June 1947 is preliminary. currency: .. the ence capital be markets esses. debt demands an 1928 1928 1930 1932 1934 1938 1938 1940 1942 1944 1948 of business inflationary and would influ¬ security otherwise disruptive to financial proc¬ Monetization of the public stimulated could result in 1924 rather than by in the real estate and prove . long- by the pressure surplus of current savings over would collection. in decline A rates. of credit expansion a States, partly estimated, and adjusted of reserves. term rates caused • process thereby bank * 'v NOTE—Sources of data presented in chart Gross t. V.'.' sold by these holders create additional In this way, the policy would contribute to fur¬ ther credit expansion and to a further decline in long-term in¬ and /vfry>t . interspersed with down-* ward reactions. since Chart IV • " j of bring about; but in adjusting to a redundancy' o£ money, the economy is likely to experience recurrent inflationary levels with Treasury certificates were These actions permitted from to term >>v/ »- level difficult Subsequently issuing rates 12- debt ply is the Federal Government debt, a decrease to the economy's early in July terminated its policy of buying Treasury bills at %%. on such permanent invest¬ more TO .".'K 'V time fulfilling of' this able to further bank raised. at its responsibilities for Govern¬ ment and also of conditions favor¬ while 80 t by the consequence month :90 f done little longer-term bonds appeared toward the of the retirement program. Federal Reserve System to coun¬ teract inflationary developments, DEPOSITS AND CURRENCY AS A PERCENTAGE OF THE GROSS NATIONAL PRODUCT weurr that could be was be can contrac¬ a Since the principal basis of the expanded money sup¬ to Government its of money expansion. declining securities and, because of the huge for shift in a banks to these outstanding and distribution, assurance of only through tion in public debt held by banks evidence of increased demand by debt volume reduced banks of pointed out illustrated by the accom¬ are available quantitative instruments of control would have resulted in prices national product been It inflationary pressures that 'developed - from many caifses during the postwar than the current credit already panying chart. By mid-1947 Treasury balances important, how¬ these ors; it can be further increased, on the other hand, by bank credit had been reduced to approximate¬ More of or expansion of bank the magnitude changes in their rela¬ carrying Government securi¬ ties, purchased in war loan drives. for somewhat to The forces and term money rates. credit to private borrowers added • M..0M Of MUM* 240 the flected abundant tlUIOM «Pt0LUft» to transition, which carried loan vol¬ pansion GROSS NATIONAL PRODUCT AND THE MONEY SUPPLY deposits private accounts. While bank loan ever, Chart III 240 discount postwar ume redeeming securities held by Fed¬ eral Reserve Banks, created a drain on bank reserves; this helped to check continued rapid expansion .of bank credit and re¬ individ¬ middle to a budget surplus dur¬ ing the ensuing year. The Treas¬ ury's debt-retirement program, by having greatly expanded holdings of deposits and currency, held over - ment from businesses, in addition to securities factor pressures. the end of the to 50% in the 1920's, a period of ac¬ tive business and full employ¬ !W'~ ':■) ;^ the ment from accumulated cash bal¬ possible for the Treas¬ was cumulated unemployment vand unused resources, and with a little over many to initiate gram able in and war were quickly ceased dominant 1946 it national product attained a level of 80% during 1946 com¬ pared with less than 70% in the late 1930's, a period of consider¬ Govern¬ restraints diminished inflationary to gross ment. these quirements The ratio of currency in With the end of war, financing the Government's fiscal re¬ of shown in the savings abandoned. cases all of over greatly the of production possibly securities, but after the was inflationary potential in the ex¬ panded money supply is roughly indicated by the increase in its not as ment billion could maintenance well to 2 Vz times the prewar level. The country's securities resulted by securities Banks during 1945 net profits in relation io capital funds reached the high¬ 1940 short-term more lateraled through 37 market customers, banks had to sell Banks. of than expenses, with the effect that on their serve in were result of the expanding loan demand from serve Govern¬ Banks the debt-retirement program and for this reason, as well as to meet Federal Reserve Banks' preferen¬ tial discount rate on advances col¬ ment debt. some pressure as a of effected was Government Re¬ purpose flationary effects, increased demands, total increased in seeds infla¬ after financing war THE PERIOD developments of end IN considerable extent a tionary in¬ expenses greatly Wartime monetary earnings TRANSITION earnings banks POLICIES (633) 4 April, -1946 by elimination of the FINANCING Government securities. The rapid growth in the assets bank and \var chases At the by such securities showed a sharp reduction from the high level reached in the Victory Loan Drive. .< Some discouragement to mem¬ Since the end of 1944, to the high¬ est level since 1929. During the a ' the reduction in reserves which new a - of Government securities. into cash. situation ' under compared with $16 billion in 1940. Bank loans also expanded, mostly This is ' addition, debt retirement directly holdings issues also precedented \ reduced commercial bank holdings still exceeded $70 billion, are CHRONICLE ' a by this policy huge additional (Continued on page 38) 38 THE COMMERCIAL (634) & FINANCIAL CHRONICLE System Problems of Postwar Monetary of (Continued from page 37) v limit the availability of decline in long-term times levels. to new low Various been have measures would System in order to purchase long¬ er-term securities in the market. in order might began to eventually be to meet neces¬ tained ' Monetization of the debt could be permitted to continue until long-term interest rates de¬ stalled. clined to would at which level a rates buy and securities short-term (4) Adoption of one or more of proposals made by the Fed¬ eral Reserve Board in its 1945 An¬ the provide Report would of restricting a assets which to limit thus could and extent should be the proposals subsequent various These fhe in unless rates pr a investment funds for tions of this paper. Even in these circumstances vWds of Determination level the of ference x>f perhaps mone- among l tary authorities and theorists as the to -effectiveness rate variations in of interest- 1 encouraging or discouraging borrowing and lend¬ ing. this that not Without attempting to settle may be said controversy, it monetary management ignore the effect of interest- both short- and rate fluctuations, ' can¬ long-term; nor can it depend entirely upon interest-rate policv to accomplish its objectives. The postwar situation, moreover, pre¬ sents many new aspects of the re¬ lation interest rates and between monetary policies. Flexible —rThe" Interest-Rate of nature the Policy. postwar declining long-term To supply capital through this process demands wouj^ contribute to inflation The would .causes return and the pend incomes Lower resulting availability of credit in inflpenc- ing expansion and contraction of bank credit than -noon the cost of credit. It is difficult, however, except through certain types of selective controls, to influence the availability of credit without hav¬ ing an Effect uppn Interest rates. Thus adherence to stability of in¬ terest rates as the prime objective such a if rates did not rise. of on .needs. s In expected faced of have as against future consumption. individuals degree some are resoonsive in monetary to and PUBLIC SECURITIES, MARKETABLE assume for increasing an for would such he have, to at es level some rates) of not possible to know how fhrpch .cf a rise in rates -might be to restrain .sale? to the With a substa^t'al yol-i necessary System, - government .obligations.' virtually every month, of we atux ng Tederal Reserve i policies must also ;nto account Treasury re-, liurding. operations.. * , ? ake risk Another - * ,'n a situation in . the operations of financial organizations are Public debt is ;; the dominate! by .bilitv that' noss substant:alrise in shortrterm' nates might HOLDINGS I some be accompanied by a While the ' NONBANK W. I HOLDINBS 'v/ CERTIFICATES RESTRICTED ISSUER of degree "SgfpV rrrr^NONBANK ym. >^^HOLOIN«a<%^ OfWNtTIHCTII ISSUES NOTES COMMERCIAL BANK rise in interest rales carried without could not seriously upiThe events of setting the market. 1946, when long-term ben I nrdces fluctuated within & range of fouf toints. indicate that! purchases of /hesp bonds at premium prices are not without some rigk■ If «s -dif "icult to know frow much f a rise in yields' government xecuriilps would be needed to"iiis- • pura«,e banks from"selling these recurities ip order to im ake.private pans- or to wds .' when to errand i nonbank ae'ive an - Fxoc-riencfe Federal .or bill-buying "ective restramt against credit ex- holdinos UNftCRTJIICTCO .credit., rates have <not always exertei e'- ! i -is there increases d'scount Reserve WITHIN I YEAR invest, in. corporate for t,h"f BY EARLIEST CALLABLE OR DUE DATE 0# bonds : M H0LDINS9 « Chart V v-hg5 selling at substantial premi¬ ums, there sis a limit peyond which be TOTAL PUBLIC AfcjD PRIVATE DEBT uncertainty, for bartio.ul3vlv are a ;v; to 'ong-term interest rates would be HOLDNMS and seems toward this end in short-term rates and rse we responsi¬ individuals would be desirable, and BANK so¬ Government ' consequence *'se In long-term rates. become the securit It. is BONDS and al¬ It patterns. essential * prepared to purchase government -if. my mLMH or DOLLARS The System serve vhich END Of MONTH FIGURES COMMERCIAL declines and dis-^ broadly debt, ■ - al¬ economic by- on To prevent wide fluctuations -j^ •hcrt-term rates, the Federal Re¬ Demands for credit by bus nesscs readjustment >" be¬ established of-1 taken not of at¬ tempting to use such .a remedy might be more harmful tf.an the disease. the salisfac- difficult tions of such institutions, bility the jirqdpctiyity of inve$j> these individuals, impair the func¬ cial ©f of Further ter basis .the ton income from with Federal predict. ion that,consumers get from pres* BILLS yields expansion institutions been . oreventfon of further declines in declining interest rates. would seriously affect the livelihood of many of cause private debt contrast, incurred savings, life insurance compa¬ nies, and educational and :other: endowed - tributed among banks, busi esseSj investment institutions, and indi¬ •likely to be influenced materially by regulation of the supply, avail¬ ability,, and cost of credit. In fact central banking policies need rather to b.e adjusted to puhlic risk-taking would be desirable to maintain economic stability. In¬ living for others, then interest rates long-term interest rates vestment at times when increased dividuals vast \ , securities government sale and fered These changes are po, Merest. endowed that de¬ from invest¬ credit r 1 BY CLASS OF SEOUfUTY AtLLIOM or DOLLAAS ' • Meanwhile, should the Federal System refuse to pure ehase vas ® Chart VI 40 instability of the T?'xe three Par'S viduals at nearly all levels of in-: Fede]rel debt to two parts private come, {he possible effect of widely anc* other debt, discussion of cus- fluctuating interest rates upon t°m£*ry Res(rrve. System mstru- operations And actions jpf .thess P°^cy 1S put into a new folders,-.and upon debt-manage{fame reference.» Changes m rent expedients is diff cult to . be incurred value able ent would . Reserve . refunding of maturing h.gh-ccupan issu^ with issues bearing lownr ra'"»s fenu to reduce ithe total interest payable. evertheicss, a r.se in s..ur.HL-.iii; la.e wcu d mean larger interest than aggregate ttotal undue market : "Vr-' the economy's , .nent in business and the reduce one-fifth over would tend to discourage risk in¬ problems bank just against public debt. country stood at a up to that time, it investment from policy to "^late greater emphasis upon the Gentral case, -monetary -expansion, long- further earnings on ments. any aspect of the postwar problem the lished in. the structure Government current interest cost public debt mirli. not b increased above the present level, because on savings institutions ready for in from rates debt family savings and de¬ on crease In OWNERSHIP OF 4JL 5. GOVERNMENT decline renewed interest predominant factoi Federal and economic instability. term ... through changes in interest are resumed, appropriate rates volume of public debt result of dis- ; Primarily from war and other opselling ®ratlon,s conducted an the piabLc namely, .purchases by the Reserve rates. monetary problem makes it neces¬ sary make even interest , opinion would the satisfaction of part of the existing demand fhrough bank credit expansion at low or ditionally been considered an im¬ portant instrument of central bank policy; at the same time there has been considerable dif. of process debt protections will need to be estab¬ this Wit>> raising further changes in the amount cf private over shown in Chart V. „ Reserve " influencing of botf public and private debt would bd subject to wide fluctuations. Wit a' worm War TT thp Fadtwas- 50% la'rger than approximately $230 billion of pub¬ bed^ debt. These changes are licly-held marketable and redeem- y other compared In view, traditional If methods the still PurreH the possible short-term interest rates has tra¬ . monetization debt of described j short-term in¬ terest rates would cope with only one pol.cies. System large as large as private and other debt.:: By mid-1947, following retirement of part of the debt in- short-term securities on of 5 The previously POLICY INTEREST-RATE levels as periods." securities. policy expansion, or unless any gap in demand is offset by an increased willingness on the part of the public to hold liquid assets. are high former ment correspondingly large capital sec¬ com~ need way .stimulated or of when' private indebted¬ level record restricted interest public welfare. There is little, if any., econorrii justification' for considering pub¬ lic and private debt on ti e samp basis with regard to the applica¬ tion of customary central banki; g ex¬ supply developed the in was , and would the the end of World War. I, at debt may be a desirable means couraging banks from more profitable assets and further monetizing short-term Govern¬ there for demand monetize the public debt. discussed ex- securi¬ Government interest lower could banks below even ties, as well as future current sav¬ ings, will exert pressure toward long-term securities or to loan to decline short-term the ability of banks to shift from short-term means to , to regulation .an4 to be higher- securities nation's the when however, of the postwar decline in bank earnings, the increase in their expenses, and the likelihood of a further decrease in earnings if holdings of higher-coupon maturing issues are refunded into lower-rate issues, somewhat high- postwar situa- i,sting unprecedentedly low levels. The large wartime accumulation by the public of funds held in currency, ba^k deposits, and longer issues. nual the tion, as already explained, is the tendency for long-term interest banks longer be induced to sell no with Inherent in , , sbort-rerm deb fully developed, which more flexible policies might have fore¬ (3) i was Even plicate the Treasury's refunding problem.5 It would also increase bank earnings, which have at¬ after it nad long-term rates. . , become in a short rates to rise to prevent further mone¬ of the public debt, for tization re¬ needed, it situation a such Permitting to resort to drastic action in sary order in ness example, would increase the cost fo ;the Treasury of carrying its quantitative when make period a policy difficult to follow. situation short-term the money long- postwar Gredit securities investors purchase The Federal Reserve System's general instruments for regulating the expansion of bank credit anc it,erm rates, other elements in the strictions of' new is¬ amounts Sufficient levels in relation to at low to pand other assets. rates of changed term (2) short-term (maintenance tions of credit supply and demand. If interest rates were held un¬ banks would long-term securities could be sued to check the decline of above- problem gradual adjustment of the money market to changing condi¬ longer be induced to sell shortsecurities to the Reserve no tiie about securities to rise at which level Flexible Interest on Policy.—While prevent the adoption of policies flexible enough to bring The Reserve System a help bear their mentioned aspects of the borrowing and lending, complete avoidance of variations could permit short-term interest rates to Rate order yielding longer-term securities. It would not prevent, although it might discourage somewhat, sale costs. Limitations was of ume The more important are as Government necessary credit at limitation such to terest follows: on when in Although small changes in in^ of interest rates indicate the de¬ rates might in themselves sirability of a flexible interesthave little influence on the vol¬ aate policy jn preference to rigid with these problems of debt monetization and declining long-term interest (1) and desirable. suggested for dealing rates.' the vent bank credit and a interest rates of expansion policy might pre¬ adoption of policies to short-term of sold by banks and other Policy functions monetary Thursday., February 5, 1948 ISSUE oansicn generated demands. be Ruch less eve.i ; by -speculative increases erJ'ectiv«e jn •where their primary wo$uld a situ a- effect would bp upon pripes of outstanding gpvern'^eot "securities, rather than upon; private borrowers. ii'i"^j ;- >{Experience with brokers' loans, served ,as 'liquid sec¬ ondary reserves for tin's country's banJkinc system, thus prpyiding a fvpg of central baik'ng service, HQLDipOS PUBLIC DEBT OVER 10 YEARS l-$ YEARS . shows -that funds banks the from will withdrawv. central \ of i; money order to' take pare market id •Jthe demands of their business and Sil OF RfITHtCTf 0 not be discoxtrage f imhf doing so -» by'having :V iokego Mghim^ey hates.Tin',the PRIVATE DEBT case absorb: pabed 1BA4 J946-,. - ; • "194?. of .1933 Ml 041* II N.OTJE—Gross .public E>f Commerce on the basis and of private debt data from as various estimated U. S. Goyfiffiment spcunities, published in Treasury bulletin for October 1947, pp. 4312-13. Federal Reserve by the U. S. Department governmental and private agencies. 1944 |94f Treasury's monthly Survey ;qf Ownership Bulletin and summarized, -in Postal savings and prewar bqnds are included; guaranteed-securities^are excluded.- X>ata understate.cpmmercipi La.V,i holdings i,Mptcw..at and .pvers^ate, n on bank holdings.I NOTET-Basic data,are frpm ithe U4 S. ■* t - bft brokers'loans *' .other lendgrs had .to be. found to ' ISA? -fftfif TIM v other customers and that thev Ayiil :* STATE AND LOCAL DEBT 'nonbankholoinbs 1929 ' wbxh long forced to the loans : ^vsecurities be k'quidated,". case of the hanks : while fnd governnruent seourities ] .ppuid ,ireadily . ., hbtain,; additional' <rpserv£'&: ftb! take Pare •>< * Volume 1-67 Number 4670; THE COMMERCIAL of the needs of their customers by celling some of their securities to below those that other holders will pay, changes in the volume of Jthe Federal Reserve bills offered wdl System.- i ... xf interest rates to postwar and bank the letary policy leads to the follow¬ ing conclus on s:/'Continuance of a ^pattern of interest rates in 'short-term rates which to levels much below long-term rates /is conducive to further declines in long-term interest expansicn of rates bank based credit. pansion over well as to as continuing downward bill as movement of term interest i view •pubi debt c •broad • rates, ofthe r short- declining funds debt, and widely fluctuating rates would greatly / complicate the Treasury's task of refunding its large maturities. Fi¬ nally, it is important to recognize that higher levels of short-term interest rates would not prevent shifting by banks, corporators and others from the vast holdings of government securities in order to meet private demands for credit if these demands are particularly strong or banks are competing ac¬ tively for such business. lib other words, while sale of short-term government ties to purchase secur longer-term issues might be pre¬ vented by diminishing the exist'ng spread between short- and longterm interest rates, the higher short-term vent rates sales of would rot pre¬ government securi¬ private debt. ties to expand present condition's terest foreseeable an' some rates flexibility in in¬ is desirable. In view of the limitation to which flexible interest-rate policy is subject as a;heritage of are., ment use the however, other war, measures reeded of to supple¬ tradit'cnal Fed¬ eral Reserve instruments of credit control. 1 .////• a the Treasury short-term debt. Even case, were sue however, if the is¬ sufficiently attractive, some holders of outstanding bankeligible issues would be likely to pari drives. tional ;/, / • Consequently, addi* offerings sues; stricted is¬ ;• they be "rer purchase by banks to as of long-term nevertheless result in further may debt monetization. Late • tin Treasury introduced: 1947,ythe variation a balance bonds, /which are nonmar- redeemable, have fea¬ similar the to Series though with bonds, ferences factors G dif¬ eligibility for pur¬ chase, purchase limits, and maturt es. They were issued to absorb the savings of the public in the hands lot of institutional investors betag invested in private out- 'ets. The of this use type of in localized eredit areas may hot be apparent in total bank credit soon enough for action to be taken in time to prevent serious weak¬ a ening of the eredit structure. of use The general credit instruments to rectify a credit development that is narrow in scope might re¬ sult in where areas was undesirable the pressure credit in situation , essentially sound. For the correction of unsound conditions in permits the of liquidation before maturity. At the same time, type of security safeguards Jiis the Treasury coupon ments Its paper to have management or of further monetary poli¬ been-discussed in paper this and subiect in another It is series.6 Treasury agement of the debt could do a J great deal to influence monetary developments. In; view of the 1 large portion of the public debt that is of short the of within within term—-$52 billicn marketable one five debt management policies "" clear mented by struments. be special supple¬ selective discussed fully more in particularly They in¬ controls stock-market credit and sumer credit, which effectively used. To also be added by as * ? various of are are government Federal Re¬ ment the needs legitimate these of real loans nature, is the certain has guar¬ of bank against loss by the lender. fully and case types of on used success¬ was of various investor groups./ In addition, this program should facilitate the adoption of credit policies designed to restrict excessive bank credit expansion and at the orderly time maintain same market securities. for *:"1/'..//** readily subject to change marketable issues of various types and maturities held by the various major groups of investors Chart VI. Within / the demands the ence the years are : . v limits Treasury shown in an Government • V V■'/ ;! of In view of the limitations upon the use of traditional methods of credit large scale in the a been extent by various agencies. '■/ /' /,/>/• '1 / U / peacetime /:/;://;./ •. Selective instruments of the type described are helpful ad¬ juncts to the general instruments " • to market can influ¬ distribution of the debt various groups holders by its choice of securities to be ~i3sued. For example, Treasury tbUls are almost wholly owned by among bank credit eoonomic sult of may contribute instability undue as expansion or a re¬ con¬ traction in.its total amount, as p result; .of undesirable conditions that are largely localized in par ticular credit sectors, or as the re- * ' * : Federal long Reserve banks as the System ficient amounts of )and, as purchases sufbills at rates 6 See Roland Aspects1 of Public (December this series. I. " Robinson, National Finance and 1945), the would require nessary to could be so applied inflation present only in of the economy. or deflation are particular sector a They stRutes Tprithp ments. however, not sub- are only be introduced where the costs and economy are in fairly well advance.- de¬ These characteristics apply to regulation of security loans and consumer eredit, as well of bank loans. ity to to the guarantee Permanent author¬ as regulate consumer credit and adoption of guarantee' loan provisions would therefore be constructive measures that would In view of the banking monetary heritage of the Federal faced with and finance, war Reserve/System is twofold responsibil¬ a timely reserve Board Governors eral Reserve System statutory serve of such Debt "Mon«»tanv Full Policy," s in Employment third ® ' might same time to credit assure and at reason¬ able stability in the prices of the large volume of Government securities outstanding. There . should be limits to the ability of banks and others to convert Gov¬ It would not be possible to ac¬ complish both of these objectives through exercise of existing powers of the Federal Reserve thorities. au¬ To assure effective dis¬ charge .of the System's basic longrun responsibilities, additional instruments of general credit reg¬ ulation such pamphlet in as those proposed in 7 Ca«l 4F- af National Instruments Credit Policy." not fall an far the increase in required of 20% established would assure demand principal would for be of which bank such securities sufencourage or discourage ficent to rpQ 1 faciiitate , transition ell to the reguiar ad_ as of bank positions re¬ by interbank flows of fund®, bunk® ®h°uld be permitted to hold additional reserve balwith the Reserve Banks ances Seltzer and staff a of nomic certain amount of short-term Government securities from com¬ or the by the economic Committee Development, for Eco¬ would be necessary to make the plan effecr tive as a limitation on bank credit expansion.9 Otherwise it mercial banks to Federal Reserve Banks, level a commercial a the (1) to shift at a de- Sub-. could major feature distinguishing this plan from those proposed by Law¬ of reserves. effects demand hsabills % is lieu °f c which cates. This provision,and certifi" amount short net credit expansion or to maintain a desired level of rates without Federal Reserve purchases, rence The measure and (2) to reduce the would be necessary for the Treas-, multiple credit expan-j ury to supply bills or certificates sion on the basis of a given, -to banks needing them to meet amount of reserves. It would.. their secondary • reserve require-, therefore, diminish the amount of ments against expanding deposits, short Governments available for ratio of This would result in further pressure for bank credit expanion and sale to the Reserve Banks and also reduce the degree of multiple credit expansion that would be possible serves The the on created plan basis of any deposits growth rather than in restraint, which it is the purpose re¬ of the by such sales. could be applied to while support could keep short-term interest rates on.Gov¬ securities some from same manner of as funds to the to make t/ tion in from plan would, in conform¬ flow holdings of limiting their ability to sell these ity with present banking prac¬ tices, be relatively simple to op¬ erate, and permit adjustments to interbank substantial oAler rising pre-determined level. measure retain short-term Government securities, Reserve ernment plan to provide. The secondary reserve plan has the advantage of permitting banks to discourage further purchases of long term issues or increased lending by banks, while Federal This the Reserve^ pmchase^ Federeal that a7 In £rve re(Iuire.rr'?i;ts short-term, securities—probably to Int°rdter justments' mfo-M a their posits would be sufficient. sequently the percentage small margin for further increases I at central reserve in k^,±°/: rm lnte,rest rtCS ,fr0m of as io% be m holdings banks Government has banks to retain the bulk of present fully utilized since early in war, except, for a relatively cRy level that would in- a £ommercial group pre- requirements jn addition to balances with *n initially at pos- within Reserve Plan required re- a duce been the Secondary establish This percentage might be placed Fed-(( already require- Banks, which might be Treasury bills and certificates equal to a specified percentage of net demand deposits.8 limits, but its authority to increase The serve> The the reserve Reserve power to vary re- requirements scribed above expansion of hank < Plan.— requirements. of sesses between banks. supplementary authority to increase commercial bank As stated, simiwould have to requirements parity instru- Reserve require- types imposed on nonmember banks in order to prevent a growing dis- This plan involves ity for the longer run: to prevent otherwise excessive lar ' Primary flexibility different different on ments of member and nonmember . The administrative reserve purposes. overtraditional should be Pc0W- heId of It counting of vault and provide for of deposits and in classifying banks for L r rdUefP?nw moderate but use the imposing would ( higher reserves greater j in j?ny one' 5hfnt authorizing reserve ; requirements. as to | ments to leave rinapf/v speculative or cash Federal Reserve crm^ gains to the credit system and to the present HjeJ lu ilofrof of authorize nf f fvL a member on requirements might also include provision for amending various aspects of the ability to accomindustry, and fact, only if ap- short-term securities in should and Legislation plied in this way would the Sys- nnrnnSl interest reserve levels commerce, agriculture; in applying plan for pay¬ reserve troduction would be increased. legisla¬ as by balances, amounts paid to the Treasury after its in¬ all commercial banks, not only to member banks of the Federal Reserve System. Each of these powers of bank have apply the provisions re¬ backed made in were primary ment that should permit consider¬ able administrative flexibility be-' cause of the wide differences be¬ tween individual banks and groups of banks.- It would also be of policy under the changed ernment securities into additional situation brought about by war, bank reserves and these limits increased reliance may. need to he should be imposed without bring¬ placed on other methods of credit ing about widely fluctuating in¬ control.... Banking history shows terest rates. that adoption tion war production loans, and employed to a limited the many similarities and also impor¬ tant differences. In each case might which,y however, This instrument invest¬ held agencies to form and maturity.! Amounts idvrma recent ; meet proposals collateral not Treasury. Therefore, unless provision plan. (3) A bond limitation plan. three the and increase the receipts of the United States , These of excess 39 gold certificates. As a result of this policy, any increase in Fed¬ eral Reserve Bank earnings would the reserve been Another type of selective de¬ vice, of a stimulative rather than of in quirements re-establish /(2) A,secondary over con¬ would entail difficult administra¬ tive and jurisdictional restrictive the ur¬ System's functioning along tradi¬ tional central banking lines. The three basic plans proposed by the Board for consideration by the Congress may be designated by the following terms: (1) A primary reserve plan. over have regulation .credit, are of are another paper in this pamphlet.7 clude estate in¬ These instruments - ily developed.; Another element in the situation is that $33 billion ;of SELECTIVE CREDIT CONTROLS and ; be read¬ can government ~ securities ' matures and $95 billion years—flexible debt- year and to modate to authorities, through joint strengthen the System's ability to planning of policies and opera¬ r serve the purposes for which it DEBT-MANAGEMENT tions,'. should carry forward a :: - //•; /POLICIES ;/•. V;;;: •' debt-management program that was established. Permanent regu¬ 1 | Since the problem of postwar will preserve the taxpayers' in¬ lation of security loans is already monetary policy is so closely tied terest in maintaining a low level authorized by law.; •/; / • / ; /■/.;:1 ip with the value and distribution. of interest cost, provide the Treas¬ PROPOSALS FOR ADDITIONAL r: of the public debt,, proper man¬ ury with ihe necessary funds, CONTROLS serve serve banks adequate terminable does exhaustive discus¬ an Some aspects of the ;hat a debt of use cies. paying l:quH invest¬ th's of scope permit sion on to temporary holders.. .The not aga list rate would struments need Report Board Treasury while also protecting them against case Annual Reserve special credit areas, the Reserve System's general in¬ se¬ the income of bona fide investors capital less in 1945 (635) gently needed. These instruments Developments Reserve System policy.v-*sir^ to' they permit application of policies nay an appropriate rate for genu¬ of limited objective and also dif¬ ine long-term savings and pro¬ ferentiation in credit policy when vides an instrument for protecting forces of curity the Federal jn the whole to as of economic situation. antee through the issu¬ Series A Investment bonds. savings such de¬ bank, reserves ana thereby the availability, supply, and interest levels of all types of eredit, their use and timing is necessarily influenced by the net a tures not problems. September, ketable and if the amount of ?f this proposal These in individ¬ occur is difficult velopments by tiring general cred¬ it instruments. Also, since these ins ruments operate by affecting ance of high Under which provide then purchase the new issue/ This n fact occurred during the war Maintenance of substantially higher interest rates .furthermore, would raise the ccst public such n end . its and structure. the with Could retire - •of further sectors.1 It impossible, to deal with keep long-term interest rates from sell these securities to banks and outstanding " would in private debt was a important part ;of the total •debt such" .securities of when more for mand volume •throughout the economy withoul exerting the same influence upon borrowing ant lend ng as in the 'past It has been suggested however, large distribution among owners have serious repercussions would savings. long-term bonds to satisfy the de¬ mit.gate unstabilizing tenden-, teies in the money -market.; ' !/'./ in use the b 11 instrument of flexible more that issuance of enough additional adj ustments to •changed situations moderate va/riaticns in the pattern and levels •of interest rates might forestall variation offerings and to a bonds ' ineligible for purchase by banks could be offered to holders mitting '• gradual Substantial the amounts of vary At the other extreme, long-term long-term interest rates grow-: tag out of monetizaticn of the public debt. Moreover, by per¬ ; re¬ market instru¬ a as This debt management. in • nearly consistent more Treasury to a or bills to rise on ment and made it possible for the ex¬ prevent level a stored the bill on Flex¬ credit taken on Reserve with other market rates. ible policies allowing some varia¬ tion in the spread between, and levels of, short- ard long-term in¬ terest rates would help to <reestabl sh- control Federal permitted the rate Stabilized at are Act -reserves. by System in July/1947, to eliminate the fixed %% buying rate on Treasury bills raon- ual CHRONICLE failure of desirable credit a developments to be reflected di¬ rectly in Federal Reserve holdings hence affect the supply of ;; Conclusions as to Interest Ratal —-This discussion of the relation suit of FINANCIAL is Reserve Its the that Banks other loans in and principal distinc¬ primary reserve under its operation the commercial banks could con¬ tinue to hold the short-term Gov¬ the ernment securities whereas in the at present. The proposal would tend to re¬ duce the earnings of commercial banks and increase those of the primary plan the Reserve Banks would hold them. This plan would establish Reserve Banks. If the plan were adopted it might be desirable for short-term securities the Reserve Banks to have power to pay some interest nn reserve position term in other types of short- over paper Government preferred market a and thus permit in- balances,. in case bank earnings lj * jttj should be unduly reduced. Under Ji a policy J adopted in April earnings T ^ 1 dends over expenses J at and divi- the statutory rate are Treasury. This is accomplished by use of a propaid over Vision Of to the law authorizing the Board of Governors to impose interest charge on the amount outstanding Federal Reserve an of notes ' reserve required to be held in special is4ue of Government would serve the same purpose. 1947, the bulk of Federal Reserve Bank 8A I j ®f some securities . , 9 Lawrence H. Seltzer, "The Problem 0ur f:*c.essiye ®anki"f Reserves," Journal of sodation, the American March 1940, search staff ( Melvin G. Statistical pp. 24-36; As- Re¬ DeChazeau, .Albert 9- Hart' T9ar,diner 9* ^Sa), Committee'To'r Ho,ward Economic at velooment, Jobs and Markets (New York, 1946), pp. 90-95. (Continued on page 40) *■ 40 THE COMMERCIAL (636) Thursday, February 5. 1948 CHRONICLE FINANCIAL & tential, is disproportionate to cur¬ rent output and incomes, even at permit needed expansion but present inflated prices, and also sential for sound Problems of Postwar Monetary without (Continued from page 39) on vidual adopt whatever lowing fluctuations in other rates, This proposal has . been criti¬ cized because it would purported¬ sition their of v holdings of Government the securities whenever there was an of amount increase would expansion . to held, just as it does now, and banks would have the same alters native as they have now of liqui¬ foe APPLICATION , would set off a large part of Once established, any such plan could be fairly rigidly main¬ tained, while traditional open market and discount rate instru¬ ments were largely relied upon for current policy in affecting Limitation Plan would limit the amount of longterm marketable securities, both Bond might justify or re¬ in It would have to cover obli¬ gations of State and local govern¬ ments and of corporations; other¬ wise ' United States securities have would market disadvantageous also might It real estate and estate real cover a position. banks in¬ vest large portions of their time deposits and capital.12 in which loans, Adjustmeants many of reserve posi¬ tions between banks would not be particularly complicated by the limitation plan, although some reduction in bond portfolios bond might be necessary if banks lost deposits, particularly time depos¬ its, and increases in portfolios would of permissible in case savings deposits. be additions to de¬ specific bank lending activities, except as re¬ gards their effects on overall While signed of the plans is none restrict to expansion, this; measure probably have less direct restrictive effects than the others, credit would except on real estate loans, and it It is primarilydesigned to restrict shifting from short-term securi¬ might even encourage lending. long-termsecurities, into > ties 10 See, for formulae proposal posits. but in would are York, Annual general terms in the relation securities to of net for possible Report of Governors in describing formula Jong-term 32nd The plan. the Board a In¬ Policy . 11 Various this Federal Reserve Company, New Trust < Bankers ■*1946). Riddle, example, J. H. and Rates terest this suggested holdings demand of as of de¬ A somewhat more complicated, practice more satisfactory, formula relate such holdings to savings plus capital accounts plus some percentage of demand deposits other than interbank balances without adjustment for collection items. This formula would avoid penalizing banks holding large amounts of cash items in process of col¬ lection and also avoid permitting banks to hold long-term assets against inter¬ deposits bank balances. estate this way, account could loans. However, there are but banks in Canada chartered ten effectuated by administrative arrangements more readily there than in this country with 14,000 banks. Other plans can be and such have countries ments based on similar arrange¬ informal under- standings or well-established banking traditions.1? point of emphasis is primary purpose of the Another the that (Continued from rates on should economy institution was as page 16) adding further —"The existing body of rules and regulations Rave been formed with much care, and done in France with the Paris Bourse more thar century ago. Despite the specu¬ lation excesses that has prevailed a in Great' Britain from time vigilant body of persons intimately ac¬ quainted with the needs and exi¬ gencies of the community for whom they have legislated. Any attempt to reduce these rules to the limits of the ordinary law of 1877 thai body of the London Stock Exchange "can hardly be inter¬ de¬ the and a the and land, or to abolish all checks safeguards not to be found Parliament without in that law, would in our opinion, freedom of self-gov¬ be detrimental to the honest and is the very life of the organization," and, efficient conduct of business.'7 fered with by that losing ernment and soul which it would supply of savings, then be Royal Commission in such experience, attention of a the result of long are to available the exceeded mands a in be investment where position preferable for interest rates on securities marketable rise to somewhat than for bank credit tc be forced into an inflationary ex¬ It would, on the other hand, be possible to support the market for long-term Government pansion. bonds and at the same time offset the effect the supply of on of reserves any bank Reserve Federal It would likewise be possible to prevent a repetition of purchases. undue decline in the4 level of the interest rates caused by an ex¬ pansion of credit in the early part of 1946. loans. would instruments These unduly not restrict banks in making It is the purpose of the proposals to restore to the System limit excessive credit expansion—the function it was created to perform but is no longer able to fulfill. Any limitation either on the supply of bank re¬ serves or on the ability of mem¬ the power to ber banks to has rediscount its effects through exerting a restric¬ tive influence on bank lendmg. The effects of the proposed instru¬ in this plans is not to save interest costs ments to keep down bank earnings from invest¬ ment in that debt—although they would contribute to these results respect from those for which all credit regulative powers of the the on public debt or is enable to System to deal with the serve control oyer general bank would Federal differ not Reserve are-de¬ System signed. banks If the Reserve monetary situation resulting from the huge public debt. The major task of postwar bank credit and monetary policies is to re-establish condi¬ tions % under which Federal Re¬ —but the needs times want of when to their there care of customers at take is active an demand for loans but when over¬ all credit expansion is not it would desired, the ma<n credit struc for them to sell securities of tenance ture the better .for be of a stable kind that non-bank investors expansion can be. effective¬ would absorb rather than of the ly exercised through traditional kind that the Federal Reserve central banking instruments. In banks would have to absorb. accomplishing this task, it is im¬ Through the one process there portant to recognize that the Sys¬ would be no net credit expansion, tem is Obliged to facilitate debt whereas through the other there management by the Treasury at would be a growth in bank re¬ low cost and with minimum unserves which would permit mul¬ stabilizing effects. The central credit problem, therefore, is to free the market for private credit from excessive influence of public credit and to further reconversion operations of banks other financial organizations of the current and from basis. a public to a private credit Adoption of one, or some of these proposals, essential step toward reinstating the traditional instru¬ ments of monetary regulation— combination, appears be taken in the statutory formula of existing na¬ tional banking law with regard to in¬ vestment in banking premises and real 12 In Limitation of bond holdings is achieved under a spe¬ cial agreement with the banks that confines their holdings of bonds to a percentage of savings deposits. employment: niay jeopardized." 1,*ji-l}- on the If .the holding. bank seriously Change in London Stock Exchange Organization permitted to fluctuate without the danger that these fluctuations would cause serious repercussions. gle-payment tion. po¬ The debt, could be traded freely active money market ana vate in no way revolutionary or drastic and their application need not , interfere apply to should be supply, actual and time, and the strong socialist prin¬ bonds and marketable ciples that have spread among all Government obligations. Market¬ segments of the population, the British Government is still fol¬ able public-debt obligations hela outside the banks, as well as pri¬ lowing the principle laid down by These proposals are bonds, or probably to supply and use of bank control, the national objective,, as declared by Without such credit. savings all sin¬ with the ability of banks to sup¬ marketable securi¬ ply the credit needs of the econ¬ ties having a final maturity of omy. They are designed to adjust more than one year at time, of the banks' greatly expanded lend¬ issue, but it might be more limited ing capacity to those needs. Com¬ in scope. Bonds within a year binations of the secondary reserve or perhaps within five years of and bond limitation plans are, in maturity might be exempt from effect, already being applied in the limitation, but such exemp¬ Canada. Regulation of secondary tion would cause sudden adjust¬ reserves of banks is accomplished ments in the market and in the by distribution among the banks banking position as large issues on an allotment basis of special passed from under the limita¬ short-term issues exclusively for all to control production and seriously periurb institutional and other permanent investors holding quire. assets. * The money free them from the changing interest In all likelihood, variations rates. tion, with requirements and limi¬ tations being varied as bank cred¬ it and developments monetary and prospects effective izing influence upon the economy. in market interest rates would not cost, and supply oi private purposes. these new plans could be flexible in their applica¬ would merely extend the principle, recognized in bank¬ ing law and pursued during the war, of restricting investment of demand deposit funds in long- the Congress, of economic stability at the highest sustainable levels of of influence Alternatively plan of needed is the over money- the credit situation in the postwar would partly credit for bank redundant more . more or described , availability, public and private, that any com¬ mercial bank could hold- against its demand deposits.11 In a sense limitation the restore it may be said that a prospective needs. resulting one war, that portion corporation of the Exchange by though r recommending} that the? however (a Stock Exchange be incorporated; of the public debt held in the ac¬ Act of Parliament, tive money markqt. These meas¬ recommendation made by a Par¬ it cautioned that "any external control which might be intro¬ ures are designed to set off a large liamentary Committee as far back as 1877), but there are no pro- duced by such a change should part of the public debt and of bank investments in a way that oosals as yet to nationalize the be exercised with sparing hand," paper. hills, certificates, or cash/ or en¬ tirely in the form of balances with the Resreve Banks, interest "defrosting", of ply of bank reserves and in in¬ terest rates on private marketable requirements, which could held in part in the form of reserve The y.. from period Is likely to be an unstabil- proposed may be necessary before policies can be adopted which would accomplish; an effective plans private debt and various foreseeable In view of the situation supply and the vastly increased capacity for further expansion, plai some of because patterned along the lines of those public debt im such a way as to free Government securities from the effects of changes in the sup¬ They would use the proceeds of these sales to meet their increased term these of Any credit policy. But eral THE OF PROPOSALS wl. ings of Treasury bills and certifi¬ cates, unless they had an excess, fout would have to sell long-term issues out of - their ( portfolios. this banking to harmful expan¬ measures In summary, securities, v In policy. .. The ment or sion. except general the yse of the customary instruments of central dating some- other assets or of borrowing from the .'Reserve Banks, They would, ; however, not be able to reduce their hold¬ he ..tightening of , in a position of corresponding power no to arrest undue .. rates, power itself today having 'V'V\ : <:■ any one of the pro¬ posed measures would not neces¬ sarily mean relative rigidity in the level and structure of interest icy. Adoption of has System finds market oper¬ open fact, such cjredit conditions and consequently rigidity would be inconsistent with would not provide as much lati¬ a restored use of traditional Fed-> tude as the alternative plans for eral Reserve instruments of gen¬ the required reserves effects the from Bank loan tion is not well taken. to perhaps in certain market categories of short-term Govern¬ securities government objec¬ This loans.10 expanding rturn.. The plan short-term highest net would not insulate the deposits resulting from increase in maturity compo¬ investment port- rates, adequate ations, and changes in reserve re¬ quirements—as sensitive, flexible methods of Federal Reserve pol¬ folios,\and whatever distribution among various types of bonds and real estate loans, would yield them to ly require the banking system increase discount restricting lending., With to bank investment, indi¬ banks would be free to regard Government se¬ curities to be stabilized, while al¬ rates terest Policy credit demands. The 13 an. England and Belgium are examples. tiple credit expansion. Entrance to London Bartow Leeds Co. admission The partner Admits Feb. 1 Bartow as William Street, New York City; dealers in U. S. Gov¬ serve System of any one of the ernment and municipal securities, proposed powers could, and is announced today. Mr. Bartow should be so regulated as to pro¬ became associated with the combanks with adequate funds meeting the economically de¬ vide sirable needs of commerce, indus¬ Leeds Co., 57 panv ing (Special to The Financial LOS a Application by the Federal Re¬ for Johnson With Dean Witter oi general in the firm of Bartow K. Philip on Stock Exchange in Capel Court in February, 1946. Johnson W. Witter try, and agriculture. It is the Sys¬ in the United States Navy in No¬ tem's task to supply the banks vember, 1945, he rejoined the with enough reserves to meet Guaranty Trust Company of New those needs, while preventing ex¬ York with which he was asso¬ pansion in the available supply of reserves beyond the amount es¬ ciated from 1936 to 1941, is Co., He with Dean South Spring with now 632 was formerly Lynch, Pierce, Fenner & Beane. >7 ' /'v With J. Barth & Co. Follow¬ his release from active duty & Street. Merrill Chronicle) ANGELES, CALIF.—Ellis ; (Special to The Financial Chronicle) ' CALIF.— —Henry W. Wagner, Jr., has be¬ come connected with J. Barth & SAN Co., bers FRANCISCO, 482 California Street, mem¬ of the New York and San Francisco Stock Exchanges.' Volume 167 Number 4670 THE COMMERCIAL following statistical tabulations shown in first column cover steel operations Equivalent to— Week Kerosine Gas oil (net tons) Feb. 9 1,694,300 Jan. 24 24 Jan. 24 fuel oil output (bbls.) I (bbls.) Jan. 24 oil and Residual distillate fuel fuel oil 1,708,600 CONSTRUCTION PERMIT 5,285,440 5,543,000 —U. 4,671,550 5,344,000 (bbls.) oil (bbls.) Illlllllll'IIIIjJan.' at 4,760,000 16,236,000 17,013,000 S. building 2,489,000 2,334,000 7,496,000 7,041,000 9,698,000 98,751,000 91,269,000 16,293,000 non-residential Additions, 14,528,000 24 42,402,000 44,482,000 50,324,000 51,601,000 51,896,000 V ' ' • ./•:! • Total U. S. ' V : •*! /• V-'•*. CONSTRUCTION, State and 260,000, 000 "343, 000,000 150 000,000 41 000,000 153.000 000 "166 000,000 73 000,000 etc.————;—- 64,000 000 87 000,000 40 ,000,000 17,000 000 ,000,000 10 ,000,00© 6,000 000 ,000,000 9,000 ,000 ,000,000 9,000,000 2,000 ,000 ,000,000 1,000,000 $20,937,000 $12,574,000 $7,217,000 -—: . -— etc.---— alterations, FAILURES—DUN ' Manufacturing 811,286 599,357 821,928 Wholesale 666,119 690,251 641,578 699,596 Retail 'vjV::0 ' ». 771,992 Jan. 24 ENGINEERING -'"J BRADSTREET & Jan. 29 $99,683,000 Jan. 29 46,614,000 53,069,000 $118,949,000 67,823,000 51,126,000 $54,364,000 26,057,000 —.Jan. 29 1 ~~ municipal 29 43,115.000 40,171,000 23,611,000 9,954,000 10,955,000 4,696,000 25,334,000 jan! 1 Jan. Federal •. — number service —— Manufacturing liabilities 18,828,000 29 " : —— number Commercial . number— number number Construction NEWS construction construction 263 000,000 non-residential Jan. 24 Private construction Public 82 000,000 88, 000,000 "596, 000,000 construction——— residential Additions, 150 000,000 "168, 000,000 162,000, 000 66,000, 000 INC.—Month of December. Revenue freight loaded (number of cars) Revenue freight rec'd from connections (nuihber of cars) ENGINEERING RECORD: ——— alterations, building New 47,805,000 $273, 000,000 $494,000, 000 "$603, 000,000 "347", 000,000 266,000, 000 477,000, 000 —— _——. New 50,670,000 51,094,000 etc building construction residential New 98,030,000 12,975,000 ' v~ alterations, Federal—all 11,997,000 of . New 8,260,000 100,586,000 Ago S. construction Non-Federal—all 5,414,000 8,880,000 U. LABOR—Month OF residential Additions, 2,231,000 7,718,000 THE OF non-residential BUSINESS CIVIL DEPT. New ASSOCIATION OF AMERICAN RAILROADS: • AREAS URBAN Year Month VALUA¬ November: 14,422,000 Jan. 24 at IN Previous Month 1,633,700 9,182,000 fuel oil output -Jan. 24 refineries, at bulk terminals, in transit and in pipe linesFinished and unfinished gasoline (bbls.) at Jan. 24 Kerosine (bbls.) at ; Jan. 24 of that date): are as Latest BUILDING New 16,747,000 2,403,000 stocks at Gas 93.4 94.8 5,326,137 5,446,000 /an __ Residual 1 41 month available (dates or of quotations, cases Ago Ago 1,716,000 5,336,287 Jan. 24 (bbls.) average (bbls.) distillate (637) Year Month 95.2 in or, All (bbls. of 42 gallons each) average (bbls.) output and 94.0 that date, TION stills—daily output 9 Week on INSTITUTE: Crude oil output—daily Gasoline Feb Previous • / PETROLEUM to month ended or Latest 'percent of capacity) Bteel ingots and castings produced Crude runs CHRONICLE production and other figures for the latest week either for the week are AMERICAN IRON AND STEEL INSTITUTE: AMERICAN FINANCIAL Indications of Current Business Activity The Indicated & $94,514,000 — — !——— 317 313 1 967,000 U98.000 7,796,000 'Si'S™ cnl'nnn 505,000 '5JJJ 1,232,000 $25,499,000 $16,345,000 $17,105,000 2,400,952 1,364,919 * 2,447,422 1,406,761 1,095,648 311,113 3,249,950 1,153,040 1,067,970 296,949 —- 43,983 43,017 252,966 268,096 246,48t» 1,215,970 1,231,561 1,497,904 279,182 284,497 262,25» 25,977 number Total 25,405 18,879 7,334 7,406 7,124 39,763 39,980 22,583 79,345 76,982 72,210 50,352,000 28,307,000 Wholesale liabilities 44,162,000 Retail liabilities 1,!25'SSS ^5,000 ——— liabilities Construction Commercial ———— liabilities--—-.-— service - Roi'nno 801,000 COAL OUTPUT (U. S; BUREAU OF MINES): Bituminous coal and lignite (tons) anthracite .——Jan. 24 . 12,200,000 13,080,000 8,500,000 1,180,000 1,210.000 746,000 1,198,000 132,200 "140,500 103,500 117,800 (tons) (tons) _ * STORE SYSTEM—1935-39 : SALES INDEX—FEDERAL OF RESERVE AVERAGE—100— AGRICULTURE "232 all (bu.) Wheat, all 220 Winter All (bu.) • —Jan. 31 — 5,429,202 5,436,430 4,868,011 (COMMERCIAL STREET, AND INDUSTRIAL)—DUN & AGE (bu.) Finished PRICES: Rice steel (per lb.) Jan. 27 3.18925c 3.18925c 2.87255c $40.17 $40.08 $37.98 S30.15 ——.Jan. 27 —... 3.18925c Jan. 27 ... ' . ; — $40.83 $41.33 $40.00 $31.00 (bu.) (bu. F.axseed Pig iron (per gross ton) Scrap steel (per gross ton).. . Rye —..Jan. 29 COMPOSITE — (bu.) spring Buckwheat IRON —-— Barley (bu.) (bu.) BRAD- INC * (bu.) (bu.) Other 4,777,207 Oats, FAILURES —————• (bu.) spring Durum 000 kwh.). of issue — "' KDISON ELECTRIC INSTITUTE: £ Electric output (in U. S. DEPT. — Report — omitted)— (000's 17— Corn, .——.Jan. 24 S. CROP PRODUCTION IN U. Dec. DEPARTMENT - 13,200,000 Jan. 24 jhn. 24 Pennsylvania Beehive coke Total liabilities . (bu.) i-— — all (ton) wild (ton) ' Electrolytic copper— .V'*7 Domestic refinery at Export relinery at Straits tin (New York) Lead (New York) at 'Lead (St. Louis) at_. Zinc (East St. Louis) Peanuts .Tan. 28 21.200c 21.200c 21.200c 19.425c Potatoes fan. 28 21.500c 21.425c 21.425c 20.100c 94.000c 94.000c 94.000c 70.000c 15.000c 15.Q00C 15.000c 13.000c Sorgo Tan. 28 14.800c 14.800c 14.800c 12.800 Tan. 28 . at 12.000c 10.500c 10,500c 10*500? '': •' PRICES DAILY ii-.1/-' J(:4'C-J Average — corporate —-—1—„ — .^ph 100.69 3 100.69 100.69 ^eb. A 3 110.70 110.70 3 115.63 115.82 115.24 3 .114127 114.27 113.70 ?eb. Public Group Utilities ; 3 109.97 109.97 3 103.64 103.64 117.60 JJ. 103.13 117.40 . Cherries 110.88 Apricots Cranberries 3 105.34 105.34 104.48 113.31 reb. 3 112.37 112.56 112.19 118.80 yeb. 3 114.85 114.85 114.46 Aaa Pecans OF : . . MOODY'S INDEX.. — 3.13 3.16 2.77 2.89 2.56 Durable 2.97 2.63 Non-durable 3 2.87 2.86 3 2.94 2.94 3 3.17 3 V All ' 3.53 3.17 .. 3.20 3.53 ' 2.78 3.56 3 3.43 3.43 3.48 3 3.04 3.03 ITY 3.05 • 2.99 2.71 3 2.91 2.91 2.93 2.62 3 •442.2 444.4 450.8 BY 382.5 and ;—; Livestock Fuels 1 ; Metals _ —. materials and Fertilizer j All 1 259.1 L 341.9 300.8 316.2 305.3 200.7 269.1 230.4 , "221.1 215.7 * Orders received : v 181.5 179.9 Non-durable Production 219.4 220.6 Unfilled : (tons) 162.1 , 161.5 January All "341.5 298J2 384.5 379.3 331.1 306.1 304.6 266.0 15.861,000 "15,831,000 15,271,000 "7,925.000 7,721,000 7,875,000 "7,906,000 7,550,000 ■ — employees in manufac¬ — goods — FARMERS BY S. — DEPT. INDEX — AGRICUL¬ OF 1909-July, 1914=100—As of products 142.3 213.0 Food 156.4 ^154.7 Feed 137.7 125.5 141.8 133.6 138.5 142.5 . , . 137.2 134.5 134.5 "225.2 225.3 189.4 hay__————— ■ Feed 124.3 224.5 ■ —i- : and grain ' — WHOLESALE All PRICES—U. S. DEPT. 188,717 162,359 114,444 155.432 Foods 193,150 126,659 173,720 Textile and 104 104 71 101 423,160 431,880 406,738 557,140 150.0 150.6 149.4 151.5 crops and Metal eggs j , Building metal and 165.5 163.0 140.3 199.2 201.5 197.0 164.2 ■ 181.2 177.8 155.9 Net 201.4 203.4 170.7 Other 145.7 146.9 135.7 Jan. 24 130.0 153.9 153.2 152.0 Manufactured | 191.3 191.1 189.1 165.5 139.3 140.8 127.7 98.5 133.Q 137.2 136.9 135.3 122.5 123.6 123.0 121.5 110.0 articles • commodities other than farm products and foods . A Jan. 24 183.4 157.1 157.4 157.6 155.0 136.0 157.5 155.4 135.1 147.6 147.4 146.0 156.5 *1 .Jan. 24 Jan. 24 186.0 156.7 Jan. 24 ; : All commodities other than farm products Ail 292 2C'l ■ 210 164 223 232 $76,433,363 $47,968,461 204 271 288 ' , 270 197 Contingent /' Net f 156.5 . ' 152.1 , . 138.6 charges ; 127.0 — of income & defense common stock preferred stock of income "Revised figure. to 99,459,914 61,717,502 2,906,783 3,510.409 48.903.591 equip.) — projects—— — . 20,146,956 58,207,153 •29,341,103 29,486,338 28,423,734 1,355,393 1,336.568 1.083,441 32,706,844 20,381,450 8,232,599 12,551,813 —— 9,676,324 3.828.360 7,915,305 1.189.238 6,173,905 2.44 1.64 2.64 . — —: fixed 2,428,437 58,832,859 23,053.739 3.857,363 — taxes- On 3,294,298 . charges——. structures & appropriations: 16,633,347 101.888,401 3,997,711 89,345,429 income——- ——i—: (way 14,158.696 62,127.157 52,760.954 — from $85,255,054 16,909,777 93.343,140 —- charges—__— On Ratio October: fixed for fixed income Depreciation Dividend of deductions after OF income-——— L—— Income available Income ITEMS (Interstate Commerce ——-—.— income Amortization 184.8 INCOME RYS. income Federal Jan. 24 I operating railway Miscellaneous 127.4 Jan. 24 Jan. 24 ; products, • 299 —- — SELECTED CLASS Total 137.7 .Jan. 24 1 Jan. 24 1 130.4 Jan. 24 commodities Raw materials Semi-man'ul'actured 262 147 Commission)—Month 177.4 145.5 Special groups-r... S. U. 201.5 ' products Housefurnishings goods Miscellaneous 164.4 Jan. 24 products allied 306 311 • 277 ————— —— Poultry and eggs— Jan. 24 ; materials Chemicals 281 352 231 — crops Dairy products Jan. 24 products., products and 320 313 —r.--- — ■ adjusted— RAILROAD r; Fuel and lighting materials ! 336 379 products- and 196 238 367 328 — products 149 294 377 135 : — animals Poultry Seasonally -V Jan. 24 leather 240 320 ———— Dairy Jan. 24 —— Hides ! V 275 164 LABOR—1926=100: products . 39P :-vsV 267 crops Meat 188,022 Truck commodities Farm 193 377 377 — Fruit. 24 -f 223 350 " .Jan.30 PAINT AND DRUG REPORTER PRICE INDEX—192G-8G AVERAGE=100_ 256 305 366 Crops grain grain 260 281 318 318 Cotton 139.8 . 301 322 307 ^ Tobacco "155.3 "233.3 Fruit OIL, 344.8 —-— 284 farm 160.8 236.3 155.3 * Jan. 24 , 132.5 15: 142.5 , Jan. 24 ——— 176.7 "138.2 Unadjusted— ..Jan. 24 at "180.5 ——— — of RECEIVED Livestock activity orders 152.0 182.1 137.6 goods NUMBER—U. 213.3 233.6 i... ...... Jan. .... 6;070,009 •?156.8 7,986,000 number Oil-bearing (tons) -6,379,000 — goods: TURE August, ASSOCIATION: (tons) Percentage-of "6,518,000 "6,331,000 6,574,000 —— manufacturing PRICES 153.6 219.1 —..Jan. 31 ' v. .6,302,000 157.2 indexes— Truck .NATIONAL PAPERBOARD 12,449,000 12.876,000 —----- — goods Non-durable 157.6 181.4 ■ Jan. 31 __ combined. groups 330.2" 261.7 ■ 220.8 31 Jan. 31 -. "12,849,000 in 229.4 Jan. 31 materials machinery 278.6 Jan. 31 .". Fertilizers Farm 278.6 Jan. 31 drugs goods Durable 211.1 280.0 274.4 310.2 Jan. 31 u_Jan.31 242.1 282.0 ' ' .Jan. 31 ; —l„Jun. ___ 239.2 . 331.0 ■ Jan. 31 Miscellaneous commodities Chemicals 271.9 Jan. 31 I Textiles ; Building 278.9 —Jan. 31 ...a....— Grains 238.8 ..Jan. 31 ——————— workers turing .industries— Ian. 31 Farm products Cotton 76,7W. 857 " All oils 104,271 . DEPT. S. ;——•— — COMMOD¬ Jan. 31 Fats U. production All manufacturing Durable goods GROUP—1936-39=100: Foods of Employment indexes— All manufacturing Durable goods Non-durable goods Estimated FERTILIZER ASSOCIATION—WHOLESALE INDEX 100,209 — manufacturing Payroll . 3.12 .Feb. ... 756 manufacturing industries— ; NATIONAL number ; 3.13 ...Feb. ....... COMMODITY 230 339 196 LABOR—Month of November: 3 Feb. :... ... 3,120 183 5 . 785 (bbl.) PAYROLL AND 2.21 ^eb . — 86,64*3 34,447 3,029 . 181 (lbs.).-. States) (12 2.45 Railroad^Group:—Feb,' -. v 83,857 35,350 3,094 199 (ton) States) (5 2.45 Feb. Public Utilities Group Industrials Group , —. (ton)—*. States) 2.45 ^eb. u 119,410 35,350 —————. States) 3 "?eb. ' — Baa 112,503 : Feb. ; t 10,562 53,171 82,981 (12 (3 Estimated —— A 12,384 47,244 44 (bu.) crop : Feb. — Average corporate Aa 12,248 120.63 ' Bonds 24,450 50,098 112,503 ——*■ (bu.) (bu.) Grapes: (toil)* YIELD DAILY AVERAGES: BOND Govt. S. ;; 5,967 V • ; EMPLOYMENT MOODY'S 11,934 5,459 19,365 ——-— ■Pears 120.43 .^eb. Group Industrials Group Peaches 121.88 'is 109.42 ^eb. ii Railroad 5,353 r " (ton) (ton) (lb.) Apples, commercial 104.34 110.15 .^eb. ; ... a Aa Baa 66,424 2,319,409 '20,270 (ton) (gal.) .Hops reb. Aaa 58,316 * ■> 9,885 1 484,174 379,886 2,190,746 11,423 57,178 (gal.) beets Sugar 201,273 2,038,355 Broomcorn AVERAGES: " Vr S. Govt. Bonds—... 177,379 2,125,205 2,167,702 —— — Sugarcane sirup 6,75© 181,362 (bu.) Sugarcane for sugar & seed . 6,542 2,251,640 (bu.) sirup 11,544 15,859 6,513 384,407 Sweetpotatoes Tobacco (lb.) Tan. 28 . 100,730 16,828 —— ——■——— — Tan. 28 ; at ' MOODY'S BOND (lb.) 106,941 13,179 17,164 (100 lb. bag) field (100 lb. bRg) Soybeans for beans (bu.) 85,950 101,804 13.306 — — dry Peas, (E. A M. J. QUOTATIONS): 35,830 95,609 — Beans, dry edible METAL PRICES 282,321 102,500 (bu.) grain Sorghums for Hay, Hay, ———- ————— ) 870,72b — charges—--——— ;.v": . 42 THE COMMERCIAL (638) FINANCIAL & CHRONICLE this whether Current Business Situation striking demonstration of the tre¬ (Continued from page 3) It. is note that petroleum re¬ interesting both in the to of case of elec¬ case, fining and electric power output, capacity has quadrupled in the last 30 years, but been multiplied consumption has about seven or Another item side the on of supply is the freight car shortage. Freight car loadings last fall ex¬ even the wartime ceeded peak, yet the shortage of freight cars to acting serious bottleneck situation has as a production. The improved lately mostly because of the seasonal downturn in agri¬ cultural shipments. There l^s also been an improvement in the pro¬ duction of cars, with running al most 10,000 cars. It seems pretty clear, however, that the shortage of freight cars will be a recurring now are examples of the on industrial side. same kind food. Farm of short¬ The thing is true about capacity output is at and it is hard to increase the sup¬ ply of meat, grains, and other products beyond present farm time. ent that we ther levels. Today's supply is substan¬ tially above prewar experience. The shortages exist only relative to a vastly expanded demand both at home and for export. Habits Food is, in pres¬ however, practically to resources fur¬ output. Hence, gains in output will have to" come either from or our improved longer a The extension has been William of Federation of week by business also by Mr. American the Labor. of week. work recently Green effi¬ labor work the proposed leaders- and Mr. Green's proposal was subject to certain important qualifications, but it is interesting that he mentions longer week as a possibility. a let Now to turn us demand. I shall review in developments mand side of briefly the de¬ the major categories. First of all, let The from con¬ is very closely tied to sumers of income flow look at con¬ us demand the I suggested in as agricultural supply. Total personal income continued vO expand to the end of 1947 to set new peaks. The latest figure we have is for November, when discussing of $205 billion. This was a high except for an abnormal figure in September when the rate new of armed forces leave provided a non-recurring been of income. The continued growth of-income has made it possible for con¬ was consumed Consumption expenditures reached a new high of $172 billion annual rate in the fourth quarter of 1947: year „ by civilians at the rate of 156 prosperity has changing our food, .habits. Millions of people have shifted from cheaper foods to more ex¬ pensive foods. Meat, for example, pounds capita and • capita, per than mote here at home 1935-39 .turkeys about 7 prewar level. each one of us up more year than before the against demand for more there have been such been in expensive foods, decreases in the of products, etc. The corn, decreases, however, have than the increases, that in the have we total also physical had rise a volume of food consumed per capita. This year's overall supply of agricultural products is not likely be any higher than last year's. to In the that -i»i of case the meat, it is estimated supply will be down to 146. pounds per capita from last year's 156 pounds. The height of the shortage will come this spring ; when the supply of meat will be down sharply from last year's figure. The talk about meat ra¬ tioning is going to grow consider¬ ably in the next few weeks. Fortunately, there has been con¬ siderable improvement in the out¬ look for the Planting slow an crop. fall got off to a largely because of in¬ moisture. important wheat wheat last start sufficient the winter area extent Conditions south-west in winter have improved to such that a heavy yield of winter wheat is foreseen. now This followed the last item for on agriculture; The the side of supply I wish to mention is that practically in labor our we have unemployed people force. In the last key question here is what will happen to the ratio of spendings to consumers income after about saved. been is about as employment the fact can go, that there people some in the low as un¬ considering are always process of changing jobs. to employment con¬ increase during 1947 and reached a new high of 51 mil- lion persons in December. This was yejar about low of of the being was ratio steadily has spendings increasing since and is Some a height 25% means ever about 94%. now feel people will and soon They decrease. that consumer spending has been temporarily enlarged by the use of accumulated liquid assets argue and big increase in by the con¬ 2 million more than a earlier, and about 5 million above the wartime peak. This is a 1920 to beat to order I high cost of clothes. This type thing could happen again, but do not expect it to be an imT portant factor in the broad eco¬ nomic picture this year. It is more as demand for high products falls off-, .it will lower priced goods and manufacturers will change their likely that priced shift to demand in suits leads mand for it in to for Thus, a de¬ high priced increase .an inexpensive in de¬ suits. We big growth in bpsement store sales of men's clothing,. In the first 11 months of 1947, sqles of men's and boys' wear in basement see a the in stores District Reserve sales while increased main in Federal York New 45%, went stores only 7%, which was probably enough to maintain physical sales volume, considering the higher prices;, up not It to seems kind this they that me are very shifts of healthy since in the direction of keep¬ are high unit volume. They provide an example of the con¬ stant readjustments which repre¬ sent such a healthy aspect of our ing up free The Gross National Product;,,!; " So much for demand froni cJCttir Next, briefly I sumers. touch ments of should the other! Seg¬ on this for been On is belief has that- there revolutionary almost an other hand, the change in the distribution of in¬ come in recent years. Before the it war, more was for % or of American families to have incomes V3 typical $2,000 with more than less less or than receiving of $2,000. Today, those figures have been reversed. Less than V3 of our families receive $2,000 and more below incomes than % are get¬ ting above $2,000. has huge' increase the occurred income groups receiving $2,000 and $5,000. The proportion of families receiving between incomes such j/4 in 1929 to has present time. 7% increase has of group 15% which also in '. in incomes been 1929, 4% the latest was from than lk at the families our in increased more above substantial. were in this in 1941, and study made, for 1946. come, plus the impact of high Federal income taxes in the upper groups, has been to push up spendings and-retard savings. Ac¬ cordingly, it seems to me that the spendings ratio will remain-high until there are structural changes ca¬ pacity and replace equipment with and timistic better models. I am op¬ this for 1948. I believe on that equipment purchases will b*. gross Gross National Product — reached high at art annual rate of $242" billion in The fourth quarter new of Consumers 1947. absorbed about 70% The expenditures of this total. 30% covered all services purchased by governmental agencies and the broad group of private expendi¬ remaining goods and tures for what The figure customarily are goods. for government pur¬ chases of goods and services was billion annual rate in the fourth quarter. Contrary to popu¬ lar impression, this is an area of demand which I expect to see in¬ $29 this crease year. actual appropriations. But I ex¬ pect to see Federal outlays remain high so long as the world situation about government the cutting sharply.* We are all in favor of economy in government. But in the interest of realism, we . remember should tions of that the government func¬ have ex¬ panded considerably over the years. If we want to see govern¬ ment expenditures reduced we large increase in marriages com¬ a ing after period when housing a construction we want them to cut. Meanwhile, I think the total pur¬ chases of goods and services by There low. was - are several million more families to* day than in 1940. High prices ate of resisted, Lie un¬ prosperity >' but course, of level precedented has increased the ability to afford and more houses. It seems obvious that the relative demand better for houses is still very We have , dence from by somp interesting evi¬ the early part of 1948 new formula developed for high. Here a mathematical a lhe formula economist.1 of machincry and equipment six months ahead. It is not necessary to plicated explain its com- makeup, that it" is based except to say the size of on cor¬ porate profits and the level of in¬ terest rates well as the relation¬ as Inventories hh - The next item of demand is in¬ growth was in the fourth quarter5 >• oi 1946, when d-e physical volume of inventories increased at an an¬ nual rate of $5^- first-half the in very closely to actual figures for all years since World War I ex¬ leveled of the course, in period Suggests that equipment expendi¬ tures will about run the first-half of 1948 high as in they were as running in 1947. Of. may be some equipment pur¬ in 1948. Many there course, tapering in off later on people are ...becoming .concerned thatdcorporations are running into a shortage of capital. According to Secretary Harriman, corpora¬ tions ?-invested $26V2 billion in capital goods last year. About $15 The- bulk allowances. mainder-came the of from re¬ borrowings partly by private, placement through insurance companies, etc., partly <. by r public flotations of bonds, • and sizeable v sum, a from bank course, Of leans.v.frrtiyk a small amount came: from stock is-, ■sues; -.V of-1947 the as important.- became inventory growth has at annual rate of out about $2% billion. It would reasonable to ex-, seem pect this rate of inventory growth" continue for some Inventories arc still to in and sales to time ahead. relative; low lines some are critically tight. This is particularly true in the case of steel products,: and Of ; building materials. some could» ' inventories course, easily become excessive if a busi¬ ness recession were to develop. ; However, the fear of excessive in-' ventories has acted as a very restraint speculation so far. healthy : inventory: . like v " ■ should I Finally, to ', , refer to briefly to the export situation. As know, we have been selling more : abroad than ; hpve been buying. This repre- •, you , considerably we a net foreign demand on OUrA,. productive;/ capacity,and is ; >a strong inflationary factor, which sents ,, Jast year hit a peak annual* rate biilion in the second ^-artnuaj rate of $81^ billion of; net }ioxeign- -p«rchases in the last may be cut down^m5;l948;.^™?f quarter;;J am referring to the net government ;beeril: was: financed-Trum* up bank reserves in its campaign amoupt Some of these control to sources of .fittids inflationa^'TpressurrtsW It has been increasing short-terni interest rates and the Federal Re¬ prices support serve have bonds term for •longreduced been sharply. All of these actions have objective of reducing the sup¬ ply of available capital and mak¬ ing it more expensive to use it. It seems likely that corporations the will find it more, funds from difficult to raise loans and from sales of securities. Also, this both is likely vate for bank to be true both for pri¬ placements of securities and public flotations of securities is be to will balance hoped be that struck a here nice be¬ legitimate productive de¬ new capital and the re-r tween mands for duction "of serious battle and of it the may recession will ulti¬ on-fiqal decisions in this area by government mately made uses of is extremely well be that inflationary This problem funds. turn routes other than the U. S. this in rate private construction of all kinds was running at an annual rate of Treas- will not be maintained The 1948. European recovery program will shift some of these about $11V2 billion in the fourth quarter. Residential construction at machinery and equip¬ an billion. This times1 widely the annual rate was more 1929 rate. divergent of lhan three There views months has been very close to the shortage of available funds. There may also^ be some .• increase in* American imports as a source of funds are on ». 1 See American nometric of before paper 29,' 1947,^ Charles F. Roos, Dec. joint meeting of "the Economic Association Society, Chicago, 111. and Eco¬ 1 : ' to foreigners for making purchases here, however. * If the amount of the net foreign demand declines further in line with expectations,; there will be easing of inflationary pres¬ some This sures. could bearish factor siori. be cited leading to However, I a do not as a reces- believe the decline will be drastic enough. * to cause a downturn in business, since I believe domestic demand is sufficient to absorb the bulk of ; the probable decline in net for**;;" ;i i ^v. Conclusion;- . •• • ■ .• ' In. conclusion; it seems to me ~ ; that ^demand v continues to 6ut'-*.> weigh probable supply in the eco-1 ' . nomic is outlook. If my reasoning the correct, Automobile for $19 * - exports to Treasury accounts,-p' but some of them will probably drop out altogether under the: . ment ' net ".LL.'//• ■/V eign purchases. officials. . uryv-The increasing dollar short¬ age abroad, makes it obvious that; ~ inflationary eie-' ments in the business situation; all levels of government Will in¬ accordingly will continue to out* crease above the $29 billion an¬ especially has been very ,strong nual rate in the fourth quarter.:, notwithstanding the price prob¬ weigh possible downward pres- • sures for some time.;:, Also, in¬ lem. There were 82,000 dwelling Capital Goods Demand flationary pressures will be units started in November or increased by the third round of Now let us turn to the demand about the'-same as,in August; alT for capital goods, beginning with wage increases which is already thougpA|pereT.i^; usually a, sharp machinery and equipment. In the seasonal decline in the fall. The under wa.y. As an illustration, I fourth quarter of 1947," business numbei4 of units started in recent might mention that the United purchased 1 . ^fv.llQ^ quarter, The.figure tapered off to v.... ;• fear Recently, con* trols were in effect. The formula billion. The rate of increase was cut down sharply recession World War II when Federal inventory The peak In ventories. ship of equipment prices to prices generally. The formula works out cept, . tightened up too much. forecastsr business purchases > choked off if availab.o credit were start functions ,' v is enormous. We have had course, inefficiency. by looking squarely A ■;••■;.Construction at the respective functions and 1: Now let us turn to construction then we should tell 'our repre¬ which has been- an element of sentatives in Washington which considerable strength lately! Total should of houses, new taining adequate capital funds. The housing boo could be It budget for need The again, however, it is necessary to point out the problem of main- by the desire to fight against high labor costs and lab-"-' is unsettled. There will be considerable talk of the middle '■ all-time high level twenties. stimulated national prod¬ uct. The total output of goods and billion of this came from retained services — technically known as earnings and current depreciation our State and local governments afe enlarging their I expect to see further increases .expenditures for highways, in consumer credit this year and we still have a large amount of schools, etc. And the Federal gov¬ ernment budget for the fiscal year liquid assets spread among all in¬ beginning next July 1 is obout $2 come groups. billion higher than in the present 1 do not believe that the spend¬ fiscal year. This may be reduced ing ratio will decline much if any somewhat as Congress makes the in 1948. One of the main reasons credit. sumer to increase endeavor chases enterprise system. called capital this that spendings ratio is abnormally high The effect of these shifts in in¬ Non-farm tinued the at The $5,000 This sons. ^-*4 75% war—which dropped to about 1.6 million per¬ 1947, the of a The The of new sav¬ ings made since the war period. unemployment part • no and continue year. new more. consistent a sharp reduction in was a in Employment much and more increase since the end of war. Correspondingly, there A So spend sharp dry beans, smaller so to taxes? This ratio reached increases cheaper foods, potatoes, sweet potatoes, as wheat eggs last war. these consumption ; the On the average, ate almost 7 dozen As chickens of was above Per average* consumption pounds pounds 30 or last source sumers in overalls wear personal income was at an annual large The high level of member the movement in cline the will rate Some people consider the present level highly temporary and expect a decline. Others ar¬ in the income flow or tax burden gue that business neeas VaStiy in the opposite direction. more capital equipment. .: ; There is no doubt that present What About Buyer's Strike? capacity is not adequate in a great p This leads me to another ques¬ many industries—as I noted in tion about consumer spendings, discussing the Supply situation. however. What are the chances The question is how much will of a buyer's strike? You may re¬ business emphasis accordingly. The Demand Side bonds Changing fact throw increase cashing s- The human more no workers at the can sumers. problem in 1948. ages use freight new monthly output These ability of the economic ciency eight times. was mendous system to thing is true in the tricity. this Thursday, February 5, 25c, 30c a an would would Workers are calling hour raise, of which be basic represent other allowances. pay and 5c and medical Also, it is likely \ Volume 467. Number 4670 that * consumer incomes will be entor additional spending by form some of year. Of , an ,« be tax ■. t - . no unavoidably following danger of that there is recession a CHRONICLE or longer that be creased absorbed subsidies. temporary interruptions in • which they should have been no points ■ . . , . . of wave the government surplus for the fiscal year will be . realized # . iii these This will be a three very The major difficulties for would months. strong defla- backfire a inflation and suit in Nevertheless, ; ment amount . it should be re- ; membered. that this be of a tightness will seasonal, temporary char- . acter. Leaving ! aside porary interruptions, it that the me nomic main events such will be particularly if they reputting an excessive of pressure blunt. quickly substituted un^ed of hitting fully will things. situation. present and The Franc Crisis and International i was 5 : peace post-war adjustment the "advocates of planners stricter ever in discrimination of the trade of other members and set a dam Government-reacted probably that was basic ful feeling . methods * that led them to believe that the1 are principle > aims present not was realistic under of available trade to those as ' achieve goods . which . (2) Avoid of the lack of refused wage to ? appropriate determining new frpp tree to such the that a They free market would have been too thin and not truly representative real forces of supply mid -demand. This may not have suf- . >V- fieiently assured • French jority of gold and foreign exchange to let that they actually receive a fair price level, valued forf the foreign "on a free market but, at the same they may be willing to sell. It is time, - have ^exporters surrender well the franc find its once p ,50% of their foreign ' receipts at the of 214 * * francs new to known that the French exchange official the. dollar. rate sider a strong: inducement for repatriation as the very franc That of core foreign exchange would be available for the purchase of essential famports. francs., to the dollar imports . chased ; der with again is easier to of the the; ~ U. .agreement, S. , v All un- Winston months and thus to assist in bilizing the French economy level. ' new The -bering, were accused of having deliberately sta^bilized the franc at a low level with a resulting drain of gold into France at Now the expense of Britain. they tried to avoid that "mis¬ by letting the franc find take" 'its own again level and arousing yet British ure!;,'. As -' a they "are displeas¬ ■ " •' ■'? June, but dramatic during 1940. the It • is war true to the whole European Re¬ covery Plan. Why should it harm British foreign trade so greatly in years ago France of that the French plan represents a real threat not only;, to Britain sta¬ on a remem- twenty to crisis ■ French, it is worth Churchill's flight designed to help avoid large price increases for essential im¬ ported goods during the next few •were = view of the fact that export prod¬ ucts of the two countries are hardly competitive. Britain's anxieties - be can rectly appraised only with a cor¬ view to the basic economic philosophy of the Labor Government. British socialist planners feel that price stability economic matter of is paramount for and political willing to go both reasons, fact, there is no They are to any of determining the true value4 length to preserve it and they are of a currency under conditions of spending several hundred million artificially set prices and wages oounds a way fight for those aims. even more %rlSiS. sl^e direii- its first was started operations. Surely, it won't-be the. last one. This crisis has all the attributes of growing pains. It may be a good thing after all, if the man¬ agement uses the opportunity for a thorough stock-taking, a full investigation of deficiencies in , methods, procedures and human performances and a vigorous de¬ termination to make a better showing in the future. - Therefore, - an analysis of some of the principal mistakes that re¬ quire .improvement seems morp important than extensive argu¬ ments rors. for recently been adopted "reluctant" blessings of the .Fund. (The Ital- by. Italy: and. given Par value had been established for ready when needed improvise them in over past policies of avail no and efforts hurry a could as cast his that the director vote of with the majority against the French pro¬ posals while the State Department and the Treasury issued state¬ ments expressing satisfaction with the French plans. Indeed, such an attitude would have been fully consistent with American the policy of accepted favoring all steps toward kets free exchange mar¬ abolishment of restric¬ and tive trade The measures. French were by means no the only ones who were shocked by these apparent inconsistencies of American policy. There are indications that they were led to believe that the United States would support their plans for free exchange markets expectation that and was this contributing a factor in their strong those plans. No defense of Cause for Defeatism Fund the launched, was the experts had no doubt that this difficult ments into uncharted fields. as Fund over to were natural a Therefore, there is pessimism Disappoint¬ failures and expected no be result. for reason the failure of the machinery to give perfect performance when facing its first emergency. Much time will be required to gain the necessary ex¬ perience and achieve the appro¬ priate improvements of the or¬ to were readily be a Lack and ; er- \ First, the old rule needs 1 A the this of difficulties the has recog- nitioh and re-affirmation that the easy way out in the short run is hot always the best one from a longer range viewpoint. The Fund anxious to avoid trouble accepted the unrealistic franc ; par value, to American principal upon Certain foreign reportsex¬ pressed the opinion that the Fund had suffered fatal Leadership responsibility the of United Fund States loss heavy and perhaps prestige. It is hard a of believe that familiar anyone with the intricacies of the subject would agree with such statements. This is a field where perfection is feasible only in theory but not for falls although been not emphasized by in practical application which can the polite and well-educated for¬ always lead only to compromises eign representatives who which will give complete satisfac¬ were protagonists of the recent struggle. tion to nobody. Under present world the strength and natural in view fact that this that Sir Stafford Cripps, Britain's economic czar, decided to drama¬ > aid; tize the struggle and to re-enact these- measures provided transitional had ones the age- proves The attitude of the Fund^^ tors is persistent are Washington Fund When ma¬ in favor of hold • experiment. Though may. he. general agreement on broad principles, there are al-Ways, those. wb° are afraid to go Objections the Which even expected. maintenance out and plans v<5v,r ^bere Why was the French plan so strongly attacked by the British pur¬ funds j their plan. Britain's Moreover, it was de¬ cided to sell at the old rate of 119 con- to provided as executive and are holdings;Vstatus^ ***** than ^ there in American was a new venture ,, suPP°^t for. J more passive d^pbey own detailed nart experienoe that it Therefore, they decided ; ^ tde ever iead 10 suc~ reluctantly) 'case was The decisions of the Fund owners appro¬ no~ propose any new methods or solutions Indeed, very similar Gov- Its Organization , monetary be the whenever an emergency After all, the French did anses. in who Fund ready Growing Pains of the Fund a Pre¬ liminary fer Improvement of restricted a Labor will oper¬ way no of the the lira but, the, technique was J31 n dmiiar v. Force" ..Govenr- i.wry »milar* But apparently no well-thought-out plans were ganization. + been Fund. the indispensable 1 com, have would But by the French Socialists marmar- pf the cor- rate of - to felt Ihp the ,. the remote contingencies to have them from unworkable be supported (though transactions but. agree which acceptable arbitrary: rpstrirt restrict non-trade probably ; rectly in advance the the franc. of an any for: ket to unavoidably1 promise franc in the face new * ^ yardstick large* essential round fixing rate for the , of would lead to another increases.'• , tn to nvp^qiirp piessure sudden any price increase as planning This Prepare that those "liberal" policies would , . (1) Avoid and more away member tice of the .military staffs ernment probably did not expect - scale more peacetime. They thought ■ French Government. ;•< ' i *they had to do two things at the The French were under strong same time: • •' , lPPr anri . so similar , ™ f™"', .Second, the rund experts should learn from the long-standing prac- in by; the intended »• ^ turned "dirigisme" regulations conditions. govern Advisory Council • . less harm- and ^ hparimnHm case Wlli vigorously The French have a long-stand-, to the French proposals. The ing reputation for being the mostgerous precedent. Moreover, they: French during recent months had ; realistic of,,-all nations and > it believe that other * those to Tor} out compromise proposals I advance theirown ideas for dealing with conflicting interests. PaiTS have .been , .Realistic-suit; j to priate stage for the Fund experts con- with rumors analyze those reports anc findings to other in¬ reforms. and -4:** the free market. They feel strong-.* "capitalistic" America. ','•Here is :ly that to permit this would re- the true reason why the British Proposals Were. French . the. British turmoil prosperity. -I • ;..,J ; ii member.1 terested members who should ther have a chance to present theii own reactions to the Fund and tr reluctantly the practical one under condir tions not foreseen by the framers ©f Bretton Woods Who dreamed of m "one world" economy of* keep the for by statute. However, to those transmit its * (of course in camera only) two principles of .whether they have not followed multiple currencies and a free an illusion by putting all their franc market - on- a ' temporary chips in the fold of "socialistic basis as long as trade transactions stability" which was so effective- ! would have been excluded from Ay compared with the only whether it tn should trols whose leader is Sir Stafford Cripps to reconsider their posiWon and to weigh the question (Continued from page 4) was a and t forced Monetary Fund ■" ; .. the question ; TJ ^ whQ The French devaluation has now Since itself. supposedly as¬ National secretly, there is tives mail 5thf with men distant i irpnnrt<, fluctua¬ the determine whether he discussed the matter and issued any instruc¬ tions to the American representa¬ success¬ two Administration „r:+u f.SjL contr^u- unavoidable tions of the . do have with representatives period. ., to regulationsolan^ pr0^ai4dOns The Funr questionable preparations. Ihe Func storms our will it touch ates to meet fu¬ more by Council. is was irresistible to the Labor party ments sured ■ Pinners. > et is was from the outset whether stability could be maintained during the in have jLIJ* It was | broader than expected. It is to be hoped that the authorities will take care in using these instru- in- emergencies breakdown of liaison or the Such cooperation is for reason. The-Fund, in order ture First, to continue war-time They have a harder": and plete lack by emotion Fund. within Once approved and ... ty lend-ieai* pons from Ameuca. lemptation The instruments of credit formally paramount close to maintain stability during closed war economy bolstered plan. a government, considerations ol prestige and personal pride be¬ come No country in the world is more dependent on international exchange and sensitive to fluctua- a of a easy corporate on i tions abroad than Britain. govern- are habit eco¬ the on the of anti- control to seems the capital. tem- stream' of the possibil- from efforts tionary factor which will reduce bank deposits substantially. r to lie in seem ity of 1948 43 But this is not the whole story. There seems to have been a com¬ during the preliminary stages it has been transactions. Practically all of is drafting the of pecting long before. Obviously, the time for recon¬ of ciling different positions and view¬ Vhowever, that inflationary economic consequences, for^s^are more Tikelyio l French have promised see ex¬ through inThey would ion- a (639) prised* when opposition developed decisive importance for the future adjust- an ment of the pound value could ; This is not to. say : FINANCIAL to doubt' and -hes^ .^predominate-.this .yearfvthan.. to.<Cacahsde the pound from their new itation-somewhat similar to;< the be overwhelmed by deflationary iree,i<exchange market. But Paris one which occurred last year in forces. I want to remind you. jthat (is the leading exchange market industrial production. This might tnis postwar period is" different on the Continent and quotations occur as an outgrowth of the from our usual experience in that there <even if unofficial) could no heavy concentration of tax col- it is the first time we have gone longer be dismissed as unreprelections by the government in the from a fighting war into a cold sentative and reflecting only infirst quarter of the calendar year. war. I significant . - •JorVsome^.ljpqe- & things seldom -"go oh' the recession has"' been indefin-! mean the end of the program -straight tine.' There may; ,#eiy postponed.^ ara of the opin-! stability with all its political and another \ side course, even main trend.!. This- year 'ihay ; j-iationary ahead.k^ reductiorf this ,v THE COMMERCIAL > The conditions, influence of the determined by the vigor and enlightened attitude cf American leadership. This valuation may a year purpose as concerned that were appropriate reached and reorganization heavy burden a worked are American struggling with the site by anyone policy the - at for (Special SAN making of international repre¬ organizations The Weiner Street. and to Financial Chronicle) FRANCISCO, CALIF.— Maynard C. Froemke is throughout Fund future Joins Ted Weiner Staff Ted the policy-making set¬ indispensable prerequi¬ a more satisfactory and who familiar with Therefore, the American the monetary relations and policies. upon over¬ the worlds sentatives an effective innumerable actual, conditions of an American as up hardly the use¬ a urgent improve the organization of both the Fund and dificult problems at the same time but the fact as such will be denied future need to overhaul and an was officials the Fund will be beset with troubles. carried out. The situation at the Fund is not identical by any means but similar in many ways. It may throw was reminder to all a However, there will be There the necessary ago. which have served ful obvi¬ ous fact was recognized in the instance of the International Bank conclusions showdown brought about by the franc de¬ Fund will. be C. the L. He was Vertin Brothers. of & now with Co., 41 Sutter previously with Co. and Buckley " . . Administration will have to realize that theirs is the outstand- Carl H. Freeman Is Now ing responsibility for the func¬ tioning of the Fund regardless of With Central Republic the-nationality -of the leading of¬ ficers of that institution. (Special to The DENVER, Financial COLO. Chronicle) Carl H. rThey hoped to get around a minor •> In the scarcities of essential Freeman has become associated goods circumstances, it was dis¬ internal-price level (at least for showdown- and they got a major with Central Republic Co., U. S. services, as are now prevail¬ goods couraging to see that the Ameri¬ included in the cost-of-liv¬ one in return. ing in Europe. The "purchasingcan representatives at the Fund National Bank Building. He was ing index). This very stability Second, recent events showed instead of power theory" which in spite of„ taking a lead in work¬ an officer of Geo. W. Vallery & would be threatened by an adjust? the urgency for its numerous deficiencies strengthening li- ing for a solution of the crisis Co.t Inc., in the past. provides men,t of the external value of aison between the Fund and its tended some sort of crude yardstick and, sterling. The British originally toward a posi¬ banked upon principal members. The Fund tion of fwas widely used after the First a price decline within "neutrality" and probably two years R. L. Hughes Opens management did not World War is virtually useless of imported materials deny that considered the whole matter (such as they w^re (Special to The Financial Chronicle) "under conditions as now exist in surprised with a final something of a family ; happened quarrel after the First WorldFrench plan submitted for conFrance and elsewhere. 1 DENVER, COLO.—R. L. Hughes among the members from Western ; C' War) and were disappointed inJ "• siderat'on and approval on a takeis engaging in a securities busi¬ Officials of the Fund point out Europe. Only gradually they ap¬ expectations. Further steep at-or-leave-.it that they basis. The French, pear to have realized that here ness from offices at 509 Seven¬ would have accepted price increases of imported goods, in turn, appeared greatly sur- was a question of great and even teenth Street., year and to, maintain a stable , - and , , ^ - • ,v , , , — 44 THE COMMERCIAL (640) their and Distribution Trends Business Prospects (Continued from page 2) keep price inflation to spiraling. although many of the products are still in short supply. If this trade opinion is correct petitors ■ right on last-minute reprieve; So perhaps it would be useful to sum¬ marize the developments then. out any Industrial for manufacturer It declined sale commodity three months. July saw Back of these figures little anxiety a the ufacturers was more among man¬ Hhe rapid accumu¬ over lation of inventories and particu¬ larly their unbalanced condition, industrial purchasing agents curbed forward orders, escalator clauses began to disappear and firm prices became more general. Retailers staged a buying revolt prices their quoting on fall goods. They had just come through post-Easter clearances sgainst higher the supply sources were with raised hob net Boom I would prices could not be modified. Out¬ standing orders for a group of 296 department stores slumped to $351 million in May compared with 1 The tug-of-war between retail¬ and their merchandise sources ers ended in sons: (1) Supply pipelines, emptied by war. are full again except for the items, notably steel. And feel the effect of a curb¬ of capital goods expansion. European Recovery Plan, it develops, will take no scrap less raw steel than expected few may ing The now and earlier. (2) frown and it Let still remarked be however, that at every hearing before the Congressional •sub-committees last fall, promi¬ nent retailers were positive in tes¬ tifying that they did not dike pre vailing prices. " Balk to Efforts battle as the wanting, might be phrased this "Millions for production, but not one cent for hoarding." small price reductions to balk the inflation rise in response Truman's President urging. Lately they have been compelled to themselves reverse -rising costs. which were due, to The escalator clauses banished last spring rooms. who over the Thus, we hear the sales manager of one of largest appliance manufac¬ turers say that retailers in his line number two and one-half to three times what they did before the our. He war. in this predicts a high mortality field—anal over-crowded These go by the name of occasion" merchandising, shortly by the National Retail Dry Goods Association will furnish specific information on this question. more personal Easter prices. About half involved. will trade So it will be furnish a a contest of Prices." tribution and some of them are Get them and you will find that good campaigns on good products prices will score hits at the right and fewer duds. I hope there my over rambling here and the fields of business distribution trends, the coming buyers' market, has not confused you too much. A busi¬ forecasts, ness commentator today, as one analyst puts it, is often like good Lord Ronold, who flung himself on his horse and rode off madly in all directions. With the inter¬ national situation what it is today, forecasting is not only truth, department stores. We hazardous—it is downright guess* see the mail order companies ex work. 1 ,' ;i panding their retail store opera¬ If the shakedown, quite gener* tions to a point where over-theally foreseen, does not prove too counter sales exceed by a good severe—if it is the moderate re¬ margin their catalogue business. cession which was predicted so setting up bigger stores which are, business in generally a year ago, then another opportunity will be offered to selling and now there is a veri¬ American industry to make good table hodge-podge of distribution, on its slogan of "more goods to was 18% above 1946, Durable goods volume, of course, climbed with no knowing who is selling more and more people at ever From December, 1945 to lower prices." Unfortunately, this more sharply than non-durables. what. Automobile sales increased 75%. June, 1947 according to the Com¬ principle, which is the keystone of Food sales gained 23% with most merce Department, home furnish- our system, has been too often of the increase represented by ing stores increased by 41%, auto¬ honored in the breach, rather than higher prices. Apparel sales Were motive dealers by 38%, and the practiced over the recent past, a$ only slightly above 1946 and unit building and hardware firms by profit figures testify, ' 28 %. The overall retail increase volume was lower. ' 1 Of one thing' business can be was 17% in new stores. v. ,i certain the Cold War is on in Mail order and chain sales ran "New the are result of these factors, one of the big stores specialize, to open bridal and resort shops, antique corners, Deb to business For Look versus 1947, retail sales set a new $118 billion which Some time ago we heard jokes about what the drug stores were all-time peak of can imagine that on the demand side we will have in industry less of the expansion that calls for men and materials to build plants and equipment for still greater out¬ puts. I have not been impressed by the argument of several indus¬ trial leaders who have maintained that as long as their friends were General going ahead with big building type by Now men who promote sales deadly earnest. plans the business skies were clear 19.3% ahead of 1946 in the "Times" Our system and requiring price at time of ship¬ and serene. This seemed to me our way of life have been chal¬ compilation; while the department will try and know where these in¬ ment on heavy apparatus, but like getting the cart before the store gain was only 9%. This can creases have taken place so that lenged. We must surely, each one limiting the rise to 20%. Shortly horse-—like in 1929. their efforts are directed to the and all of us, give a little more, be readily explained by the reap thereafter GE reduced prices an Plants are built to make goods pearance of hard goods, The chains right spots. Their advertising plans so that we may share the more, all average of 5% on consumer appli¬ We must prove in the Cold and catalogue houses felt the ab¬ will take account of population of us. ances. Some trade opinion was to sell to people—and if people War that the right principles are reported that this was done to don't like prices, or are fairly well sence of these goods in the war growth and shifts, the growing bring prices into line with com¬ supplied with goods, or can wait, but now they have caught up and age of our people, the variation in Freedom, Democracy and Plenty. have! been returning. — Electric brought in a new rA that As the supply side improves as a to Agreement. imports the upper ranks stay. in troublous times ahead. taking. 34.1% now pretty good indication of how con¬ (3) Competitive imports will sumer demand may be expected begin to have their effect, slowly to act for the rest of the year. The at first, but with increasing vigor stores have the. "New Look" in as a result of the- rate cuts that fashions to help them sell goods, became effective Jan. 1 under the but they also have new and higher merchants ternational with What the banking authorities want, dutiable tendency is to move into im¬ is customer and a customer a will Well, we see the department of income, ac¬ stores moving along several cording to the Commerce Depart¬ fronts against the competition of ment, against 26.5% in 1941 and specialty stores, chains and inde¬ 23.9% in 1929. pendents. The chains, meanwhile, In retail trade there is a feeling are pushing ahead with mass dis¬ are disposable organized bankers join them was Last spring Ford and In¬ Harvester attempted up. which to ago in our put months commodity speculation. Geneva Inflation In the industrial field there such clothing and home furnish¬ ing goods are too high. The rea¬ son might well be food 'prices, way: in passing, no The fault may not be that cur¬ loans for real estate and on central was several probably true in the was rent Examiners were it down. their is always been a danger signal which sooner or later will occur. retailing since the days of 1920. The answer in several quarters It is the reason why merchants was that it gave good promise of don't like current prices. sticking. A survey to be completed have been taken instructed rise, consumer t job of seeing that the "man who sells the man who uses the goods" to jumping was too fast and steps push of the inflation forces made boom wards. credit wage ' portant. He is the final judge. But of almost equal importance is the has \ Bank victory for the manu¬ facturers when the three-pronged a it clear that the direction for several good rea¬ to .hold $934 million in May 1946. : say, salary' payments their ! . end, The boom is at tag outlook. to steel get better qualities and lower prices for fall. Manufacturers in¬ sisted that costs were up and which, represents my subcon¬ thinking on the business suppose, scious as ultimate The the phases of the brands mixed up in the bank¬ but ruptcies will be mixed up in trou¬ appear to represent is day everything isn't readily sold, ble too. a as you are well aware, and there try at specialty store business. It is with this thought in mind Similarly, the department stores that I offer the suggestion that is entirely too big a ratio between what a modern plant, can make in are expanding their branch store one of the most remunerative production and the purchasing operations, a move on the chain types of advertising just now Again, the big stores would be directed at finding sound power released by its building. Or store order. have taken up advertised brands so it seems to me. and trouble-free distribution, and in a big way, which might be in¬ distribution which will carry the Concern Regarding Consumer terpreted as a stroke at the inde¬ good product through the time of Demand pendent store type of operation. stress which is surely ahead. } But capital goods expansion is Selling is not a lost art in thig Increasing Competition ebbing and the main concern on country but the experts agree that Now I was interested enough to the demand side is consumer de¬ it has developed callouses in the mand. Here the story in general ask on your behalf whether the seat of its pants and not on its merchandise lines is that high jump on the band-wagon was just feet over recent years. When the a passing fancy or whether it prices are taking their toll of unit "Phony War" is over and the volume. Sales are ahead in dol¬ might be expected to live through Blitz begins, you will want mer* lars but behind in items sold. That the era of price competition and not mice on the firihg* line, A word slipped out then I and other market. what they End At Tag have materials higher price brackets. people earn is the Certainly there is a tendency in early days when everything that made was readily sold. To¬ especial¬ ;? their special targets of the are natural I argument offered to ex- unions labor was boom. ly at the tag end of a mar¬ determined were That profit must be met and beaten, a They gins. little a stores purchasing power that takes care of production. business competitively his aim and drive is to stay on top. Competitive prices . which and what these But a big in against advance resumed. than not an of And market. be ple mine or harvest the to bulwark himself the time when more money is needed for promotion, for new machines to cut costs, for a dozen other contingencies, but extra 149.5 in March and reacted in the next is He may take future. the reached prices heard may and income consumer 1 the theory advanced stores themselves out pricing and \; department traditional people make the machines, peo¬ to premiums pay passing those of are I have seen that be built all can right, but they may find no mar¬ for what they are equipped to make. Of course we have the just today, he has a close eye on 176 by Juiy to loss of about llk%. Whole¬ a would sumers measured by the Federal Reserve index. plants kets goods can still be short and con¬ production hit a post¬ get-what'they want. of 190 in March, as peak war the then, in perspective, it may turn out that the GE move marked the old principle o£ classical economics turning of the page from a sellers' that everything comes from pro¬ People make the plant, to a buyers' market. Products and duction. in the spring of again and with¬ What happened 1947 will happen then gains department stores. the 1948 Thursday, February 5, CHRONICLE FINANCIAL & Securities INDICATES ADDITIONS SINCE PREVIOUS ISSUE • Acme Broach Corp., Ann Arbor, Mich. (2/9) (letter of notification) 40,000 shares ($5 par) common. Price—$5 a share. Underwriter—Dean W. Titus Dec. & 2, Co., ■and for Arbor, To build working capital. Ann American factory, pay obligations All Industries, be changed to American Steel & Pump Corp.) Under¬ writer—Herrick, Waddell & Co., New York. Price by amendment. Proceeds—To pay off indebtedness incurred in the acquisition of the Inc., • American Public Financing • 29 Atlantic Hostess, Coast Inc., Fisheries 2 filed Akron, O. convertible par) common Co., Boston, Mass. general mortgage and col¬ 166,950 shares ($1 $556,500 4V2% trust Buffalo. bonds and Underwriter — Doolittle & Co., bonds are being offered to for each 1,000 stock held. The stock will be reserved stock. Offering — The stockholders at the rate of $1,500 of bonds shares of The common conversion of the bonds. Unsubscribed bonds will be publicly offered by underwriter. Proceeds — General corporate purposes. - Business — Commercial fisheries. * ;' l\7 against FIRST BOSTON CORPORATION Boston . ; 7 New York Chicago and other cities Pittsburgh • Automatic Dialing Corp., Del. Dover, (letter of notification) 6,000 shares (50c par) common. Price—$3 each. For working capital./ / ; ;; Jan. 30 •n-'. •' : 1 vr •. Aztec Mining Co. of Nevada V • k ) * ,«■« ■ •.'vi'-sw-:-. ,;/r ./•;i S/vt of notification) 300,000 shares of:.,non« assessable treasury stock. For mine requirements. 26 • (letter Bates mon (letter of notification) lateral Feb. • Jan. Jan. 30 230 shares ($100 par) common stock and 750 shares ($100 par) participating preferred stock. For working capital. Jan. Corporate and capital stock of A. D. Cook, Inc., Lawrenceburg, Ind. New York C?ct. 30 filed 100,000 shares ($1 par) common (name to . Registration in Now Manufacturing Co., Lewiston, Me^';'^' (letter of notification) 200 shares ($10 par) coin* Price—$33. Underwriter—R. W. Presspridj) stock. Volume 167 Number 4670 THE COMMERCIAL & FINANCIAL CHRONICLE Dogpaw Gold Mines Ltd., Toronto 22 filed 1,000,000 shares ($1 par) capital stock. Price—400 per share. Pro¬ ceeds—To develop mining properties in Flint Lake local¬ February 6, Chic. Rock Island & Pac Underwriter—Tellier & Co. Domestic Cond. Sales Agreem't Monsanto Chemical Co Dec. 29 --—Preference February 9, 1948 offered be to Corp.___ ...........Common Cameron Aero Engine Corp,.._...-r—-Common Eastern em¬ Gas & Water Iowa Power & Class A Stock .• Dec. Investment 16 filed 900,000 shares (no par) common. Under¬ Offering—Stockholders of record Jan. given the right to subscribe for the new stock to repay 23 21 on the basis of in Edge • 29 Philadelphia Electric Co Jan. ___„BoncIs 19 shares This stock is being sold by Herman P. Ruhm, Jr., Lewiston, Me. ($5 par) common. Underwriter—Robert L. Mit- Investments, Denver. ton To supplement working cap¬ ital. stock. Price—$15. Bath Jan. and Tennis Club, Inc., Palm Beach, Fla. < (letter of notification) 2,650 shares of class A 26 ($100 par) preferred stock. Offered only.''To repair hurricane damage. • to club members /(.■•■'VVi-'y Bennett-Ireland, Inc., Norwich, N. Y. Feb. 3 (letter of notification) 500 shares of 5% cumula¬ tive preferred stock (par $100) and 1,490 shares of com¬ mon stock (par $20). Price—Preferred, $100; common, $33,333. This is partly a recission offer. tal and general corporate purposes; • Black Jan. 30 common par). Working capi¬ Mountain Tramways, Inc., Portland, Me. (letter of notification) 10,000 shares ($2 par) and 2,300 shares of 5% preferred stock ($100 Price—Par in tramway and develop each a To /construct case. Markets" in Los Aero eral Fraser ceive Products Co., 12 Cement Co., Philadelphia, ment in return for cancelling $15,000 open account for Price—$2 per share. Underwriters—R. A. machine tools. Keppler & Co., Inc. and Henry P. Rosenfeld & Co., New .York. To provide operating funds, etc, • - ' Century Steel Corp., Hollydale, Calif. Nov. 10 filed 4,000 shares ($100 par) common. No underWriting. Price—$100 a share. Proceeds—To purchase' given the right to subscribe for stock and each share of common stock held. Proceeds a securities one • Price—$4.10 per unit. To construct a tavern. • Cincinnati (Ohio) Economy Drug Co. (letter of notification) 12,000 shares 26 common stock. Price—$12.50 each. capital. (la.) ! , • ■ Industries, Inc. Dec. 15 filed 210,000 shares ($1 par) capital stock. Underwriting—None. Offering—Shares are to be offered in exchange for 300,000 shares of Obear-Nester Glass Co., St. Louis. < • Columbia Gypsum ' Products, Inc., Bremerton, ^ Washington (letter of notification) 300,000 shares ($1 par) common. For mining development. : Jan. 28 Commercial Finance Co., Mount Rainier, Md. Jan. 16 (letter of notification) $68,000 of 6% debenture .bonds. Underwriter—Emory S. Warren & Co., Wash¬ ington, D. C. ' writing—None. • Coolidge Corp., Middletown, O. shares ($100 par) cumulative preferred stock and 5,000 shares ($10 par) 29 (letter of notification) stock. common Price—Par in capital and general, corporate Coosa River none. each case. For working purposes. (par $50). Under- common Offering—Stock will be offered direct public through directors and officers. Price, par. to Proceeds -—Erect and operate mill for manufacture of newsprint. tfrom Southern pine. Company also contemplates the sale J©f $16,000,00.0 4% 1st mortgage bonds. Cowles Co., Inc., Cayuga, N. Y. (letter of notification) 5,000 shares of capital (par $5). Price—$30 per share. Underwriters—. Jan. j 13 Stocfc Norie.' Offering—4,000 shares to be offered to stockhold¬ ers^ record Jan. 13 in ratio of two new shares for each three shares held. Rights .< expire Feb. 20. Working capital. •' Curtis Publishing Co., Philadelphia J^in. 28 (letter of notification) 4,125 shares of common stock. To be offered at market (about $8), by Mary Curtis Zimbalist through Granbery, Marache & Lord, New York. • . • . Dayton (Ohio) Power & Light Co. Dec. 5 filed 170,000 shares ($7 par) common. Under¬ writing—None. Offering—Offered for subscription by v Stockholders of record Jan. 30 on the basis of one share for each nine shares held. Rights expire Feb. 25. Price $24 per share. Proceeds To finance construction — program. , _ / . . . share. • Hacienda Jan. 26 Under¬ Underwriters—Walston, Hoffman Ltd., terests • Sherbrooke, . . (CST) Feb. 16. Kansas-Nebraska Natural Gas Co., Inc. Jan. 23 (letter of notification) 2,200 shares of $5 cumu¬ lative preferred stock. Price—$104. Underwriters— Cruttenden and Co., Chicago, and the First Trust Co. of Lincoln, Neb. To pay indebtedness. Kansas Soya Products Co., Inc., Emporia, Kans. Dec. 3 (letter of notification) 3,157 shares ($95 par) preferred. Price—$95 a share. Undewriter—Kenneth Van Sickle, Inc., Emporia. For additional working capital. • Jan. Kramb 26 common chinery, Manufacturing Corp., Reno (letter of notification) stock. -Price—Par. raw material and 20,000 shares ($1 par) For leasing a factory, ma¬ operating capital. Kuner-Empsom Co., Brighton, Colo. Jan. 19 (letter of notification) $125,000 first & refunding subsidiary and affiliated companies. products. /. ;. . Limb Corp., New York. (letter of notification) 1,000 shares of non-voting Thomas Wentworth Boykin, Jr., of Greenwrich, Conn. Working capital for manufacture and retail distribution of Iowa Power & Light Co. (2/16) Dec. 22 filed $6,000,000 first mortgage Johnson Bronze Co.* New Castle, Pa. Nov. 10 filed 150,000 shares common stock (par 500). Underwriteri—Lee Higginson Corp. Proceeds •— Stock being sold for account J. P. Flaherty, a stockholder. certain . —$1 each. Proceeds—To construct milling plant and purchase equipment, Business—Asbestos processing. — in cumulative preferred stock (par $100). Price—$100. Underwriting—Portion of issue will be distributed by ($1 par) common stock. Frechette, Hartford, Conn., is the authorized agent and principal underwriter. Price Construction. Bids Bids for purchase of the bonds will be received by company at suite 2200, 105 W. Adams St., Chicago, up to noon be National Action Jan. 28 1,500,000 shares bonds, series due Underwriting—To be determined by competitive bidding. Probable bidders: Blyth & Co., Inc.; The First Boston Corp.; Halsey, Stuart & Co., Inc.; Glore, Forgan & Co., and A. G. Becker & Co. (jointly); Harriman Ripley & Co.; Kidder,: Peabody & Co., White, Weld & Co, and Shields & Co. (jointly); Salomon Bros. & Hutzler; Lehman Brothers. Price—By amendment. Pro¬ & Goodwin and Hart¬ & to Business—Food Quebec — Ura- Co., San Francisco. Offering—<63,785 publicly offered (25,000 on behalf of and 38,785 for account of Marcus Nalley, Chair¬ are company Underwriter—Paul E. ceeds stock. man).; 20,000 shares will be offered to employees, execu¬ tives and directors and 35,367 shares are to be issued in acquisition of all publicly held stock or partnership in¬ Humphrey-Ketchen Co., Boise, Idaho f 21 (letter pf notification) 1,000 shares ($100 par) preferred stock and 1,000 shares ($100 par) common. To buy new equipment and.pay indebtedness. Co., Rogers shares Jan. filed common NalSey's Inc., Tacoma, Wash. 119,152 shares of common stock (par $1.25), ley, • 30 $6.75. Minnesota Power & Light Co., Duluth • doing business as Hacienda Manana Hotels filed 1,000,000 shares ($1 par) preorganization subscriptions. For hotel .costs. Jan. — Jan. 15 filed Hotels, Denver (letter of notification); Charles Whitfield David¬ Asbestos Brothers, Price corporate purposes. Proceeds—For Manana International filed Barney & Co., New York. Price by amendment. Proceeds repay $10,000,000 of bank loans and for general son, • Mo. —To artificial limbs. • Nevada-Stewart Mining Co., Spokane, Wash. / (letter of notification) 100,000 shares of non¬ assessable capital stock. Price—32 cents each. Under- Jan. 1973. Newsprint Co. Dec. 23 filed 238.829 shares of -writing 1,000 a City, Nov. equipment and working capital. U. S. Jan. Price—50 cents Kansas Monsanto Chemical Co., St. Louis (2/6) 28 filed 250,000 shares (no par) cumulative con¬ vertible preference stock, series B. Underwriter—Smith, Jan. 26 Guyana Mines, Ltd., Toronto, Canada ($1 par) common. Inc., purposes, which may include payment of porary bank loan. . Nov. 26 filed 303,587 shares ba outstanding old Price—By amendment. $6,000,000 construction program and for other corporate a $750,000 tem¬ * Goidfield-Cripple Creek Mines, Inc., Denver '($10 par) Additional working ' /Clinton # like amount of by competitive bidding. Proceeds—Toward financing a capital Jan. Offering—43,383 shares will a Feb. 3 filed 100,000 shares (no par) dewriters—To be determined (letter of notification) 100,000 shares (par 10c) stock. Underwriter — Harry Joseph Newton, Denver. To pay loans and -taxes. rolling mill, equipment and for working capital. 30 • ■— Price—$100. Co. New York, holder of 23,000 warrants. Business—Women's apparel chain. • • & exchange for Co., Inc., New York 59,000 five-year-bearer warrants to pur¬ (50c par) common stock by April 15, 1950. Offer¬ ing—By seven holders, headed by Lehman To develop a plant and facilities for' the company's subsidiary, Carolina Giant Cement Co., Harleyville, S. C. stock. gen¬ chase for Golden Leaf, Inc., Aspen, Colo, h a. JanA;28' (letter ' of notification) 400 shares rof 'common For Miiler-Wohl Jan. unit warrant Francisco. shares. Mid-Continent Airlines, filed 564,906 shares ($1 par) common and 282,stock purchase warrants. Underwriters— consisting of two shares of be San / Jan. 9 (letter of notification) 30,601 shares ($1 par) com¬ mon stock. Price—$6 per share. Underwriting—None. For working capital and equipment. common additional underwriting consideration and. 7,500 shares Will be issued to American Die & Tool Co. for invest¬ ; Unexchanged shares and the additional 31,617 shares will be sold publicly. Price — $13.75. Pro¬ ceeds—Toward paying off bank loan. • * Craigmyle, Pinney & Co., New York; Winslow, Douglas & McEvay. New York, and Jenks, Kirkland & Co., Phil¬ adelphia, Offering—Stockholders of record Jan. 30 will as Corp., Corp. (2/11) 75,000 shares of class A stock. Underwriter' Walker class A Pa. Engine Corp. (2/9-13) Dec. 29 (letter of notification) 101,000 shares of common stock (par $1), of which 85,000 shares will be sold to the public; 8,500 shares will be issued to underwriters H. offered in proceeds. Portland Calif. Merchants Acceptance —G. filed Giant Securities Jan. 20 filed ' Detroit, Mich. 100,000 shares ($1 par) common. Under¬ writers— Campbell, McCarty & Co., and Keane & Co., both Detroit. Price—$5.25 per share. Proceeds—The shares are being sold by 14 stockholders who will re¬ Oct. 21 Pasadena, corporate purposes. .7 Angeles, Riverside, Colton and San Ber¬ nardino County. 453 Cameron —Guardia "Super Jan. resort. Underwriting—Officers, direc¬ tors and employees of the company will offer the stock friends and associates. Price—$100* per share. Pro¬ ceeds—To retire 7% preferred stock. Business: to ski a ($100 par). par) Proceeds—For additional working capital. Mercantile Acceptance Corp. of Calif. Jan. 19 (letter of notification) 2,092 Va shares of first preferred 5% series stock. Price—$20 each. Underwriter Fitzsimmons Stores, Ltd., Los Angeles, Calif. Feb. 2 filed 10,000 shares of 6% cumulative first pre¬ ferred stock Basket, ($1 For indebtedness. exercise of common stock purchase warrants issued in July, 1945. Price—Two shares per warrant at $6 a share. • • • $10 per Dec. 30 filed 27,788 shares (50c par) common. Under¬ writers—None. Offering—Shares are to be issued upon, cu¬ mulative, non-convertible ($100 par) preferred and 5,000 & Co., New York. Corp., St. Louis notification) 20,000 shares of Market (letter of notification) 2,500 shares of 4J/2% at States funds. Rights ex¬ building expenditures and Aircraft (letter common Finance Corp., Denver, Colo. 1948 two shares held United bank loan. - February 17, for each or Proceeds—For McDonnell Jan. capital. one Canadian pire Feb. 18. Realty Corp., Irvington, N. J. notification) $30,100 of preferred stock. Price—$100. Underwriting—None. To increase working Bonds are share Jan. 30 (letter of 1948 Light Co., Noon (CST)— ? McColl-Frontenac Oil Co., Ltd., Montreal, Can. . February 16, For ($1 par) common treasury To be supplied by amendment. Proceeds—To develop mining; — share. a properties. • February 11, 1948 Denver, writing—None. Jan. New York Chicago & St. Louis__Equip. Trust Ctfs. Merchants Acceptance Corp Underwriting Price—50 cents Co., PSiila. (letter of notification) $125,000 51/2% de¬ bentures, due Feb. 1, 1978. Underwriter—Bioren & Co., Philadelphia. Price—Par. To advance subsidiaries funds for capital improvement and working capital. 1948 Inc., June 27 filed 300,000 shares stock. ployees, executives and management personnel/ Price— $3.49 a share. Proceeds — Company did not state how proceeds will be used. Broach February 10, Chicago ($1 par) Class A Common. Offering—To Christensen, Legend Gold Mines, Ltd., Toronto, Canada Credit Corp., filed 150,000 shares- Underwriters—None. Acme —Peters, Writer and plant improvement. ity of Ontario. 1948 45 mortgage 41/2% sinking fund bonds and 5,278 shares of 6% cumulative preferred stock ($10 par). Underwriters Oct. NEW ISSUE CALENDAR (641) >, 28 writers—H. M. Herrin & Co., Wallace, Idaho. Co., Seattle, and Pennaluna & For developing mining claims. Northeast Airlines, Inc., Boston, Mass. 'Dec. 24 filed 83,333 shares (no par) $1 cumulative con¬ vertible preferred. Underwriter—Atlas Corp., owner of 100,000 shares of the registrant's common stock, has agreed to purchase all shares not subscribed for by other stockholders. Offering—Offered for subscription by com¬ mon stockholders of record Feb. 2 at $20 on the basis of share for each six common shares held. Rights expire March 1. Proceeds—To pay off indebtedness. one Ocean Downs Racing Association, Inc., Berlin, Md. Nov. 28 filed 34,900 shares ($10 par) common. No un¬ derwriting. Price — $10 a share. Proceeds—To build trotting and pacing race track near Ocean City, Md. Ohio Public Service Co. Dec. 22 filed $10,000,000 first mortgage bonds, series due be determined by competitive bidding. Probable bidders: Halsey, Stuart & Co. Inc.; The First Boston Corp.; Harriman Ripley & Co.; Blyth & Co.; W. C, Langley & Co., and Glore, Forgan & Co. (jointly); Lehman Brothers; Salomon Bros. & Hutzler. Price—By amendment. Proceeds—To be used for con¬ 1978. Underwriting—To struction. Expected later this month. • Jan. Pacific 29 Gas filed ; and Electric, San Francisco 686,953 shares ($25 par) common (Continued on page 46) stock. j 46 THE COMMERCIAL (642)' (Continued from page 45) holders held. 10 Proceeds-^To program. finance construction a -" ■ . Parkview CHRONICLE *. > & Co., St. Louis, Mo. Price—$6' for the and' $2.50 for the common.-..This stock - ' - Under¬ Thursday, February 5,'1943 . securities to be sold include $20,000,000 in first mortgage* /bonds, $5,000,000 in debentures and' common shares sui~f ficient to bring the over-all proceeds from the financing; prefer: ed stock is being offered by stockholders who are members ofto $28,635,500, The company ' ha§" be en discussing the/ the Belt family. Business—Chain of retail restaurants. - financing with investment bankers: 1 • !\ ^ writer—White Offering—To be offered at par to outstanding commonstock at rate of one snare on each FINANCIAL sold and the remainder reserved for conversion: Underwriting*—none. for & ■ Drugs*Inc^ Kansas City, Mo. Jan. 27 tiled 100,uuO shares of preferential cumulative 35c participating stock ($4.50 par). Underwriter— Union Trusteed J NewYorki,/'v';'i'r1' jjv. Laclede Gas .Light Co.-.:/v^>y::;;; Feb Funds, Inc., 21 stockholders will vote to authorize $6,084,050'of Underwrit¬ ers—Lord, Abbett & Co., Inc., New Yobk* is selling agent.. convertible debentures, $4*000,000 -of - new bank credit!; and such additional fir&L mortgage bonds as may be per- ; Price based on market prices. Proceeds—Formnvest- " mitted under-the-indenture. Company will have.to .spepd'i... ment. Dec. 29 filed 657,500 shares of capital stock. • Straus s & Blosser, • Chicago. Proceeds—$140,000 will Price—$5.25 share/ per used to- reimburse be company; ... for funds used to purchase McFarland Drug Co., Topeka, Kan., and the $332,500 balance will be used for working capital and expansion of business: retail drug stores. Wisconsin Dec. bonds, due 1978. Underwriter—To be offered under bidding. Stuart & Co. & Co., and Boston Probable Bidders include Underwriters—Only the bonds will be competitive bidding terms. Probable amendment. -'•//"*•• (letter of notification) 385 shares ($1 par) com¬ $38,000 of 20-year 3xk % debentures, due July 15, 1965. Underwriting—None. Price—$30.83 each for ine and and porate $102.63 ;i" ' ' . Alleghany Ludlum Steel Corp. Underwriters—Kuhn, Loeb & Co.; A. G. Becker & Co., Inc. and Hemphill,, Noyes & Co. Price by amendment. shares and offer rights to stockholders in ratio of one To refund • Production Jan. 30 (letter ///, Aids, Inc., a • Pubiic , - Co. bank notes, and for expansion purposes. com¬ the offering on bank loans. Funds the from be used to take care additional ' stock. common •* . equipment and working capital. Price—80 W. Bennett & Co. : For 9 Underwriters —$7. of debentures • to provide funds for the 1948 names to. be filed by Gulf States with Price • from private sale of $600,000 of 4%% debentures and $253,000 of 6% subordinated debentures, will be used to pay • off indebtedness. Business—Hand lift funds trucks and • Sherman of common sim- equipment, ital. ■ /. South i tooling costs and working Electric & Gas Feb cap- Co. basis. l-for-10 basis and the Unsubscribed shares will common be on , Nov. 5 19 / Proceeds—To • Stanton 3 vertible finance Feb. 2 filed "n Shake, Inc., Bioomington, III. 40,000: shares of 50c cumulative convertible participating preferred "stock, ($1 par); and 160,000shares (50c par) common stock, of which 40,000 will be • San Co. Diego Gas & Electric Co. Segal Lock & Hardware Co., - 12 stockholders for basis, at a offered the l5i authorized Inc. creation / of $2,000,000'" convertible sinking fund, debentures, to -be*: subscription by stockholders on a pro rata- i discount. Unsubscribed debentures will be public at par. Proceeds would' be used toU retire.$415,000 short-term loan and lor expansion. • Southern Co. * , The SEC Jan. 28 gave the company permission to' mego- ' tiate privately for the sale of about $20,000,000 of addi-; tional shares ($5 par) common stock. Company is a sub¬ of Commonwealth stock of its & Southern Corp^ Proceeds by Southern to buy common operating' subsidiaries, Alabama Power Co. Georgia Power" Co. //''•'■■ '""v/.r■» The money, gained, by these subsidiaries- through'the of their stock to Southern will be used-for con- sale petition asking are Otis & Co. , \ (Inc.); V • Lehman , • * i ■ - no- have all the money we can bond issue in mind and for the immediate International Harvester usefully employ." Co. ,•/:,/./'//■:•■/;• Southern Natural Gas Co. //•/:./:■•■'.■.!■ Ry. ••. • Utah Power & Co.. f? market conditibhs.• ;Union Prrhnnlfc Light Co. . '' Feb • - Interstate 3 reported Power Co. plans tp;filq. a registration statement with the SEC shortly covering new securities required to put its plan of reorganization-into effect. The company "1' cer- * tT^ 1 Corp. .(Jointly); aaxr C!i»«r4 f." - / r, PA'- ■> Co. and Equitable ,h.Barney.proC Co. antf timS.;)yltnioJ( & White,~Weld:& Co.: " Petroleum Corpr. reported company contemplates new'financing in: forjp. of convertible preferred stock, Fenner & will vote Feb. 20 on ; Ripley & Co. Warren Pierce, » . hiH/-lpra Securities Harriman Feb 2 " • C'.;i Jan. 28 reported company working on plans for $3J)00;,000 new mortgage bohds, "plxis $5,000,000 new. ideben- .^euritieH • > ■ tificrat.es, sexdes "NN," to mature in 20 equal jsemi-annual installments, will be-received at company's office, Room 20.18, 70 Bine. St., New York, up to-noon (ESll> Feb: 18. Probable bidders: Halsey* Stuart & Cot Inc:; Salomoni Bfos. & Hutzler; The First Boston Corp.; Jiarrimafg Ripley & Co.; Harris, Hall & Coi (Inc.), ; / Fenner: & Beane, R. W. Presspfieh & & . /;■.■;>?•; -(2/18') .. Iof $10,680,000 equipment trust timing will depend of the company's business. Probable underwriters: Glore, Forgan & Co.; Harris Hall & Co. (Inc.); William Blair - ' ;:v- v,/•; n;// 9*. Southern Bids for -purchase 000,000 to $100,000,000 in new capital through permanerit financing; It has not yet been decided when the financ S + f -f when the linancing would be done or what form it w; 011 ///':;/'/ Peabody & Co. Stuart & Co. Inc.; The First Boston Corp./.. misinterpreted recently, Mr. McCloy said1 that we ./'/ , (jointly); Halsey, . 28, stockholders approved a proposal giving d^.c- ; authority to issue convertible debentures., already had authority to issue eitheTsCommom st£«k. ' ordinary debentures. Company plans to raise from , J used and ^ tors non-con¬ stor'k Electric Feb. 4 reported company has plans under consideration, for raising some $10,000,000 through sale of a "new' offered the: Jan. Chemicals, Inc., New York (letter of notification) -1,766 shares of Steak 1 International Bank for Reconstruction ancF • construction (par $100) and 1,883 shares of common (per 100), Price, par for each." Underwriting, none. Con¬ struct plant,, working; capital, etc. • bonds "we have program. Feb. program. future Inc., Lehman Brothers and Lazard Freres&Co. (jointly); White, Weld & Co. and Kidder, Peabody & Co. (jointly): Blyth & Co.. Inc. and Stone & Webster Securities Corp; (jointlyk; Glore. Forgan & Co/and W. C. Langley & Co (jointly): Harriman, 'Ripley & Co.;. Merrill Lynch, Pierce: - bid for the had been $7,000,000 30^year first mortgage bonds, Underwriting—To be determined at competi¬ tive bidding. Probable bidders: Halsey,* Stuart & Co Beane. & units with present distribution facilities. 9 in financ¬ Development •'—*•= .' ' * / Feb. 3, John J. McCloy, President said that he wanted to make it "quite clear" that the Bank was not contemplat¬ ing another bond issue at present; Contending- that he filed & for basis' Unsub- v Jan 29 reported company contemplates sale of $20,000,000 bonds and debentures in near future. Probable bidders include Blyth & Co. Inc. and Kidder, Bros.; Blyth & Co., Inc./. series B. Fenner Gas sidiary in- bidding tlm 'to Dec offered /'.?'/-// Oklahoma 15-year 5 company on held. struction. may l-for-2 a & Web¬ Salomon '""Si Beane , told! the Indiana PS interested new shares from the <sale will be be shares bonds carrying a coupon rate-of 3 V8,%ia year, including: Halsey, Stuart & Co. Inc. Other investment houses who Southwestern Gas & Electric Co. - would stockholders common share for each 3J/2 Co. Inc., Hampshire permission of the Commission to sell the entire $8,000,000 issue do the Metropolitan Life Insurance Co. at par, the publicly. Price by amendment. Proceeds—Proceeds together with other funds will be used to purchase all of the outstand¬ ing common of South Carolina Power Co. from the Commonwealth & Southern Corp. Stuart & initially to new & Light Co.. The company had filed a supplemental Underwriter—Kidder, Peabody & Co., New York. Offering—Shares initially will be offered for sub¬ scription by company's common stockholders, the pre¬ a 3, Halsey, ; money" bond issue. It is thought that the offering will be * ready for the market- by the end of March. Probable ' bidders include: Halsey, Stuart & Co. Inc.; Blyth & Co., ' Inc.; The First Boston Corp. .' ' " $10,000,- - Commission it preferred. on 7":; / Electric & Gas Corp. bonds, maturing in 1971. The proceeds wo "Id he build a -7,500-Kilowatt generating plant in Scott ' County, Mo., and a transmission line to conxiect cne new * „ f . one • £ ; Co. $8,000,000 bond issue planned by the ing part of its $38,000,000 expansion Dec. 2 filed 80,858 shares ($50 par) cumulative convert¬ ible preferred and 404,293 shares ($4.50 par) common for sale, and 687,293 shares reserved for conversion oi ferred Power >,'•/ Indianapolis Power ./'// Carolina eacli'v on The company has applied to the Arkansas P S Commis- r sion for authority to issue an additional $2,500,000 314% : .; 2 Z& Co. — For 10 years, would be sold to an underwriting syn¬ by Kidder, Peabody & Co. anci Biyui oe • Co., Inc., for resale to the public. bidding. Probable bidders include: Halse^, Stuart & Co, Inc.; The First Boston Corp.; Harriman, Ripley & Co., Inc., and Glore, Forgan & Co. (jointly), and White, Weld Products, Stoetzer, Faulkner & Co. and Bennett, Smith & Co., De¬ troit. V?/;,;' company scribed company asked the SEC for permission to sell $15,000,000 of first mortgage bonds. The interest rate and price cf the bonds would be determined by competitive Inc., Roval Oak, Mich. (letter of notification) 150,000 shares (par $1) stock. Price $2 per share. Underwriters — 26 Jan. Illinois Feb. ilar equipment. /■•';/:, -/./ , annually foj? .,• Public Service Co. of New be offered Utilities Co. ster Securities amendment. together /■ asked the SEC for permission to issue:/' 199,627 additional shares of common stock (par $10) and use the proceeds for construction. Shares would expansion Jan. 28 reported company plans an offering of 000 new money bonds. Probable Bidders^—Stone working capital. Proceeds—Proceeds mature and sell program. It is expected that the registration statement will be filed shortly and bids will be called for around / the middle of March. Probable bidders include:/Morgan Corp.; Halsey, Stuart & C } • r Service Carter & Truck Corp., Albion, Mich. / Bros. & Hutzler; Merrill Lynch, Pierced Jan. 30 filed 80,000 shares of common stock (par $1). and White, Weld & Co. (jointly). ; will New York State f Jan. 31 finance four Diesel passenger locomotives, under a conditional sales agreement. Stanley & Co.; The First Boston Corp. Underwriter—Frank cents. / trusti dicate headed , Corp., New York notification) 180,000 shares (50c par) (letter of and common of business expansion in Reiter-Foster Oil Jan. 16 (2/10) _ April 1. Proceeds of the bonds will be used to <\ • Columbia' Gas & Electric Corp. Jan. 30 reported corporation expects to offer $45,000,000 Regira chase of aircraft and opening of bids at its Chicago office for the lowest interest rate at which bidder will provide not to exceed $1,240,000 to & Hutzler. Proceeds—Prepayment of $1,700,000 of bank notes due i- April 20 and $1,375,000 of Oklahoma Power and Water ; St. Louis RR. ^ t Pennsylvania Telephone Corp. / Jan 30 reported company may sell 40,000 preferred, shares, with Paine, Webber, Jackson & Curtis and Stone & Webster Securities Corp. as underwriters. Chicago Rock Island & Pacific RR. (2/6) v Company will receive bids up to noon (CST) Feb. 6 Glore, Forgan & Cargo Airlines, Inc., Brooklyn, N. Y. Feb. 2 (letter of notification) 277,500 shares of preferred stock (par $1) and 500 shares of common stock (par $1). Price, $1 per share for each. Underwriting, none. Pur¬ & $1,400,000 serial equipment /• Halsey, Stuart & Co. Inc. (bonds only); Blyth & Co., Inc.; The First Boston Corp.; Merrill Lynch, Pierce, Fenner & Beane.:./'- (jointly); HarriCentral Republic Bros. of construction. Probable bidders include: Halsey, Stuart & Co. Inc.; The First Boston Corp. / 1949. Probable bidders include: • • on retire Co* of Oklahoma, Tulsa, Okla. $10,000,000 first mortgage bonds, series B, due 1978. Underwriters to be determined by competitive bidding. Probable Bidders—Halsey, Stuart & Co. Inc.; , stock. Plans call for. public Service Co. and: White, Weld & Co. Ripley & Co., Blyth & Co., Inc., Co. and Lee Higginsori Corp. (jointly); Co., the First Boston Corp., Salomon " March 30, with bonds and stock being offered to the on 30 iiled Shields & fqj- underwriter, The First Boston Corp. mortgage bonds and 100,0000 additional shares of mon v'0 stock, will man purchase $6,000,000 of preferred stock. The preferred would have ' the benefit of a sinking fund of 2.%%, according to presn ent plans. The new secuirties are to be sold through; 107,383 , stock and 14,987 stock, and 25,000 shares ($1 par) common reserved for conversion of the preferred. To be offered in units of one preferred and one common share at $6 per unit. For Jan. register York Chicago for competitive bidding. Proceeds would be used to finance .'5' Hollywood, Cal. 14,987 shares ($5 par) shares ($1 par) common „ plans to California-Oregon Power Co. \ > ; ~ ~ Feb, 3, A. S. Cummings, President stated company has a tentative working schedule for sale of $4,500,000- first North additional working capital. Company 9 of notification) preferred stock. 12. Probable outstanding first mortgage bonds. -Temporarily deferred. preferred $1,620,000* Feb 3 company filed an aplicatiort with the New York PS/ Commission for authority to issue $10,500,000 bonds and Jan. 26 stockholders authorized an/ssue-of 200,000 shares ; ' • 1^ • of — New March 1,.1949-58. Prospective Offerings • - certificates will be received at company's office, Cleve-' land up to Feb. 10. Certificates will, be dated March i:' , Nov. 20 fileu $>o,5UU,UUU of first mortgage bonds, due 1967. Proceeds 9 -Bids •"'/" v"'v.. - ' ■! ''■ <*, ;■•/ -^/j ' .-■># :../7/-..: ; . ' ' . 7 'v V 1948, $100 debenture. For general cor¬ per r RR. equipment trust certificates in connection with the pur-' qhase of equipment'costing $2,027,440. Probable, bidae"rs:4 Halsey, Stuart & Co. Inc.; Salomon Bros. & Hutzler. t • purposes. Pittsburgh Steel Co. _ //;-''' r financing will be used to-pay off $6,500,DOO off the change over program., •*• i Missouri-Kansas-Texas Proceeds—To pay bank indebted¬ and for construction costs, ,'./ A ' -V/'■ :■ Jan. 28 stock 9 while stock will be offered to holders of 4%% preferred. Price by • new Feb. 4 company asked ICC authority to issue Co., White, Weld & Co. and Kidder* Peabody & Co. (jointly); Blyth & Co., Inc.; The First Boston; Corp.; Shields & Co. Offering—Bonds will be offered publicly — property dnd. new bank loans and to pay for and Harriman Ripley & Pittsburgh Consolidation Coal Co. mon "dn the Bidders—Halsey, Stuart & Co. Inc.; Glore, Forgan &.COi. Co. (jointly); W. C. Langley & com¬ Halsey, $12,500,000 for $3,00,000 to convert customers to the use of straight! 'natural gas to replaceMhe mixed manufactured and na-y tural gas now being served in the territory.' Proeeeds^ $3,000,000- 30-year -first ness • ih the next five years Light Co. mortgage: bonds B, and 30,000 shares ($100 par) 43£% cumulative Series Inc.; Morgan Stanley & Co.; Glore, Forgan W. C., Langley & Co. (jointly); the First about Feb. 17. & underwritten under Corp.; White, Weld & Co. Price by amendment. To-finance expansion program. Expected Proceeds filed Power preferred stock. Philadelphia Electric Co* (2/17) Jan. 20 nlca $25,000,000 first /and refunding mortgage ■a,. petitive 29 /;.,k; ■ Beane as v with Merrill, Lynch;/.;, underwriters. Stockholder*-! on creating a new preferred issue and increasing authorized common stock. : Volume 167 Number 4670 ! THE COMMERCIAL xXx v'i:. V,Vt ij ' (Continued r'rom page 5) & FINANCIAL CHRONICLE prise Morgan Stanley Offers $180,000,000 first and re¬ 802,990 shares of $1: Dividend compaint by implication seem common stock and Morgan Stanley & Co. heads a preference neglect of their stockholders' interests group of 63 underwriters that js I shares of common stock. 'through coiiusion or rank stupidity. Such tn thp nnhiip tndav i complaint against business, /vffpHncr offering to the public £ addition, subsidiary companies •management would likewise pertain to its non-use of competitive (February 5) 150,000 shares of had outstanding as of Oct. 31, 'bidding, which the Attorney General wants to make universally Philadelphia Electric 4.3% Pre¬ 1947, an aggregate of $40,168,185 I'compulsory, in disregard of the higher pricing which would be ferred Stock (par value $100 per principal amount of long-term debt. pj foisted on the community of inexpert investors. x'>J'vt'- • share) at $100 a share and accrued ip In any hvent, the complexity of such phases of the situation is Gross income and net income of dividends. !so great, and practical experienced knowledge of actual trade the company Net proceeds from the sale of prac¬ for the first ten tice is so essential, that the determination of the future of this-im- the new Preferred, as well asf^odths of 1947 amounted to $19,portant segment of the economy should be controlled by the Congress from the sale of $25,000,000 of ['127,469 and $15,973,516,/respec'or one of its established specialized agencies, rather than ex cathedra new bonds expected to be offered tively, as compared with $22,840,"by the Attorney General. V;" 'x'x.'x-' by the company at competitive 318 and $17,711,096, respectively, bidding on Feb.. 17, 1948, will be for the full year 1946. frey & Keller, noted the good that used to provide new capital for the company's planned construc¬ had come about under the Truth • : company officials, who throughout the to be charged with wanton 9.72(^240 (Special to MIAMI A. Thk Financial Canon has staff of / ; Chronicle) BEACH, FLA.—Robert been added Atwill and to the Co., 605 Lin¬ coln Road. With Buckley Brothers (Special SAN The to Financial Chronicle) DIEGO, CALIF.—O. Wen¬ ,. ^ 47 Joins Atwill Staff funding -mortgage bonds;' 724,720 shares of preferred, $100 par; Hula, Electric Pfd. • (643) dell Larson is now affiliated with Buckley Brothers, 625 Broadway. ' . in Securities Act and its adminis-r tration by the Securities and Ex* change Commission and declared pany's himself all for the operation, % admitted there still things, to be done from istration standpoint, ceeding rules The taste of institutional in¬ with and simplification bidding issues in the have interval - with little up de¬ : attraction for people's money. In¬ variably of serial maturity they afford the opportunity for filling out gaps in investment portionos. general a too large rule they and have cost of such assets. Insurance counts banks trust have in the sues over a record period of Averaging maturity to trust afforded from 2.95% offering : recent to about year ranging 2.35% on Ohio & a is¬ the effering such securities in to the detriment market.. ' * ' . pro¬ the of '; - It hasn't happened recently but there have been far intervals, not too back,' when bankers were investment at their wit's end to figure out how they were going to compete for several issues of securities As once on a given day. - ' matter of a the fact,, situation became than such that potential issuers had to be prevailed upon to revise their of¬ fering schedules in order to avoid a difficult situation... than for that kind be of with who lament this recurrent ention... cont¬ that why get he is unable corporate to D. Oil Co. of themselves caught in such position. Bankers have up is not conducive I results for the issuer. < a the to Yff?-'''. Mr. law over has that under inquiring firm of Gordon, Brady, Caf¬ trust of ^counsel the new foi pre- legal investment a funds and being are from bolstered of and the has a call on; the $75,000,000 bank credit a J. of two "subscription rights" substantially in full it is indicated in current Southwestern Public Service Co. been declared has totalling 135,389 shares for its offering of 103,115 shares '•] '■ mon, Meanwhile ,, Electric Co. for - of additional ' * : ■ com¬ v . Cincinnati Gas PKEFERRED ho'.ders by the company, of the total. On January 27, 1948, to . The the Preferred or L. has to The Financial Co., Financial become Financial Chronicle) with 135 Kid¬ South Stock of this Company, has fixed Chronicle) affiliated Chronicle Morgan is with Herrick, Wad¬ dell & Co., Inc., Merchants Bank Building, CO. and de¬ close of January business February 6j W. 15, 1948. 1948. COX, Secretary. ^ "THEATRES EVERYWHERE" January 30th, 1948 rP HE Board of Directors has declared a -*• quarterly dividend of 371/(»<j per share on the outstanding Common Stock of the Company, payable on March 31st, 1948, COMMON to stockholders of record business dn March STOCK has declared regular a at 12th, will be the close of 1948. Checks mailed. The Board of Directors of DeWalt, CHARLES C. MOSKOWITZ, quar¬ Vice President & Treasurer terly dividend of forty cents (40(') the Common Stock of per share corporation, payable March 10, 1948, the on stockholders to close of - — business Wilbur of record at SOCONY-VACUUM February 25, OIL COMPANY Gardner, Secretary INCORPORATED Dividend payable No. 148 THE FLINTKOTE Checks will be mailed. Rockefeller American Standard Radiator Sanitary Pillilurqk of Directors today quarterly dividend of 25^ per share on (he outstand' ing capital stock of this Com' pany, payable March 15, 1948, Plaza February 4, 1948 quarterly dividend of $1.75 on per stockholders of record payable March of record close of at : 1, 1948, to stockholders business on quarterly share has dividend been Cumulative of $1.00 declared Preferred 15, 1948 at the to close W. D. the Stock payable March 31, 1948, to Febiuary 27, 1948. ^ Bickham, Secretary of on March stockholders of record of business March 1, 1948. Checks will be mailed. NEWYORK STOCKS, INC. Common Stock The following distributions have been declared A quarterly share dividend has. been of $.50 per on the declared on the Special Stock of the Company from Investment Income, able Common Stock of this corporation, payable on March 10.1948 to stock¬ of Treasurer holders as of the of record at the close of business February 25, 1,948. Checks close of business February 5, 1948. Agricultural Series $.09 Automobile Series CLIFTON W. GREGG, Vice Pres. and Treas. Aviation Series AMERICAN GAS * . . • • . • . January the 4M% cumulative Preferred capital stock of the Company, issued and outstanding in on the hands of the public, has been declared of the surplus net earnings of the Com¬ such stock of record on close at the the "books of the of business ' Common Stock Dividend THE regular quarterly dividend for I the quarter ending March 31,1948 of Twenty-five Cents (25c) and 2/100ths f of The Oil Series share of the Common Stock of Atlantic a City Electric Company on each share of the Common capital slock of this Company, issued and outstanding in the hands of the public, has been declared out of the sur¬ plus net earnings of the Company, to be payable and distributable March 15, 1948, to the holders of such stock of record the books of the Company at the close of business February 11, 1948. on i H. D. ANDERSON, Secretary February 4, 1948. PREFERRED 87'/a .04 . • ■ • , • • • • • • .07 .09 .12 -.15 ...••••• .06 09 * . ....«••• -09 .12 Diversified Investment Fund • • • .18 • • • .09 Corporate Bond Series • ..... .07 Diversified Preferred Stock Fund. .15 Pacific SECOND share - .02 Diversified Industry Shs. STOCK STOCK cents per • Steel Series shore 3V2% CONVERTIBLE • ...... Railroad Equip. Series Tobacco Series PREFERRED • .......... Railroad Series 4% CUMULATIVE PREFERRED STOCK $1 per share cents per .08 .10 Public Utility Series of Directors of this Corporation, has declared the following regular dividends: 87'/a • Metal Series CORPORATION CUMULATIVE • ....... Merchandising Series Board 3Va% • • 10 Machinery Series BURLINGTON MILLS . Government Bonds Series out payable April 1,1948, to holders of .09 Insurance Stock Series ($1.18%).-per share for-the ending March 31, 1948, .07 .08 Food Series 30,1948 Notice i One Dollar Eighteen and Three- pany, • Electrical Equip. Series Dividend .08 04 * Chemical Series • THE regulcr quarterly dividend of quarter Cents • Building Supply Series : pay¬ February 25,1948, to stockholder* record will be mailed. JOHN E. KING quarter 13, -.sj? per on , stockholders of record at the close of busi¬ ness A 1948. February A dividend of twenty cents (20^) per on the Common Stock has been declared the at close of business February this Corporation, payable share the Preferred Stock has been declared a Preferred Stock $4 COMMON DIVIDEND ' A 1948 The Board to CORPORATION Feb. 3, > declared New York 20, N. Y. Company INDIANAPOLIS, IND. —4Lewis , at the York. February 2, 1948 Preferred Stock Dividend Herrick, Snecial WESTERN RAILROAD Directors LOEW'S INCORPORATED 30 ^ Waddell & Co. .". & of W. quarterly dividend of declared on // Neergard, Miller & Co. With FETERS, Secretary. ecord 4cw ANII ELECTRIC COMPANY PETERSBURG, FLA.—Carl Cook with The business of COMPANY roughly 92% Street. to B. close BAY Five percent to be the amount Class *'A" Debentures (Payment No. R. A. BURGER, Secretary. Neergard, Miller Staff (Special has Company 1948, . to April 1, 1948, to Stockholders of record at the close of business March 18, 1948. Transfer Books March 4, 1948. ST v . the at WM. offered , & Treasurer. Bank Stack Series associated Peabody With record CAMERON, per cent was .; Co., in the statistical department, has become Salle a three-quarters and & With" Partlow der, of rc STOCK holders have entered common . payable April 1. 1948. and a per share upon the outstanding 40c CO. a meeting held dividend of 50 cents stock payable March of record February payable 52) and a dividend of Five percent to be payable on the capital stock, out of the net earnings for ,hfe year 1947, payable at Room No. 3400, No. !0 Exchange Place, New York 5, N. Y., on md after February 16, 1948. The dividend in the stock will be paid to stockholders of on 4, 1948. share 'upon-the out- per „ 187,924 of the 204,000 shares additional (Special of LEATHER at a 1948. Board clared Wis., February $J.75 par value Common Stock of this been declared payable April 1, com- share subscriptions of out¬ CA.3 COMPANY. 20, 1948., received KEMP, ' Company standing Preferred "Stock of this Company $25 STATES Directors the exist¬ PREFERRED DIVIDEND accruing M. 1948. utilities their Secretary. the Taking Down Stock exercised BELL, (Incorporated). Racine, dividend ** 1947. Stockholders O. I. Case - A of C. GREEN AMERICAN fltuiljarl, have UNITED Board January 28, The have source cash still company bulk that de¬ business February 18, 1948. C. DIVIDEND NOTICES advances treasury the close of ing School District personal prop¬ erty taxes in Philadelphia and Pittsburgh. Following the Preferred Stock by Arabian-American Oil plus divi¬ dends have in sonal property tax and will remain open. . of 1948 of. Directors of this Company ha declared a dividend of Twenty (20c share on the outstanding capita, stock, payable March 15, 1948 to shareholders o' Pennsylvania exempt from the existing mill Pennsylvania State per¬ one firms Corporation January 28, 1948, declared per share on the Class A ,15, 1948, to stockholders 13, 1948. per is says comfortably fixed for needed Repayment the situation now with the > „ this Common THE The STREET Board 'dividend the. Opinion capital no consideration D. Caffrey, who is Hivi aivi " of special WALLACE day 31, in set¬ best Over-The-Counter Looking back . to a main¬ The this Cents money turned away since the company is officers tained right along that such nnprnpH accrueq underwriters, California CoI,lier, Chairman, company plans understand finance nlna plus IV.O, near the La 1 Dec. a dividend of $1.00 per share capital stock, payable February 28, 1948, to stockholders of record at the close of business February 3, 1948* Dec. a share; and on or 1958 at $102 a share; rncp case BROAD New York, January 29, share; there¬ before or 30 Inc., Meeting with a group of re¬ porters the other day, he declared j. before Machinery Corporation Directors the on PIPE LINE COMPANY ; will company's standing capitalization will CHICAGO, ILL.—E. C. Patrlow, formerly with Smith, Barney & he -joins those on 1957, at $103 pnrh eacn or a NOTICES The BUCKEYE , . record at Stock financing "the purities and Exchange Commis-s now but on $104 after Jan. 1, 4 deal, handled Kidder, Peabody at times. For after and $20,- James J* Caffrey, recently re* signed as Chairman of the Se«; sion, must have been giving that problem considerable thought, 1952, at ferred will be compact groups. orders more redeemable for reports. Bunching New Issues Preferred future, it is telling in¬ quiring investment firms. The bankers' fondest hope now is that carriers do not get around fusion less can obtained in sue. to of exacting looking for any new likely will not have and is¬ Lackawanna's Chesapeake too funds. this yields on like they Standard 10-years' market have is is not ac¬ certificates new THE Wet Blanket shown these point one - writers since years. about the brought of be 31, In hardly shows this to true.| On the contrary under¬ more lively interest in this market, finding ample basis for the opera¬ tions about ' The record be II. companies, and -.The in 1" .000,030. the against, normally cover¬ to about 80% of the total up York transactions added ing Caffrey made are pull of being secured by actual equipment they are and $50)000,000 is planned for 1948. the New p type of security naturally issued T on which he probably would get plenty of argument, namely that and or no other the * . expended in 1947 dendS. those who have the job of invest^ not -- was law. Mr. competitive considerable As , contem¬ expenditures of approxi¬ mately $235,000 000 during the six-year period, 1947-1952,* inclu-r sive,, of which about $48,000,000 Hestrongly:: favors bringing the unlisted securities under the been lay by the ultimate holders. ing of issues, once they have been awarded, provided the potential buyer gets a prospectus before the through . snapped has pro¬ \ such offered This as procedures. He' ex¬ pressed himself as $11 for oral solicitation of orders for new . Eight v admin¬ an such - running, strongly to railway equipment trust issues Since- thq turn/pf the yeair, it was pointed out in market circles this: sale is closed. week. were overall -program United Shoe clared Treasurer. plates He • vestors has been DIVIDEND tion program through 1948 and the early part of 1949. The Com¬ DIVIDEND NOTICES .13: Coast Invostiqent Fund . . COMMON STOCK ($1 par value) (44th Consecutive Dividend) 37'/a Each cents per dividend share is payable March to Stockholders of record at the business February 6, 1948. STEPHEN L. 1, 1948, close of UPSON, Secretory 41 WALL STREET, NEW YORK 5, N. Y. & FINANCIAL COMMERCIAL THE (644) 48 Thursday,; February 5, 1948 CHRONICLE jority" for Mr. Eccles' largely academic. BUSINESS BUZZ >:« Eccles' Miy on • t cleared : the ' , | ee/ifi© or omcrm ';;v- V,/ * ' Eccles ; ( e/w* What has been you are business. .777- ' ; important thing is that what has been happening most re¬ cently doesn't point the way to the final turnout of legislation, let or know you whether your cut off. business head will be $ Federal the and vestibule Reserve asked, them Mr. to go Potomac, .r 7 '-'A firmly con¬ that the Marshall Plan vinced merchan¬ political popular effect daring the He is in dise. is Truman Mr. is tell the Truman would chuck it into Congressional majority to try to snip off a billion or so. He knows that at least a billion is off the foreign going to be cut aid appropriation. And unless most daring of politihe will actually ring up the notwithstanding. he is the cos, sale trying to do appropriation for for¬ eign aid as close to his dollar fig¬ ure as possible. If he is right on All Mr. Truman is is to get an his political of brand-line mer¬ chandise, the nearer he can suc¬ ceed the better for him. So if foreign aid is popular the more for Eccles' The scheme. mariner. ancient for That that He be couple that is Eccles and Matt Szymczak, were innocent¬ walking at anybody known, came or said and news men John Snyder. so. had only plausible gressional majority which seem¬ ingly is reluctant, the greater his prestige and popularity with the just got tired for or that looking at, or and wanted are compromise. The Brookings pro¬ posal for an official of Cabinet rank to handle foreign aid sounds like the independent agency most of the Congress has been wanting. Seemingly the Administration would go for this, because it looks like something that didn't with originate majority. •. ^ Republican the 7'7.,7; v"r,v... ■ v. Then, too, there was this hint that General Marshall might be to willing program - go for without one-year a four-year, a $17 billion authorization. Then Mr. Truman cast doubt on this one knowns we other any - the of write us very few can't quote ! quote, phone i"* * - ❖ - ;:y777 no the dollars for getting the absolutely correct an¬ collect silver 64 swer to this riddle. who knows the The one answer man neither in his sleep nor at cocktail parties, and he doesn't keep any talks columnist pets. "'I sS ■ One thing '' . which (except the ■' the. Eccles- would and Federal things Reserve since doesn't without do Treasury South Shore Oil & Dev. un¬ For H. & B. Amer. Mach. us, Pitts. Steel or Pfd. & ; (1) are ration¬ ing of scarce foods, 7;i\7 ;7<l'77-;' i:m price control. so catch would avoid to later Old Reorganization Rails a — his die an as Domestic & predicated argu¬ on The President tried to port to in issue the side-step Re¬ a re-write man excellent job an New Issues his Economic hiring by do of syn¬ views on credit restraining. It pleased both sides, who quote it in sub¬ M. S. WlEN & Co. thesizing the pro and con to spot, Foreign] Securities in¬ on their conviction that the President is ESTABLISHED Members 40 N. Y. 1919 Security Dealers Exchange PL, N. Y. 5 Ass'n H.A. 2-8780 with them. stantiation of Teletype N. Y. 1-1307 Congress controls these for the high cost of body * continued inflation, not on preventing it by promoting some deflations provi¬ credit); the on the knew enact whole now prevention flation ment, Truman Mr. collapse Truman has cast the controls openly. This the only tenable Congress If Mr. Eccles had not blame the living. . v secondary talk to continued the reserve might not have come to a Mr. Eccles acted, however, as head. Now it has. Basically pow¬ though he thought the President erless on its own initiative to af¬ really meant to curb the expan¬ fect credit conditions, the Reserve sion of bank credit. He vigorously Board must sell its argument to pressed his proposal to require the Treasury. The Reserve Board commercial banks to hold short- has now discovered that there is Trading Markets: thing term securities reserve. such an¬ pro¬ to that he to inspire more confidence. Even though Mr. Eccles shouldn't take all the rap for dropping the pre-; the as not of demand long-terms, consumer the Federal Reserve Dogma—is not part of the Truman dogma also. Mr. not if McCabe shift is expected to do is miums Con The "This U recession A bit of staff least opposed because that will who ma.y not explained it: collapse." worse proposed the controls solely put * pretty good hunch bright newspaper man a Indiana Gas & Chemical VIRUS-X is. ;'77v: . It's comes the suggested pitch of voice. already large signs that when the time comes, the Administration will be willing to There since but time economist whether is will political in. Every the President "ten-point" conclusion different a the officials a then the Here point up clearly that covertly maybe listening to, Marriner S. Eccles, Vice direct a his done part is identified be 1(2) that nearly all Mr. Truman's subordinates were for the most shift that maybe Harry Truman reason plan. sions the as has planning to operate the Of¬ explanations leave to demotion also of the Executive agencies none Johnny loves Marriner, he said Eccles' since gram couldn't circumstances plan to cut the head off the business boom and the question nounced it maybe been ernment is maneuvering because been, plan of the secondary re¬ sign It the worried about are one They didn't see 'em. Some radio was who un¬ from behind tripped them up. and credit serve up will suggested that told that curbing bank rationing had not yet been de¬ a proposal, as one gov¬ cided upon, certainly not without the at understand bearing upon the secondary re¬ on names a has Chairman or spitting any one. All of a sudden or two bad boys, identity faces calling prompting, many gents worried about prices of these bonds are the Mr. Washington. making not if serve. along the thin ice They weren't ly of these Under getting that he advocated Eccles Reserve Board Reserve squirming and the President, for¬ same a much less de¬ And when that if ever, the Treasury Federal administrative the Marriner boys, fijUCiV 7 TP good All line. Federal of have conventional increase sing the same tune. clearance gleaned from offi¬ plump it can risking, more time comes, and just wanted explanations them additional reserves flationary degree. President - official is the can cial a Administra¬ Then if the worth are navigator. new the tax collec¬ is off the banking tion feels that re¬ ficial -si the whole subject control will be held in pressure system. credit navigation of his the al., Unless Messrs. Tobey, et credit of Tom nearly he succeeds in his objec¬ tive, especially by pushing a Con¬ voters. of the inflation pic¬ get too direct, system, secondary entire the considering in reserves but to a Mr. serve. liked a in ture. Chair¬ with him replacing system delay The official explanations, de¬ Presi¬ dent's stand on foreign aid, for in¬ signed to conceal the true objec¬ stance. Mr. Truman seemed to tives, are a source of considerable amusement here. Nobody had any say he would buy full-scale for¬ objective in mind for doing it. eign aid and not a cent less. If The change accomplished noth¬ the Congress didn't want to give Mr. Truman is still yes and Mm all the $6.8 billion that he ing. no Reserve that the way is clear for a .credit phase this matter of the Take the of means Governors of „' . Fundamentally the passing of Eccles from the front door to the McCabe. * »:< <s tion Board a confirmation. the same alley is of Marriner S. Eccles the of man of hearing on his down from his well-worn seat as for Thomas McCabe comes up storage until after the hoisting be that hunter should * Right The the to secondary The even may shortly have a business or a They don't add up to much> apparent compromise. Sure he not decisive. And if you should. He hasn't yet been think that, you probably are called and until all the money, is right. For what is showing up is on the table he doesn't have to a great deal of enveloping of show his cards. later objectives, a pushing from this place to that, the taking of As for the Republican conten¬ steps designed to cause later tion that they couldn't think of steps that will put the other fel¬ binding future Congresses to carry low behind the 8-ball, and get out a four-year commitment, this a one's self out from in back of it. is maneuver, too. After all It's a little on the soterie side for millions of babes not yet born are even the sophisticated outside of committed to pay taxes for the this center of the political trade. "social security" of those now But the obscure steps are part of living. the sem¬ a affirmed for plots, Chairman Tobey of the Banking committee, ask his cus¬ tomary blunt questions when reserve sense. They Vice- as give demand for curbing credit. bank of of the purely maneuver phase the profit over which politicians have been fighting, recent developments look like non¬ If political battle of 1948. the of asking consistency President's happened in this capital during the last several days intensification an first, at for on to was of blance ,cs~" reason, hang to Chairman This reserve. admitted be 7 has dropping for way the because mM has not may . JL C/W xJLf l/\A/ from the Nation's Capital ^ JM A Behind-the-Scene Interpretations 8-,v ' passing secondary s> .s the is views >:« >;t equivalent to 25% deposits The as a secondary President was re¬ peatedly embarrassed by people asking where did the President stand in view of Treasury oppo¬ sition. 7 ,7 r7 Mr. Truman probably didn't a er reality to the logic of the great¬ force. Its independence and coequality in credit about the same as Canada's international independ¬ ence would be if, say, the Domin¬ Ralston Steel Car Oregon Portland Cement Riverside Cement A & B ] Spokane Portland Cement theoretical matters ion is proposed r an Russia. alliance Hence the FR Board with LERNER & CO. Investment 10 Post Office Securities Square, Boston 9, Mass. Teletype BS 69 Telephone Hubbard 1990 "ma- Teletype—NY 1-971 HAnover 2- Empire Steel Corp. Firm Trading Markets Susquehanna Mills FOREIGN SECURITIES Foundry All Issues Common VIRUS CARL MARKS & CO- INC. Herbert H. Blizzard & Co. 123 South Broad LEWIS & ST0EHR >i. Clear thru—Montgomery, Scott & New York & Philadelphia Co. - 80 SPECIALISTS Established 1926 Broad St. - New York 4 Telephone: DIgby 4-0985-6-7-8 Hill, Thompson & Co., Inc. FOREIGN SECURITIES Incorporated St., Philadelphia 9, Pa. 50 Broad Street Markets New York 4, N. Y. AFFILIATE: CARL MARKS & CO. Inc. CHICAGO - and Situations for Dealers 120 Broadway, New Tel. REctor 2-2020 York 5 Tele. NY 1 -2660