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firtallqui lircintrie Volume 134 New York, Saturday, May 21, 1932 Number 3491 The Financial Situation EDERAL RESERVE policy of large-scale purchases of United States Government securities, with the view to releasing Federal Reserve credit to a corresponding degree, would appear to have reached the climax of absurdity the present week, as revealed in one of the indirect effects of such policy. By this we mean that $75,000,000 of 91-day Treasury bills were on Monday disposed of at an average price so high that the rate to the purchasers of the bills on a bank discount basis was only 0.43 of 1% per annum. This, on the one hand, was the best price ever realized by the Treasury in any sale of Treasury bills, and on the other hand was the lowest rate of return ever obtained by the purchasers of such bills. The absurdly low and wholly artificial rate at which Government borrowing is being conducted is the immediate result of the huge purchases of Government securities by the Reserve banks, the unneeded Reserve credit thereby created leading to the accumulation of excess reserves at the financial centers which the member banks at these centers in sheer desperation and out of a desire to keep themselves in thoroughly liquid condition are employing in the purchase of short-term obligations. According to the original design of the Federal Reserve Act, Reserve credit would be put afloat only in response to the needs of trade and commerce, and with trade and commerce virtually non-existent because of the bad times, especially such as has to be financed through banking accommodation, large masses of these Treasury bills and certificates of indebtedness, which the United States Treasury is disposing of week by week, almost immediately find their way into the Federal Reserve portfolios, and there they remain until their maturity. No information of an authentic nature is available as to whether the Reserve banks are direct purchasers of Treasury bills, that is, themselves put in tenders for the bills, and as a matter of fact the bill holdings and the holdings of certificates of indebtedness are lumped in the weekly returns of the Federal Reserve banks under the general designation of "certificates and bills." Presumably, however, the Reserve institutions buy from the dealers, and this being so, the dealers must be allowed a profit; hence, the basis yield' to the Reserve banks must be even less than the 0.43% per annum referred to. And what an anomalous situation is thus presented. The Reserve banks are engaged in putting out huge volumes of Reserve credit, and to make the operation successful must, in the end, take over TreasurY bills at merely nominal rates. The proceeding is close to the farcical. The dealers them- F selves in their bids would be influenced to make the yield low by the knowledge that they would in any event be able to dispose of the bills to the Reserve banks on the dealers' own terms. In any event the important thing is that in the end the bills land in Federal Reserve portfolios and, furthermore, the Reserve banks take the bills over at the abnormally low rates referred to. The final result is that the Reserve banks in their effort to put large volumes of Reserve credit afloat must make investments that yield next to nothing. Of course the United States Treasury finds an easy market for its offerings, whether of bills or of certificates, or of Treasury notes (the Reserve institutions have recently been liberal purchasers of all three classes of obligations), but the project is in the highest degree objectionable and mischievous and full of menace. This is going on, too, at a time when propositions galore are being offered for putting out additional billions of Government obligations, some providing for expenditures of another $1,500,000,000, some for $2,000,000,000, and others even for $3,000,000,000 to $5,000,000,000, either to provide employment for the idle or to revive the country's flagging industries. The result is that general fear and apprehension are being aroused as to the ultimate outcome. The remarkable thing is that while considerable opposition (though not overmuch opposition) is being manifested against extravagant expenditures and also against the Goldsborough Bill, which would make it mandatory for the Federal Reserve banks to engage in operations intended to restore the level of commodity prices prevailing in the period from 1921 to 1929, few people seem to realize that what the Reserve banks are doing in engaging in largescale buying of United States Government securities is closely akin to the propositions referred to and hence is open to the same objections and in like manner is full of menace. To call the present buying of Government bonds "controlled", inflation does not change the character of the transaction. It is in any event inflation, whatever its professed aim or purpose. The present week the Federal Reserve banks have added $81,136,000 more to their holdings of Government securities, $12,511,000 consisting of bonds, $11,682,000 of Treasury notes, and the remaining $56,943,000 of "certificates and bills," raising the grand total of the holdings of United States securities to $1,466,403,000 against only $598,536,000 12 months before, on May 20 1931. If we make comparison between the present holdings and those at the time when large-scale buying of • 3678 Financial Chronicle United States securities was inaugurated, we shall find that the greater part of the new acquisitions in the period since then has consisted of "certificates and bills," the weekly Federal Reserve returns making,as already stated, no distinction between the two classes of Government obligations, giving point to our statement further above that new issues of Treasury bills are finding their way mainly into the possession of the Federal Reserve institutions. Since Apr.6 the holdings of all classes of U. S.securities by the 12 Reserve institutions have risen from $885,014,000 on the date named to $1,466,403,000 May 18, representing new acquisitions in amount of $581,389,000. The holdings of United States Government bonds have in this period of six weeks risen only from $318,690,000 to $358,658,000, the holdings of Treasury notes from $84,395,000 to $165,422,000, but the holdings of certificates 'and bills from $481,929,000 to $942,323,000. The increase in this last instance in the six-week period referred to has been no less than $460,394,000, and, accordingly, it becomes apparent how great has been the part played by Federal Reserve buying in raising the price .of Treasury .bills—to a point now where the return to the purchasers of the bills—in this case predominantly the Federal Reserve banks themselves—is hardly more than nominal. Yet objection is being strongly voiced against the Goldsborough Bill,- both because it is a highly dangerous measure and because it attempts the impossible, while there is ready acquiescence in the policy of the Reserve banks in pumping Reserve credit into the member banks for which no healthy use can be found. Thus we find the Goldsborough Bill, which has already passed the House of Representatives at Washington, sweepingly condemned as a measure "so unsound as to be absurd,if it were not potentially so dangerous," in a report authorized by the Executive Committee of the Merchants' Association, of which Thomas J. Watson, President of the Association, is Chairman. Drafted by the Association's Committee on Banking and Currency, which includes Percy H. Johnston, Willis H. Booth, Fred I. Kent, Henry Fletcher, George W. Naumburg, Thomas S. Lamont and Richard Whitney, all members united in the conclusions. The report of the Committee reads in part: "Theoretical schemes for stabilization of the price level have been discussed more or less for several years, but have hitherto made no progress in a practical way. To transmute such a theoretical concept into a rigid statutory requirement and to bind our banking system to an arbitrary and quite inflexible price level is so unsound as to be absurd, if it were not potentially so dangerous. What is sought at the moment is a short-cut back to prosperity by a feat of legislative legerdemain. The level of commodity values can be raised now but only by abandoning the gold standard. This would result in raising prices in depreciated paper, and the net gain would be nothing because of depreciated purchasing power. Our last state would be worse than our first because we should have destroyed what little confidence business and industry still retain and have nothing to put in its place." The report also said: "The Goldsborough Bill is essentially in a class with measures to stabilize prices by governmental purchase of uncontrollable surpluses and to help debtors by the destruction of creditors through the issuance of fiat money. Your Committee, therefore, recommends that the Association oppose any May 21 1932 and all attempts to impose the statutory duty of maintaining price stability upon our banking system." Nothing stronger or beater than what is here said could be uttered in condemnation of the theory and principle underlying the Goldsborough Bill, and nothing more thoroughly convincing. Yet it unfortunately happens that many who plainly perceive the folly and the fallacies embodied in the Goldsborough Bill and its futile character cannot see that the present policy of the Federal Reserve banks in their large-scale purchases of Government securities is equally open to objection and equally vulnerable. On the other hand, in financial Europe they entertain no such illusions as to the possible consequences of the inflationary scheme of our Reserve banks. Accordingly, we find that a new period of fear and doubt has sprung up leading once again to withdrawals of foreign balances on this side, attended by a new outflow of gold from this country that is startling because of its magnitude. Europe is outspoken, too, in condemning what is going on in this country, both in Congress and on the part of our Federal Reserve banks. One of the Paris correspondents of the New York "Times," in a wireless dispatch which appeared in the issue of that paper on Monday of this week, expresses French sentiment regarding the matter by saying: "In surveying the controversies which are carried on in various countries, financial Paris feels that the idea which seems to be spreading that multiplication of credits and currency tokens without a proper monetary basis might cure the world depression is a crazy dream." This correspondent adds: "The belief of financial Paris may be summed up as showing that, even if all countries were to agree to raise prices through general depreciation of the currencies, nothing would actually be changed, since costs would eventually rise in proportion to prices." In the meantime, however, gold exports from the United States are proceeding on a scale that is unpleasantly large, to speak mildly. In the week ending on Wednesday the withdrawals for export reached no less than $43,059,000, $20,003,000 of this going to Switzerland, $11,823,000 to Holland, $6,231,000 to France, $4,152,000 to Belgium, and $850,000 to Germany. Besides this, there was an increase during the week of $3,608,000 in gold earmarked for foreign account, making the total loss for the week $46,667,000. This large outflow followed $41,099,000 exports of the metal the previous week ($6,094,000 of this representing gold previously earmarked); $15,872,000 shipped the previous week (the week ending May 4);$18,817,000 the week ending April 27;$9,203,000 the week ending April 20, and $20,156,000 in the week ending April 13. Moreover, the movement still continues in progress on a large scale; on Thursday of the present week $6,972,900 more was withdrawn for export ($5,997,900 being for Switzerland and $975,000 for France), though $298,640 of this represented gold previously earmarked for later shipment. Most important of all, yesterday (Friday, May 20), the huge additional total of $37,829,000 (all in a single day) was withdrawn for export—$21,075,300 being for account of Holland, $12,631,100 for France, $4,084,600 for Belgium, and $38,000 for Switzerland— though $17,019,900 of the total represented gold previously earmarked for later shipment. Volume 134 Financial Chronicle At this juncture the Governors of the 12 Federal Reserve banks were in session at Washington on Tuesday to consider (as expressed by the United Press) "means of further employing their powerful influence to speed up the economic recovery of the nation." As to the result of this meeting Washington dispatches said that continuation of open market operations by the purchase of Government securities had been agreed upon by the Governors of the 12 Reserve banks and the Federal Reserve Board. An announcement, issued by the Board on May 17, said: "The Governors of the Federal Reserve banks met to-day with the Federal Reserve Board, and it was decided to continue open market operations by the purchase of Government securities, the extent and amount to be determined from time to time as conditions justify." This was looked upon as a rather cryptic utterance, suggesting that purchases hereafter might be on a smaller scale, which, it is hoped, will prove true. It should be noted,too,that Eugene Meyer, Governor of the Federal Reserve Board, when appearing before the Senate Banking and Currency Committee on Wednesday (May 18), to oppose the Goldsborough and Fletcher dollar stabilization bills, emphatically expressed the opinion that the United States would not be forced off the gold standard, in which view he is sustained by opinion in financial and commercial circles generally, though it is admitted that the outflow of the metal is proving disquietingly large. More significant, however, than this was the statement contained in the dispatches from Washington which said that "Mr. Meyer disclosed that the Board instructed the Governors of the 12 Reserve digtriets yesterday (the day before) to go home and find ways and means of spreading credit according to the Board's present policy." It was added that "this was taken to mean that the Governors were told to influence member banks to extend credit to business." The significance of this statement lies in the fact that it was an admission that Federal Reserve policy in its large-scale purchases of Government securities had proved ineffective, at least in failing to induce member banks to avail of the large volume of new credit placed at their disposal by the Federal Reserve banks. The denouement came on Thursday afternoon, when very decisive steps were taken to prevail upon member banks to make liberal use of the Reserve credit so unstintedly placed at their disposal by the Reserve authorities. And the daily papers here on Friday morning contained very sensational statements as to what was intended to be accomplished by this lateskaction. The New York "Herald Tribune" defined the action taken in news headings reading as follows: "Banking Board Named to Thaw Out Idle Credit—Put Billions to Work—Owen Young Heads Group of Financiers Named by New York Reserve to Utilize Funds 'Affirmatively'— Basis for Three Billion in Loans Available—Co-ordination Committee May Propose Bond Buying for Deserving Enterprises or Public Works." The heading in the New York "Times" read as follows: "Twelve Bankers and Industrialists to Find Ways to Use Federal Reserve Funds—Hoover Approves New Recovery Move—Most Powerful Group Since War Formed by Governor Harrison—Rise in Prices An Object—Financing of Homes and Aid on Farm Loans Are Also Expansion Possibilities—Vast Sums Piled Up Here—Bankers Have Had Difficulty in 3679 Finding 'Good Borrowers' in Time of Fear." It appears that this new banking group for dealing with the situation was called together by George L. Harrison, Governor of the Federal Reserve Bank of New York, according to the New York "Times," as New York's response to the policy devised at the meeting of the Federal Reserve Bank Governors in Washington on Tuesday. An official statement issued Thursday night with reference to the purpose in mind said: Governor Harrison, of the Federal Reserve Bank of New York, has called together a committee, composed of bankers and industrialists, for the purpose of considering metliGds of making the large funds now being released by the Federal Reserve banks useful affirmatively in developing business. Its purpose will also be generally to co-operate with the Reconstruction Finance Corporation and other agencies to secure more co-ordinated and so more effective action on the part of the banking and industrial interests. The Committee held its first meeting this afternoon at the Federal Reserve bank. The membership of the Committee, which may be enlarged later, is as follows: Owen D. Young, Chairman, General Electric Co. Mortimer E. Buckner, Chairman, New York Trust Co. Floyd L. Carlisle, Chairman, Consolidated Gas Co. Walter S. Gifford, President, American Telephone & Telegraph Co. Charles E. Mitchell, Chairman, National City Bank. William C. Potter, President, Guaranty Trust Co. Jackson E. Reynolds, President, First National Bank. Alfred P. Sloan, Jr., President. General Motors Corp. Walter C. Teazle, President, Standard Oil Co. of New Jersey. A. A. Tilney, Chairman, Bankers Trust Co. Albert H. Wiggin,Chairman of Governing Board.Chase National Bank. Clarence M. Woolley, Chairman, American Radiator and Standard Sanitary Corp. The membership of the Committee, it will be observed, contains many eminent names, which ought to furnish assurance of wise leadership, though recent experience has demonstrated that in times like the present, high standard in the business world does . not invariably afford assurance of sound and sane thinking. Reports yesterday indicated that similar committees to urge the use of Reserve credit would be formed in the 11 other Reserve districts. The outcome of this new move will be awaited with no little interest, not entirely free from disquieting apprehensions. For ourselves we can only say, inasmuch as this move is along the same lines as so many previous moves in behalf of the restoration of normal conditions, that business recovery and the restoration of confidence, which latter is the end mainly to be accomplished as an indispensible preliminary,cannot be achieved by enlarging the volume of banking credit or by inflation of any character or description. MORE plausible suggestion for aiding business recovery, and promoting the recovery in the business and financial world, would appear to be contained in some utterances made by Speaker Garner in talking with representatives of the press on last Saturday afternoon, only we would go much further in the application of the suggestion than does Mr. Garner. The latter directed his strictures against President Hoover. We would apply the same strictures to Congress and all the other Government agencies that have by their course and action served to make a bad situation infinitely worse, often by the exhibition of overzealousness. "If the President will refrain for 30 days from making 'double-barreled statements,' this frozen confidence will naturally melt," Mr. Garner said. "His statements have done more in the last six months to freeze confidence than all other sources put together. His statements are contrary—they jump from one thing to another—and the people are all upset read- A 3680 Financial Chronicle ing them. He says confidence is frozen. Well,something must have brought it about. Honestly, I believe his continuous statements in the last two years have done more to keep the minds of the people upset than anything else that has happened. Pd suggest now he reverse the process and not give out any statements at all. Hoover's tendency is,'I've got to be advertised all the time.' The Lindbergh incident yesterday was an example. The Attorney-General might have issued the statement that all Federal resources had been thrown into action to run down the murderers of the Lindbergh child and have put. them into action himself just as effectively as the President. But Mr. Hoover himself has to issue a signed statement." The force of what Mr. Garner says lies in the fact that for many successive months Congress and various governmental bodies and agencies have by unwise action of one kind or another, or through the offering of panacea having absolutely nothing to recommend them, proved the most serious obstacle in the way ,of business recovery and the restoration of normal 'trade conditions. If Congress should speedily pass a bill for balancing the budget and then adjourn; if all the other Government agencies should cease from their pernicious activities, including the InterState Commerce Commission, and if the Reserve authorities should stop meddling with banking and currency matters, the way would at once be paved for the functioning of business in a normal and natural way—the only way in which and by which business recovery will be achieved in the end. HITHER the large gold exports, detailed further above, are leading, as far as the Federal Reserve banks are concerned, is indicated by the Federal Reserve returns for the week ending May 18. It will be recalled that a week ago it was found that the Federal Reserve banks were obliged to avail themselves of the privilege accorded under the GlassSteagall Act in permitting the use of United States Government securities as collateral for Federal Reserve notes to the extent of 60% of the face value of such notes, the other 40% consisting of the gold which the Reserve banks are obliged to hold as the necessary legal cash reserve. The amount of United States securities which then had to be used as collateral was $97,300,000. The present week the total amount of United States securities held as collateral for Reserve notes is reported as being $148,300,000, showing that resort had to be had to the use of $51,000,000 more of United States securities as collateral for Reserve notes. The process therefore seems now to have become a regular one and apparently is to continue so long as the gold outflow continues and the Reserve authorities at the same time adhere to their policy of large-scale purchases of United States securities. The gold holdings of the 12 Reserve institutions were diminished in amount of $37,385,000 during the week, the total of the gold reserves having dropped from $2,956,417,000 May 11 to $2,919,032,000 May 18. At the same time the volume of Federal Reserve notes in actual circulation increased slightly during the week, rising from $2,551,363,000 May 11 to $2,558,107,000 May 18. A year ago, on May 20 1931, the volume of Federal Reserve notes outstanding was fully a billion dollars smaller, the actual amount then being $1,551,458,000. Deposit liabilities also Increased during the week, mainly owing to the W May 21 1932 larger reserve deposits held in the respective districts for the member banks. Nevertheless, the ratio of total reserves to deposit and Federal Reserve note liabilities combined, which latterly has been steadily declining, has further declined during the week only from 65.6% to 64.4%. Of course this is much below the figure a year ago at the corresponding date, when the ratio stood as high as 84.9%, but is far in excess of the legal reserves, which are 40% in the case of Reserve notes and 35% in the case of the deposit liabilities. The 12 Federal Reserve banks acquired $81,136,000 more of United States securities during the week, the amount having increased from $1,385,267,000 May 11 to $1,466,403,000 May 18, at which figure comparison is with only $598,536,000 on May 20 last year. The increase in the holdings of United States securities has been offset in only small part the present week by reduced 'holdings of acceptances or bills purchased in the open market and by reduced holdings of member banks' discounts. These discounts, reflecting member bank borrowing, fell only from $471,373,000 May 11 to $464,943,000 May 18, while the holdings of acceptances fell from $42,719,000 to $40,643,000. The result altogether is that total bill and security holdings, including, of course, the holdings of United States securities, the whole constituting a measure of the volume of Reserve credit outstanding, are reported at $1,977,012,000 May 18 as against $1,904,401,000 May 11, indicating an expansion for the week in amount of $72,611,000. At the corresponding date of 1931 the volume of Reserve credit outstanding was no more than $879,186,000. Foreign central banks have reduced their holdings of acceptances in this country during the week in amount of over $30,000,000, the total this week being $239,948,000 as against$270,741,000 last week. Foreign bank deposits with the 12 Reserve institutions are a little larger this week at $45,578,000, as compared with $44,177,000 last week. ERCHANDISE exports from the United States in April took quite a drop. The value was only $136,000,000. Imports also were lower again, but the reduction in imports was considerably smaller than that of exports. Imports last month amounted to $127,000,000. The balance of trade continued on the export side, but for April it was only $9,000,000. March exports were $155,254,000, and imports $131,292,000, the excess of exports for that month amounting to $23,962,000, while for April 1931 exports were $215,077,000 and imports $185,706,000, the export trade balance being $29,371,000. These figures illustrate very clearly the continuous decline from month to month in the overseas trade of the United States—the fact is that this loss has now been in progress for practically three years. Exports last month were the smallest since August 1914, the first month of the European war, and imports since February 1915. Exports for the month just closed were $19,254,000 below those of March, a decline of 12.4%, and from a year ago there was a reduction of $79,077,000, or 36.8%. The decline in Imports last month was less severe—from March amounting to $4,292,000, or 3.3%, and from April 1931, $58,706,000, or 31.6%. Exports for the 10 months of the current fiscal year are down to $1,703,491,000 against $2,692,- M Volume 134 Financial Chronicle 383,000 for the same time in the preceding fiscal year, a reduction of 36.7%. Exports two years ago were more than double the amount of this year. Imports for the 10 months of the current fiscal year were $1,508,285,000 compared with $2,078,925,000 a year ago, the decline this year in the case of imports being 27.0%. Imports in 1930 were also more than double the value reported so far this year. Commodity prices for both exports and imports may have accounted in some small measure for the loss in values between March and April 1932. Compared with April of last year, however, prices last month averaged fully 10% lower, while prices this year are about 22% below those of April 1930. The balance of trade for the 10 months of this year shows an excess of exports of $195,206,000; a year ago, covering the same period, the excess of exports was $613,458,000. Much of the loss in exports in April as compared with March reflected much smaller shipments abroad of raw cotton during April. This movement last month amounted to 553,918 bales against 938,800 bales in March. It has been in excess of the quantity last mentioned for each month back to September. Shipments abroad of cotton for the seven months (October to April, inclusive), were considerably greater than for that same period in a number of years back. In April of last year cotton exports were 400,970 bales. As to value, however, the reduction in cotton shipments has been very marked. Cotton exports last month were valued at $20,650,532 against $36,511,700 in March, a decline of $15,861,200, or 43.4%. The total decline in merchandise exports for April compared with March was $19,254,000, so that shipments of all commodities other than cotton were reduced by $3,393,000 during April. Cotton exports for the 10 months of the current fiscal year have been 7,755,200 bales against 6,249,773 bales in the same period of the preceding year, an increase this year of 24.1%. In value, however, there has been a very large loss, the amount for the past 10 months of $308,139,000 comparing with $391,232,000 for the same 10 months in the year before, a reduction of 21.2%. Foreign shipments of gold in April were not greatly altered from those of March. Gold exports were $49,509,000 and imports $19,033,000, the net movement last month against the United States being $30,476,000. For the 10 months of the current fiscal year gold exports have been $795,498,000 and imports $480,999,000, the excess of exports being $314,499,000. For the same period last year gold exports were $106,426,000 and imports $289,651,000, imports being in excess of exports to the amount of $183,225,000. The indications are that gold exports for the 12 months ending with next June will approach $900,000,000 and may exceed that amount. The highest previous record for gold exports was in 1928, $560,760,000, and gold imports, 1921, $691,248,000. The silver movement abroad continues below preceding years, exports of silver last month having been $1,596,000 and imports $1,612,000. HE course of the stock market has again been unsatisfactory. Prices have moved irregularly, but with weak spells, in which sharp declines occurred in some of the specialties nearly every day of the week until Tkursday, though the fluctuations in the general market were within a narrow range. At the half-day session last Saturday the market T 3681 was soft, with especial weakness in a few active stocks like American Tel. & Tel., Consolidated Gas, and Atchison Topeka & Santa Fe. On Monday the news regarding the assassination of the Japanese Premier was a depressing feature, and Japanese bonds and the Japanese yen sufferel sharp recessions, as a rule. After an early slump. however, a rally occurred later in the day. The rally followed, apparently, mainly as a result of the covering of outstanding short commitments. On Tuesday prices again took a sharp turn downward in which many new low prices were established, though with a complete turn about again later in the day. The meeting of the Governors of the Federal Reserve banks at Washington aroused some interest, but the unemployment relief program in its various phases, being discussed in Washington, seemed to be regarded of more immediate concern, and United States Government securities displayed weakness owing to the fear of further issues of United States bonds. As a matter of fact, United States securities have been under more or less pressure all week, with important recessions in prices in many different issues, though the announcement given out with reference to the meeting of the Federal Reserve Governors on Tuesday had somewhat of a steadying effect on Government bond issues, inasmuch as it stated that open market purchases of Government securities would be continued. On Wednesday the action of the American Tel. & Tel. Co. in continuing unchanged the quarterly dividend of 21470 did not serve to prevent a sharp break in the stock of that company, and Atchison shares also displayed exceptional weakness, with Atchison general 4s likewise suffering a sharp decline on the assumption that a small grain movement was in prospect in Atchison's territory owing to the damage to wheat in Kansas and other Southwestern States traversed by the Atchison System. On the other hand, the report of the "Iron Age" that steel ingot production had increased 1% over that of the preceding two weeks to 25% of capacity was a distinctly encouraging bit of news. The close on Wednesday, however, showed numerous declines for the day. - It was not until Thursday that the tone distinctly improved, and leading industrial issues, after early weakness, enjoyed a moderate recovery, though the railroad list and the public utility shares continued under liquidation. On Friday, however, considerable irregularity in the course of values was again in evidence. The weakness in the railroad list on Thursday was due largely to the action of the Atlantic Coast Line RR. in omitting the semi-annual • dividend on the common stock. On the same day the Louisville & Nashville RR. also suspended dividend payments. As a matter of fact, dividend suspensions and dividend reductions were again of unusual importance all through the week, and did their part in keeping the market in a depressed state. On May 18 the Southern Pacific Co. definitely decided to omit dividend payment on its capital stock. At the Feb. 17 meeting of the board of directors it had been decided to defer until May further consideration of a dividend payment, but it was now found that a dividend was wholly out of the question owing to the steady shrinkage of traffic and revenue. The Chicago South Short & South Bend RR. determined to suspend the quarterly dividend on the class A $6.50 cumul. pref. stock. The Indiana Service Corp. 3682 Financial Chronicle suspended the quarterly dividend on the 7% and 6% cumul. pref. stock. The Midland United Co. suspended the quarterly dividend on the series A cony. pref. stock, and the Midland Utilities Co. suspended the quarterly dividend on the 7% and 6% cumul. prior lien and the 7% and 6% cumul. class A pref. stocks. The Crucible Steel Co. of America omitted the quarterly dividend on the 7% cumul. pref. stock, and the Crane Co. suspended payment on the quarterly dividend on its 7% cumul. pref. stock. Warner Bros. Pictures, Inc., omitted the quarterly dividend on the p.85 cumul. pref. stock. The Chesapeake Corp. decreased the quarterly dividend on common from 75c. to 50c. The American Sugar Refining Co. reduced the quarterly dividend on its common stock from $1 a share to 50c. a share. The (E. I.) du Pont de Nemours & Co. reduced its quarterly dividend on common from $1 a share to 75c. a share. The International Salt Co. reduced its quarterly dividend on common from 50c. a share to 37/ 1 2c. a share, after having the previous quarter reduced from 75c. a share to 50c. a share. The Mergenthaler Linotype Co. reduced its quarterly dividend on common from 75c. a share to 40c. a share, after having the previous quarter reduced its dividend from $1.50 a share to 75c. a share. Of the stocks dealt in on the New York Stock Exchange, no less than 359 fell to new low levels for the year during the current week; only seven stocks established new high levels. Call loans on the Stock Exchange again showed no deviation from the 2/ 1 2% rate which has been maintained for so long. The volume of trading has continued very light, with Monday the only day when the transactions reached or exceeded a million shares. At the halfday session on Saturday last the sales on the New York Stock Exchange were 600,010 shares; on Monday they were 1,306,700 shares; on Tuesday, 932,894 shares; on Wednesday, 683,950 shares; on Thursday, 675,280 shares, and on Friday, 767,310 shares. On the New York Curb Exchange the sales last Saturday were 79,875 shares; on Monday, 150,845 shares; on Tuesday, 121,150 shares; on Wednesday, 107,135 shares; on Thursday, 104,175 shares, and on Friday, 86,705 shares. As compared with Friday of last week, prices are again quite generally lower. General Electric closed 1 2 on Friday of last yesterday at 131/ 4 against 13/ week; North American at 19% against 22½; Stand4; Pacific Gas & 8 against 131/ ard Gas & Elec. at 111/ 2; Consolidated Gas of 1 2 against 251/ Elec. at 21/ N. Y. at 457 8; Columbia Gas & Elec. / 8 against 471/ at 7/ 1 2against 8; Brooklyn Union Gas at 67 against 4 against 6%; 681/ 2; Electric Power & Light at 51/ Public Service of N. J. at 41 against 42½; Inter1 2 against 17; J. I. Case national Harvester at 17/ Threshing Machine at 191/ 4 against 20%; Sears, 4; Montgomery Roebuck & Co. at 17% against 161/ 4 Ward & Co. at 61/ 8 against 6%; Woolworth at 291/ against 305 / 8; Safeway Stores at 43% against 43%; % against 18%; Western Union Telegraph at 193 2 against 951/ American Tel. & Tel. at 951/ 2; Inter/8; American national Tel. & Tel. at 3% against 47 Can at 38 against 36%; United States Industrial Alcohol at 157 / 8 against 171%; Commercial Solvents 1 2 against 7, 4 against 53%; Shattuck 8z Co. at 6/ at 51/ and Corn Products at 321/2 against 33. Allied Chemical & Dye closed yesterday at 53% 8 on Friday of last week; E. I. du Pont against 521/ May 21 1932 de Nemours at 29/ 1 2 against 271%; National Cash Register at 8% against 87 / 8; International Nickel at 5 against 5; Timken Roller Bearing at 14 ex-div. against 13½; Mack Trucks at 13 against 127 /8; Yellow Truck & Coach at 17 /8 against 178; Johns-Manville at 113 % against 107 / 8; Gillette Safety Razor at 141/ 4 against 137 / 8; National Dairy Products at 193 / 4 against 203 %; Associated Dry Goods at 3% against 3/ 1 2; Texas Gulf Sulphur at 16% against 17; Freeport Texas at 131/ 2 against 14%;American & Foreign Power at 2-V8 against 3; General American Tank Car at 127 /8 against 12/ 1 2; United Gas Improvement at 15/ 1 2 against 161%; National Biscuit at 331/ 8 against 32; Coca-Cola at 943 / 8 against 917 / 8; Continental 8 against 22; Eastman Kodak at 421/ Can at 221/ 8 1 2 against 11%; against 42; Gold Dust Corp. at 11/ Standard Brands at 11 against 111/ 2; Paramount /8 against 3; Kreuger & Toll at 1/ Publix Corp. at 17 8 8; Westinghouse Elec. & Mfg. •at 241/ against 1/ 4 8; Drug, Inc., at 341/ 8 against 357 . against 231/ / 8; Columbian Carbon at 19 against 18½; Reynolds Tobacco B at 311/ 8 against 32; Liggett & Myers class B 1 2 against 131/ 1 2; Lorillard at 12/ at 44 against 47/ 8, 4. 4 against 611/ and American Tobacco at 581/ The steel shares have held up fairly well. United 4 States Steel closed yesterday at 28% against 271/ % on Friday of last week; Bethlehem Steel at 123 against 12½; Vanadium at 7 against 63%, and Republic Iron & Steel at3 against 3. In the auto group 4 Auburn Auto closed yesterday at 32% against 321/ on Friday of last week; General Motors at 10% 1 2 against 81/ 8; Nash against 101%; Chrysler at 6/ 8 Motors at 101 / 4 against 10½; Packard Motors at 21/ 8;Hudson Motor Car at 37 against 21/ /8 against 4, and Hupp Motors at 2 against 2. In the rubber group Goodyear Tire & Rubber closed yesterday at 8 against 97 / 8 on Friday of last week; B. F. Goodrich at 31/ 4 against 3%; United States Rubber at 2% against 31/ 8, and the preferred at 47 / 8 against 51/ 8 bid. The railroad shares have continued depressed. Pennsylvania RR. closed yesterday at 9% against 97 /8 on Friday of last week; Atchison Topeka & Santa Fe at 29 against 31/ 1 2; Atlantic Coast Line at 11 against 11%; Chicago Rock Island & Pacific at 2% against 23%;New York Central at 11% against 111/ 4; Baltimore & Ohio at 5/ 1 2against 51/ 8; New Haven at 8% against 93%; Union Pacific at 42 against 45%; Southern Pacific at 8/ 1 2against 10; Missouri Pacific at 2 bid against 21/ 4; Missouri-Kansas-Texas at 2 against 2½; Southern Railway at 31/ 4 against 4; Chesapeake & Ohio at 147 / 8 against 14; Northern Pacific at 8 against 8, and Great Northern at 8/ 1 2 against 8%. The oil shares have ruled pretty steady. Standard Oil of N. J. closed yesterday at 25 against 237 / 8 on rriday of last week; Standard Oil of Calif. at 18/ 1 2 / 8; Atlantic Refining at 11% ex-div. against 187 against 107 /8; Texas Corp. at 11 against 10%; Phillips Petroleum at 41/ 8 against 33%, and Pure Oil at / 8. 37 /8 against 37 The copper stocks, while ruling at extremely low figures, have continued weak. Anaconda Copper / closed yesterday at 47 8 against 5 on Friday of last week; Kennecott Copper at 6% against 67 /8; Calumet & Hecla at 2 against 2; American Smelting & Refining at 81/2 against 8½; Phelps Dodge at 43% against 4%, and Cerro de Pasco Copper at 61/ 4 against 6. Volume 134 Financial Chronicle • 3683 NSETTLED stock market sessions were reported recovering a good part of the losses sustained in the this week on the exchanges in all the important two previous sessions. The advance was attributed European financial centers. The markets at London, largely to greater confidence in the foreign policies Paris and Berlin were closed Monday, for the Whit- of M. Herriot, who is likely to assume a leading role suntide holidays. When trading was resumed Tues- in the next French Cabinet. Bank of France and day, a slow and modest liquidating movement was Suez Canal shares moved forward rapidly, while started in all centers by discouraged holders. Buyers others followed in a more sedate stride. The tone were chary and prices sagged in most departments yesterday was uncertain, with most issues slightly of the several markets. Rallies were not lacking, lower. however, and the net declines for the week were not The Berlin Boerse was very quiet, Tuesday, and great. There were no perceptible indications of small orders were sufficient to influence the movegeneral trade and industrial improvement in any of ment of stocks. Execution of a small accumulation the leading European countries this week, and the of orders held prices steady at the start, but a declinsecurity markets clearly marked time pending defi- ing tendency soon set in and most issues showed nite indications of the trend. Much interest was small net losses for the session. The textile group occasioned by the publication of the April foreign showed better results than others. In a further dull trade figures, which contained an encouraging ele- session, Wednesday, prices again showed a tendency ment in the case of Great Britain, but only discourag- to decline. The unsatisfactory German foreign trade ing features in the cases of France and Germany. A figures for April caused some selling, but this was heavy decrease appeared in the British imports for confined chiefly to professional circles. Mining the month, as compared with April of last year, but stocks were in demand for a time, but the gains were exports showed only a very slight gain and this was not maintained. Dealings Thursday were again not regarded as entirely satisfactory. French foreign marked by dullness and a declining tendency. Liquitrade figures for last month declined heavily, while dation on a small scale sufficed to upset the market the German totals reflected a rise in imports and a and the downward movement gained momentum as sharp drop in exports. The monetary situation re- the session progressed. Movements yesterday were mains the chief encouraging feature in all markets, very small, but chiefly toward lower levels. funds being plentiful and cheap in the leading ECRETARY of State Henry L. Stimson arrived centers. at New York last Saturday on his return from The London Stock Exchange was quiet, but firm Geneva with only a qualified belief in the success of when business was started Tuesday morning, but irregularity developed in several important sections the General Disarmament Conference, but with a of the list during the day. British funds again rep- strong hope that an agreement may be reached which resented the most cheerful department of the market, will contribute materially to the preservation of these premier issues 'advancing on indications of world peace. This, it is reported from Washington, cheaper money. British industrial issues were some- was the substance of the impressions conveyed by what uncertain, with changes small. The trans- Mr. Stimson to President Hoover, Monday. It was Atlantic list was marked down to conform with the remarked in a Washington dispatch to the New York lower quotations reported from New York. In Wed- '"Times" that the Secretary found the European • nesday's dealings, almost all groups of issues de- powers in substaiittial agreement with American clined on the London market. British Government policies in the Far East, and that reparations and securities were down on profit-taking. Industrial war debts were not discussed in the course of the stocks were dull and slightly lower quotations ap- visit. Mr. Stimson was thus able to devote his attenpeared in all groups, with the exception of brewery tion chiefly to disarmament. He holds the view, the issues. The international group was again soft. The report added, that real progress in disarmament tone Thursday was again dull and prices declined must be preceded by a clearing of the European until near the close, when a modest rally erased some political skies. Since the national elections in the of the losses. British funds showed small recessions, leading countries are now over, it is hoped by the and industrial stocks also resumed their decline. Secretary that real progress will be possible at the Brewery shares remained an exception, these issues conference beginning next'month. moving slowly but steadily forward. The internaIn a statement issued by Mr.Stimson on his arrival tional list steadied in the expectation of a better here last Saturday, it was remarked that the visit trend at New York. British funds were steady afforded much more direct and satisfactory discusyesterday, but other departments of the market sions of disarmament problems than would othershowed small losses. wise have been possible. "I return," the Secretary Dealings on the Paris Bourse were started, Tues- added,"with a very strong impression of the earnest day,in a pessimistic atmosphere, and prices declined and general feeling throughout the conference that steadily. The weakness was general, but the leading it must not be allowed to fail in producing a maissues, such as Bank of France and Suez Canal terial contribution to the cause of disarmament and shares, showed the greatest losses. Although reces- peace. The problem with which these men are consions also appeared in the foreign list, these issues fronted,is most difficult and complex, and the views resisted the declines better than French stocks. At as to how the common objective may be attained are the opening Wednesday, a brief rally was noted on diverse and sometimes conflicting, but there is no the Bourse, but prices soon resumed their downward doubt as to the sincerity of their purpose to succeed." course and in some instances levels were reached not The formal work of the Conference has been interfar from the low records of last December. Railway rupted, but will be resumed next month, Mr. Stimson stocks and bank shares suffered, the largest reces- pointed out. Technical committees are continuing sions, while issues of oil and gold mining corpora- their discussions, in the meantime. Disarmament questions were debated with fervor tions were comparatively steady. A substantial and general upward reaction followed, Thursday, stocks by the Council of the League of Nations, soon after U S 3684 Financial Chronicle this body assembled at Geneva early this week. The formal approval of the Council was registered, Wednesday,of rules for League supervision of the armies and navies of disputants when war threatens. It was promptly indicated by Joseph Paul-Boncour, President of the Council and delegate of France,that his country would ratify the convention embodying the rules. In further discussion of disarmament, Wednesday, Viscount Cecil, of Great Britain, earnestly urged the adoption of practical proposals by the General Disarmament Conference. He declared that all weapons should be abolished which have been forbidden to Germany as aggressive. These, he added, would include warships of more than 10,000 tons, submarines, tanks, mobile guns of over 105 millemeters in calibre, and all military and naval aircraft. A strong plea was likewise made by Viscount Cecil for the French plan of internationalizing civil aviation. Lord Cecil's views, however, may not represent those of his Government, as they were expressed at a meeting of the Geneva International Clhb. illiPENDING readjustments of European affairs 1 give a peculiar importance to views on French foreign policy, expressed Thursday by Edouard Herriot, leader of the Radical-Socialist party in the Chamber of Deputies. In a statement made to the diplomatic corps in Paris, M. Herriot indicated plainly that the Government which will go before the new Chamber early next month will differ but little in that respect from the present Tardieu regime. The leader of the Radical-Socialists is expected to become either Premier or Foreign Minister in the new Cabinet which is to succeed that of M. Tardieu, already resigned. His position will depend on the coalition which is finally arranged. At a reception for foreign diplomats, held by M. Herriot and President Albert Lebrun, it was announced that France has a most earnest desirelto work in concert with other countries for the prompt settlement of serious problems. The active and disinterested cooperation of all Governments is necessary in the present difficult circumstances,it was admitted. M. Herriot also made clear, a Paris dispatch to the Associated Press said, that he favors the established French policies on war debts, reparations and disarmament. He approved, specifically, a speech by M. Joseph Paul-Boncour in which it was proclaimed that French policy remains national security, arbitration and disarmament, in the order named. Support was also extended the doctrine of M. PaulBoncour on reparations, which is firstly, to maintain European solidarity, and secondly, to permit no disturbance in the equilibrium between credits and debits at the expense of the French taxpayer. The Tardieu plan for an international police force under the control of the League of Nations will be the cardinal point in the program of the French delegation at Geneva, it was indicated. GNORING repeated warnings from London, the I members of the Dail Eireann gave final approval Thursday to President Eamon de Valera's bill removing from the Irish Free State Constitution the oath of allegiance to the British Crown. The bill was approved in the lower house of the Irish Parliament by a vote of 77 to 69, and amendments offered by the Opposition were defeated by the same vote. May 21 1932 In a final statement on the measure, Mr. de Valera asserted it was in the interest of the Irish Free State that the oath should be removed, whether the Free State should be coequal with the Dominions or not. The Government, he added, was carrying out the will of the Irish people, without any violation of the Anglo-Irish treaty. The bill was promptly referred to the Irish Senate, which will consider it next Wednesday. Formidable opposition is expected in the upper house, but the Senate cannot exercise a final veto. It may refuse to pass the measure for 18 months, and in that case the Dail may again pass the bill. The attitude of the London Government on this measure has been made clear on several occasions by J. H. Thomas, Secretary for the Dominions. Mr. Thomas informed a questioner in the House of Commons last month that examination of the bill "confirms the general view expressed to Mr. de Valera on April 19 that what is actually raised by him is nothing less than repudiation of the settlement of 1921 as a whole." In reply to a further question, put last week, Mr. Thomas stated that if the bill is enacted, Great Britain will retaliate by cutting off without negotiation the tariff advantages now enjoyed by the Free State in the Irish market. Irish tariff preferences, in that case, would cease on Nov. 15 next, when all existing Dominion preferences under the British Import Duties Act must be renewed. "It would be unreasonable to expect the British Government to enter negotiations for further agreements with a Government which has thus repudiated an agreement already entered into," Mr. Thomas declared. N AUSTRIAN transfer moratorium is foreshadowed in a note addressed by the Vienna Government to the League of Nations, and made public late last week. The action threatened by the Government would be equivalent to a suspension of service on most external loans, and perhaps on all of them. Asserting that the country is facing bankruptcy while the great Powers debate the political possibilities of a Danubian Union, the note stated that further months cannot be allowed to elapse without the beginning of a program corresponding to the urgent needs of Austria. To this statement was appended a warning that a transfer moratorium must be declared, unless the League has an alternative solution to offer. The Vienna Government proposes, in addition, to begin direct negotiations with its neighbors for preferential tariff and other agreements. This suggestion relates, it is assumed, to the negotiations with Germany for agrarian and industrial preferences, which were abandoned when stern opposition was registered by France somewhat more than a year ago. In the note of the Austrian Government, regret was expressed over the League failure to act on the report of its Financial Commission regarding Austria. It was admitted that suspension of service on foreign loans would be highly objectionable unless the action were recognized as justified by the League and by foreign opinion. But it would be equally objectionable, the note argued, to allow dissipation of the note issue cover, most of which has been borrowed from the Bank of England and the Bank for International Settlements. The note concludes with a plea that the League and its Financial Commission offer counsel in this dilemma. A Volume 134 Financial Chronicle ROPOSALS for economic co-operation among the Danubian States formed one of the principal subjects of discussion at this year's conference of the Little Entente, held at Belgrade, May 13 to 15. The Foreign Ministers of the three countries agreed, dispatches said, that remedial measures must be applied immediately in order to relieve the desperate plight of some Danubian and Southeastern European nations. The bristling difficulties of the problem were again illustrated, however, by the fact that the meeting brought few practical results. Foreign Minister Edouard Benes of Czechoslovakia, and Foreign Minister Ghika of Rumania, arrived at the Jugoslavian capital early May 13, and promptly began their conversations with Foreign Minister Voyislav Marinkovitch. In an official communication issued after the conclusion of the gathering last Sunday, the three Ministers condemned the present tendency of the economic system, but suggested no remedies. It was recalled in the statement that the Little Entente had agreed on several previous occasions that "superindividualistic nationalism" produces unfortunate consequences. Although declining to take the initiative in devising remedies, the three countries stand ready to cooperate in any proposed solution, it was said. The Tardieu plan for preferential tariff agreements among the Danubian States received favorable comment, and the conference also urged that financial aid be extended to distressed countries. It was indicated that specific suggestions for the financial rehabilitation of the Danubian States may result at a later date from the discussions initiated at Belgrade. P HE dread weapon of political murder was again employed in Japan, last Sunday, when a band of militaristic terrorists shot and killed Premier Ki Inukai, the 77-year-old head of the Seiyukai party Cabinet. This occurrence was only one of a series of terroristic acts committed by the assailants during the day. Several groups, numbering a score all told, attired themselves in military and naval uniforms and rode about Tokio in automobiles. An attempt was made to assassinate Count Nobuaki 3Iakino, Lord Beeper of the Privy Seal, and one of the closest advisers of Emperor Hirohito. A bomb thrown at his residence damaged the structure, but failed to injure the political leader. Bombs were thrown at a number of Government buildings and at the quarters occupied by the Bank of Japan and the Mitsubishi Bank. Shots were fired at the Metropolitan Police Station as the assassins rode past. It was indicated in Tokio dispatches and in an official report received at Washington from Edwin L. Neville, American Charge d'Affaires, that some 18 attackers had been apprehended or had given themselves up after this series of outrages. Mr. Neville reported that they claimed to be members of the Young Officers' Association, who are opposed to weakness and corruption in government, and to capitalism. Premier Inukai was shot without hesitancy and without any sign of remorse by the five assassins who arrived at his residence last Sunday afternoon. They forced their way past policemen and guards, injuring several, and entered an inner room where Mr. Inukai was conversing with a guest. The Premier was shot twice in the head, and he died early Monday morning. News of the developments spread T 3685 swiftly through Tokio and caused much apprehension. It was at first believed the attacks might be part of a widespread plot by a powerful political organization, which aimed at a coup d'etat. Such thoughts were discounted, however,when it appeared that handbills had been left in several places by the terrorists expressing bitter dissatisfaction with the political parties and the handling of both internal and foreign affairs. These sufficed to identify the terrorists with a rather small group of extremist patriots. "Appearances suggest," a dispatch to the New York "Times"remarked,"that the acts are those of one-idea men _rather than a well prepared plot. The fact that the perpetrators voluntarily surrendered shows them to have been motivated by the old Japanese idea of registering a protest at the cost of one's life against conditions which have become intolerable. The real cause of this outburst of political crime must be sought in the inflamed nationalism of the past six months, coupled with economic stress and the general disgust at the politicians' ineptitude and corruption." There have been a number of political murders in Japan recently. Within the past 18 months Premier Hamaguchi, Finance Minister Inouye and Baron Takuma Dan, a leading industrialist, have been assassinated, and an attempt also was made on the life of Emperor Hirohito. The unsuccessful assault on the Emperor, however, was attributed to Korean malcontents. A Cabinet crisis was, of course, precipitated by the assassination and the other acts of terrorism. Two hours after the death of Premier Inukai, the Emperor appointed Korekiyo Takashashi, the aged Finance Minister,in his place. The Cabinet resigned Monday morning, and political consultations were promptly started for the formation of a new Government.. Prince Saionji, last surviving member of the Genro, or Elder Statesmen, proceeded to Tokio to advise Emperor Hirohito, and he is expected to remain at the Emperor's side until the situation is stabilized. An order was issued late Monday commanding the Cabinet to remain at their posts for the time being. Stock and silk exchanges throughout Japan suspended business, Monday, but there was no disorder anywhere. The Seiyukai or Government party leaders agreed, after several meetings, upon the appointment of Kisaburo Suzuki, Home Minister, to the leadership of the party. Ordinarily this would mean elevation to the Premiership, but leaders of the army gave notice that they would refuse to support a Cabinet based on political parties. The militarists, who are not affiliated with any party in Japan, demanded the formation of a National Cabinet, and further consultations were clearly required. After some hesitation the Seiyukai leaders agreed, Wednesday, to the formation of a coalition regime of the Seiyukai and Minseito parties. There was some question, however, whether the Emperor would appoint Mr. Suzuki as Premier, or would request Baron Iiiichiro Hiranuma, Vice-President of the Privy Council, to form a Government. EMPORA.RY abandonment of the gold standard by Peru was approved by the Congress of the country, Tuesday, when a measure relieving the Central Bank of its obligation to exchange notes for gold was adopted by a vote of 62 to 20. Directors of the Central Bank decided last Saturday to suspend the sale of sterling and dollar drafts, and a drastic fall in the international value of the sol T 3686 Financial Chronicle May 21 1932 quickly followed. It was announced that abandonHE Bank of England statement for the week ment of the gold standard would be effected "for a ended May 18 shows an increase in bullion temporary period," and that the Finance Minister, of £2,037,605, reflecting the purchase by the Bank Ignacio Brandariz, would introduce a Government of £2,014,000 of gold in the London open market bill for this purpose. The measure approved Tues- during the period. Since circulation expanded day provides for re-establishment of the gold stand- £126,000,000, reserves rose £1,912,000. The total ard, when, in the opinion of the directors of the gold held now amounts to £123,522,501 as compared Bank, the time for such action is appropriate. Ap- with £151,205,686 a year ago. Public deposits inproval,of the Finance Minister must also be obtained. creased £7,708,000, while other deposits fell off Under the new measure, an Associated Press dis- £3,989,493. Of this latter £3,427,524 was in bankers' patch from Lima reports, the Central Bank may buy accounts and £561,969 in other accounts. The ratio bar gold, gold coin and foreign drafts independently of reserve to liability is at 31.15% in comparison of the gold backing of the sol. The reorganized Cen- with 30.55 last week and 56.48% in the same week tral Bank of Peru began operating in April, last in 1931. Loans on Government securities increased year, along lines proposed by Dr. Edwin W. Kem- £809,000 and those on other securities £1,003,134. merer, of Princeton University. The gold reserve The latter consists of discounts and advances which at that time was approximately 66,000,000 soles, but decreased £406,715 and securities which increased the-demand for drafts on London and New York £1,409,849. The discount rate is unchanged from diminished the reserve in the last year to 42,000,000 23/2%, which rate was installed a week ago. Below soles. we show a comparative statement of the different items for five years: BANK OF ENGLAND'S COMPARATIVE STATEMENT. THE Bank of Bulgaria on Tuesday (May 17) re1930 1932 1931 1929 1928 1 2%, duced its discount rate from 9-1/9% to 8/ May 20. May 21. May 22. May 18. May 23. and on Thursday the National Bank of Norway Circulation a358,438,000 351,540,860 354,694,062 362,363,774 135,065,485 21,426,000 14,966,095 21,177,728 15,299,748 13,095,479 1 2%. Rates are 11% in Public deposits reduced from 5% to 4/ 107,219,991 90,659,369 95,071,654 92,822,000 100,517,836 deposits 1 2% in Bulgaria; 7% in Austria, Rumania, Other Greece;8/ Bankers accounts_ 74,602.046 56,633.516 57,836,199 57,507,302 Other accounts._ _ 32,617.945 34,025,853 37,235,455 35,314,698 1 2% in Spain and in FinPortugal and Lithuania; 6/ Govt. securities_ _ _ 72,944,906 31,879,684 49,787,629 38,486,855 29,582,427 land; 6% in Hungary, Danzig, and in Colombia; Other securities _ 33,387,561 31,845,895 20,480,300 '27,035,158 54,924,493 5,956.300 6,837,628 6,915,678 Disct. & advances 11,689,473 5.84% in Japan; 51/2% in Estonia and in Chile; 5% 21,698,088 25,889,595 13,642,674 20,119,480 Securities 59,664,826 40,083,000 63,749,487 60,383,523 46,872,997 & coin Reserve notes Denin Germany, Italy, India, Czechoslovakia and Coin and bullion_ _ _ 123,522,501 121,205,686 158,443,549 162,747,297 162,187,482 in in Norway; 31 / 2% . mark; 4/ 1 2% in Sweden and Proportion of reserve 56.48% 3115%. 54.82% 55.84% to liabilities 413% Belgium and in Ireland; 21/2% in England, France Bank 2K% 2K% 3% % rate 555% rand •in. Holland, and. 2% in Switzerland. In the a On Nov.29 1928 the fiduciary currency was amalgamated with Bank of England London open market discounts for short bills on note issues adding at that time £234,199,000 to the amount of Bank of England 4% on notes outstanding. 8@l1/ • Friday were 11/ 8@1/ 1 4% as against 11/ 4% for three Friday of last week, and 1 3/16@11/ HE Reichsbank's statement for the second guar4@1 5/16% on Friday of months' bills as against 11/ ter of May shows an increase in gold and last week. Money on call in London on Friday was bullion of 374,000 marks. The Bank's bullion now 7 /87 0.1 At Paris the open market rate continues at stands at 851,484,000 marks, which compares with 2%. 17 / 8%, and in Switzerland at 11/ 2,370,289,000 marks at the corresponding period a • year ago and 2,577,665,000 marks two years ago. rr'HE Bank of France statement for the week The items of reserve in foreign currency, silver and • May 13 records a further increase in other coin, notes on other German banks and other ended gold holdings, this time of 311,660,240 francs. The assets record increases of 5,938,000 marks, 39,078,000 Bank's gold now aggregates 78,651,492,256 francs, marks, 1,449,000 marks and 3,782,000 marks, re,in comparison with 55,628,047,909 francs a year spectively. Notes in circulation show a decline of ago and 43,187,319,778 francs two years ago. Credit 67,919,000 marks, reducing the total of the item to balances abroad increased 60,000,000 francs, while 3,922,946,000 marks. Circulation last year amounted • bills bought abroad decreased 527,000,000 francs. to 3,909,909,000 marks and the year before to Notes in circulation show a contraction of 632,- 4,196,275,000 marks. No change is shown for deposits 000,000 francs, reducing the total of notes outstand- abroad and in investments. Decreases appear in ing to 81,750,444,865 francs. Total circulation last bills of exchange and checks of 140,676,000 marks, year was 77,309,848,335 francs and the year before in advances of 8,573,000 marks, in other daily 71,130,689,425 francs. French commercial bills • maturing obligations of 8,919,000 marks and in other discounted and creditor current accounts rose 118,- liabilities of 21,790,000 marks. The proportion of • 000,000 francs and 463,000,000 francs, while ad- gold and foreign currency to note circulation rose to vances against securities declined 75,000,000 francs. 25.3% from 24.7% the last quarter. A year ago The proportion of gold on hand to sight liabilities is the item was 65%, and two years ago 68.5%. A now 71.91%, as compared with 55.83% last year comparison of the various items for three years is and 50.79% the previous year. Below we furnish a furnished below: REICKSBANK'S COMPARATIVE STATEMENT. comparison of the various items for three years: T T • BAKK OF FRANCE'S COMPARATIVE STATEMENT. Status as of Changes May 13 1932. Mae 15 1931. May 16 1930. for Week. Francs. Francs. Francs. Francs. 55,628,047,909 Gold holdings_ ...Inc.311,660,420 78,651,492,256 5,574,436,816 43,187,319,778 6.896,477,347 4,654,468,504 60,000.000 abr'd_Inc. Credit bals. French commercial 3,551,364,444 4,775,590,055 4,588,251,488 bills discounted_Inc. 118,000,000 6,232,903,500 2,587,809,410 18,709,084,018 Bills bought abr'd_ Dec. 527,000,000 2,768,968,806 2,840,568,476 2.678,029.025 Adv. agt. seem_ _Dec. 75,000,000 81.750,444,865 77,309,848,335 71,130,689,425 Note circulation_ _Dec. 632,000,000 27,627,774,812 22,319,576,954 13,899,384,419 Cred. curr. accte__Inc. 483,000,000 Properties of gold on hand to sight 50.79% 55.83% 71.91% 0.40% Inc. liabilities Includes bills discounted abroad. a Includes bills purchased in France. b Chances for Week. Assets— Reichsmark:, Gold and bullion Inc. 374,000 Of which depos.abed.. No change Res've in for% cum _ _Inc. 5,938,000 Bills of exc.& checksDeo. 140,676,000 Silver and other coin_ _Inc. 39,078,000 Notes on oth.Ger.bks_Inc. 1,449,000 Advances Dec. 8,573,000 Investments_____ No change Other assets Inc. 3,782,000 Liabilities— Notes in circulation_ _Deo. 67,919,000 Oth.dally matur.obllg.Dec. •8,919,000 Other liabilities_ ...Des. 21,790,000 Propor. of gold & torn curr.to note circu'n_Inc. 0.6% May 15 1932. May 15 1931. Mae 15 1930; Reichsmarks. Reichsmarks. Reichsmark,. 851,484,000 2,370,289.000 2,577,865,000 94.967,000 207,638,000 149,788,000 139,192,000 170,803,000 297,819,000 3,015,040,000 1,417,420,000 1,584,886,000 354,071,000 186.171,000 156,119,000 17,956,000 18,549,000 7,272,000 69,067,000 102,401,000 180,833,000 93,045,000 361,561,000 102,681,000 821,083,000 491,195,000 615,471,000 3,922,946,000 3,909,909,010 4,196,275,000 353,917,000 279,419,000 556,035.000 690,619,000 261,282,000 165,191,000 25.3% 65% 68 5% Volume 134 Financial Chronicle 3687 HERE have been no changes this week in the HE New York money market remained quiet and rediscount rates of the Federal Reserve banks. Reserve open easy this week, with Federal following is the schedule of rates now in effect The influence dominating the market operations so much that little else mattered. The announcement by the for the various classes of paper at the different Federal Reserve Board, Tuesday, that purchases of Reserve banks: Government securities will be continued in amounts DISCOUNT RATES OF FEDERAL RESERVE BANKS ON ALL CLASSED AND MATURITIES OF ELIGIBLE PAPER. to be determined from time to time was accepted as Rate in an assurance of further pressure for ease in money. Date Effect on Previous Federal Boum Bank. May 20. Established. Rats. Rates for all classes of accommodation remained 3% Oct. 17 1931 Boston 234 unchanged, in these circumstances, at the phenomi- New York 3 Feb. 26 1932 334 Oct. 22 1931 3 334 Philadelphia nally low levels current during recent weeks. Call Cleveland Oct. 24 1931 3 334 334 Jan. 25 1932 4 Richmond loans on the New York Stock Exchange held at Atlanta Nov. 14 1931 3 334 Oct. 17 1931 234 334 2/ 1 2% for all transactions, whether renewals or new Chicago Oct. 22 1931 334 234 St. Louis 334 4 Sept. 12 1930 Minneapolis loans. In the unofficial outside market funds were Kansas City 334 Oct. 23 1931 3. 834 Jan. 28 1932 4 • Danas available every day at 11/2%, or a concession of a San Francisco Oct. 21 1931 234 334 full 1% from the official rate. Time loans also were steady. Although funds were available in treTERLING exchange is quiet, more inactive than mendous oversupply, the demand for accommodation in several weeks, but fluctuating within comon stock market collateral continued to dwindle. paratively narrow limits. On Saturday last and on Brokers' loans, as reported by the Federal Reserve Monday there was no market in London and in Bank of New York for the week to Wednesday night, many of the European centres owing to the Whitdeclined $24,000,000, to an aggregate of only $414,- suntide holidays. The range this week has been 000,000. Gold continues to flow outward on a heavy between 3.65M and 3.68k for bankers' sight bills, scale, the movements for the same weekly period con- compared with 3.683/b and 3.6531 last week. The sisting of export's of $43,059,000, an increase in ear- range for cable transfers has been between 3.6531 marked stocks of $3,608,000, and imports of and 3.68/, compared with 3.68% and 3.653 % a $2,002,000. An ,issue of $75,000,000 Treasury dis- week ago. Although sterling and all the European count bills, due in 91 days, was sold Monday at an exchanges are still firm with respect to the dollar, on balance rates have worked this week more in favor average discount of only 0.43%. of United States currency, due in large part to the inactivity of the market in the early part of the week, EALING int detail with call loan rates of the but also to less nervousness over the dollar on the Stock Exchange from day to day, 2/ 1 2% was part of European bankers. The outstanding event the rate ruling all through the week, both for new of the week was the purchase on Saturday last of loans and renewals. In time money there has been £2,012,665 of bar gold by the Bank of England, its no change in the market,and dealers can see nothing first big purchase of gold since abandonment of the hopeful while other classes of offerings remain at gold standard on Sept. 21. This was not open martheir present low rates. Rates are quoted nomiket gold, and London bullion dealers profess ignorance nally at 11/2% for all dates. Prime commercial of the source, but suggest that the metal had been paper has been in sharp demand, but the available accepted by the Treasury on exchange accounts. supply continues small and dealers are unable to Since the suspension of gold payments by Great Britsupply all of their customers. Quotations for choice ain the Bank of England has bought none of the names of four to six months' maturity are 23 / 4@3%. Transvaal gold arriving weekly in London. Names less well known are 31/ 2%. On some very Prior to the abandonment of gold payments the high class 90-day paper occasional transactions at Bank frequently bought up all the arriving gold, 23 / 4% were noted. amounting sometimes to £1,000,000 or more, though on occasion the Continental markets managed to RIME bankers' acceptances have been in good secure the bulk of the South African arrivals. The demand during the present week, but sales price in sterling at which the Bank of England can have been greatly restridted due to the shortage of buy gold is stipulated in the Bank Act, and purchases high class paper. Rates are unchanged. The quota- of the metal in the open market made by the Bank tions of the American Acceptance Council for bills prior to September were effected at a price averaging up to and including three months are 1% bid, 7 /8% around 84s. 10d. per fine ounce. Last week gold asked; for four months, 11/8% bid and 1% asked; sold in the London open market at from 112s. 10d. for five and six months, 1%7 0 bid and 11/ 4% asked. to 113s. 3d., and this week the price has been from The bill buying rate of the New York Reserve Bank 112s. 11d. to 113s. 7d. At these prices it was supis 2/ 1 2% for all maturities. The Federal Reserve 'posed that the Bank of England could not make banks show further decrease in their holdings of purchases in the open market. Hence the present acceptances, the ,total having fallen from $42,719,000 accumulation, bankers believe, represents some to $40,643,000. ITheir holdings of acceptances for secret transaction between the Bank and the British foreign correspondents also further decreased, fall- Treasury in connection with the exchange stabilizaing from $270,741,000 to $239,948,000. Open market tion account, for which Parliament recently approrates for acceptances are as follows: priated £150,000,000 for the purpose of controlling the movement of sterling exchange. Bankers are SPOT DELIVERY. —180 Dews— —150 Days— —120 Days — inclined to regard the purchase as a positive indicaBid. Asked. BM. Asked. Bid. Asked. 134 134 134 134 1% 1 Prime eligible bills tion that England is preparing to lead the world back —90Days— —80Days— —30Daps— Bid. Asked. Asked. Md. Asked to the gold standard. As pointed out here last week, 1 74 1 1 34 34 Prime eligible bills according to the estimates of conservative authorities, FOR DELIVERY WITHIN THIRTY DAYS. 134% bid Eligible member banks the British Treasury has accumulated ,between 11,1% bid Eligible non-member banks T T S D P 3688 Financial Chronicle $60,000,000 and $70,000,000 of gold since March. Bankers believe that, including the metal bought on Saturday, the Bank of England and the British Treasury have now a hidden gold reserve of approximately £16,000,000, all of which can be turned over to the Bank of England for inclusion in its reserves at any time. Therefore the Bank of England's position, so far as gold reserves are concerned, must be considered much stronger than the weekly statement of the Bank would indicate. Subsection 1 of the Gold Standard (Amendment) Act, 1931, states that "It shall be lawful for the Treasury to make, and from time to time vary, orders authorizing the taking of such measures in relation to the exchanges and otherwise as they may consider expedient for meeting difficulties arising in connection with the suspension of the gold standard." Under this provision the Treasury in cooperation with the Bank of England has been active in building up exchange reserves ever since September and through these means was successful in making final payments on Bank of England and Treasury credits obtained in New York and Paris. There still remains roughly $100,000,000 outstanding in France in the form of British Treasury one-year notes which were sold directly to the French public and which could be retired prior to maturity only through direct purchases in the market. A small amount of these notes, it is understood, has already been bought and the British authorities have sufficient funds on hand for the retirement of all the notes on maturity. The official British balances in New York are understood to have been maintained at around $160,000,000 for the past several weeks. These balances are obtained through official sales of sterling made to prevent the sterling rate from appreciating too rapidly.• The British authorities have on numerous occasions intervened in the market in this manner. According to well informed circles in New York and Paris the British authorities have also actually bought sterling when too sharp a downward movement threatened. It will be recalled that on Thursday of last week the Bank of England reduced its rate from 3% to 23/2%, making the fourth reduction in the rate since Feb. 18. This cut in the official rediscount charge has given great satisfaction to bankers in all centers. It has been exceptionally gratifying to the London market. The lower Bank rate followed a continuous fall in London open market money rates and increasing abundance of loanable funds. It is believed in London that there will soon be a still further reduction in the Bank of England rate, possibly to 13/2%. The feeling in the market is general that confidence in the British future has been almost completely regained.' Money rates are still easing in London. Call money against bills on Thursday was easy at 1%, against 1@13.i% on Wednesday. Two and three-months' bills continued unchanged from Wednesday at 13/8@131%; four-months' bills 11 / 1@1 5-16%, unchanged; six-months' bills at 1 8@ 13/2%, compared with 13A%. This week the Bank 014England shows an increase in gold holdings of £2,037,605, the total standing on May 18 at £123,522,501, which compares with £151,205,686 on May 20 1931. The Bank's ratio of reserves to liabilities shows an improvement, standing on May 18 at .31.15%, compared with 30.55% a week earlier. At the Port of New York, the gold movement for the week ended May 18, as reported by the Federal May 21 1932 Reserve Bank of New York, consisted Of imports of $2,002,000, of which $1,002,000 came from Canada, $500,000 from Newfoundland, $203,000 from Mexico, and $297,000 chiefly from Latin-American countries. Gold exports totaled $43,059,000, of which $20,003,000 was shipped to Switzerland, $11,823,000 to Holland, $6,231,000 to France, $4,152,000 to Belgium, and $850,000 to Germany. The ;Reserve Bank reported an increase of $3,608,000 in gold earmarked for foreign account. In tabular form the gold movement at the Port of New York for the week ended May 17, as reported by the Federal Reserve Bank of New York, was as follows: GOLD MOVEMENT AT NEW YORK,MAY 12-MAY 18 INCLUSIVE. Imports. Exports. $20,003,000 to Switzerland $1,002,000 from Canada Newfoundland 11,823,000 to Holland 500,000 from 6,231,000 to France 203,000 from Mexico 4,152,000 to Belgium 297,000 chiefly from Latin Ameri850,000 to Germany can countries $2,002,000 total $43,059,000 total Net Change in Gold Earmarked for Foreign Account. Increase $3,608,000 The above figures are for the week ended Wednesday evening. On Thursday there, were no imports of gold. Exports amounted to $6,972,900, of which $5,997,900 was shipped to Switzerland and $975,000 to France. Gold earmarked for foreign account decreased $298,600. Yesterday imports totaled $1,015,000, of which $996,000 came from Canada and $19,900 came from Mexico. Gold exports amounted to $37,829,000, of which $21,075,300 went to Holland, $12,631,100 went to France, $4,084,600 to Belgium and $38,000 to Switzerland. Gold earmarked for foreign account, however, decreased $17,019,900. During the week approximately $3,519,000 of gold was received at San Francisco, of which $2,437,000 came from Japan and $1,082,000 from China. Canadian exchange continues at a severe discount. The Canadian rate follows the pound more or less closely as Canada normally has a substantial export surplus in its trade with England, as compared with an import surplus with the United States. The balance of Canadian funds in England is depended upon largely to furnish the exchange necessary for payments to the United States. Consequently any improvement in sterling has a tendency to firm up the Canadian rate, while weakness in sterling has the opposite effect. On Saturday last Montreal funds were at a discount of 11%, on Monday at 111 / 3%, on Tuesday at 113 /%, on Wednesday at 113 4%, /% and on Friday at 12%%. on Thursday at 117 Referring to day-to-day rates, sterling exchange on Saturday last was dull but steady. Bankers' sight / 8@3.661/8; cable transfers 3.651 was 3.651 / 8@3.653/ 2. the European markets were closed, Monday On Whit-Monday; sterling was firm here. The range was 3.66@3.68 for bankers' sight bills and 3.66%@ 3.683/i for cable transfers. On Tuesday exchange displayed a slightly easier tone. Bankers' sight was 3.657A@3.66/ On 3 a; cable transfers 3.66(4)3.66 Wednesday the market was higher again. The range was 3.67@3.68% for bankers' sight and 3.6734.@ 3.687 4 for cable transfers. On Thursday sterling continued steady. The range was 3.673/2@3.683' for bankers' sight and 3.67%@3.68% for cable transfers. On Friday the range was 3.66@3.67% for bankers' sight and 3.663@3.673/ 2 for cable transfers. Closing quotations on Friday were 3.673. for demand and 3.673 /i for cable transfers. Commercial sight bills finished at 3.663; 60-day bills at 3.655 /s; 90-day bills at 3.65; documents for payment (60 days) at Volume 134 Financial Chronicle 3.65%, and 7-day grain bills at 3.663/2. Cotton and %. grain for payment closed at 3.663 XCHANGE on the Continental countries presents no new features. All the Continental units are firm, though slightly easier. German marks several times during the week touched 23.90, though later easing off again, with a range of from 23.86-23.90 for cable transfers. According to a wireless dispatch from Berlin to the New York "Times," the Chancellor's reiteration in the Reichstag on May 11 of the Government's determination to maintain stability for the mark, even if new restrictions on foreign payments are thereby initiated, was considered in Berlin as addressed to the holders of German bonds. The statement was interpreted in the market to mean that if the Government is obliged to choose between letting the reichsmark depreciate and curtailing the service on foreign bonds, the latter course would be adopted. Continuance of full service on the bonds hereafter still depends on the maintenance of an adequate trade balance in Germany's favor. German foreign trade returns for April show an export surplus of only 54,000,000 reichsmarks, the lowest since July 1930. If the lower export balance proves to be permanent the question of transfers for service of foreign obligations will be rendered more acute, since payments in the past few months were slightly in excess of export devisen. The falling off of exports in April represented chiefly a contraction in Germany's two major markets, England and Russia. The Deutsche Bank und Disconto-Gesellschaft of Berlin estimates that the foreign exchange requirements of Germany during 1932 to meet service on foreign debts will be from 1,200,000,000 reichsmarks to 1,300,000,000 reichsmarks. This amount must be obtained through an excess of exports over imports and compares with 416,000,000 reichsmarks in the first four months of export surplus. During the first four months the export surplus was not sufficient to meet all the devisen requirements and the Reichsbank was compelled to pay out approximately 170,000,000 reichsmarks in gold and foreign exchange. During that period, however, requirements were unusually large because considerable amounts of the foreign debt falling due under the "standstill agreement" were repaid. The Deutsche Bank und Disconto Gesellschaft holds that there is no place for even the smallest reparations transfer in the foreign exchange balance for this year. At the present rate there will be little or no margin between surplus exports and requirements on private debts. There has been frequent talk recently that the Reichsbank might reduce its rediscount rate from the present 5%, but more considered statements from Berlin point out that under the bank law of 1924 the present 5% rate is the lowest permissible to the Reichsbank so long as the gold and exchange reserves stand below 40%. The Reichsbank statement for May 14 shows a ratio of 25.3%, which compares with 24.7% on May 7 and with 65.0% a year ago. The current improvement in the ratio is due to an increase of 374,000 marks in gold holdings and to an increase of 5,938,000 marks in foreign currency reserves. The bank law of 1924 is an integral part of the reparations settlement and cannot be altered without international consent. It is believed that in any event the Reichsbank would not be inclined to reduce the rate further in the face of the present uncertainty regarding its E 3689 reserves. It is believed that foreign bondholders for whom the condition of the Reichsbank reserves is a vital facor would criticize any such action adversely. French francs are firm and relatively steady at quotations which make it easily possible to withdraw gold from New York, although on not a very profitable basis. The Bank of France continues to draw down gold from New York. As shown above, the Federal Reserve Bank reported a shipment of $6,231,000 in gold to France. This week the Bank of France shows an increase in gold holdings of 311,660,420 francs, the total standing on May 13 at the record high level of 78,651,492,256 francs, which compares with 55,628,047,909 francs on May 15 1931, and with 28,935,000,000 francs in June 1928 upon stabilization of the unit. The Bank's ratio of reserves to liabilities is also at record high, standing at 71.91% on May 13, compared with 71.51% on May 6, with 55.83% on May 15 1931, and with legal requirement of 35%. Money continues extremely abundant in Paris and practically unloanable at the lowest rates. The London check rate on Paris closed at 93.08 on Friday of this week, against 92.68 on Friday of last week. In New York sight bills on the French center 5 on Friday 5 against 3.944 finished on Friday at 3.944 4 3.943 against 4 3.943 at of last week; cable transfers 3.94%. against 3.94%, at bills and commercial sight Antwerp belgas finished at 14.023/i for bankers' sight bills and at 14.03 for cable transfers, against 14.04 and 14.043.. Final quotations for Berlin marks were 23.85 for bankers'sight bills and 23.86 for cable transfers, in comparison with 23.87 and 23.88. Italian lire closed at 5.14 for bankers' sight bills and at 5.143/ for cable transfers, against 5.15 and 5.153/2. 2; Austrian schillings closed at 14.133/2, against 14.143/ against 2.973', at akia exchange on Czechoslov 4; on Bucharest at 0.603A, against 0.60%; on 2.963 4, and on Finland 2, against 11.223 Poland at 11.223/ . Greek exchange 4 1.743 against @174, 2 at 1.743/ bills and at 0.66 sight bankers' for 4 0.653 closed at for cable transfers, against 0.663 and 0.663/3. XCHANGE on the countries neutral during the war displays no new features of importance. The Scandinavian units move in sympathy with the course of sterling, with which they are closely allied. It will be recalled that on Friday of last week the Swedish bank rate was reduced from 532% to 432%, the new rate becoming effective on May 17. This week the Norwegian bank reduced its rate of rediscount from 5% to 43/2%. Spanish pesetas continue to display an upward trend, owing to a steady gain in confidence in the republican regime. Madrid dispatches on Wednesday stated that the Spanish Government is seeking to avoid a sharp rise in peseta exchange. Holland guilders and Swiss francs continue to display exceptional strength as these markets are refugee countries for foriegn funds seeking safety rather than profit. As noted above in the remarks on sterling exchange, Switzerland withdrew from the New York market $20,003,000 in gold during the week, and Holland took $11,823,000. It seems to be the determined policy of the central banks in both countries to bring home to their own vaults all their earmarked gold. Bankers' sight on Amsterdam finished on Friday at 40.52, against 40.55 on Friday of last week; cable transfers at 40.53, against 40.56, and commercial sight bills at 40.48, against 40.45. Swiss francs E 3690 Financial Chronicle closed at 19.59 for checks and at 19.593 for cable transfers, against 19.58 and 19.583/2. Copenhagen checks finished at 20.12 and cable transfers at 20.13, against 20.01 and 20.02. Checks on Sweden closed at 18.89 and cable transfers at 18.90, against 18.66 and 18.67; while checks on Norway finished at 18.39 and cable transfers at 18.40, against 18.44 and 18.45. Spanish pesetas closed at 8.243/ for bankers' sight bills and at 8.25 for cable transfers, against 8.14 and 8.14%. XCHANGE on the South American countries continues demoralized as most of them are laboring under governmental exchange control and moratoriums. On Tuesday -the Peruvian Congress approved a bill relieving the Central Bank of its obligation to exchange notes for gold under the "Kemmerer law." The Bank was authorized to restore the operation of the gold standard when "the board of directors believe the time has come to reestablish the gold standard" and upon the approval of the Finance Minister. Under the new measure the Central Bank of Peru may buy gold in any form and foreign drafts, but independently of the gold backing of the sol. Par of the sol is 28.00. There is no trading in the unit and the nominal quotation is largely meaningless. The Argentine Senate has •approved the 500,000,000 paper peso "patriotic loan" which has been under discussion. It would seem, however, that there is no possibility of public absorption of the loan even under a cost to the Government of 20%. This discount is prohibitive and would only injure the Government's credit. The Buenos Aires market has long been congested with Government paper. It is possible that 100,000,000 pesos may be absorbed at a somewhat better price. The Government will probably turn over to the Caja de Conversion 400,000,000 of the issue or whatever amount the Conversion Office can absorb consistent with the gold reserves. The great bulk of the issue will probably be held by the Conversion Office until conditions improve sufficiently to permit a successful public offering. Argentine paper pesos closed on Friday at 253' for bankers' sight bills, against 253 on Friday of last week; cable transfers at 25.90, against 25.70. Brazilian milreis are nominally quoted 6.80 for bankers' sight bills and 6.85 for cable transfers, against 6.33 and 6.38. Chilean exchange is nominally quoted 63/8, against 63'. Peru is nominally quoted at 28.00, against 28.00. E • XCHANGE on the Far Eastern countries is overshadowed by the untoward political events in Japan (details of which will be found in another column). As pointed out here last week, the market is much concerned as to the course of yen exchange. Only a few weeks ago it was positively asserted in official Japanese quarters that no attempt would be made to control yen exchange, although a policy of inflation had been determined upon. On Wednesday of last week a bill was introduced into the Japanese Diet authorizing the Government to control foreign exchange. Yen went off sharply toward the end of last week on the announcement that the Government was planning to increase the fiduciary issue from 120,000,000 yen to 1,000,000,000 yen. The law formerly required a 100% metallic backing for all notes in excess of the fiduciary issue. Between January 1930, when Japan resumed gold payments E may 21 1932 and the suspension of the gold standard last September, the gold losses of the country were so heavy as to make impossible a 100% cover. Even so, the present authorization, or planned for authorization, would not mean an alarming inflation as the country's present gold holdings are approximately 40% of note issue, not including the fiduciary issue. This percentage compares favorably with the accepted practice in most gold countries. Following the murder of Premier Inukai on Sunday yen had a another sharp break, selling down to 31.00. Par of the yen is 49.85. At present, and until the political situation clears, the market must be regarded as only nominal. The Far Eastern exchange situation is further complicated at present owing to the severe Moslem-Hindu riots in Bombay and Calcutta and in other cities of India. The Chinese silver currencies were firmer early in the -week owing to a fractional improvement in silver prices. - The National Silver Exchange in New York announced on Monday an advance of from 30 to 45 points in silver when for the first time in over a month all positions passed the 29-cent mark. Closing quotations for yen checks yesterday were 3131, against 31.85 on Friday of last week. Hong Kong closed at 23%@24 1-16, against 24@24 3-16; Shanghai at 30 15-16@31.00, against 3114@31 3-16; Manila at 49%, against 49%; Singapore at 42 8, against 42%; Bombay at 27 9-16, against 27 7-16, and Calcutta at 27 9-16, against 27 7-16. FOREIGN EXCHANGE RATES CERTIFIED BY FEDERAL RESERVE BANKS TO TREASURY UNDER TARIFF ACT OF 1922. MAY 14 1932 TO MAY 20 1932, INCLUSIVE. Country and Monetary Unit. Noon Buying Rate for Cable Transfers in New Fort Value in United States Money. May 14. May 16. May 17. May 18. May 19. May 20. EUROPE5 .139650 Austria,echilling 140338 Belgium, belga Bulgaria, ley .007200 Czechoslovakia, krone .029648 Denmark, krone .199692 England, pound 3 653625 sterling Finland, markka .017116 France, franc .039470 Germany, reichamark .238685 Greece. drachma 006770 Holland, guilder .405587 Hungary, pengo .174666 Italy, lira 051506 Norway, krone .183200 Poland, zloty 111833 Portugal, escudo .033175 Rumania. leu .005977 Spain. peseta •.081644 Sweden, krona 186523 Switzerland, franc_ .195800 Yugoslavia, dinar__ .017750 ASIAChinaChefoo tael .318541 Hankow tael .316041 Shanghai tael .307656 Tientsin tael .321875 Hong Kong dollar .236250 Mexican dollar- .218750 Tientsin or Pelyang dollar .222083 Yuan dollar .218750 India. rupee .272250 Japan, yen .319000 Singapore (B.S.) dollar .420625 NORTH AMER.Canada, dollar .889062 Cuba. peso .999268 Mexico. peso (silver). .296233 Newfoundland, dollar .886750 SOUTH AMER.Argentina, peso (gold) .583846 Brazil, milreia .071975 Chile. peso .060000 Uruguay. peso .475833 Colombia. peso 952400 S $ $ .139650 .139550 .140170 .140369 .140219 .140246 .007200 .007200 .007283 .029652 .029651 .029654 .200015 .200592 .200515 5 .139791 .140353 .007150 .029650 .200030 3.671438 .017164 .039467 .238739 .006295 .405485 .174500 .051523 .183823 .111833 .032840 .005975 .081707 .187123 .195750 .017745 3.660833 .017033 .039469 .238728 .006715 .405882 .174333 .051512 .183369 .111687 .032825 .005975 .081475 .186138 .195751 .017756 $ .139750 .140257 .007200 .029652 .200607 3.678166 .017000 .039469 .238685 .006425 .405675 .174700 .051460 .183769 .111666 .033175 .005979 .082375 .186969 .195791 .017730 3.672583 .017083 .039470 .238664 .006350 . .405653 .174833 .051455 .183546 .111687 .033800 . .005975 .082525 • .187684 .195794 .017775 • .320625 .318958 .309531 .323541 .236562 .220000 .323958 .322500 .317083 .321875 .320416 .315000 .312656 .310937 .305937 .327291 .325416 .320416 .238125 .238750 .235000 :220937 .223125 .218125 .317083 • .314583' .305000 . .320416 .235312 .216875 .223750 .220416 .272750 .311000 .421250 .225000 .221666 .273000 .315550 .423125 .889583 .886354 .999331 .999331 .297166 .304633 .887000 .882500 3.676666 .017166 .039465 .238757 .006710 .405785 .174950 .051497 .183384 111.833 .033225 .005966 .081807 .186523 .195771 .017737 .224583 .221250 .221666 .221250 .217916 .218333 • .273250 .273250 .273000.. .314000 .314375 .313750 .422500 .422500 .422500,. .883906 .999331 .293533 .881125 .880312 .999331 .295366 .878000 .878697 .999331 .296933. .876250 . .581911 .581911 .582328 .582021 .582328 .072066 .072095 .072691 .072433 .073104 .060000 .060000 .060000 .060000 .060000 .475833 .475833 .475833 .474166 .475833 .952400 .952400 .952400 .952400 .952400 HE following table indicates the amount of bullion in the principal European banks: T May 19 1932. Mail 21 1931. Banks o Gold. Silver. Total. Gold. Silver. Total. England .. 123,522,501 123,522,501 151,205,686 151,205.685. _ 629,211,938 France d 629,211,938445.024,383 445,024,383' (d/ Germany b 37,825,850 c994.600 38,820.450108,132,550 994,600109,127,1E0' Spain _ _ _ 90.064,000 22,373,000112.437,000 96,929,000 28,106. 125,035,000 . 60.876.000 Italy 60.876,000 57,479,000 57,479,000 Netherl.ds. 75,892,000 2,059, 77,951,0001 37,498.000 3,025,000 40.523,000 . Nat'l Bela. 72,163,000 72,163,000 41.312.000 41,312,000' Switzeird. 71,818,000 71,818,000 25,710,000 25,710,000 Sweden_ __ 11.441,000 11,441.000 13,316,000 13,316,000 Denmark _ 8,032,000 8,032,000 9.552,000 9,552,000 • NorwaY - - 6.561.000 6.561.000 8,133,000 8,133,000 Total week 1 187407289 25,426,600 1 212833889 994.291,61E 32,125,600 1026,417219 . Prey. week 1 178628350 25,212,6001 203840950 993.107,62r 32,222,6001025,33022 1 a These are the gold holdings of the Bank of France as reported in the new form of statement. b Gold holdings of the Bank of Germany are cumin:live of gold held I abroad, the amount or which the present year is Z4,748,350, c As of Oct. 7.1924. 'd Silver Is now reported at only a trifling sum. Volume 134 Financial Chronicle Crisis and Change in the Far East. On May 8 the Tokio correspondent of the New York "Herald Tribune," in an informing dispatch regarding the political situation in Japan as the session of the Diet at the end of the month approached, commented particularly upon the renewed activity of the so-called Fascist elements which were urging "the replacement of Premier Tsuyoshi Inukai's Cabinet by a Fascist super-party Cabinet with Baron Kiichiro Hiranuma, sixty-seven-year-old Privy Councillor and former President of the Supreme Court, as Premier." The dissatisfaction which was said to exist with the Inukai Government was due, so the correspondent reported, to dissensions within the Seiyukai or Government party, the dissatisfadtion of the army with the Finance Minister for his failure to provide adequately for the military expenditures in Manchuria, and a difference of opinion between the army and the Foreign Office regarding an immediate or a delayed recognition of the new State of Manchoukuo recently erected under Japanese protection in Manchuria. On May 13 Premier Inukai, in denying reports of serious differences between Japan and Russia, took occasion to ridicule the accounts of a rapid growth of Fascism in Japan, and declared that the movement was unimportant save for the publicity which it received. Two days later, however, on last Sunday, members of a group of terrorists, comprising eleven army men and six navy men, assassinated Premier Inukai in his official residence, bombed the house of Count Makin°, Lord Keeper of the Privy Seal and a close friend and adviser of the Emperor, threw bombs at two bank buildings,the police station and other buildings, and confronted the capital with what appeared to be an attempt to overthrow the Government and establish a new political regime controlled by the army and navy. Subsequent dispatches have tended to confirm Premier Inukai's contention that the so-called Fascist movement as such was insignificant, and to make clear that the term itself is something of a misnomer. There is no sufficient evidence that what has been described as Fascism in Japan bears any close resemblance to what goes under that name in either Italy or Germany. On the other hand, the tragic events of Sunday have been followed by a demand by army leaders for the formation of a new Government on a national and'nonpartisan basis. To what extent the navy supports this demand is not certain, but there seems no reason to doubt that the new Government, if it is to survive, will have to be one that meets the wishes of the military leaders. At the moment the whip hand appears to be held by General Sadao Araki, Minister of War in the late Inukai Cabinet, who is reported to have declared that he cannot control the younger army officers unless the Government meets the demand for social and financial measures to relieve distress among the unemployed and the farmers, a shifting of taxes from the poor to the rich, bond issues for various public enterprises, a firm course in Manchuria, and full recognition of the new State of Manchoukuo. It is still possible that the Seiyukai, the former Government party and the dominant party in the country, may control the new Ministry, but the latest advices indicate that it will only be at the price of positive assurances that the army demands will be met. 3691 The immediate fiture of Japan under a Government tied to the army, and perhaps also to the navy, cannot be viewed without misgivings, but the political crisis through which the country is passing, together with the indications which it holds regarding future policy,is quite in line with the trend of recent events. There has been no reasonable doubt for some months that the political influence of the army was increasing, and that the Inukai Government, in spite of the firm support which it seemed to receive from the Seiyukai party, was holding its place less because of general satisfaction with its policy than because of sharp differences between the two branches of the defense service and the difficult position of the Foreign Office. The army, in particular, has increasingly taken the upper hand. It is generally believed that the army did not look with favor upon the Shanghai adventure, and that it regarded the Manchurian policy of the Government as weak. Back of the military and naval dissention, however,has been the growth of a nationalistic spirit which favors retirement, as much as possible, from European concerns and attention to the special interests of the Far East. The Western culture which Japan has absorbed has undoubtedly been the greatest single force in the extraordinary advancement of the country, and recognition as one of the great Powers has increased national pride and assurance, but there are significant indications now that Japan is inclined to draw away from the West and pursue its own course. Whatever the underlying motive of Japan may have been in attacking China at Shanghai, the consequences of that episode may very possibly be farreaching. The unexpected resistance which the Japanese forces encountered has unquestionably dimmed the reputation of Japan as a military and naval Power,and by so much as Japan has lost China has gained. The experience also brought manifestations of European and American displeasure with Japanese policy toward China of which Japan could not fail to take note. On the other hand, the incident enabled Japan to take the measure of the League of Nations, and the stubborn resistance which Japan has offered to the claim of the League to intervene in the controversy has left the League in a quandary and raised in Japan the question whether continued membership in the League is worth while. The announcement from Washington that the"United States would not recognize any changes of territorial or political status brought about in violation of the anti-war pact has evoked strong criticism in Japan and opened a new ground of potential controversy. The attitude of the European Powers, too, has been informing. It has been officially denied that France looked with favor upon Japanese pretensions either at Shanghai or in Manchuria, but it was to be noticed that France carefully refrained from taking a prominent part either in the debates at Geneva or in the operations of the Powers at Shanghai, and that Great Britain, the Power with the largest commercial and financial interests in China,did nothing, asfar as is known,that could be construed as putting pressure on Japan. The net result of the whole proceeding has been to enable Japan, not without some national chagrin, to extricate itself from an impossible position at Shanghai, to put upon the Powers a responsibility which some of them,at least, can hardly have wished to assume, and to free Japan for the new problems 3692 Financial Chronicle which have arisen in Manchuria. In agreeing on May 5 to the armistice which had been arranged at Shanghai,and then, on May 11, suddenly announcing its intention to withdraw at once all its troops, Japan acted, according to a spokesman quoted by the Associated Press,from a desire "to conform to world opinion and to prove that Japan had no territorial or other ulterior motives in sending the troops to Shanghai;" but the same spokesman added, in substance, that Japan "expected the United States and other Powers interested in Shanghai to see to it that the terms of the recently-signed truce agreement were observed by China." The same authority also declared that the troops "would be held in readiness to return should a 'genuine emergency' demand it," although the Government "would probably be slow to decide that such an emergency existed and would not consider minor infractions of the truce by the Chinese a reason for dispatching troops." The Tokio correspondent of the New York "Times," cabling on May 14, reported that while Japan was"profoundly relieved" by the liquidation of its Shanghai enterprise, its "friendly gesture . . . must be interpreted not only in terms of the immediate past . . . but even more in terms of the future, to which she looks forward with a strong sense of approaching dangers." What those dangers are the events of the past week or ten days have continued to emphasize. On the eve of the armistice the leading Chinese peace representative, Quo Tsi-chi, Vice-Minister of Foreign Affairs, was beaten in his home at Shanghai by a mob believed to have comprised Chinese Students who were dissatisfied with what they supposed to be the terms of the armistice. On the same day General Chen Chia-tang, an opponent of the Nanking Government, seized the naval and air forces at Canton. On May 6, four days later, Quo Tsi-chi resigned, and Shanghai newspapers were reported as predicting that the regime of General Chang Kaishek, who shared in the armistice agreement, was "certain to be quickly swept from power by the rising tide of popular wrath." Pronounced resentment was also reported over orders from Nanking directing the suppression of the anti-Japanese boycott and anti-Japanese organizations. On May 7 came the announcement, through an exclusive statement to the Shanghai correspondent of the New York "Times," that the Nanking Government had decided to abandon its policy of attempting to unify China • by force,that"the tendency toward regionalism must be permitted full freedom," and that if the Cantonese wished to set up their own Government Nanking would not interfere. Some offset to this new policy of relinguishment was afforded by the report on Wednesday that Shantung province, which had been restive under the control of Nanking, was prepared to acknowledge the authority of the Nanking Government in the administration of the taxes, and that national revenues would no longer be retained. The possibility of serious disturbances in China, especially if the Nanking Government should persist in leaving a large part of the country to experiment with self-determination, will doubtless have a good deal of effect upon Japanese policy, but for the moment the eyes of Japan are upon the struggle in Manchuria. While "banditry" seems a rather inappropriate term with which to describe such largescale operations as the Chinese are carrying on in Manchuria, it is clear that the region is overrun by May 21 1932 armed forces of Chinese who own no allegiance except to their immediate commanders, and whose fighting and plundering make the pacification of the country extremely difficult. The gravest danger is that Japan,in its efforts to conquer and control Manchuria, may find itself in conflict with Russia, and the spectre of another Russo-Japanese war dominates most other considerations. It may well be doubted if Russia at the present time wants a war anywhere, but it evidently does not fear a clash with Japan, and is making preparations for eventualities in case the Japanese troops invade Russian territory. It is not clear that the full recognition by Japan of the new State of Manchoukuo, which is reported to be one of the demands of the Japanese army leaders, would make for peace, since the new State owes its existence to Japanese support, but such recognition, if it precipitated further controversy with the League, would almost certainly intensify the Japanese nationalist movement. Upon Japan, more than upon any other Power, rests the responsibility of keeping the Far East out of war. If Russia and Japan clash, it will be difficult to make the Western world believe that Japan has not contributed the larger element of provocation, while if the Nanking Government were drawn in it would be certain to plead the Japanese occupation of Manchuria as a justification. Were it not for the Ministerial crisis in Japan, there would be some ground for hoping that failure at Shanghai would chasten the Japanese spirit and incline the Government to caution, but with the army in virtual control of a new Government the outlook for moderation cannot be regarded as bright. Does the Country Need Its Railroads? Our railroads are one of the largest concentrated industrial concerns in the country, and as such have become such a great utility, and the center of so much capital, that their condition, profits and progress are at this time a matter of vital concern. The question then arises, are they in their attempt to perform their duty of supplying themselves with adequate facilities on the theory that they are solely responsible to take care of the needs of the country, to find themselves eventually in the possession of facilities which may prove largely in excess of the requirements of the traffic•which would be left to them if competing agencies continue to make the inroads which they have been making? These facilities have been provided by the investment of huge amounts of capital; and under conditions which have come to exist, the railroads are confronted with the problem as to whether or not they are justified in making further enlargement of their facilities. If so, they may eventually find themselves vastly oversupplied with transportation capacity, and yet, in that event charges for capital used in producing the facilities must continue to be provided. This situation has had such a profound effect upon the private investor in railroad securities that the public in general has now become deeply concerned about the huge decline in the value of these widely distributed investments. Therefore, if transportation by railroad continues to be essential to the public welfare, notwithstanding the appearance of new agencies of transportation, the public isfundamentally concerned that the steam Volume 134 3693. Financial Chronicle covers equiproads shall continue capable of furnishing adequate 000,000,000 or more in trucks merely investadditional the not include does and ment, and efficient transportation. truck of part the on required be would that ment other However, the recent rapid development of repair terminals, garages, for operators and owners passentransportation agencies, such as the private billions ger automobile, and the common carrier autobus, shops, and the like. Nor does it include the called be would public the investment additional of private The traffic. passenger has whittled down vast the and constructing improving in make to upon operating truck motor carrier common contract, and operate. they would which on in ever-widening zones, has brought an increased network of highways Going still further, the 5,037,000 trucks would call element of freight competition into the picture. Ad'thousand ditional elements are the growth of the hydroelectric for 5,037,000 drivers, whose wages at one per year. $5,037,000,000 aggregate would each dollars and other power plants, which indirectly tend to be would alone drivers truck of number total The reduce coal consumption along with the coal movenumber total the as great as times four than more line pipe ment by rail; rapid expansion in the classes; and industry, which has come to cover the piping of of railroad employees, including all army of great another drivers 5,037,000 these behind waterway inland and oils; gasoline and the cruder relief as function development, fostered by large and increasing Gov- employees would be required to ernment appropriations for river and canal im- drivers. Looking at this gigantic undertaking from another provements. The motor vehicle alone has had a profound effect angle, we find that the loading of an average train upon the railroad industry. It has radically altered in 1931 was approximately 740 tons, and the necesthe customs and methods of passenger travel, and sary requirements for handling such a train were To in this field has grown into a competitor of sub- an engine and train crew of five or six men. average an at trucks motor by tonnage same the haul stantial proportions. It is really important enough to have stimulated the public to accept an immense loading rate of five tons per truck, would require the burden of taxation in order to revolutionize the employment of 148 trucks, with 148 drivers. These facts merely emphasize the importance and highway system of the country for its accommodaof the services now required of the railmagnitude the to up that fact the .by tion. This is evidenced end of 1931 there has been constructed at a huge roads,for it can hardly be conceived that the present so public cost 3,066,000 miles of highways, and this system of highways could ever begin to stand of transfer the as traffic heavy of increase an great mileage is being added to yearly by approximately involve. would truck to rail from freight all 60,000 miles, at the cost of some $36,000 per mile. There is only a certain amount of traffic in this When considering the gigantic expansion of this and building up these various methods of country, the as well as vehicles new competition of motor can only be accomplished at the extransportation agencies n transportatio other of rapid development the question arises, does the country need the rail- pense of one of the other systems. Generally speaking, everyone is using railroads roads? It is perfectly natutal for the public to select and less then he formerly did. It is amazing but unpatronize the means of transportation which under fortunately true that out of every 10 persons who the circumstances serves it best. However, it must travel in this present-day age, only one uses a railbe remembered that any community which loses its way train. It is just a trifle over a hundred years railroads has no other permanent and dependable ago that the steam railroad became a reality, and means of transportation which it may adopt in their in that century it has grown atid developed into one place. In other words,the railroad is the only means of the most useful industrial machines the world has of transportation fixed to a given locality and per- ever known. So far as passenger travel is concerned manently attached to a given route. It is, in fact, it would appear to have reached and passed its the only agency which continues to be the permanent peak. In 1920 travelers in this country used 46,849,and perpetual servant of the localities which it has 000,000 passenger-miles on steam railroads. In 193/ the requirements of the traveling public were only once begun to serve. If it could possibly be conceived that motor trucks 21,800,000,000 passenger-miles on the railroads_ and other forms of transport can take from the rail- More than two-fifths of the passenger business disaproads enough of their traffic to lead to the abandon- peared in a 10-year period. Where did it go? Onement of the entire railway network, then other forms sixth of the loss has gone to the buses. The other of transportation must be developed to take the five-sixths is accounted for by the private automobile. There are approximately 25 million private place of the railways. Let us try to visualize a situation whereby the automobiles in the country to-day, and if each car entire freight burden of the nation should fall in a traveled only 500 miles a year with a single passenger principal measure upon the motor truck. This mode in it, outside of its ordinary town driving, the loss of transportation would then be confronted with an in railroad travel could lie accounted for. As a annual transport task of 340 billions of ton-miles, matter of fact, each private automobile undoubtedly which would necessitate an addition of 5,037,000 to travels a great many more than 500 miles, and in the present number of trucks in service. These fig- that way also accounts for what otherwise ures are computed upon the basis of an average load- would have been the normal increase in passanger ing of 3.6 tons per truck. At three thousand dollars travel. It is not necessary to study these pretentious apiece, these additional trucks would in turn call n problems diligently in order to disin trucks transportatio investment capital initial alone of an for $15,100,000,000, a sum nearly as great as the capital cover what valuable public servants the railroads securities of all the steam railroads in the country. have proved to be. So great is their task that it is While railroad capital covers all railroad property, quite difficult to get an adequate picture of it; for including equipment,roadway and tracks, shops and the statistics of train-miles, car-miles, passenger. roundhouses, and stations, this investment of $15,- miles and ton-miles expand into millions and billions • Financial Chronicle 3694 :so rapidly that it is extremely difficult to reduce them to terms within the grasp of the layman. When we see a long string of freight cars passing ioy on the rails, some of them carrying live stock, -other moving products needing refrigeration and 'ventilation, still others hauling such diverse products as coal and oil, bulk molasses and ore, little do we realize what stories they might tell. If these stories were made into one composite tale, we would learn that the average car during 1931 ran 25.1 miles a day,carried 25.8 tons of freight per load, and secured about 25 loads during the year. Nearly two-fifths of the 14,000 miles it traveled was as an empty. The national balance sheet of the work actually accomplished during the year just passed shows that 1,609,000,000 revenue tons of freight were loaded into cars and that the average ton was carried 190 miles. The Class I railways alone paid approximately $863,000 per day in taxes, at the rate of more than $315,000,000 per year. During the same period 65% of the working expenses of these same railroads were represented by wages paid employees. The average compensation paid to each employee was $1,673; consequently it was necessary for the railroads to haul one ton of freight 158,578 miles in order to earn a sufficient ium to pay the average yearly rate of pay to one employee. The average number of persons employed by the railroads during 1931 was 1,285,000, so that they were compelled to show a performance of nearly 203,712,000,000 ton-miles before they could meet their wages bill. • RAILROADS LARGE PURCHASERS OF SUPPLIES. In addition, it must be emphasized that our railroads to-day represent one of the largest single group of customers of the basic industries of the country. They buy annually 23% of the bituminous coal output and about 4% of the anthracite production. Directly they consume approximately 17% of the annual iron and steel output, and indirectly about 32% through their orders for all kinds of equipment to equipment manufacturing concerns. In the case of forest products the railroads purchase directly about 16% of the total timber cut, which figure would be increased to above 20% if the direct purchases were included. In addition, they also purchase large quantities of copper, tin, brass, lead and zinc, and considerable cotton in the form of cotton waste. With respect to cement, statistics indicate that they use more than 8% of the total output. The . proportion of the fuel oil taken by the railroads approximates 19%. Because of their tremendous volume, these aggregate purchases exercise a wholesome and stimulating effect on the market. What then would industry in general do without this xast network of steel, which has conferred untold benefits upon it and has at all times afforded a stimulus to the industrialist to improve his enterprise to the highest capability of production? In the foregoing we have left untouched a hundred and one phases of railroad operation that add to the picture of the vastness of the task of moving the nation's freight and carrying its passengers, as well as the intricacy of the details of a year's transportation business. But the phases we have considered are representative of those which must be passed by. When we contemplate these facts, we cannot fail to realize that the American railway industry, for • May 21 1932 its size, and considering the number of companies operating it, is a very important business enterprise. The question then, Does the nation need the railroads? answers itself. Mortmain's Grip on Philadelphia. Aside from a publicly owned water system of doubtful advantage about the only utility problems which vex the city of Philadelphia are centered around urban transportation. The earlier companies took out State charters around 1854 to 1858 for horse railways, and as soon as the experiment proved to be a good investment there was a great rush to obtain franchises covering nearly all of the main thoroughfares within that city. Financiers of those early days were wise. They sought and obtained perpetual franchises, that is for 999 years. No one then could well foresee the wonderful developments which would follow, and because of uncertainty there was no difficulty in having franchises made perpetual and no one then surmised the complications which would arise out of the perpetual provisions. The new field for capitalists, financiers and promoters was diligently and adroitly worked, the second step being the process of mergers, and out of these combinations have grown the worries of the present generation. Mergers which began in the old horse-car days were given a great impetus when new companies were formed to operate "traction" lines, revolving underground cables being used as a motive power displacing horses. The old Widener-Elkins group of Philadelphia became active not only in Philadelphia, but in Washington, Pittsburgh, Chicago and even in New York, where they constructed the old cable line on Broadway. Under the new series of mergers guarantees of dividends to the underlying companies possessing franchises were given with long-term leases. While the rates of dividends were based upon par, most of the stocks had small amounts paid in and the dividends on the amounts paid in were very large. Union Traction of Philadelphia will serve as an illustration. Par of this stock is $50, but the sum paid in on each share is only $17.50. The lease of this company to the Philadelphia Rapid Transit Co. guarantees a return of 6%,or $3 per share, annually, which is equal to over 17% on the amount paid in on Union Traction stock. This principle applies to many issues of stocks of the numerous underlying companies. Another method of financing the merger s was to acquire the shares of underlying compani es, deposit them as security, and issue collateral trust bonds of a par value far in excess of the par value of the deposited stocks. One such issue of bonds is not redeemable and will run, therefore, as long as the franchise of the underlying corporations continues. By reason of this pyramiding of securities and guarantees the Philadelphia Rapid Transit Co., as the operating corporation, is now obligated to pay to owners of underlying securities $8,000,000 yearly. The burden is such that the Rapid Transit Co. is paying no dividends and the corporation was. unable to raise funds which would have been require d to construct underground railways. Philadelphia City has expended well over one hundred millions in underground railways, and the municipality is still at work upon additional lines which are leased as fast as completed to the Phila- Volume 114 Financial Chronicle delphia Rapid Transit Co., which is the owner of the Market Street Elevated and Subway Railway, ivhile the Frankford Elevated was built by the city and leased to the Rapid Transit Co. for operation, as was also the Broad Street subway and feeder. Investment of many millions of dollars of public funds in modern high-speed lines and leasing them to the Rapid Transit Co. has had the effect of greatly strengthening the financial position of the underlying securities. In view of this the owners of the underlying securities will be asked to accept a lower return upon their holdings. The city feels justified in this request because it is not getting a fair return upon its investment in the underground roads now leased to the operating company. Since Mitten Management released control of operations a board of highly respected citizens has supervised operations, and under their direction expenses have been greatly curtailed, and now it is proposed to reduce wages on all Rapid Transit lines 9%. In view of the concessions made by the municipality and by the employees, it is proposed that the owners of underlying securities shall pare down the underlying charges. Because of the great demands upon municipal revenues to pay its ordinary expenses and interest on outstanding obligations, there is little prospect of Philadelphia acquiring the entire Rapid Transit system, which has been the hope of the owners of the underlying securities. The argument is therefore presented that it will be a sensible thing for the owners of the underlying securities to make some secrifice and permit development of the system which will further strengthen the value of all underlying stocks and bonds. What makes the end difficult of accomplishment is the "dead hand," as estates represented by trust companies are the chief owners of the underlying securities. The complex and tangled financial web has been about 84 years in the weaving. Bus lines, taxicabs and magnificent central terminals for the elevated and subway lines of the Pennsylvania and Reading railroads add to the complications and give added force to the necessity of full co-operation of all factions, including the municipality, in plans for holding intact the passenger railway system. ,New 'Orleans Sets Fine Example in Manner of Handling City's Bonded Indebtedness. New Orleans, the great Southern metropolis, enjoys the proud distinction of having never defaulted •in the payment of the principal or interest of any of its bonds or other obligations. This fact is strikingly brought out in a brochure of the financial history of the Crescent City recently issued by the Board of Liquidation of the City Debt of that city. 'This Board itself is a noteworthy institution among American cities, and enjoys a unique position in the • city government of New Orleans, inasmuch as it is a self-perpetuating body whose members control the policy of the Board in a manner absolutely free from • political considerations or influences. Just at this time, when some of our large Amer•ican municipalities are in financial difficulties due • to political mismanagement of city finances and tax funds, a study of the New Orleans method of taking care of city indebtedness may prove both interesting and profitable. >igince 1880, when the bonded indebt- 3695 edness of New Orleans was only $17,976,000, the handling of the bonded indebtedness of that city has been in the hands of the self-perpetuating Board referred to in the previous paragraph. The Board was created by Act No. 133 of the Legislature of Louisiana for the year 1880, and was embodied as a part of the Constitution of the State of Louisiana. The object of this legislative creation was to have a body of representative business men and financiers who should design and carry out a sound financial plan by which the entire bonded indebtedness of the City of New Orleans should be cared for in a manner regardless of political changes from time to time. A special 1% debt tax was levied, and now produces over $5,000,000 per annum, this sum being paid over to the Board daily as collected, and no part of this money goes to the city government for its budgetary purposes until sufficient money has been provided to take care of the principal and interest of bonds maturing in each year. After all such principal and interest payments have been made, the surplus is divided between the City of New Orleans and the Sewerage and Water Board. The surplus funds arising from the collection of the 1% debt tax have from time to time served as the basis for several special bond issues by the city for public improvements or welfare. In this way the City of New Orleans in recent years has been able to put through some constructive programs without increasing the city's rate of taxation, which, including the 1% debt tax, is now 281/ 2 mills on 85% assessed valuation. In a recent election the taxpayers of the City of New Orleans voted in favor of a bond issue of $750,000 for welfare relief, private charity, due to the prolonged depression, being unable to care for the unemployment problem. The surplus tax funds collected by the Board of Liquidation will be amortized to take care of this special bond issue, which will shortly be sold. Going back over the financial history of that city, it had no bonded debt until 1830, although incorporated as a city Feb. 17 1805. The first bond issue in 1830 was for $300,000. By 1840 the bonded indebtedness had risen to $4,399,660, and in 1860, the year the Civil War broke out, the total bonded indebtedness had expanded to $11,252,000. During the Reconstruction period, when the carpetbaggers were in control of the State and city governments in the South, the New Orleans bonded debt increased over $6,000,000. It then remained stationary, as a new regime took hold, until about 1890, when the city's population had grown to 242,000 and the bonded indebtedness was placed at $21,072,000. By 1900 it had been reduced to $20,000,000 under the handling of the City Board of Liquidation. From then on, as the city's population and taxable wealth grew, the bonded indebtedness increased until it reached a total of $56,822,000 in 1930. In 1932 the city's bonded indebtedness had been reduced to $54,390,000, over two million dollars having been retired during two years of depression. As stated by the Board of Liquidation, during the 10-year period commencing with 1928 and ending with 1937, bonds have been and will be retired out of tax revenues, as follows: 1928 1929 1930 1931 1932 1933 81,091,500 1.267,500 678,000 1,248,000 1,320,000 1.490,000 1934 1935 1936 1937 $1,538,000 1,581.500 1,622.500 1,870.500 TotaL r 813:707.000 The Board of Liquidation estimates the total value of the property owned by the City of New Orleans, 3696 Financial Chronicle including a municipal water plant, sewerage and drainage systems, public belt railroad, &c., at $144,016,000. The assessed value of taxable property in New Orleans for 1931 was: Real estate, $444,556,000; personal, $165,582,000, or a total of $610,138,000. Leading bankers and business men of New Orleans have always composed the membership of the Board of Liquidation of the City Debt. The Board as at present constituted is as follows: A. BRITTIN, director The Equitable Life Assurance Society of the United States, and also director of the Hibernia Bank & Trust Co. of New Orleans. CHARLES J. THEARD, Vice-President Canal Bank & Trust Co. R. S. HECHT, President Hibernia Bank & Trust Co. J. D. O'KEEFE, President Whitney National Bank. WALTER R. STAUFFER, President Stauffer, Eshleman & Co. J: P. BUTLER, member of Fenner, Beane & Ungerleider. T. S. WALMSLEY, Mayor City of New Orleans, ex officio. A. MILES PRATT, Commissioner of Public Finance, City of New Orleans, ex officio. DR. FRANK R. GOMILA, Commissioner of Public Safety, City of New Orleans, ex officio. Our Mysterious Underground Transportation System—The Pipe Lines. Few of us know anything about the underground railway system of the United States, which during the past 70 years has grown into one of the biggest, least known, almost mysterious transportation organizations in the world. It is easily the most efficient of all devices to eliminate distance and cheaper transportation. The "underground railway" is, of course, the petroleum pipe line system, and, according to a survey recently prepared by G. R. Hopkins, economic analyst, at the Bureau of Mines, Washington, D. C., it includes 111,660 miles of line, representing a trifle over two-fifths of the country's railway mileage, and it is capable of holding 23,214,000 barrels of oil. Of the 111,660 miles of oil pipe lines in this country, 58,020 miles, or 52%, are trunk lines and 53,640, or 48%,are gathering lines. In 1926 the mileage of the oil pipe lines aggregated 90,170, of which 44,470 miles, or 49%, were trunk lines and 45,700, or 51%, were gathering lines. During the past five years the total mileage increased 24%; trunk lines, 30%, and gathering lines 17%. This country's pipe line fabric is curiously like the railroad system. It has trunk lines, feeders, terminals and storage yards, switching systems, stations, dispatchers, telegraph and telephone systems. If pipe lines had never been built this country would be an entirely different place, for our 26,500,000 motor cars, our expanding highway system, and our most modern and popular transportation facilities would have been impossible. A petroleum pipe line is much like a city water main, except that being the length of a street it extends half way across the continent. Oklahoma oil is piped to refining centers on the Atlantic Coast, and Wyoming oil as far east as Chicago. As the name indicates, gathering or lead lines connect individual wells with a trunk line, a loading rack on a railroad, or to tankage. Gathering lines vary in diameter depending largely on the size of the wells and the character of the oil. Compared with trunk lines, which are generally regarded as permanent installations, gathering lines May 21 1932 are often laid with the idea that they are to be moved as soon as the flush output of the field declines, and because of their temporary nature they are usually run on the surface of the ground. As gathering lines are related to the wells, so are trunk lines dependent mainly upon the locality of the refineries. Trunk lines have been built to transport crude oil to water or railroad terminals, but the majority terminate at one or more of the large refineries. The major portion of the trunk line mileage built during the past five years was laid in Texas. Thus, the total for that State during that period shows an increase of 99% compared with a gain in the entire United States of 30%. Prior to about 1920 the principal movement of crude petroleum from the Mid-Continent to the Atlantic seaboard was by pipe lines which traversed the States of Missouri, Illinois, Indiana, Ohio and Pennsylvania. The years following 192/0 marked the ascendancy of transportation by tanker from California and the Gulf.Coast ports, and the direct movement of crude oil by pipe lines from the MidContinent to the Atlantic seaboard declined to a comparatively small figure. Because of this decline a number of Eastern lines were taken up and others were made over into gasoline lines. These earlier indications that the pipe line movement from the 'Mid-Continent northward would diminish did not materialize, because the expansion of refining facilities in the central Ctates of Ohio, Michigan, Indiana and Illinois necessitated building several new pipe lines and the looping of most of the others. Thus the major portion of the trunk line mileage that was laid outside of Texas between 1926 and 1931 was laid in those four States. According to the desired capacity, the pipe line may be 4, 6, 8,10 or 12 inches in diameter, and in the 1931 survey a special effort was made to obtain a separation of trunk line mileage into the various sizes of pipe used. It was found that the sizes most generally employed in trunk lines were 6, 8 and 10 inches. The most popular size was 8 inches, which represented 26,290 miles of trunk lines, or 45% of the total. The majority of the small-size pipe (below 6 inches) and large-sized pipe (12 inches or over) used in trunk lines was used to meet special conditions. The most popular size of pipe used in gathering lines in 1931 was 2-inch. There were more than 10,000 miles of large diameter gathering lines (6 inches or over) in use,a material portion of which was confined to service in California and West Texas, where the wells have a high average yield. A four-inch pipe line with 800 pounds per inch pressure will deliver approximately 3,800 barrels per day; a six-inch line, 10,000 barrels, and an eightinch line, 21,000 barrels. An oil man is chiefly interested in the length and diameter of a pipe line; but a steel man talks pipe in terms of tons. For the special benefit of the steel industry approximate figures of total tonnage of all the oil lines was 5,460,000 short tons, of which 4,179,000 short tons, or 77%, was in trunk lines and 1,281,000 short tons, or 23%, was in gathering lines. The cubic capacity of oil pipe lines is a matter of interest chiefly as an indication of the amount of oil stored in them. The lines are never completely full of oil, except possibly those portions adjacent to the outgoing end of a pump station, but it is assumed that the amount of oil stored in pipe lines equals the total cubic capacity of the lines. The Financial Chronicle Volume 134 total cubic capacity of the trunk lines amounted to 106,800,000 cubic feet, the equivalent of 19,023,000 barrels; the cubic capacity of the gathering lines was 23,500,000 cubic feet, or 4,191,000 barrels. The total of 23,214,000 barrels in pipe lines represented approximately 6% of the total stored in the United States. It has been estimated that the oil pipe line companies, and companies engaged in the transportation of oil, have invested in these pipe lines and their equipment more than two billion dollars, and the operating revenues derived from crude oil pipe lines alone exceeds two hundred and seventy-five million dollars. Thus, considered purely from a transportation angle, the piping or transportation of this product constitutes a vast industry. Twenty companies representing 90% of the twelve billion dollar oil industry control the majority of these pipe lines. These companies include: Continental, Cities Service, Gulf, Phillips, Tidewater, Union Oil, Pure Oil, Shell Union and Texas. The following statement of the oil pipe line mileage by States indicates the magnitude of this extensive underground railway" system, which has now come to be one of our firmly established industries: OIL PIPE LINE MILEAGE BY STATES-1931. State. Trunk Lines. Gathering Lines. Total. 840 820 Arkansas 1,660 3,780 California 1,820 5.600 90 20 Colorado 110 1,140 3,020 Illinois 4,160 Indiana 410 1,980 2,390 Iowa 98 98 Kansas 3,440 3:866 6,940 540 Kentucky 1,700 2,240 1,890 Louisiana 900 2,790 33 Maryland 33 325 Michigan -ido 485 Missouri 4,170 4,170 Montana 60 -E5 . 275 Nebraska 404 ---404 New Jersey 190190 New Mexico 150 - 80 500 New York 210 610 820 Ohio 2,580 5,780 8,360 Oklahoma 10,990 13,510 24,500 Pennsylvania 3.510 6,540 10,050 Tennessee---15 15 Texas 10,460 18:ggo 29,340 West Virginia • 320 4.910 5.230 Wyoming 610 690 1,300 Total 58.020 53.640 1 1 I Ran Creation of Money on Basis of Capital Assets to Restore Prosperity Held Cause of Present Slump. • [H. Parker Willis in "World-Telegram" of May 17.1 The politicians seem to be developing a new application of their older doctrines of the use of public funds and public credit to relieve the depression. If current dispatches are to be trusted, this plan now being matured would involve the raising of moneys on National credit to be placed in the hands of various agencies, public and private, for use in what is described as "productNe" investments in new construction and the like. It is essential, if an accurate appraisal of this general idea is to be made, to trace its evolution. A good while ago political wiseacres arrived at the conclusion that our troubles arose from a lack of credit, or a shortage of money in circulation. Bank assets were frozen and money and credit unobtainable as a result of a loss of confidence on the part of everybody, particularly the banks. . Hence the few courageous business men left in the country, and such others as might under more favorable circumstances as to credit become more confident of conditions, were stopped from proceeding with business as usual. Banks and Others Aided. The remedy for this situation was first of all to create a huge corporation supplied with funds by the Government to relieve the banks and to supply certain other groups with credit or money to carry out their business plans. The Reconstruction Finance Corp. was then brought into existence and set up in business. Its operations, while apparently helpful in certain directions, left much to be desired. It soon became necessary, according to this school of business 3697 doctors, to go further in relieving the shortage of credit and to increase the "money in circulation." So the Glass-Steagall Act was called into existence, and at once the Federal Reserve System set to work to pump funds into the stagnant stream of business. Shortly it was found necessary to advance the rate of such operations from $25,000,000 to $100,000,000 a week. Plan Large Additions. But still the banks do not show much disposition to lend freely enough to suit the politicians and other inflationists. So now apparently the banks and particularly the Reserve system are to be called on if certain groups have their way to supply the Government with additional amounts variously estimated at from $1,500,000,000 to nearly $2,500,000,000 (depending upon which plan is adopted) for relief. A substantial part of this is to be expended by Governmental agencies themselves that can be made to accept loans whether in accord with sound business judgments of the situation or not. Sum all this up, and we have a statement to the effect that the banks, according to these plans, would be forced to proceed at even a faster rate than at present to create "money" on the basis of capital assets as a means of restoring prosperity. Is this not precisely what they did ad infinitum during the boom years, and is not that very practice on their part the chief cause of most of our present misery? B. M. Anderson, Jr., of Chase National Bank of New York Believes Goldsborough Bill, with Absurd Proposal Through Federal Reserve, to Restore 1926 Prices, Will Fail of Enactment—Central Bank Influence on Money and Capital Markets. Discussing the Goldsborough bill, in the Chase "Economic Bulletin," issued May 16, Benjamin M. Anderson, Jr., Ph.D., Economist of the Chase National Bank of the City of New York, says: The Goldsborough Bill brings borne to us sharply the question of what should and what should not be asked of the Federal Reserve banks. The bill proposes that Federal Reserve bank credit policy should be guided by commodity prices. It directs the Federal Reserve authorities to raise the general average of commodity prices at wholesale as measured by the Bureau of Labor Statistics to the average levels of 1921-1929, and to keep them there. The theory is that this can be accomplished by a great expansion of Federal Reserve bank credit. After this level has been reached, Federal Reserve bank credit is to be expanded or contracted depending on whether commodity prices are falling or rising. I do not believe that the Goldsborough Bill, with its absurd 'proposal tc restore 1926 prices, has any chance at all legislatively. It is opposed by the Federal Reserve authorities, it is opposed by the President of the United States, who would undoubtedly veto it if it were presented to him, and there is evidence enough that the Senate does not take it seriously. But the doctrine behind the bill, that the Federal Reserve banks, and central banks in general, can and should stabilize commodity prices, has many adherents. There are many who believe that Federal Reserve credit can work miracles, that Federal Reserve policy can make prosperity by expanding credit and adversity by contracting credit, and that it is the business of the Federal Reserve authorities to make us prosperous all the time. There are many who believe that it Is in the power of the Federal Reserve System, and, consequently, the duty of the Federal Reserve System, to regulate the whole fabric of commodity prices and industrial activity. In opposition to this new doctrine, I offer the old-fashioned doctrine, rarely questioned in pre-war days, well understood and well tested in experience, that central bank policy should be guided by the banking position of the country and the state of the money market, with heavy •emphasis placed on the domestic banking position and the domestic money market, but with occasional co-operation with other central banks in International emergencies. Whereas the new theory asks central banks to stabilize the canmodities market, I maintain that they have a great enough task in steadying the money market. The Old-Fashioned View of Central Bank Functions and Central Bank Policy. The traditional pm-war view of the duties of a central bank is definite, clean-cut and simple. (1) It is the business of a central bank to protect the paper money of the country by converting it into gold on demand. This is its first and most essential function, and everything else must be subordinated to this. (2) It is the business of a central bank to ease off monetary stringencies and to prevent business crises from degenerating into money panics. In a crisis, the central bank supplies whatever money is necessary, at a steep discount rate. It enables solvent men to protect their solvency, but it does not regard it as its duty to validate the unsound assets of really insolvent men, or to help defer the liquidation of stale positions. (3) In times of great speculative excesses, whether in commodities or in securities, central banks should act to prevent the extension of unsound credits, to protect the liquidity of the banks of the country, and to check speculative excesses, by tightening the money market. (4) It is not the business of a central bank to finance a boom—least of all a stock market boom. Central Bank Influence on the Money and Capital Markets. What can central banks do with respect to commodity prices? First they can influence commodity prices only through their influence on the money and capital markets. Second, central bank policy is only one of many factors governing money rates and governing the volume of money and capital available in the money and capital markets. There are five main sources of capital: (1) Consumers' thrift. (2) The turning back of business profits, Including corporate profits, to industry 3698 Financial Chronicle and trade. (3) Taxation, when the proceeds of the taxes are used for capital purposes and very especially for the purpose of reducing public debt. (4) Direct capitalization, as when a farmer spends his spare time in building barns and fences, or putting in sub-soil drainage, or when a farmer allows his herds and flocks to grow instead of selling off the annual increase. (5) New bank credit, the product of bank expansion, based on excess bank reserves, which rimy grow out of (a) inflowing gold, or (b) increased central bank credits It is the abuse of this source of capital which is responsible for our present financial problems. The money market proper is the market where bank deposits are exchanged for highly liquid loans, namely acceptances, call loans in the Stock Exchange, open market commercial paper, prime customers' commercial paper of short maturity, and so on. The capital market is the market where liquid funds are exchanged for bonds, for real estate mortgages, for corporate shares, for real estate itself, and for other slow, less liquid, and more risky investments. Rates of interest in the capital market and in the money market depend upon both supply and demand. There are many subdivisions in each of these markets, each with its own special supply and demand, and each with its own special rate or rates. Normally, rates will be lower for the most liquid loans. Normally, rates in the money market will be lower than rates in the capital market, and, normally, there will be gradations and differentials in each of these 4narkets favoring the shorter, safer, and more liquid loan or investment. When funds grow superabundant in the money market proper, they tend, however, to overflow into the capital market, making rates lower on longterm loans, and making yields lower on fixed investments. Conversely, when funds grow scarce in the money market, the effort is made to turn fixed investments into cash, and, if the pressure is extreme, this can mean violent increases in the yield on fixed investments, as we have recently been seeing in the bond market. We saw, in 1929, open market commercial paper above 6%, with time anoney on the Stock Exchange at 8%%, and call money even as high as 20%. At the same time, we saw many common stocks yielding only 2%, and in some cases very much less than that. This was an appalling distortion, and we are seeing precisely the opposite to-day, in violent reaction from the distortion of 1929. To-day we are seeing call money at the Stock Exchange at 24%, time money at the Stock Exchange at , of 1%, 2 1 1%@2%, acceptances at 1% Q1143%, short Government bills at / while the yield on many admirable common stocks is 10%, and the yield on many bonds, which by all credit standards, should be a dollar good, are fantastic. What is the power of central bank policy with respect to money and the capital market? First, its direct influence is only on the money market. It can influence the capital market only indirectly as it first affects the money market. Second, in its influence on the money market, it can affect only the supply side. Demand it cannot control. Taking money market and capital market together, it can affect the supply side of only one of the main sources of capital, our number 5 above, namely bank credit. Investors' savings, corporate savings, Government policy with reference to the paying off of public debt, and direct capitalization are all beyond the control of the central bank. Even in the regulation of commercial bank expansion or contraction, central bank credit is only one (b) of five major influences, the other four being (a) international movements of gold, (b) the confidence of the people as manifested in their willingness to deposit their cash in the banks or their preference for hoarding cash, (c) the confidence of the bankers, as manifested in their willingness to lend or to invest, and (d) the confidence of the clients of the banks, as manifested in their willingness to borrow and use borrowed money. The power of a central bank, therefore, to regulate even the mdhey and the capital markets is limited, and we must not ask too much of it. We may properly expect it to prevent extreme variations, to moderate the movements in money rates and interest rates, to take up slack at times when rates are unduly low, to meet seasonal needs for increased hand-tohand currency and seasonal variations in the commercial demands for credit, and, above all, to prevent fantastically high interest rates in times of crisis and emergency. But, under anything like normal conditions, it is quite unreasonable to ask more than this of a central bank. Artificial manipulation of interest rates by a central bank seeking to overcome all the other factors in the money market and the capital market, generates troubles which lead to excessive rates in the other direction at a later time. This proposition holds true for all markets. An artificially low price for coal would check coal mining, on the one hand, and lead to wasteful use of coal on the other, with the result that sooner or later a great scarcity of coal would come, which could only be corrected by extremely high coal prices, checking the use of coal, and increasing its production. The main cause for the appalling state of the capital market ,in the United States to-day, with the fantastic yields on bonds, the scarcity of mortgage money, and the unprecedented yields on good stocks, is the excess of money market funds which flowed over into the capital market from 1921 to 1929. Central Bank Power Over Commodity Prices. If it is unreasonable to ask a central bank to fix money rates and interest rates, far more unreasonable is it to ask a central bank to fix the level of commodity prices. Central bank policy Is only one factor in the money and capital markets, and the state of the money and capital markets is only one of many factors affecting commodity prices. In no way, except through the regulation of the money and capital markets, can the central banks influence commodity prices, and this influence is an influence at second or third remove and of indeterminate degree. The general average of commodity prices is governed by a multitude of forces. In 1924, for example, in the United States we had a moderate rise in commodity prices beginning in the middle of the year. It started In a sharp rise in wheat, growing out of a world shortage, with positive disaster in the Canadian crop, accompanied by an abundant wheat harvest in the United States. American agriculture, which had been very depressed, found its position greatly improved, and agricultural buying of manufactured goods increased sharply. Simultaneously, the Dawes Plan restored confidence in Europe among American investors. We had placed only $267,000,000 of foreign securities (refunding excluded) in our market In 1923. But in 1924 we took nearly a billion dollars worth of such securities, mostly in the second half of 1924. Coincidently, our Federal credit is a source a many old-fashioned writers would deny that expanding bank the mere creation of of capital. They would say that it is absurd to contend thatbank and the bank's two liabilities, namely, the liability of the borrower to the held within limits, it But, deposit liability to the borrower, creates new capital. The trouble in recent great must be recognized that this Is a real source of capital. to an extent which passes years is that this source of capital has been overworked justify. See "The Chase can credit far beyond the limits which any theory of Economic Bulletin," Vol. VI, No.3, November 1926, pages 24-27, and "The Chase," November 1920, pages 318-326. S Cf. "Chase Economic Bulletin," Vol. VIII, No. 1, for an analysts of all the factors affecting commercial bank reserves and bank expansion in the United States, May 21 1932 Reserve authorities carried through the purchase of a great volume of Government securities, flooding our markets with money, leading to very excessive commercial bank reserves, and to a great credit expansion. This facilitated the enormous placement of foreign securities, which the second half of the year brought. Our export balance of commodities had dropped to about $375,000,000 in 1923, and rose to a billion dollars in 1924. Commodity prices increased from an average of 148.7 in the first half of 1924 to an average of 158.4 in the first half of 1925. In the absence of any of these three factors, the rise in commodity prices would have been less than it was. In general, central bank policy has a very limited control of the general average of commodity prices in a gold standard country. The relation between goods and gold is an international matter. Long-time variations in the production and consumption of gold, taking the gold as a whole, have a great deal to do with commodity prices. Changes in the production and consumption of goods of various kinds have a great influence. Chances in the proportions in which various goods are produced may make radical changes both in particular prices and in the general average of prices. If, for example, agricultural goods are produced in great excess, while manufactured goods are produced inadequately, the resultant break in agricultural prices may so reduce the buying power of the farmers that they are unable to take even the relatively scant product of the manufacturers at prevailing prices, and a break in the prices of manufactured goods comes also. Prices are interrelated. We saw precisely this situation as one of the major factors in the break in commodity prices in the United States and in the world in 1920-1921.c And we see it again to-day. The Facts versus the "Quantity Theory of Money." Adherents of the view that central banks can and should stabilize commodity prices may be divided into two classes. The one holds simply to the old quantity theory of money. This theory holds that, allowing for changes in the volume of trade, the average of commodity prices will go up or down in precise proportion to the quantity of money and bank deposits. The more scientific adherents of this theory make allowance also for "velocity of circulation" of money and deposits, but usually contend that "velocity" is guided by more or less fixed habits and customs. This doctrine is false even in theory, but I need do little more than present recent history to confute it. In the middle of 1919 the quantity theorists told us that we were on a permanently higher level of commodity prices as a result of the great expansion of bank credit, and we were assured that while prices might fall or rise moderately 5% or 6% above or below the existing level, with the business cycle, the existing level was permanent and safe. In the year and a half that followed, commodity prices first rose 15% and then dropped precipitately 49%, with the volume of bank credit higher at the end of the drop than it had been at the beginning of the rise. Following the great drop, the quantity theorists told us that prices would have to rise again to very high levels, because of the great flow of gold that was coming in to us, a flow which continued year after year on a colossal scale, reaching its climax in 1927. The gold came, but the rise in commodity prices did not materialize. The average of commodity prices stood in 1928 precisely where it stood in 1921. Facts do not ordinarily make a great impression upon the quantity theory school, as John Stuart Mill observed long ago.d In this case, however, the facts have been so startling and so disappointing that a myth arose among certain European quantity theorists to explain the facts away. The myth was that our Federal Reserve authorities sterilized the gold which came to us, and prevented it from expanding credit and raising commodity prices. The following table demonstrates the absurdity of this myth: April 11 1928 June 30 1919 Deposits of Commercial Banks.e April 11 1928 844.234,100.000 June 30 1921 27,728,241,000 Increase Per cent increase 516,505,859,000 59.5 Increase Per cent increase Increase Per cent increase 515,882,477,000 50.i Increase Per cent increase $44,234,100,000 29,831,015,000 514,403,085,000 48.2 Loans, Discounts and Investments of Commercial Banks.e April 11 1928 547,607,000,000 April 11 1928 847,607,000,000 June 30 1921 31,724,523,000 June 30 1919 34,209,282,000 $13,397,718,000 39.1 e The figure for April 11 1928 is estimated. See "The Chase Economic Bulletin," Vol. VIII, No. 1, Appendix A. Credit expanded, running far beyond the growth of trade, but commodity prices did not rise. Commodity prices would have had to be 83% higher in 1928 than they were if the quantity theory of money were to be justified. Commodity prices would have had to be 123% higher in 1931 than they were, if the quantity theory of money were to be justified. I present the details of this computation in an appendix. The expenditure of ammunition in the form of credit expansion was tremendous. The effect on commodity prices was nil. Instead, we financed a great real estate speculation, and a stupendous stock exchange speculation. Some defenders of the quantity theory have objected to figures of the sort I have presented here, on the ground that they do not take into account all prices, but only commodity prices at wholesale, and urge that if account were taken of all other prices, including stacks and bonds and real estate, that the picture would look better. Let me say, first, that for the purpose in hand this point is quite Irrelevant. We are discussing commodity prices at wholesale, and we are discussing the theory that proportioning the volume of money and credit to the volume of trade will stabilize commodity prices at wholesale. This is the doctrine that lies behind the Goldsborough Bill. Let me say, second, however, that if, in the price index, we included stocks, bonds, and real estate, while it might improve the picture for the theory down to 1929, it would make the picture look very much worse from 1929 to date, since the decline in the prices of stocks, bonds, and real estate has been far more rapid than the decline in commodity prices at wholesale, and very much more rapid than the decline in the volume of money and e Cf."The Chase Economic Bulletin," Vol. I; No. 3. rl "Not only has this fixed idea of the currency as the prime agent In the fluctUa; Mos of price made them shut their eyes to the multitude of circumstances which. by Influencing the expectations of supply, are the true causes of almost all speculations and of almost all fluctuations of price: but in order to bring about the chronological agreement required by their theory, between the variations of bank isst1139 and those of prices, they have played such fantastic tricks with facts and dates as would be thought incredible, if an eminent practical authority hail not taken the trouble of meeting them, on the ground of mere history, with an elaborate exposure. I refer, as all conversant with the subject must be aware, to Mr. Tooke's History of Prices.' The result of Mr. Tooke's investigations was thus stated by himself, in his examination before the Commons Committee on the Bank Charter question in 1832, and the evidence of It stands recorded in his book: 'In point of fact, and historically, as far as my researches have gone, in every signal instance of a rise or fall of prices, the rise or fall has preceded, and therefore could not be the effect of, an enlargement or contraction of the bank circulation.."—"Principles of Political Economy," book III, chapter 24, paragraph 1. Volume 134 Financial Chronicle credit. Bank credit, in fact, reached its peak in the autumn of 1930, long after the decline in stocks, bonds, and real estate began./ The New Formula of the Stabilisers. Disappointed in the behavior of the figures, or ignoring the figures, certain of the stabilizers have devised a simpler formula. They do not try to relate the volume of money and credit to the volume of trade. Instead, they look simply and solely at commodity prices at wholesale, and call upon the Federal Reserve authorities or the central banks to regulate commodity prices without reference to anything else. If commodity prices are falling, keep expanding credit until they stop falling. If commodity prices are to be raised, keep expanding credit until they are raised to the desired point. If, in the course of this, you generate a wild stock market speculation, pay no attention to it, and do not let it influence your credit policy.g The Great Credit Expansion Did Affect Commodity Prices. The great expansion of bank credit, running far beyond any need for credit, left commodity prices in 1928 precisely where they stood in 1921. But the price level would have gone down between 1921 and 1928 if that great expansion had not taken place. The expansion had its influence, not in raising commodity prices, but in maintaining them. It worked. however, not as the quantity theorists expected, by a mechanical equilibration of the quantity of money, on the one hand, and the quantity of goods in the process of exchange, on the other hand. It worked, rather, in indirect ways, the most important of which are the following: (1) The great expansion of bank credit made it possible for us, a creditor nation with very high tariffs, to maintain a great export trade, and even a great export surplus. The outside world was unable to sell goods, within our borders, in sufficient quantity to obtain earned dollars with which to pay interest on its debts in our country, and to buy goods from us. But the great expansion of bank credit made possible the flotation of a tremendous volume of foreign securities, giving the outside world borrowed dollars, with which to pay interest on past borrowings and to continue to buy our goods. (2) There was immense activity in our building trade, and in other longtime construction, including the building of roads and highways, which would not have gone so far had the volume of bank expansion been less. (3) The financing of installment buying with bank credit went much further than would have been possible under ordinary circumstances. (4) Consumer demand was swollen on a great scale by profits in stocks, bonds and real estate which accrued with the speculative developments in these fields. The Federal Treasury reported in 1928 that almost 11% of the income reported for taxation in that year represented either profits on stocks, bonds and real estate, or capital net gains on assets held over two years. This percentage represents only the case of realized profits on transactions actually completed. In addition, we know very well that the successful speculator, who had large paper profits, increased his expenditures through drawing on his balance with the brokers, when the balance greatly exceeded margin requirements. "Brokers' loans" increased to offset these withdrawals, and thus in part represented consumers' expenditures, including trips to Europe and automobiles! Commodity Prices of 1926-'29 Abnormally and Dangerously High. The prices of 1926 and the years immediately preceding and following, which the Goldaborough Bill wishes to regain, were thus dangerously insecure prices. They were dependent (a) on export trade done on credit, (b) on building trade and State and municipal construction financed by bond and mortgage issues, based on bank expansion, (c) rapidly expanding Installment finance, and (d) on the spending of speculative profits. Such a price level cannot be regained, and should not be desired. We should prefer a tougher and more tenacious price level, self-sustaining, resting on the expenditure of normal income. We should prefer an export trade soundly based on the balancing of goods and services against goods and services. We should prefer to have our building trade and our State and municipal -construction financed with investors' savings, and, for that matter, in the case of State and municipal construction, paid for in much greater degree out of current taxes. The commodity price-level does not need to be as low as it is to-day. We have to-day a panic price-level. If we can restore our foreign trade—and we can if we will—we can bring about a radical revival in the price* of agricultural commodities, and in the ability of the farmers to buy manufactured goods. With the restoration of activity in the manufacturing field, raw materials will enjoy a radical rally. With increasing volume of activity, the prices of manufacturers will not need to rise in order to make manufacturing profitable. With the restoration of the balance between the prices of manufactured goods and the prices of foods and raw materials, we shall have a price level safe, dependable and adequate. But the way to accomplish this la not to create another great credit expansion, but, rather, to deal directly with our foreign trade, through the reduction of our tariffs, and through settling inter-allied debts and reparations. .f There was a temporary peak in the panic week at the end of October 1929 due to the emergency expansion of credit, but with this one exception the autumn of 1930 shows the real highs In bank deposits and in bank loans and investments combined for the reporting member banks of the Federal Reserve System. All member banks show their high point in deposits In June of 1930 and practically their high point for combined loans and investments In the same month. g This view was maintained vigorously by Professor Cassel and others in 1928-29. See "Chase Economic Bulletin." Vol. IX, No. 3, pages 13-16. R. S. Hecht at Meeting of United States Chamber of Commerce Views Bill for Bank Unification as Threat to Economic Freedom -Opposed to Nation-Wide Branch Banking— Contrasts Canada with United States. Attacking proposals at Washington to force all commercial banking under Federal control, Rudolf S. Hecht, of New Orleans, told the meeting of the Ohamber of Commerce of the United States, at San Francisco, on May 20, that even if this idea "could be shown to be 100% desirable on purely banking grounds, the main question would remain as to how heavy a price would be paid for it in terms of further encroachments of central government domination over private business and surrender of local financial independence." He made a strong plea for the preservation of the present plan of alternative State or national charters and supervision for banks. "Complete banking unifica- 3699 tion would constitute abandonment of our traditional defenses against over-centralized government," declared Mr. Hecht, who is President of the Hibernia Bank & Trust Co. and Chairman of the Economic Policy Commission of the American Bankers' Association. "Effectively centralized. control over credit would mean potential dominance over the very lives and liberties of the people." He argued that the multiplicity of political jurisdictions in the United States, especially in the dual division of authority between State and national government, is inseparably a part of American political seturity against overcentralization and the dual banking system of State and National banks carries this out in the financial field. The national interests in respect to Federal Government cur- , rency, fiscal and other financial requirements, he said, were fully provided for by the National bank and Federal Reserve Systems, and to consolidate central government influence over banking any further would carry it too far. Hr. Hecht continued: "Continuation of the State banking systems enables business, if it chooses, to conduct its financial affairs i.n entire independence of Federal influence. To bring all commercial banking under Federal control would destroy this safeguard. It would create opportunities for lines of political thought that do not now exist, and opportunity inevitably becomes temptation,, and temptation, long enough continued, seldom fails to become action sooner or later. "The traditional sanctity that surrounds the Presidency and its zone of administrative influence forbids picturing the possibility of a national political regime using the power made possible by unified control over all commercial banking for base purposes or political manipulation. But it does not forbid the general observations that the Government has a long time to live, that generations come and go, that even honest statesmanship may unconsciously fall under evil influence, that humon nature swings through wide extremes, and there is no telling what changes in the state of political morals the future may witness. "Ours is a government of checks and balances, and the fact that banking has free choice whether it shall render its services to the people under Federal or State charter is one of the most important of these. To forceall commercial banks under Federal control by abolishing the power of the States to charter them would shut off escape for banking from any bureaucratic tyranny or political coercion that hight conceivably arise. The fact that almost without exception, particularly in recent years, Federal bank officials have been characterized by the highest ideals of public service under the dual banking system in the past, does not guarantee that others would not display a different attitude under a single unescapable system in the future." Mr. Hecht pointed out that all credit basically is local in character, that inter-state trade does not demand a particular type of inter-state financial function and that its free flow is in no way hampered by the present multiplicity of banking jurisdictions which it encounters. He also declared that, although statistically banks under Federal auspices in the Federal Reserve and National Systems had made a better record in respect to failures than State banks, nevertheless even there the record was "so far from satisfactory as to fail to show that the mere transfer of our banking from State to central Government jurisdiction into a single unified system would supply the remedy for our banking troubles." The remedy, he said, was to preserve the dual system and to bring all codes and supervisions up to the best standards that can be found in either system. He also advocated an extension of branch banking in both State and National systems to enable strong local financial banks to extend support to communities now lacking adequate banking facilities, but vigorously opposed the provision in the Glass Banking Bill now pending in Congress to grant National banks, regardless of State bank laws, statewide branch powers in all States and limited interstate branches in certain localities. He declared that National banks should be given just as wide branch powers as State banks within any State but that they should not be given greater privileges than are granted State banks in their own territory. Mr. Hecht, in opposing nation-wide branch banking, presented a vigorous refutation of comparisons between the Canadian and American systems "making it appear the former has all the virtues, the latter all the vices." It is true, he said, no bank failures occurred in Canada in recent years "while thousands have closed their doors in the United States,—but there is far more for banking to do than merely to keep its doors open." He went on to compare the "extraordinary contrast of American progress as against the picture of Canada's development," pointing out that Canadian authority estimates that of 360 million acres there available for agriculture, 200 million lie neglected and that the mineral resources have been hardly scratched. He also brought out that Canada, granting that there are larger waste regions in her gross area which is equal to that of the United States, supports only 10 million people against America's 122 million, that her developed National wealth was only 29 billion dollars in 1928 against this country's 3700 Financial Chronicle 360 billion, and her income but $6,000,000,000 against $82,000,000,000. Mr Hecht went on to say: "These facts are not to say that Canada is a backward country, but they indicate that she has in no way comparable to the United States yet entered into the great adventure of industrial and commercial expansion and exploitation which for all their contributions to human progress are also attended by great social and financial hazards. Without contrasting standards of living, systems of education, world-wide financial responsibilities and *other contributions to human progress, the United States has gone to far greater lengths than Canada. "This progress has been made possible under our banking systems and methods for all their defects. The United States has ventured greatly and American banks have at all times stood right beside American agriculture, industry, commerce and finance and taken their chances with them." He asked whether Canada would not have made greater if "instead of less than a score of banks centralized in the big cities, with 4,000 branches reaching out and enforcing cautious, metropolitan financial policies upon the farms and local industries throughout the country, she had the American system of independent local banks, bound up in the welfare, progress and ambitions of their local communities." He also expressed doubt that America's greater progress would have been possible if local development had been dependent upon a few great financial centers instead of receiving aid from thousands of local bankers. One bank in Canada alone, he said, with about a thousand brandies, controls 27% of the nation's total commercial banking resources, while the three largest, with 2,400 branches controls 70%. "We do not want any such centralization as that," he declared. "How foreign that is to anything this country wants is obvious when we consider that many of our people grow apprehensive because two or three of our great banks each control resources of a billion and a half or two billion dollars-about 7% of the nation's total for the three largest combined, as contrasted with the 70% for Canada's three largest." He was opposed, he said, to giving banks under National charter, such vital advantages over State banks, as proposed in the Glass Bill, as to lead to the destruction of the present dual system of local independent unit banks. He, and bankers generally, he said, were heartily in favor of legislation or changes that are "truly constructive and helpful to banking as well as to the public." • Trends in Security Ownership Surveyed by R. G. Dun & Co.-----Holders of Common Stocks Increased Over 40% in Past Two Years-Increase in Holders of Preferred Stock Negligible-Decline in Bondholders. A survey of security distribution prepared by the research department of R. G. Dun & Co. was made available May 16. It is based upon information on stockholders' lists and registered bond holdings contributed by more than 400 corporations, the securities of which are listed on the New York Stock Exchange. The major trends in security distribution shown by the survey of the past two years are summarized as follows: 1. Holders of common stock have increased by more than 40%. 2. Holders of preferred stock have increased by a negligible amount In the aggregate although they have decreased in 19 out of 27 industrial groups. 3. There has been a decline of about 4% in the number of registered bondholders. 4. There has been a nominal gain in the percentage of corporate funded debt registered in owners' names. In summarizing the results of the study R. G. Dun & Co. state: To what conclusion do these facts point? They confirm the belief that common stock psychology is still the ruling investment force-that the belief persists that carefully chosen common stocks will ultimately enhance greatly in value and the income securities are unlikely to participate to a satisfactory degree in our future corporate prosperity. There are several factors which have contributed to the gain in common stock ownership and to the decline in income security ownership. The influence of each is impossible to measure since all have combined to bring about the effect. One of the primary influences is the long-continued down trend in security prices, another is the relative scarcity of Income issues and a third is the psychology of the American investor. In his book,"The Work of the Stock Exchange," J.E. Meeker,Economist of the New York Stock Exchange, presented a concentrated study of the relationship between price and security ownership. He chose a 24-year period and analyzed the price and investment ratio fluctuations In that Interval of U. S. Steel preferred and common. This point is graphically Illustrated: That stock in investors' hands always increased as price declined and that stock holdings decreased as prices rose. Undoubtedly, this influence has been at work on a very broad scale in the past two years. Another factor which bears upon increased common stock and decreased Income security ownership is the great abundance of common stocks availMany corporaable and the comparative scarcity of prime income issues. tions retired bonds and preferred stocks up to 1929 whenever the opportunity coupons. attractive with offered. Many refunded bonds retired The investor for income saw his bonds and preferred stocks completed the and his bonds refunded. Each time such an operation was -choice of prime income securities was further narrowed. May 21 1932 Because of retirement and refunding common stocks have in many cases become the senior and only issues of our most prominent corporations. Whoever would invest in these corporations has no choice but to take common stocks. The psychological factor is an important one. Common stocks have been popular in recent years because they appeal to the American temperament. We are a young nation. Our entire history has been one of growth and improvement-of achievement and of progress. This background has made us in all things optimistic and aggressiveimpatient alike of delay and of complacency. This mental attitude places the common stock in a position of ascendancy, since it represents, to the exclusion of other securities, actual, profitable participation in the future of the country. From the viewpoint of the average American investor the case for the common stock may be summed up in these words: common stocks are dynamic; income securities are static. Many of us can remember the period when a common stock was never regarded as anything but a speculation. Widows, orphans and trust funds were advised to avoid them. In those days only bonds, mortgages, and a few select preferred stocks were in good repute. A very definite change occurred in our psychology in that respect after the war. We became convinced of indefinite prosperity for American corporations. We felt that these abnormal profits would go to common stock so we bought them. In this way the common stock psychology was born. The common stock era began. We sold our income to buy possibilities. We had tasted moderate profits by buying Liberty Bonds. We had educated thousands of security salesmen in the Liberty Bond drives. The transition from common stock investing to common stock speculation was inevitable and quick. In this new age the conservative investors bought common stocks for the long pull, the speculators bought common stocks for the short swing. Few were aware that the Golden Age had actually ended in the Fall of 1929. The general attitude was that the lower prices were bargains which should be snapped up quickly. Although a period of widespread inflation ended in 1929, the psychology of the period did not change. The common stock was as much the king of securities after the break as before. There seemed to be only this difference in the general attitude toward the common stock: that it came to be regarded more generally as the ultimate hope of the patient investor, rather than primarily as the immediate means to a speculative fortune. These impressions are confirmed by the results of one of the most comprehensive analyses of the corporation stockholders' lists ever undertaken. This survey, conducted by the Research Department of It. G.Dun & shows the extent to which the apparent trends have actually influenced security ownership in the past two years. The survey was approached in this way: it was decided to llrn t the Investigation to securities listed on the New York Stock Exchange because this group represents an important percentage of the total securities owned by American investors. To collect the material for analysis a questionnaire was sent to every corporation which has securities of any type listed on the New York Stock Exchange. The questionnaire asked the number of shareholders of all classes of stock on the last record date and on the corresponding date two years ago. It also asked the number of registered bondholders and the percentage of funded debt registered on these dates. Replies were received from 409 corporations. A total of 346 gave the requested information as to common stockholders' lists. The number reporting on preferred stockholders' lists was 138; information on registered bond holdings was contributed by 80 organizations. The discrepancy between the numbers reporting the different types of information is due to the fact that many corporations have only one type of securities listed and that more of them list common stock than preferred; it is also true that a relatively small percentage of the funded debt of any of the corporations contributing to the survey was registered in owners' names. Since the Stock Exchange was chosen as the field of study, the corporations replying to the questionnaire were grouped in the same industrial divisions as are listed each month in the New York Stock Exchange "Bulletin." This provided an accurate check of the percentage of the industry participating in the survey, since on the common and preferred stockholders' lists the market value calculated by the Stock Exchange as of April 1 was compared with the market value of the same date computed by the Research Department for the companies in each group from which questionnaires were received. This table lists the groups according to which the contributing corporations were classified, the number of organizations reporting in each group, the percentage of the market value of the group to the Stock Exchange market value and the increase in stockholders in the two-year period: TWO-YEAR COMPARISON OF COMMON STOCKHOLDERS BY INDUSTRIES. Industry. 1 Agricultural machinery 2 Aircraft 3 Amusement 4 Apparel manufacturing 5 Automobile 6 Automobile accessory 7 Building 8 Business & office equipment_ 9 Chemical 10 Electrical equipment 11 Financial 12 Food 13 Foreign 14 Land-Realty-Hotels 15 Leath and shoe Mfg 16 Mach.& eq. dr metal mfg.__ 17 Mining (excluding iron) 18 Miscellaneous 19 Paper and publishing 20 Petroleum 21 Railroad 22 Railroad equipment 23 -..etall merchandising 24 Rubber goods and tires 25 Shipbuilding and operating._ 28 Shipping services 27 Steel-Iron-Coke 28 Textile 29 Tobacco 30 United States companies operating abroad 31 Utility Number of No. Ratio So Stockholders, Corn- S. E. panics Market Two Years Report- Value lag. April 1. Ago, Current, 4 4 3 2 12 13 11 8 28 8 1 26 7 1 3 28 19 4 14 19 21 9 30 4 4 2 15 8 12 92.1 76.1 37.2 58.8 94.6 38.7 43.6 100.0 79.6 96.6 17.2 80.1 44.9 16.8 96.8 40.2 60.9 84.6 92.4 74.3 56.7 68.2 84.9 47.0 73.3 44.2 79.4 50.2 50.4 32,938 44,082 36,360 3,409 376.823 67.697 26,833 39,685 200,640 163,847 6,463 243,398 88,970 4,347 15,230 78,111 169,419 8,558 31,522 294,734 567,027 78,221 136,144 60,774 8,102 2,672 191,702 23,311 52,481 6 22 85.1 90.3 94,844 984.925 49,734 55,847 53,875 4,761 574,357 83,184 34,132 54,231 294,873 209,298 10.012 372,124 139,780 6,919 15,797 109,929 262,050 . 9,970 40,090 450,673 646,841 87,814 239,522 76,134 9,699 3.394 281,404 25,166 84,956 138,570 1.422,515 P. C. Increase. 51.1 26.7 49.4 39.7 52.5 22.9 27.2 36.6 47.1 27.8 55.0 52.8 45.4 59.3 3.7 40.7 54.7 16.5 27.2 52.9 14.1 12.3 75.9 25.2 19.7 27.0 46.8 7.9 62.1 48.0 44.4 41.5 5.847.651 4,133,267 346 Total 76.6 The 346 Corporations which contributed information on their common stockholders' lists were classified into 31 different industrial divisions. The Stock Exchange market value of all the common stock listed for these 31 groups on April 1 was $1.9,763,191,675. The market value of the listed common stock of the companies included in the survey was, on the same date, $15,128,913,173. The value of the common stocks, the stockholders' lists of which are analyzed in the survey, is therefore 76.6% of the total value of the same groups. Two years ago the 346 corporations had 4.133,267 common stockholders. As of the last record date the number was 5.847,651,an increase of 1,714,384, or 41.5% over the figure of two years ago. It will be observed that each group showed a gain in the number of stockholders for the two years. The increases range from as low as 3.7% for the Leather and Shoe Manufacturing division to as high as 75.9% for the Retail Merchandising group. Other groups showing large gains in common stockholders were: Tobacco. 62.1%, and Land-Realty-Hotels, Agricultural Machinery, Automobile, Food, Mining, Petroleum and Finance, all of which had average increases of more than 50%. The divisions which had the smallest average gains, under 25%, were: Automobile ,Accessories, Leather, Miscellaneous, Railroad, Railroad Equipment, Shipbuilding and Operating and Textiles. Two years ago, 137 of the 346 reporting companies had stockholders' lists of less than 2,000. As of the last record date the number had shrunk to 106. These changes and those in the remainder of the list are shown in this table: DISTRIBUTION OF CORPORATIONS BY NUMBER OF COMMON STOCKHOLDERS. Number of Companies. Number of Common Stockholders. Change. Two Years Last Record Ago. Date. 64 73 34 23 27 40 20 15 10 21 13 Under 1,000 1,000= 2,000 2,000- 3,000 3,000- 4,000 4,000- 5.000 5.000- 10,000 10,000- 15,000 15,000- 20,000 20,000- 25,000 25,000- 50,000 50,000-100,000 Over 100,000 Number. 6 Per Cent. -25 -6 +8 +7-7 +4 +4 -1 39 67 42 30 20 44 24 14 9 29 18 10 +8 +5 +4 -39.0 -8.2 +23.5 +30.4 -25.9 +10.0 +20.0 +6.7 -10.0 +38.1 +38.4 +66.7 The gains and losses are not evenly distributed. However, the decline of 31 in the number of corporations with less than 2.000 stockholders, and the gain of 17 in the number of corporations with more than 25,000 stockholders show a tendency toward larger stockholders' lists for the two-year period. In the accompanying chart the percentage of the corporations in each group two years ago is compared with the percentage on the last record date. The same stockholders' list subdivisions are used as in the table. A total of 138 corporations contributed information on preferred stockholders' lists. These companies were classified into 27 industrial groups., The market value calculated by the Stock Exchange for all the listed preferred stocks in these divisions as of April 1 was $4.011.612.791. The market value on the same date of the listed preferred stocks of the organiLions contributing to the survey was $1.929.998.496. or 48.0% of the total value of stocks in these groups. Two years ago the 138 corporations had 662,383 preferred shareholders. As of the most recent record date the total was 664.500, indicating an Increase in the two-year period for the entire group of only 0.32%. In spite of this small aggregate gain the groups in which preferred stockholders decreased outnumbered those showing increases. Only 8 groups had more preferred stockholders in their last record dates than two years previously19 had fewer preferred stockholders on their most recent record dates than on the corresponding dates two years ago. This table lists the 27 groups according to which the 138 contributors were classified and shows the number in each group. It also shows the percentage of the market value of the listed preferred stocks of the corporations In each group to the official market value for the entire group. The table also shows the number of preferred shareholders two years ago and as of the last record date, as well as the percentage increase or decrease: TWO-YEAR COMPARISON OF PREFEARED STOCKHOLDERS BY INDUSTRIES. Industry. 1 Agricultural machinery 2 Amusement 3 Apparel 4 Automobile 5 Automobile accessory 6 Building 7 Business dr office equipment_ 8 Chemical 9 Food 10 Foreign 11 Land-Realty-Hotels 12 Leather and shoe mtg 13 Mach. 5, eq. & metal mtg_ _ _ 14 Mining (excluding Iron) _. 15 Miscellaneous 16 paper and publishing 17 Petroleum 18 Railroad ip Railroad equipment 20 Retail merchandising 21 Rubber goods and tires . 22 Shipping services 23 Steel-Iron-Coke 24 Textile 25 Tobacco 26 United States companies operating abroad 27 Utility Tntal No. Ratio to CornS. E. parries Market Report- Value log. Aprill. Number of Stockholders. Two Years Ago. P. C. of Change. Current 3 2 1 1 1 5 2 15 12 2 1 2 8 4 1 5 3 12 5 16 3 2 6 4 8 79.5 51.3 78.0 3.9 8.2 13.6 100.0 73.5 50.9 46.4 82.9 47.0 17.9 55.2 5.5 100.0 37.5 45.5 83.9 55.4 55.2 55.1 84.6 22.5 57.7 32,280 4,419 729 845 2.482 6,472 5,164 39,167 83.488 19,812 1,957 3,628 13.942 23,603 994 30,527 5,036 52,080 18,043 24,137 50,753 2,603 102,078 1,716 13,512 22,551 3,850 639 783 2,287 6.398 4,882 42,337 90,048 16.432 1,889 3.218 12,813 23,589 932 35.519 5,523 52,721 17,795 23,388 51.681 2,592 98,865 1,390 11,988 -30.2 -12.8 -12.7 -7.3 -7.9 -1.1 -5.5 -8.1 +7.9 -17.1 -3.5 -11.3 -8.1 -.06 -6.2 +16.3 +9.6 +1.2 -1.4 -3.1 +1.8 +0.4 -3.1 -19.1 -11.3 1 13 4.1 35.2 656 122,260 660 129,730 +0.6 +6.1 138 48.0 6S2 5S 11114 Ann .LO 5, 1 The changes range from a decrease of more than 30% for the Age cultural Machinery to a gain of over 16% for the Paper and Publishing industry. Exclusive of these extremes, the heaviest decreases were in the Textile industry, Foreign Companies, Amusement industry. and Apparel manufacturing industry. The most pronounced gains were in the Chemical, Food, Petroleum, and Utility industries. There were generally far fewer preferred stockholders in the average Corporation than common stockholders. For this reason smaller intervals were used in classifying the corporations according to number of stockholders two years ago and as of last record date. table: • The comparison is made in this 3701 Financial Chronicle Volume 134 DISTRIBUTION OF CORPORATIONS BY NUMBER OF PREFERRED STOCKHOLDERS. Change. Number of Companies. Number of Preferred Stockholders. Two Years Ago. Current. Number. 17 30 14 14 8 5 6 6 10 3 7 4 5 3 5 19 30 14 11 8 8 5 10 5 4 9 3 4 5 3 +2 0 0 -3 0 +3 Under 500 500- 1,000 1,000- 1,500 1,500- 2,000 2,000- 2,500 2,500- 3,000 3,000- 4.000 4,000- 5,000 5.000- 6,000 6.000- 7,000 7,000-10,000 10,000-15,000 15,000-20,000 20,000-25,000 Over 25.000 Per Cent. +11.7 0.0 0.0 -21.4 0.0 +60.0 -16.7 +66.6 -50.0 +33.3 +28.6 -25.0 +20.0 +66.6 -40.0 +4 -5 +1 +2 -1 +2 -2 Whereas, two years ago, there were 5 corporations with more than 25,000 preferred stockholders, there are now only 3. The 2 which dropped from the highest category are now in the 20,000 to 25,000 group and account for the gain which it shows. Similar counter-balancing changes are shown in the remainder of the list. For instance, the decline from 10 to 5 in the 5,000 to 6,000 group accounts for the gain from 6 to 10 in the next lowest classification. In the accompanying chart the percentage of the total number of companies in each classification as of the last record date is compared with the percentage in the same classifications two years ago. Relatively few corporations reported the number of their registered bondholders or the percentage of funded debt registered in owners' names. This was due partly to the fact that only a small percentage of the corporations participating in the survey had bonds listed on the New York Stock Exchange and also to the fact that not all corporations keep precise records of this kind because of the small number of investors who register bonds. A total of 84 corporations in 3 major groups contributed the information on the number of registered bondholders on their books which is summarized In this table: NUMBER OF REGISTERED BONDHOLDERS. Group. Railroads Industrials Utilities Corporations No. of Companies Number of Registered Bondholders. Change. Two Years Apo. Recent Record Date. Number. 40 28 16 14,375 3,664 1,755 13,678 3,526 1,832 -697 -138 +77 -4.9 -3.8 +4.4 84 19,794 19,036 -758 -3.8 P. C. The only gain was shown by the smallest group, the utilities. Both the rail and industrial divisions, which represent 81% of the number of corporations reporting, showed decreases in the number of their registered bondholders. Of these 84 corporations,80 were able to contribute data on the percentage of funded debt registered on the last record date and on the same date two years previous. This table gives the summary of this information: AVERAGE PERCENTAGE OF FUNDED DEBT REGISTERED. P. C. Funded Debt Registered. Group. Railroads Industrials Utilities Corporations Number of Companies Two Years Ago. Recent Record Date. 40 25 15 16.38 5.02 6.01 16.59 4.68 8.61 80 10.88 11.37 Per Cent Change. , +0.21 -0.34 +2.61 +0.49 United States Supreme Court Upholds State Authority to Limit Oil Output-Proration Plan of Oklahoma Declared Valid-No PriceFixing Seen. In a unanimous opinion written by Justice Butler the United States Supreme Court on May 16 decided that a State has the power and authority to limit the production of oil and gas from the wells of the State to the amount of the reasonable daily market demand and to require ratable production by all taking from a common source of supply. The Supreme Court,in upholding the Oklahoma oil conservation law, set aside a minor section of the voluminous curtailment Act, according to Associated Press accounts from Washington, May 16, which stated: It provided that oil companies who violate the law may be put into the hands of receivers for operation. This, however, did not affect the Court's conclusion that the State was within its right in giving its corporation commission power to pro-rate the flow of oil in the various fields to conserve the liquid wealth. From the "United States Daily" of May 18 we quote as follows regarding the Supreme Court's conclusions: The proration scheme of limiting oil production as practiced in the State of Oklahoma under its so-called Curtailment Act and the orders of the State Corporation Commission thereunder were found not to deprive oil well owners and operators of any rights under the Federal Constitution. Procedure Challenged. The decision of the Court was handed down in a case in which the proration plan was challenged by the Champlin Refining Co., an integrated organization owning wells, refineries and sales outlets. Counsel for the company had urged among other things, that the plan operates as a pricefixing scheme, deprives a well owner of his property, and burdens inter. State commerce. These contentions were rejected by the court in an unanimous opinion written by Mr. Justice Butler. Possible Waste of Oil. Relative to the argument that the company "has a vested right to drill wells upon the lands covered by its leases and to take all the natural flow 3702 Financial Chronicle of oil and gas therefrom so long as it does so without physical waste, and devotes the production to commercial uses," the court stated that "if plaintiff should take all the flow of its wells, there would inevitably result great physical waste even if its entire production should be devoted to useful purposes." The Court recognized that "every person has the right to drill wells on his own land and take from the pools below all the gas and oil that he may be able to reduce to possession, including that coming from land belonging to others." It ruled, however, that "the right to take and thus acquire ownership is subject to the reasonable exertion of the power of the State to prevent unnecessary loss, destruction or waste." Definition of "Waste." The statute in question prohibits the production of petroleum in such a manner or under such conditions as constitute waste. The term waste is defined to include, in addition to its ordinary meaning, economic, underground and surface waste, and waste incident to production in excess of transportation or marketing facilities or reasonable market demands. It empowers the Corporation Commission to make rules and regulations for the prevention of such wastes, which it has done under its proration plan since April 1927. The fact that the Commission never limited production below market demand "and the great and long-continued downward trend of prices contemporaneously with the enforcement of proration" was said by the court to strongly support the finding that the orders assailed have not had the effect of fixing prices for oil. Since the regulation pertains to production and not to sales or transportation, it was held that the plan does not burden inter-State commerce. One section of the statute pertaining to its enforecment, which purported to provide for the appointment of a receiver of the producing property of a person or corporation violating the act, was held by the Court to be void for indefiniteness of the statute in so far as it describes the prohibited acts for violation of which the receiver may be appointed. The Court also, on May 16, announced that it would bear a case, entitled Railroad Commission of Texas vs. MacMillan et. al., No. 844, involving the validity of orders of the Texas Commission fixing the allowable production of oil in the East Texas oil field. The hearing of this case will not be had until the next term of the Court in the Fall. The Oklahoma Act, in substance, authorizes the Commission to determine the value of crude oil or petroleum, and prohibit production at times when there "is not a market demand therefor at the well at a price equivalent to thc actual value." From the Washington account May 17 to the New York "Times" we quote: "None of the Commission's orders has been made for the purpose of fixing the price of crude oil or has had that effect," Justice Butler said, "When the first order was made, the price was more than $2 a barrel, but it declined until at the time of the trial it was only 35 cents. In each case, the Commission has allowed to be produced the full amount of the market demand of each pool. "It was not shown that the Commission intended to limit the amount of oil entering interstate commerce for the purpose of controlling the price of crude oil or its products, or of eliminating plaintiff or any other producer or refiner from competition, or that there was any combination among plaintiff's competitors for the purpose of restricting interstate commerce in crude oil or its products, or that any operators' committee made up of plaintiff's competitors formulated the proration orders. The evidence before the trial court undoubtedly sustains the findings above referred to, and they are adopted here. "Plaintiff herein insists that the act is repugnant to the due process and equal protection clauses of the Fourteenth Amendment. "We need not consider its suggestion that the business of production and sale of crude oil is not a public service and that it does not devote its property to the public use. The proration orders do not purport to have been made, and, in fact, were not made, in respect of services or charges of any calling so affected with a public interest as to be subject to regulation as to rates or prices. "Plaintiff insists that it has a vested right to drill wells upon the land covered by its leases and to take all the natural flow of oil and gas therefrom so long as it does so without physical waste and devotes the production to commercial uses. But if plaintiff should take all the flow of its wells there would inevitably result great physical waste, even if its entire production should be devoted to useful purposes." The decision in full is taken as follows from the "United States Daily": Champlin Refining Company v. Corporation Commission of the State of Oklahoma et al. Corporation Commission of the State of Oklahoma et al. v. Champlin Refining Company Supreme Court of the United States. Nos. 122, 485, 486. On appeals from the District Court of the United States for the Western District of Oklahoma. Harry 0. Glasser and James M. Bech (George S. Ramsey, Horace G. McKeever, Edgar A. DeMettles and Nathan Scarritt with them on the brief) for the Champlin Refining Company: W. P. Z. German and John H. Miley (J. Berry King, Attorney-General, and Jess L. Ballard, Assistant Attorney-General, of Oklahoma, and E. S. Ratliff, Attorney for Corporation Commission, with them on the brief) for the Corporation Commission of the State of Oklahoma et al.; Philip Kates filed brief as amicus curia: Cicero I. Murray, Warwich M. Downing and Kenner McConnell filed brief for Oil States Advisory Committee, as amid curiae. Opinion of the Court May 16 1932. Mr. Justice Butler delivered the opinion of the court. The refining company by this suit seeks to enjoin the Commission, Attorney-General and other State officers from enforcing certain provisions of c. 25 of the laws of Oklahoma enacted Feb. 11 1915 (Note No. 1), and Note No. 1—C. 0. S. 1921, Sections 7954-7963. Section 1—That the production of crude oil or petroleum in the State of Oklahoma, in such a manner and under such conditions as to constitute waste, is hereby prohibited. (Section 7954.) Section 2—That the taking of crude oil or petroleum from any oil-bearing sand or sands in the State of Oklahoma at a time when there is not a market demand therefor at the well at a price equivalent to the actual value ofsuch crude oil or petroleum is hereby prohibited, and the actual value of such crude oil or petroleum at any time shall be the average value as near as may be ascertained in the United States at retail of the by-products of such crude oil or petroleum when refined less the cost and reasonable profit in May 21 1932 thebusinessrof transporting refining and marketing the same, and the Corporation Commission of *this State is hereby invested [sic] with the authority and power to investigate and determine from time to time the actual value ofsuch crude oil or petroleum by the standard herein provided, and when so determined said Commission shall promulgate its findings by Its orders duly made and recorded, and publish the same in some newspaper of general circulation in the State. (Section 7955.) Section 3—That the term "waste" as used herein, in addition to its ordinary meaning, shall include economic waste, underground waste, surface waste and waste incident to the production of crude oil or petroleum in excess of transportation or marketing facilities or reasonable market demends. The Corporation Commission shall have authority to make rules and regulations for the prevention of such wastes, and for the protection of all fresh water strata, and oil and gas bearing strata, encountered in any well drilled for oil. (Section 7956.) Section 4—That whenever the full production from any common source of supply of crude oil or petroleum in this State can only be obtained under conditions constituting waste as herein defined, then any person, firm or corporation, having the right to drill into and produce oil trom any such common source of supply, may take therefrom only such proportion of all crude oil and petroleum that may be produced therefrom, without waste, as the production of the well or wells of any person, firm or corporation bears to the total production of such common source of supply. The Corporation Commission is authorized to so regulate the taking of crude oil or petroleum from any or all such common sources of supply, within the State of Oklahoma, as to prevent the inequitable or unfair taking, from a common source of supply, of such crude oil or petroleum, by any person, firm or corporation, and to prevent unreasonable discrimination In favor of any one such common source of supply as against another. (Section 7957.) Section 5—That for the purpose of determining such production, a gauge of each well shall be taken under rules and regulations to be prescribed by the Corporation Commission, and said Commission is authorized and directed to make and promulgate, by proper order, such other rules and regulations, and to employ or appoint such agents with the consent of the Governor, as may be necessary to enforce this Act. (Section 7958.) Section 6—That any person,firm or corporation, or the Attorney-General on behalf of the State, may institute proceedings before the Corporation Commission, or apply for a hearing before said Commission, upon any question relating to the enforcement of this Act, and jurisdiction is hereby conferred upon said Commission to hear and determine the same. Said Commission shall set a time and place, when and where such hearing shall be had and give reasonable notice thereof to all persons or classes interested therein, by publication in some newspaper or newspapers having general circulation in the State, and in addition thereto shall cause reasonable notice in writing to be served personally on any person, firm or corporation complained against. In the exercise and enforcement of such jurisdiction, said Commission is authorized to determine any question or fact arising hereunder, and to summon witnesses, make ancillary orders, and use mesne and final process, including inspection and punishment as for contempt, analogous to proceedings under its control over public service corporations, as now provided by law. (Section 7959.) Section 7—That appellate jurisdiction is hereby conferred upon the Supreme Court in this State to review the action of said Commission in making any order, or orders, under this Act. Such appeal may be taken by any person, firm or corporation, shown by the record to be interested therein, in the same manner and time as appeals are allowed by law from other orders of the Corporation Commission. Said orders so appealed from shall not be superseded by the mere fact of such appeal being taken, but shall be and remain in full force and effect until legally suspended or set aside by the Supreme Court. (Section 7960.) Section 8—That in addition to any penalty that may be imposed by the Corporation Commission for contempt, any person, firm or corporation, or any officer, agent or employee thereof, directly or indirectly violating the provisions of this Act shall be guilty of a misdemeanor, and upon conviction thereof, in a court of competent jurisdiction, shall be punished by a fine in any sum not to exceed five thousand dollars (85,000), or by Imprisonment in the county Jail not to exceed thirty (30) days, or by both fine and imprisonment. (Section 7961.) Section 9—That in addition to any penalty imposed under the preceding section, any person, firm or corporation violating the provisions of this Act shall be subject to have his or its producing property placed in the hands of a receiver by a court of competent jurisdiction, at the suit of the State through the Attorney-General, or any county attorney, but such receivership shall only extend to the operating of producing wells and the marketing of the production thereof, under the provisions of this Act. (Section 7962.) Section 10—That the invalidity of any section, subdivision, clause or sentence of this Act shall not in any manner effect [sic] the validity of the remaining portion thereof. (Section 7963.) certain orders of the Commission on the ground that they are repugnant to the due process and equal protection clauses of the Fourteenth Amendment and the commerce clause. The district court consisting of three judges, 2811. S. C., Sec. 380, denied plaintiff's application for a temporary injunction, and No. 122 is plaintiff's appeal from such refusal. As final judgment has been entered, this appeal will be dismissed. The final decree sustains certain regulatory provisions of the Act but declares invalid some of the penal clauses. 51 F.(2d) 823. No. 485 is plaintiffs appeal from the first mentioned portion of the decree and No. 486 is defendant's appeal from the other part. No. 485 The Act prohibits the production of petroleum in such a manner or under such conditions as constitute waste. Section 1. Section 3 defines waste to include—in addition to its ordinary meaning—economic, underground and surface waste, and waste incident to production in excess of transportation or marketing facilities or reasonable market demands and empowers the Commission to make rules and regulations for the prevention of such wastes. Whenever full production from any common source can only be obtained under conditions constituting waste, one having the right to produce oil from such source may take only the proportion of all that may be produced therefrom without waste as the production of his wells bears to the total. The Commission is authorized to regulate the taking of oil from common sources so as to prevent unreasoanble discrimination in favor of one source as against others. Section 4. Gauges are to be taken for the purpose of determining production of wells. And the Commission is directed to promulgate rules and regulations and to appoint such agents as may be necessary to enforce the Act. Section 5. Since the passage of the Act the Commission has from time to time made "proration orders." The court made its findings which, so far as need be given here, are indicated below: Plaintiff is engaged in Oklahoma in the business of producing and refining crude oil and transporting and marketing it and its products in intra-State and inter-State commerce. It has oil and gas leases in both the Greater Seminole and the Oklahoma City fields. In each field it has nine wells. It owns a refinery having a daily capacity of 15,000 barrels of crude and there produces gasoline and other products. It has approximately 735 tank cars, operates about 470 miles of pipeline Including adequate facilities for the transportation of crude oil from the fields to its refinery, and has about 256 wholesale and 263 retail gasoline stations in Oklahoma and other States which are supplied from its refinery. At the refinery it has gas-tight steel storage tanks with a total capacity of about 645,000 barrels. It does not use earthen storage or permit its crude to run at large or waste any oil produced at its wells. All that it can produce will be utilized for commercial purposes. It also purchases much oil. The Greater Seminole area covers a territory 15 to 20 by 8 to 10 miles and has eight or more distinct pools in formations which do not overlie each other. The first pool was discovered in 1925 and by June 15 1931, there were 2,141 producing wells having potential production of 564,908 barrels per day. The wells are separately owned and operated by 80 lessees. About three-fourths of them, owning wells with 40% of the total potential Volume 134 Financial Chronicle capacity of the field, have no pipelines or refineries and are entirely dependent for an outlet for their crude upon others who purchase and transport oil. Five companies,owning wells with about 13% of the potential production, have pipelines or refinery connections affording a partial outlet for their production. Nineteen other companies own or control pipelines extending Into this area having a daily capacity of 468,200 barrels, and most of them from time to time purchase oil from other producers in the field. The Oklahoma City field, about 65 miles west of the Seminole, is about six by three miles and part of it has been divided into small lots. All of plaintiff's leases are in that portion of the field. Oil was discovered there in December 1928, and is being produced from four different formations more than 6,000 feet below the surface. In some parts of the area two or more overlie each other, and at many points the wells penetrate all overlying formations and are capable of produring from all of them. The field is not ybt fully developed. June 15 1931, there were 746 producing wells having an estimated potential of 2,987,993 barrels per day. These wells are owned by 53 different lessees. Thirty-six of them are wholly and eight are partially nonintegrated; they operate wells having about 90% of total potential production. The 10 producing companies control pipelines extending into this area with a carrying capacity of only 316,000 barrels per day. Most of them from time to time purchase oil from other producers there. Crude oil and natural gas occur together or in close proximity to each other, and the gas in a pool moves the contents toward the point of least resistance. When wells are drilled into a pool the oil and gas move from place to place. If some of the wells are permitted to produce a greater proportion of their capacity than others, drainage occurs from the less active to the more active. There is a heavy gas pressure in the Oklahoma City field. Where proportional taking from the wells in flush pools is not enforced, operators who do not have physical or market outlets are forced to produce to capacity in order to prevent drainage to others having adequate outlets. In Oklahoma prior to the passage of the Act, large quantities of oil produced in excess of transportation facilities or demand therefor were stored in surface tanks, and by reason of seepage, rain, fire and evaporation enormous waste occurred. Uncontrolled flow of flush or semiflush wells for any considerable Period exhausts an excessive amount of pressure, wastefully uses the gas and greatly lessens ultimate recovery. Appropriate utilization of gas energy is especially important in the Oklahoma City field where, because of the great depth of the wells, the cost of artificially recovering the oil would be very high. The first of the present series of proration orders took effect Aug. 1 1927, and applied to the then flush and semiflush pools in the Seminole. Similar • orders have been in effect almost continuously since that time. Soon after the discovery of oil in the Oklahoma City field, production exceeded market demand there. The first proration order applicable in that field took effect Oct. 15 1929. Such orders usually covered short terms because of rapidly changing potential production and market demand from each of the pools. All the proration orders attacked by plaintiff were made pursuant to sections 1, 3, 4, 5 and 6 of the Act. Each, and the findings that it contained, were made after notice to all interested persons and were based upon evidence adduced at the hearings. The allegations of the complaint that the orders were made by the Commission without having heard the testimony of witnesses under oath or any legal evidence were not sustained before the Court. The Commission construes the Act as intended to empower it to limit production to the amount of the reasonable daily market demand and to require ratable production by all taking from the common source. In current orders it has found that waste of oil will result in the prorated areas unless production is limited to such demand. In order No. 5189, June 30 1930, it found that the potential production In the United States was approximately 4,730,000 barrels per day and that imports amounted to about 300,000 barrels creating a supply of over 5,000,000 barrels as against an estimated domestic and export demand of 2,800,000 barrels. And it found that the existing stocks of crude in storage exceeded the needs of the industry and that purchasers were unwilling to buy in Oklahoma for storage in any amount sufficient to take the surplus of potential production in that State. Similar findings are contained in the Commission's subsequent orders. Based on findings of the daily potential of the Oklahoma City field and the amount of the market outlet for oil there—that is, the amount that could be produced without waste as defined by the Act, plaintiff at the time of the trial was limited by the proration orders to about 6% of the total production of its wells in that field. And the orders also operated to restrict plaintiff to much less than the potential production of its nine wells in the Seminole pools. The Court found that at all times covered by orders involved there was a serious potential overproduction throughout the United cularly in the flush and semiflush pools in the Seminole States and partiand Oklahoma City fields; that, if no curtailment were applied, crude oil for lack of market demand and adequate storage tanks would inevitably go into earthen storage and be wasted; that the full potential production exceeded all transportation and marketing facilities and market demands; that accordingly it was necessary, in order to prevent waste, that production of flush and semiflush pools should be restricted as directed by the proration orders and that to enforce such curtailment, with equity and Justice to the several producers in each pool, it was necessary to enforce proportional taking from each well and lease therein and that, upon the testimony of operators and others, a comprehensive plan of curtailment and proration conforming to the rules prescribed in the Act was adopted by the Commission and was set forth in its orders. The Commission, acting under Section 5 of the Act and with the consent of the Governor of the State, appointed one Collins as its umpire and agent and constituted certain producers in each pool an operating committee to assist him in administering the prescribed rules and regulations. Later, one Bradford was appointed assistant umpire and agent. He spent all his time in the Oklahoma City field, leaving Collins to serve in the other prorated areas. They supervised the taking off gauges, ascertained daily production of prorated wells, checked the same against quantities transported and kept complete records to the end that wells in each pool should be operated in accordance with the Commission's rules and that violations be detected and reported. No appropriation had been made for the payment of umpires or agents. The Commission did not have sufficient regular help for the administration of the proration orders. Members of operators' committees served without pay. Collins' salary and expenses have been paid by voluntary contributions of certain producers in the Seminole field and Bradford's by voluntary contribution of producers in the Oklahoma City field. In each field a great majority of the producers joined to raise such funds, and contributions were prorated on the basis of production. This method of paying for such help has been 3703 followed since 1927 and at all times has been known to the Commission , the Governor and the public. In that period there have been two sessions of the legislature, and it has not forbidden the practice or provided funds to pay for the work. Neither the umpire nor the members of the committee are public officers; they are mere agents or employees of the Commission. The evidence does not establish that they have been guilty of favoritism or dishonesty or that the Commission has acted arbitrarily or discriminated in favor of the groups paying such agents or that the plaintiff has suffered any injury by reason thereof. The Commission has not discriminated against the Oklahoma City field or any other prorated area nor in favor of the Seminole. The relation between potential production of each pool and the amount of crude oil that without waste could be produced therefrom was not the same in all prorated pools and therefore the applicable percentages of curtailment varied. The same pipelines and purchasers did not serve or take oil from all the pools, and in some the reasonable market demand was greater in proportion to potential production than in others. Some were prorated longer and had purchasers whose facilities do not extend to others. When oil was discovered in the Oklahoma City field the pools in the Seminole area were quite fully developed and some bad passed flush production. The latter is a more favored location in respect of trunk pipelines and has a larger market demand although the daily production of the former is greater. The constant bringing in of new wells in the Oklahoma City feld has resulted in a continuous and rapid increase in the potential production of that field whereas market demand for oil there has increased very slowly. None of the Commission's orders has been made for the purpose of fixing the price of crude oil or has had that effect. When the first order was made the price was more than $2 per barrel but it declined until at the time of the trial it was only 35 cents. In each case the Commisilon has allowed to be produced the full amount of the market demand for each pool. It has never entered any order under Section 2 of the Act. It was not shown that the Commission intended to limit the amount of oil entering inter-State commerce for the purpose of controlling the price of crude oil or its products or of eliminating plaintiff or any producer or refiner from competition or that there was any combination among plaintiff's competitors for the purpose of restricting inter-State commerce in crude oil or its products or that any operators' committee made up plaintiff's competitors formulated the proration orders. The evidence before the trial court undoubtedly sustains the findings above referred to, and they are adopted here. 1. Plaintiff here insists that the Act of repugnant to the due process and equal protection clauses of the Fourteenth Amendment. We need not consider its suggestion that the business of production and sale of crude oil is not a public service and that it does not devote its property to the public use. The proration orders do not purport to have been made, and in fact were not made, in respect of services or charges of any calling so affected with a public interest as to be subject to regulation as to rates and prices. Plaintiff insists that it has a vested right to drill wells upon the land covered by its leases and to take all the natural flow of oil and gas therefrom so long as it does so without physical waste and devotes the production to commercial uses. But if plaintiff should take all the flow of its wells, there would inevitably result great physical waste even if its entire production should be devoted to useful purposes. The improvident use of natural gas pressure inevitably attending such operations would cause great diminution in the quarntity of crude oil ultimately to be recovered from the pool. Other lessees and owners of land above the pool would be compelled, for self-protection against plaintiff's taking, also to draw from the common source and to so add to the wasteful use of lifting pressure. And because of the lack,especially on the part of nonintegrate d operators of means of transportation or appropriate storage and of market demand, the contest would, as is made plain by the evidence and findings, result in surface waste of large quantities of crude oil. In Oklahoma,as generally elsewhere, land owners do not have absolute title to the gas and oil that may permeate below the surface. These minerals, differing from solids in place such as coal and iron. are fugacious and of uncertain movement within the limits of the pool. Every person has the right to drill wells on his own land and take from the pools below all the gas and oil that he may be able to reduce to possession including that coming from land belonging to others, but the right to take and thus to acquire ownership is subject to the reasonable exertion of the power of the State to prevent unnecessary loss, destruction or waste. And that power extends to the taker's unreasonable and wasteful use of natural gas pressure available for lifting the oil to the surface and the unreasonable and wasteful depletion of a common supply of gas and oil to the Injury of others entitled to resort to and take from the same pool. Ohio 011 Co. v. Indiana, 177 U. S. 190. Lindsley v. Natural Carbonic Gas Co., 220 U.S.61,77. Bandini Co. v. Superior Court, 284 U.8.8, 19 et seq. Brown v. Spilman, 155 U. S. 665, 669. Walls v. Midland Carbon Co., 254 U. S. 300, 323. Rich v. Doneghey, 71 Okla. 204. People v. Associated Oil Co., 211 Calif. 93, 100 et seq. It is not shown that the rule for proration prescribed in Section 4 or any other provision here involved amounts to or authorizes arbitrary interference with private business or plaintiff's property rights or that such statutory rule is not reasonably calculated to prevent the wastes specified in Section 3. We put aside plaintiff's contentions resting upon the claim that Section 2 or Section 3 authorizes or contemplates directly or indirectly regulation of prices of crude oil. The Commission has never made an order under Section 2. The court found that none of the proration orders here involved were made for the purpose of fixing prices. The fact that the Commission never limited production below market demand and the groat and long continued downward trend of prices contemporaneously with the enforcement of proration strongly support the finding that the orders assailed have not had that effect. And if Section 2 were to be held unconstitutional the provisions on which the orders rest would remain in force. The unconstitutionality of a part of an Act does not necessarily defeat or affect the validity of its remaining provisions. Unless it is evident that the Legislature would not have enacted those provisions which are within its power,independently of that which is not, the invalid part may be dropped If what is left is fully operative as a law. Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 565. Pollock v. Farmers' Loan & Trust Co., 158 U. S. 601, 635. Reagan v. Farmers' Loan & Trust Co.. 154 U.S.362.395-396. Field v. Clark, 143 U.S.649.695-696. Section 10 declares that the invalidity of any part of the Act shall not in any manner affect the remaining portions. That discloses an intention to make the Act divisible and creates a pregumption that, eliminating invalid parts, the Legislature would have been satisfied with what remained and that the scheme of regulation derivable from the other provisions would have been enacted without regard to Section 2. Williams v. Standard Oil Co., 278 U. S. 235. 242, Crowell v. Benson, 284 U. S.—,—. Utah Power & Light Co. v. Pfost, — II. 8. —. 3704 Financial Chronicle The orders involved here were made under other sections which provide Commisa complete scheme for carrying into effect, through action of the of sion, the general rules laid down in Sections 3 and 4 for the prevention waste. See Julian Oil St Royalties Co. v. Capshaw. 145 Okla. 237, 243. The validity of Section 2 need not be considered. to burden 2. Plaintiff contends that the Act and proration orders operate the cominter-State commerce in crude oil and its products in violation of merce clause. It is clear that the regulations prescribed and authorized only to by the Act and the proration established by the Commission apply production and not in sales or transportation of crude oil or its products. is not a Such production is essentially a mining operation and therefore intended part of inter-State commerce even though the product obtained is Iron to be and in fact is immediately shipped in such commerce. Oliver Co. v. Lord, 262 U.S. 172, 178. Hope Gas Co. v. Hall,274 U.S. 284, 288. Co. Light Sc Power Utah Foster Packing Co. v. Haydel, 278 U. S. 1, 10. v. Pfost, supra. No violation of the commerce clause is shown. basis in 3. Plaintiff assails the proration orders as unauthorized, lacking not based fact and arbitrary. But it failed to show that the orders were Namely, upon just and reasonable determinations of the governing facts: a common that proportion of all crude oil, which may be produced from bears to the source without waste, that the production of plaintiff's wells total production from such source. each well of production Gauges were taken to determine the potential not shown under rules and regulations prescribed by the Commission and ory results. to be inappropriate or liable to produce arbitrary or discriminat -employed It does not appear that the agents-umpires and committees the provienforce by the Commission with the consent of the Governor to necessary to secure sions of the Act, did more than to make investigations by Section 4 for the Commission data required to make the proration directed or that they acted otherwise than as faithful subordinates. subjected agents Plaintiff has not shown that any act or omission of these or discriminait to any disadvantage or that the prorations were arbitrary agents and emtory in any respect. Obviously the Commission, without the Act. ployees, could not make or enforce proration as directed by at naught The plaintiff is not entitled to have the Commission's orders set the absence of in and the purposes of the Act thwarted merely because, of agents legislative appropriations therefor, the salaries and expenses in having or employees were paid out of funds raised by operators interested proration established under the statutory rule. to give and 3 Section Proration, required to prevent waste defined in to conditions effect to the rule prescribed by Section 4, changes according time may be Mapexisting from time to time and percentages valid at one v. Public Service plicable, unjust and arbitrary at another. Bluefield Co. U. S. 1. 19. As 212 Comm.,262 U. S. 679,693. Knoxville v. Water Co., time of the trial plaintiff has failed to prove that any order in force at the or otherwise was not in accordance with the rule prescribed by Section 4 be affirmed. invalid, the part of the decree from which it appealed will a different suit, But such affirmance will not prevent it in an appropriate to rsetrain state of facts being shown to exist, from having an injunction by the Act or the enforcement of any order proved to be not authorized Cf. Euclid v. unjust and arbitrary and to operate to plaintiff's prejudice. Ambler Co. 272 U. S. 365, 395. No. 486. decree that declares This is defendant's appeal from that part of the final -general and that Sections 8 and 9 are not valid and enjoins the attorney of law the conclusions and county attorney from enforcing them. In its penalties for court below declares that these Sections in terms impose the Commission: violation of the Act, and not for violation of the orders of to warrant uncertian that Sections 1, 3, 4, 5 and 6 are too indefinite and both sections the imposition of the prescribed penalties and that therefore are invalid. also a regulaThe opinion points out that the Act is a penal statute and orders of the tory measure to be supplemented by rules, regulations and oil from a comCommission. It suggests that an operator or producer of to determon pool should not be required at the peril of severe penalties "economic mine whether in the operation of his oil well he is committing because demands" waste" or producing in excess of the "reasonable market and doubtful these terms are not defined in the Act and are of uncertain meaning. of Section 1.-Defendants insist that no question concerning the validity 8 was before the court. defendthat record the We do not find any direct or definite allegation in prosecuted under ants have threatened or are about to cause plaintiff to be been commenced Section 8. The court found that no prosecution had section. against plaintiff, its officers or employees under that that any such one, There is no finding, or evidence sufficient to require the opinion states in prosecution was imminent or contemplated. And Act as a penal statute substance that Section 9 was the only provision of the that was before the court. threatened enforceEquity Jurisdiction will be exercised to enjoin the Constitution whenever ment of a State law which contravenes the Federal rights and the rights it is essential in order effectually to protect property such case a person, of persons against injuries otherwise irremediable; and in of enforcing its laws who as an officer of the State is clothed with the duty proceedings, either civil and who threatens and is about to commence be enjoined or criminal, to enforce such a law against parties affected, may Thompson, v. from such action by a Federal court of equity. Terrace 263 U. S. 197,214, and cases cited. rule definitely to The burden was upon plaintiff seeking to invoke that necessary to restrain show that in order to protect its property rights it was before us indicate defendants from enforcing Section 8. Indeed the record affected by any that plaintiff did not show that its rights were directly had no standing to danger of prosecution under Section 8 and therefore Iron Co. v. Oliver invoke equity jurisdiction against its enforcement. U. S. 447, 483. Lord, supra, 180-181. Massachusetts v. Mellon, 262 Aetna Insurance Co. v. Hyde,275 U. S. 440.446 et seq. from other parts of Undoubtedly Section 8, if invalid, may be severed which the prorations the Acts without affecting the provisions under follows that the lower were made. Ohio Tax Cases,232 U. S. 576,594. It section, and the decree will court erred in passing upon the validity of that Section 8 was before the court. be modified to declare that no question as to as to the validity of Sec2.-Defendants also maintain that no question court. the before was 9 tion crude oil in excess of the The record shows that plaintiff having taken -General,May 28 1931, brought quantities allowed by the orders,the Attorney have a receiver appointed for its suit under Section 9 in a State court to a temporary injunction reissue to court that procured he wells. And violating the Act or proration straining plaintiff from producing oil or receiver. orders pending the appointment of a and supplemental bill applying On the next day plaintifffiled an amended orders pending the determination for a stay of enforcement of the proration of the appeal, No. 122, to this Court. plaintiff's application and affidavits June 13 the lower court, upon plaintiff would suffer irreparable submitted by the parties, found that And it entered an order: loss and injury unless the stay be granted. May 21 1932 restraining the Commission from instituting proceedings under Section 6, of the Act: restraining the Attorney-General and County Attorney from prosecuting under Section 9 receivership proceedings against plaintiff: allowing plaintiff, on conditions which need not be stated here, to produce up to 10.000 barrels daily, It is clear, if Section 9 is invalid, that the enforcement of its provisions pending the trial of this case would, as plaintiff claimed and the lower court found, have inflicted irreparable loss and damage upon the plaintiff. Defendants do not show or claim that the evidence does not establish that finding. The lower court had authority to stay the enforcement of the assailed orders pending the determination of plaintiff's appeal from the denial of its motion for temporary injunction. Hovey v. McDonald, 109 U. S. 150, 161. Cotting v. Kansas City Stock-Yards Co., 82 Fed. 839, 857. Cumberland Tel. Co. v. Pub. Serv. Comm., 260 U. S. 212. Virginian Ry. v. United States, 272 U. S.658.669 et seq. The jurisdiction of the Court was properly invoked to determine whether plaintiff was entitled to protection against the shutting down and seizure of its wells and the sale of its oil pending the Federal Court's final decision. The Attorney-General, though not required so to do, dismissed the suit in the State Court,and here insists that, as no proceeding for a receiver was pending, the Court erred in construing or passing on the validity of section 9. But, when regard is had to the facts and circumstances, it is clear that such dismissal did not require the Court to hold that thereby the purpose of the Attorney-General and County Attorney had changed or that prosecution under that section was no longer imminent. The Court was therefore properly called upon to pass upon its validity. 3. Section 9 provides: "That in addition to any penalty imposed under the preceding section, any person, firm or corporation, violating the provisions of this Act, shall be subject to have his or its producing property placed in the hands of a receiver by a court of competent jurisdiction, at the suit of the State through the Attorney-General,or any County Attorney, but such receivership shall only extend to the operating of producing wells and the marketing of the production thereof, under the provisions of this Act." The language used applies to violations of the Act and does not extend to violations of orders of the Commission. It is plain and leaves no room for construction. A direct and unambiguous expression would be required to warrant an inference that the State Legislature intended to authorize the seizure of producers' wells and the sale of their oil for a mere violation of an order. The context and language used unmistakably show that the section or imposes a penalty and is not a measure in the nature of, in aid of remedy 6 the Comby, injunction to prevent future violations. By Section record (State Conof court a is matters such mission-which in respect of as for contempt stitution, Article IX, Section 19)-is empowered to punish per day during violation of the Commission's orders by fines up to $500 C. 0. S., 1921. continuance of such violation. Sections 3498, 3499, 82 Bros., Okla. 145, 147. West v. Planters' Cotton St Ginning Co. penalty" that may be And Section 8, declares that, "in addition to any or indirectly imposed by the Commission for contempt, one directly guilty of a misdemeanor "violating the provisions of this Act" shall be And similarly the liability and be punished by fine or imprisonment. of this Act" and is "in adunder Section 9 is for "violating the provision dition to any penalty" imposed by Section 8. Both deal with an act already committed. Moreover liability under of the offender's wells Section 9 is not limited to seizure and operation but extends to the marketing of his oil. Absolute liability arises from be had after all occasion a single transgression and prosecution therefore may for restraint of production has ceased. There is nothing in the Act by which the duration of the receivership so seized may not, as of may be determined. An owner whose wells are right, have production reduced or withheld to await a better demand or have any voice as to quantities to be produced or continue to have his oil transported by means of his own pipe lines or other facilities or have it sent to his own refinery or delivered in fulfillment of his contracts. Plainly such a taking deprives the owner of property without compensation even if the moneys received for oil less expenses were accounted for by the receiver. The suit is prosecuted by the State to redress a public wrong denounced as crime. The provisions of Section 9 are not consistent with any purpose other than to inflict punishment for violation of the Act and they must be deemed as intended to impose additional penalties upon offenders havingoil-producing wells. Boyd v. United States, 116 U. S. 616, 645. United States v. Reisinger, 128 U. S. 398, 402. Huntington v. Attrill, 146 U. S. 657, 667, 668. As Section 9 declares that one "violating the provisions of this Act shall be subject" to the prescribed penalties, it is necessary to refer to the regulatory provisions here involved. Section 1 prohibits "production of crude all . .. in such manner and under such conditions as to constitute waste." Section 3 declares that, "in addition to its ordinary moaning," "waste" shall include "economic water, underground waste, surface waste, and waste incident to the production of crude oil or petroleum in excess of transportation or marketing facilities or reasonable market demands." Section 4 provides that whenever full production from any common source can only be obtained "under conditions constituting waste" then one having the right to produce from such source may take therefrom only such proportion "that may be produced therefrom, without waste, as the production of the well or wells" of such taker "boars to the total production from such common source of supply." There is 'nothing to support the defendants' suggestion that the regulatory provisions of the Act do not become operative until the Conunission has defined permissible production. As shown above, Section 9 does not cover violations of orders of the Commission. The validity of its provisions must be tested on the basis of the terms employed. Court In Connally v. General Construction Co., 269 U. S. 385, 391, this statute has laid down the rule that governs here:"That the terms of a penal who creating a new offense must be sufficiently explicit to inform those its are subject to it what conduct on their part will render them liable to ordinary penalties, Is a well-recognized requirement, consonant alike with notions of fair play and the settled rules of law. Act In "And a statute which either forbids or requires the doing of an terms so vague that men of common intelligence must necessarily guess at essential of' its meaning and differ as to its application, violates the first due process of law." common The general expressions employed here are not known to the definite sufficiently law or shown to have any meaning in the oil industry with them apply to enable those familiar with the operation of oil wells to word "waste' any reasonable decree of certainty. The meaning of the changes. No necessarily depends upon many factors subject to frequent and, upon the Act or definite course of conduct is specified as controlling Act the Court trial of one charged with committing waste in violation of the reasonably might could not foresee or prescribe the scope of the inquiry that fact there had in have a bearing or be necessary in determining whether command that wells been waste. It is no more deinite than would be a mere Financial Chronicle Volume 134 shall not be operated in any way that is detrimental to the public interest in respect of the production of crude oil. And the ascertainment of the facts necessary for the application of the rule of proportionate production laid down in Section 4 would require regular gauging of all producting wells in each field, a work far beyond anything that reasonably may be required of a producer in order to determine whether in the operation of his wells he is committing an offense against the Act. In the light of our decisions, it appears upon a mere inspection that these general words and phrases are so vague and indefinite that any penalty prescribed for their violation constitutes a denial of due process of law. It is not the penalty itself that is invalid but the exaction of obedience to a rule or standard that Is so vague and Indefinite as to be really no rule or standard at all. United States vs. Cohen Grocery,225 U. S. 81, 89. Small Co. vs. American Sugar Ref. Co., 267 U. S. 233,239. Connally vs. General Construction Co., supra. Cllen vs. Frink Dairy CO., 274 U. S. 445. 454. Smith vs. Cahoon, 283, U. S. 553, 564. No. 122, dismissed; No.485, affirmed; No.486, modified and as modified affirmed. The Course of the Bond Market. 3705 road bonds stood at 52.41 on Friday, as compared with 54.92 one week before and 56.97 two weeks ago. This represents a decline of 1.81 points in the index from the Dec. 17 1931 low. The industrial bond list was mixed in character, with some issues declining sharply, while others remained unchanged. This group held up better than usual, but the low-grade section was subject to continued liquidation. Steel company bonds continued to show some softness. Oil obligations, on the other hand, were relatively firm in the face of declines in other issues. This strength was probably due in part to the decision of the United States Supreme Court approving the action of the Oklahoma Corporation Commission in restricting oil production. The price index for 40 industrial bonds has not gone through the Dec. 17 low; on Friday the index was 65.21, as compared with 67.33 one week before and 68.67 two weeks before. The low point on Dec. 17 was 63.74. ftel The market for public utility bonds was an orderly one in comparison with the railroad group. The high-grade issues were subject to small recessions, while there were some sharp declines in the more speculative obligations. Detroit City Gas 5s, 1950, an inactive issue, dropped 73/i points to 75 on Monday. American Water Works & Electric 6s, 1975; Southeastern Power & Light 6s, 2025; American Power & Light 6s, 2016, and Southern Colorado Power 6s, 1947, were among the weaker issues. The utility group went through the previous low level of Dec. 17 and finished the week at 71.29, as compared with 73.35 one week previously and 73.95 two weeks ago. This represents a decline of 2.26 points from 73.55, the December low point. During the past week several municipalities were able to float new issues, such as the $3,000,000 issue of the State of California, the $5,000,000 issue of New York City and a $4,000,000 issue of Newark, N. J. The statement of Mayor Walker regarding the reduction of the city budget was received with mixed sentiment. The high-grade issues continued to be sought by investors, while the less favorably situated municipal obligations were in little demand and showed some irregularity in price. The foreign section of the bond market continued highly irregular. Japanese bonds were especially depressed during the first part of the week because of political unrest in that country. Australian bonds went up slightly as the political situation there seems to be clearing up. United Kingdom obligations were strong and reached new high levels on the recovery. Argentine bonds were easy. The issues of Switzerland remained unchanged. The bond yield for 40 foreign issues was 14.70% on Friday, as compared with 13.98% one week before and 14.19% two weeks ago.* Reductions in ratings during the past week necessitated the following substitutions, with the usual adjustments made: This past week the general bond market extended its losses of the preceding week, with many groups breaking through their previous low points established on Dec. 17 1931. Many bonds are following the course of stocks, and the factors contributing to the decline in stock prices continue to be poor earnings and dividend cuts. Moody's price index for 120 domestic corporation bonds closed the week on Friday at 62.09 as compared with 64.39 one week ago and 65.87 two weeks ago. United States Government bonds continued to lose ground during the past week. This was due in large part to the fact that investors are beginning to entertain some doubts as to the future open market policy of the Reserve banks. They realize that the Reserve system plays a very important part in making a market for Government issues and that at present the market is artificially supported. The Reserve authorities intimated that they had not abandoned their policy of purchasing Government bonds, but that the rate of buying would vary with circumstances. Another development in the new Reserve policy was the calling together of a committee by Governor Harrison of the Federal Reserve Bank of New York to study ways and means by which this liberated credit might flow into the desired channels. This announcement had little effect on bond prices; in fact, the market was particularly weak on Friday. The mice average for 8 long-term Treasury issues ended the week on Friday at 95.72, as compared with 98.58 one week ago and 98.71 two weeks ago. Practically all railroad bonds were weak, with many issues making new low levels. Moody's price index for 40 railroad bonds broke through the index of Dec. 17 1931, Rating. Bonds Removed. Bonds Substituted. the date on which previous lows were made. Atchison A Cleve. CM.Chic. dc St. L. 4145, 1977 Cleve. Cin. Chlc.8rSt. L.4s, 1993 Aa Metroplltan Edison 454s, 1968 So. California Edison is, 1952 general 4s, 1995, ended the week at 80k, a decline of four Bari Standard Power ge Light 6s, 1957 American Power it Light 6s, 2016 points for the week. Baltimore & Ohio 4s, 1948, which did A Japan 554s, 1965 Danish Cons. Muni°. Ois. 1955 A Oriental Dev. 554s, 1958 Oslo 65, 1955 not sell on Wednesday, dropped 9 points on Thursday to A Tokio 545. 1961 Bergen is, 1949 58. Great Northern 432s, 1976,on Wednesday lost 7 points, Daa Gt. Cons. El. Pow.of Japan 6545. 1950 Japan Uis. 1965 ending the day at 49. Michigan Central 43/2s, 1979, a very Das Uruguay 6s, 1960 Tokio 5344. 1961 inactive issue, sold at 45 on Thursday, suffering a decline Moody's computed prices and yield averages are given of 50 points from the last sale. The price index for 40 rail- in the tables below: MOODY'S BOND PRICES.* (Based on Average Yields.) 120 Domes Sc by Groups. 120 Domestics by Rat ngs. Baa. 89.86 90.00 90.97 90.97 90.97 92.10 92.39 92.97 93.26 93.26 93.40 93.26 93.11 92.53 92.53 93.11 93.55 77.00 77.55 78.10 78.21 78.66 78.88 79.11 80.14 80.84 81.07 80.95 80.95 80.14 80.14 80.26 81.07 81.18 58.59 58.66 58.66 59.44 59.51 60.31 60.82 62.25 62.64 62.95 62.72 63.19 62.64 61.87 61.71 63.58 64.31 41.48 41.78 42.23 42.62 42.62 42.90 43.38 44.33 45.28 45.87 45.55 45.46 44.67 44.21 44.04 45.06 45.77 93.85 94.58 92.82 92.68 94.58 96.70 96.70 97.62 95.63 94.29 98.70 91.67 91.81 92.25 93.40 93.70 81.90 82.62 80.95 79.68 82.50 84.85 84.72 85.74 83.48 82.02 81.54 79.80 80.49 81.07 82.99 82.87 65.62 67.07 66.64 67.07 71.29 73.45 73.85 75.29 73.35 72.26 71.77 89.77 70.62 70.52 72.06 73.15 47.44 49.22 47.73 45.15 50.80 55.42 56.58 59.80 58.66 57.57 58.82 55.55 55.78 55.99 57.17 57.30 87.96 76.03 59.87 42.58 106.42 99.84 86.64 69.86 109 47 00 52 04 72 RA 12 RR. P.U. Indus. by Groups. RR. 40 ForP.U. reds, dons. .m......m.401.09. e; m'eme-40m .T.299-!-:-. 0v vccgcbcp.tchm4t-r--.0-ric.r19.-viet99t1m-t-e0- cl ,0 v.2223333X^Nt-t-vlipor-t- *e900.00.950.—.:66,4e4 ,.1, ..; b 71.29 71.19 71.67 72.06 72.26 72.95 73.35 74.25 74.57 74.57 74.67 74.46 73.95 73.75 73.95 74.57 75.29 65.21 65.45 65.58 66.04 66.04 86.64 67.33 68.13 68.85 69.03 69.31 79.40 68.67 68.22 68.49 69.77 70.24 75.92 76.68 74.98 71.87 77.55 80.72 81.07 83.85 81.42 79.68 79.56 77.11 77.44 77.66 80.14 81.54 70.90 71.48 71.00 71.88 78.65 74.57 74.98 76.14 73.55 72.75 72.45 70.62 70.71 70.81 71.48 71.19 73.55 63.74 96.70 84.22 OR AR 01 55 May 20- 19_. 18-. 17-16-14-13... 12._ 11-10-9-7-6... 5-4-3-2-. WeeklyApr. 29-22... 15-8... 1-Mar.24.18-11-4__ Feb. 26-19__ II__ 5-Jan. 29-22._ 15__ Frey. Low Dec.17'31 Year Ago May20'31 2 Yrs. Ago May17'30 8.11 8.07 8.01 7.96 7.94 7.87 7.82 7.68 7.59 7.57 7.57 7.56 7.64 7.71 7.72 7.57 7.50 5.43 5.42 5.35 5.35 5.35 5.27 5.25 5.21 5.19 5.19 5.18 5.19 5.20 5.24 5.24 5.20 5.17 6.48 6.43 6.38 6.37 6.33 6.31 6.29 6.20 6.14 6.12 6.13 6.13 6.20 6.20 6.19 6.12 6.11 8.59 8.58 8.58 8.47 8.46 8.35 8.28 8.09 8.04 8.00 8.03 7.97 8.04 8.14 8.16 7.92 7.83 11.93 11.85 11.73 11.63 11.63 11.56 11.44 11.21 10.99 10.97 10.93 10.95 11.13 11.24 11.28 11.04 10.88 9.57 9.48 9.36 9.29 9.27 9.21 9.15 8.93 8.76 8.73 8.75 8.73 8.83 8.95 9.05 8.81 8.70 7.04 7.05 7.00 6.96 6.94 6.87 6.83 6.74 6.71 6.71 6.70 6.72 6.77 6.79 6.77 6.71 6.64 7.35 7.19 7.34 7.50 7.00 6.68 6.61 6.43 6.59 6.71 6.72 6.95 6.90 6.87 6.73 6.69 5.15 5.10 5.22 5.23 5.10 4.96 4.96 4.90 5.03 5.12 5.16 5.30 5.29 5.26 5.18 5.16 6.05 5.99 6.13 6.24 6.00 5.85 5.82 5.74 5.92 6.04 6.08 6.23 6.17 6.12 5.96 5.97 7.67 7.50 7.55 7.50 7.04 6.82 6.78 6.64 6.83 6.94 6.99 7.20 7.11 7.12 6.96 6.85 10.52 10.16 10.46 11.02 9.86 9.07 8.89 8.42 8.58 8.74 8.63 9.05 9.02 8.98 8.80 8.78 8.40 8.05 8.28 8.49 7.77 7.16 7.05 6.78 6.87 7.00 6.99 7.25 7.16 7.10 6.96 6.95 6.58 6.50 6.67 6.98 6.43 6.15 6.12 5.93 6.09 6.24 6.25 6.47 6.44 6.42 6.20 6.08 8.05 5.57 6.57 8.41 11.64 9.43 6.81 5.50 4.37 4.76 5.67 7.19 5.68 4.96 5.05 4.60 4.78 5.09 571 402 SOS 14.70 14.63 14.61 14.55 14.52 14.03 13.98 13.96 14.01 13.91 13.96 14.10 14.19 14.49 14.15 13.80 13.76 13.70 13.31 13.39 13.23 12.77 12.66 12.62 12.31 12.55 12.82 12.86 13.23 13.00 13.22 13.12 13.44 16.53 t3 C 70174=====goIC CCC:CMCC2CCangi Oe ..102.:00.-.11, 01WOMOMQ.P.M* 04.Wh,0000.1.WOW04•WW.1.0 0 4040000•400...0.4.4000 ...1.41+0.40.4.400.0WW.4s400 A. V p Aa. 120 Domestics Pn022:1;ASNAgng3R2 S8822===2882 Aaa. All 1932 120 120 Domestics by Rat ngs. Daily DomesAverages. tic. Aaa. A. Aa. Bea. 1 May 20 19 18 17 16 14 13 12 11 10 9 7 6 5 4 3 2 WeekIll-Apr. 29 22 15 8 1 mar.24 18 11 4 Feb. 26 19 11 5 Jan. 29 22 15 Previous Low-Dee. 17 1931-Year Ago-May 201931_ Two Year& A-170- All 120 Domes tie. a A 1932 Daily Averages. MOODY'S BOND YIELD AVERAGES. (Based on Individual Closing Prices.) 7.21 A Aft *NAT.-These prices are computed from average yields on the basis of one "Ideal" bond (434% coupon, maturing in 31 years) and do not purport to show either the average level or the average movement of actual price quotations. They merely serve to illustrate In a more comprehensive way the relative levels and the relative movement of yield averages, the latter being the truer picture of the bond market. 3706 Financial Chronicle Indications of Business Activity THE STATE OF TRADE—COMMERCIAL EPITOME. Friday Night, May 20 1932. Retail trade increased in some parts of the country, but in others was stationary or else,slackened. Wholesale trade has not as a rule increased, though some reports state that there is a moderate gain in wholesale trade in clothing, drygoods, notions and jewelry. Inventories had got so low that buying here and there became imperative. In Boston there was a moderate increase in retail business. That was also the case at Minneapolis, Indianapolis, and some other Central and Western districts. Leading mail order houses at Chicago have cut prices sharply. Mail order sales of farm and garden implements in Chicago have therefore been larger than at this time last year. In Pittsburgh, department store business has increased, but otherwise retail trade there was poor. Retail trade in Philadelphia is also reported as not satisfactory in either the department or other retail stores. At the South, trade has not been encouraging; in fact, it is described as at a standstill. The weather at the South has been unseasonably cool. Recently the Southwest had too much rain and now the wet weather has drifted over to the Eastern gulf and South Atlantic States. In some parts of the country it is said there have been increased sales of summer furniture and house furnishings, sporting goods, luggage and vacation supplies where the temperatures have encouraged such buying. Of late it has been cooler in the East, but at the Northwest it has been warmer. Much really depends on seasonable weather. Meanwhile, it is stated, that as a rule wholesale and jobbing trade has for the most been dull. In a few cases wholesale business is reported slightly better than a year ago. But the exceptions seem to prove the rule of a sluggish trade and there is no use trying to construct a "Fool's Paradise" in defiance of the facts. San Francisco complains that buying is still of the hand-to-mouth sort. At Los Angeles wholesalers and manufacturers of women's clothing, it seems, are closing their shops for lack of business. In Boston the wool market is dull and the sale of shoes for men and women is poor. In short, if there is any increase in business in this country, it is small and confined to retail lines, while in general retail trade is unsatisfactory. Iron and steel are as dull as ever. Some attempts are being made to advance the price of steel, but it does not appear that buyers respond. Practically there is no break as yet in the prolonged dullness and depression in the United States. Wheat advanced 2 to 3 cents on bad crop news from the winter wheat belt, some decrease in the spring wheat acreage and reports of ravages by the Hessian fly which may have more foundation than trade cynics will be apt to believe. With the winter wheat crop perhaps the smallest in 15 years the American farmer may be facing the turn in the long lane of hard times and higher prices. Corn advanced M to 134 cents, encouraged by the rise in wheat, but corn needs the unremitting stimulus of a sharp cash demand if it is to make its way to a lasting advance in prices. Oats and rye responded feebly to the rise in other grain. Lard futures advanced 10 points. Cotton advanced nearly $1 a bale, led by May and helped upward also by cold or wet weather at the South, delayed germination of the plant, higher prices at times for stocks and wheat and the persistent refusal of the South to sell freely. Cotton goods have been offered down by second hands, but the mills refused to relax their prices. Coffee advanced 15 to 30 points, owing to higher Brazilian exchange and cost and freight prices and buying by New York, New Orleans and Europe, not forgetting some overconfident shorts. Raw sugar went to a new low and then steadied, closing 1 to 2 points net higher on futures. Rubber closed irregular, that is, 2 points lower to 6 points .nd seems to show sings of stabilizahigher for the week, a tion. At any rate the violent declines of recent weeks are absent. Hides have declined 15 points on futures, while spot hides have been rather more active. Like all commodities hides are to all appearance too low. Silk futures are unchanged to 2 points higher and dull. Silver has dropped 20 to 50 points. Cocoa is 15 points lower to 5 higher. Stocks and bonds declined on the 14th inst. There was some irregularity, but the main trend was downward, though as usual the decline was small. Bonds weakened under the possibility of new and searching financing by the May 21 1932 1 Government. Wheat, cotton, rubber, sugar and coffee declined, though not sharply. All the markets were under half steam. The sales of stocks were only a little over 600,000 shares. United States Government bonds made a small net advance but railroads and foreign bonds as a rule declined, though some domestic railroad issues advanced. On the 16th inst., after an early decline to the lowest on the downward movement, stocks on a sudden rebounded 1 to 4 points with better Washington news, a sharp rise in grain and cotton, and heavy covering. The close was at a moderate net rise. The transactions were 1,304,000 shares. Bonds dropped sharply and the rally was irregular, leaving some railroad issues noticeably lower. The assassination of the Premier of Japan was disturbing as showing the sort of reactionary spirit in Japan of which the world has had more than enough in the last 18 years, tending to delay the progress of civilization. Just how much effect it had on the bond market in general must be a matter of conjecture. But it is certain that Japanese led the decline in bonds, with a drop of 15i to 434 points and five of the Japanese issues fell to new lows. Many railroad bonds declined 1 to 9 points. Of the United States Government bonds, 9 out of the 12 declined 1-32 to 20-32 point and most of them ended at the lowest levels of the day. On the 17th inst. stocks were irregular but in the main ended somewhat higher after sales of some 932,000 shares. A wet blanket was the report that Congress would not adjourn as soon as it had been hoped for. The decline was certainly an ironical commentary on the value set upon its deliberations by many. Two "seats" on the Exchange sold at $80,000 to $81,000. The sale at $80,000 was back to the low of the year; the high for the year thus far is $175,000. Bonds declined in many cases, though some railroad issues rallied in the later trading. Others touched new low levels. United States Government Liberty bonds advanced 1-32 to 3-32 points, but Treasury issues fell 1-32 to 12-32,led by Treasury 3s. Japanese Government bonds rallied 134 points on the 634s and 1 point on the 532s, after an early decline. But other Japanese bonds showed an irregular decline. On the 18th stocks had an average decline of 1 to 2 points, with sales of some 684,000 shares in a market cowering under a fear of vicious legislation at Wa3hington. Some 50 stocks reached new lows and it was cold comfort to notice that the number of new lows was not quite so high as on some days recently. Amer. Tel. & Tel. declared the usual annual rate of 9%, followed, however, by a decline of 13,4 points to 9534. Some $5,000,000 gold was taken for export, but the fact got but listless attention. The National deficit, according to a Washington dispatch threatens to exceed $3,000,000,000 before June 30, but this was simply rubbing an old sore and it did not seem to matter. Members of the Exchange were notified by its officials that margin requirements on short sales should be increased to a minimum of 10%. Again there was but languid interest. It is believed that the recent downward drift of prices has been due less to short selling than to liquidation by banks and private individuals. In bonds the United States Government issues rose 2-32 to 6-32 on six issues and fell 4-32 to 12-32 points on four. Domestic corporation bonds and foreign issues were generally lower. On the 19th inst. stocks were irregular, that is, lower early advancing later and ending at a moderate net rise on some popular issues with sales of some 675,000 shares. For the most part the market was feeling its way and also waiting more definite developments at Washington. Bonds on the 19th inst. declined on larger selling, U. S. Government bonds declined 2-32 to 1 10-32 points. Many of the railroad issues touched new lows for the year. Industrials and utilities also fell. Municipal bonds were strong. British and French bonds advanced. German and Japanese declined. To-day stocks advanced for a time and then reacted in trading in some 800,000 shares, losing most or all of the early upturn. There was not enough snap to hold the early advance. Yet the undercurrent was rather better. It would be much better if Congress would balance the budget and go home. The truth is the country's attitude towards that body is the traditional one "What's your hurry? Here's your hat!" Bonds were higher. And there was a better feeling generally due to the formation of a committee of 12 bankers and industrialists with Owen D. Young as Chairman, to grapple with the problem, that Volume 134 Financial Chronicle 3707 should not be too difficult, if how to reach people who need duction slightly less than the previous week. Shipments and deserve loans with no needless amount of starch in the for the week were 4.6% over production. Inventories as rules and regulations therefor. Stocks advanced for a time reported by 144 mills, declined 5,000,000 feet from the week at least as the Young Committee began to function. The ended April 30 and are 18% less than at this time last year. organization of similar banking and industrialist committees Unfilled orders declined 3,451,000 feet from the previous in all other Federal Reserve districts throughout the country week. is suggested. Stocks of newsprint at United States and Canadian mills Boston wired May 17 that curtailments in manufacture and were reduced during April from 102,225 to 89,321 tons as finishing and dyeing of textiles, cotton and woolen and shipments exceeded output by 12,844 tons. Stocks on May 1 worsteds, contributed largely to the decrease in the number 1931, according to the News Print Service Bureau, totaled of employed in Massachusetts industries during the past 74,043 tons. Production of newsprint in this country and month, estimated to-day by "Labor." In April, compared Canada in April totaled 267,895 tons against 266,793 tons in with March 1931, there was an increase of four-tenths of 1% March and 308,288 tons in April last year. Production in in employment, but a decrease of 1.5% in the amount of the the first four months of the year totaled 1,039,505, against payroll while in April as compared with March in 1930 there 1,041,354 tons in 1931 and 1,292,598 in 1930. was a decrease of 1.9% in employment and a decrease of 2.9% On Monday, May 16, came the warmest weather of the in the amount of the payroll. Factors in decreases in em- year in New York, with a temperature of 62 to 83 degrees ployment and payroll payments were curtailments in cotton and even at 10 p. m. it was 76. Boston even had 92, Cingoods at Fall River and New Bedford, particularly woolen cinnati and Cleveland 82, Philadelphia 86, Baltimore 90, and worsted goods at Lawrence, and in a number of small St. Paul 56, Omaha 66, Chicago 64, and Winnipeg 32 to 56. mill towns. Boots and shoes made important decreases in On the 17th inst. it was cooler in New York, but still the Brockton and vicinity. Electrical machinery, apparatus temperature was as high as 77 and the lowest was 64. and supplies (except radio) and dyeing and finishing textiles Boston had 64 to 84, Chicago 48 to 60, Kansas City 54 to were off, especially in Fall River and Adams. 72, Philadelphia 68 to 78, Phoenix, Ariz., 66 to 104, St At Newton, N. C., the Catawba Cotton Mills, which had Louis 54 to 76, Seattle 50 to 68, Spokane 48 to 78 and been closed for two years have opened and are running every Winnipeg 30 to 72. On the 18th inst. New York had 51 to day. At Chester, S. C., the Chester plant of the Aragon- 67 degrees, Chicago 48 to 66, Kansas City 58 to 76, MinneBaldwin Cotton Mills, Inc., will not operate in the week of apolis 52 to 80, and Winnipeg 56 to 90. On the 19th inst. May 23 but will resume operations on May 30. The plant New York temperatures were 51 to 68 with Boston 46 to which had been on a day and night schedule for some time 64, Chicago 50 to 70, Cincinnati 44 to 72, Cleveland 46 to since the week of May 16 discontinued night operations. 60, Kansas City 58 to 78, Omaha 60 to 84, Milwaukee 54 Manchester cabled: "Inactivity has prevailed during the to 70, St. Paul 62 to 84, St. Louis 52 to 76, and Winnipeg past week. The decision of employers to terminate, be- 52 to 68. To-day temperatures at New York were 52 to 70; ginning June 11, all agreements on wages and hours has been at Chicago over night 56 to 70; at Detroit 54 to 70. The causing buyers to hold aloof as long as possible, for they hope forecast here was for fair weather on Saturday and probable that the manufacturers will reduce prices when wage cuts are showers on Sunday. introduced. At Laporte, Ind.,the Laporte Woolen Mills are Loading of Railroad Revenue Freight Still Declining. operating at about 60% or on an average of 50 hours a week. Loading of revenue freight for the week ended on May 7 The firm is booking a steady day-to-day business on cassimeres, topcoatings and overcoatings and plans to step up totaled 533,677 ears, according to reports filed by the railroads with the Car Service Division of the American Railway production to 75% in the v,ry near future. Chicago wired May 19 that drastic reductions were an- Association and made public on Tuesday. This was a nounced in the mid-summer sales catalogues of Sears, decrease of 20,335 cars under the preceding week, 212,063 Roebuck & Co. and Montgomery, Ward & Co. The reduc- cars below the corresponding week in 1931, and 398,669 tion by Sears ranged from 5 to 49% and by Ward from 5 to cars under the same period two years ago. Particulars 50%. Sear's catalogue now being mailed to 10,000,000 mail follow: Miscellaneous freight loading for the week ended on May 7 totaled 196,order customers, reflects continued declines in prices of raw 190 cars, a decrease of 3,427 cars below the preceding week, 103,749 cars materials and finished products. Prices of companies All- under the corresponding week in 1931, and 171,449 cars under the same state's Companion tires are reduced 10% from previous week in 1930. Loading of merchandise less than carload lot freight totaled 185,104 levels. Textile prices in the new catalogue shows a reduction cars, an increase 81 cars above the preceding week but 41,123 cars below of 40% from prices in 1929. Montgomery Ward's catalogue the correspondingofweek last year and 64,140 ears under the same week shows a 10% reduction in Riverside Mate four ply tires. two years ago. Grain and grain products loading for the week totaled 28.575 cars. Electric output in the United States for the week ended May 4,166 cars below the preceding week, cars below the corresponding 14 was 1,436,928,000 k.w.h., a decline of 13.1% from last week last year and 8,917 cars below the6,678 same week in 1930. In the Western year, according to the National Electric Light Association. Districts alone, grain and grain products loading for the week ended on The A tlantic Scaboard shows a decrease of 10.6% and New May 7 totaled 18.112 cars, a decrease of 4,702 cars below the same week last year. England, taken alone, shows a decrease of 14.3%. Coal loading totaled 80,392 cars, a decrease of 10,658 cars below the St. Louis reported retail trade slow, but small stores are Preceding week, 31,251 cars below the corresponding week last year, and 60,174 cars below the same week in 1930. doing better than large ones. In quite a few instances the Forest products loading totaled 19,422, a decrease of 520 cars below the five-day week has been adopted. Detroit reported that Preceding week, 13.407 cars under the same week in 1931 and 34,195 cars retail trade as compared with the first two weeks of April below the corresponding week two years ago. Ore loading amounted to 2,193 cars, a decrease of 803 cars below the week so far this month has shown a slight increase, the result of before, 8,600 cars under the corresponding week last year and 48,016 cars warm weather and the necessity for summer clothing. under the same week in 1930. Coke loading amounted to 3,225 cars, 208 cars above the preceding Merchants continue their long followed policy of close buying week, but 3,328 cars below the same week last year and 6.076 cars below and are becoming reconciled to small profits and take a the same week two years ago. healthier attitude toward existing conditions. Louisville, Live stock loading amounted to 18,576 cars, a decrease of 1,050 cars Ky. wired that trading has been dull and draggy in the below the preceding week, 3,927 cars below the same week last year and 5,702 cars below the same week two years ago. In the Western Districts textile business in this section the past two or three weeks. alone, loading of live stock for the week ended on May 7 totaled 14.883 Most of the Ohio Valley plants are closed, making no effort cars, a decrease of 3,459 ears compared with the same week last year. All districts reported reductions in the total loading of all commodities to operate at the present time. The Indiana Cotton Mills, compared with the same week in 1931 and 1930. Cannellton, Ind. have been down for 10 days or two weeks, Loading of revenue freight in 1932 compared with the two previous but it is planned to resume operations around May 23. At years follows: Evansville, Ind. trade has been quiet. At Louisville the 1932. 1930. 1931. Louisville Textiles, Inc. producers of yarns and woven goods Four weeks In January 2,873,211 2,269,875 3,470,797 have been doing well enough in cloth but found yarns very Four weeks In February 2,834,119 2,245,325 3,506,899 Four weeks In March 2,280,672 2,936,928 3,515,733 quiet. The plant has been running four and a half to five Five weeks In April 2,772,888 3,757,863 4,561,634 533,677 745,740 932,346 days a week, as against full time of five and a half days or Week ended May 7 Total 10.102.437 13.147.861 15.987_409 54 hours. Seattle wired May 17 that a total of 321 mills reporting The foregoing, as noted, cover total loadings by the railto the West Coast Lumbermen's Association for the week roads of the United States for the week ended May 7. In ended May 7 operated at 24% of capacity as compared to the table below we undertake to show also the loadings for 25% for the previous week and 45.8% for the same week last the separate roads and systems. It should be undeistood, year. During the week 192 of these plants were reported as however, that in this case the figures are a week behind down and 129 as operating. Current new business of 216 those of the general totals-that is, are for the week ended mills was 1.8% over production. This group reported pro- Apri130. During the latter period, a total of only eight roads May 21 1932 Financial Chronicle 3708 showed increases over the corresponding week last year, the most important of which were the Bangor & Aroostook RR., New York Ontario & Western Ry. and the Fort Forth & Denver City Ry. REVENUE FRZIGHT LOADED AND RECEIVED FROM CONNECTIONS (NUMBER OF CARS)-WEER ENDED APRIL 30. Eastern DistrictGroup A: Bangor & Aroostook Boston & Albany Boston & Maine Central Vermont Maine Central New York N. H. & Hartford_ Rutland Total Group B: x Buff. Rochester & Pittsburgh. Delaware& Hudson Delaware Lackawanna & West. Erie Lehigh & Hudson River Lehigh & New England Lehigh Valley Montour New York Central New York Ontario & Western Pittsburgh & Shawmut Pitts!). Shawmut & Northern... s Ulster & Delaware Total Group C: Ann Arbor Chicago Indianan. & Cleve. CM. Chic. & St. Louis_ Central Indiana Detroit & Mackinac Detroit & Toledo Shore Line_ Detroit Toledo & Ironton Grand Trunk Western Michigan Central Monongahela New York Chicago dz St. Louis Pere Marquette Pittsburgh & Lake Erie Pittsburgh & West Virginia.... Wabash Wheeling & Lake Erie Total Loads Received from Connections. Total Revenue Freight Loaded. Railroads. 1932. 1931. 1930. 1932. 1931. 2,117 3,093 7,665 711 2,437 10,878 625 2,015 3,939 10,755 918 3,349 14,216 755 2,208 4,078 12,374 1,007 4,143 18,306 760 447 4,814 10,089 2,130 2,685 11.749 1,146 537 6,084 13,963 4,032 3,950 15,105 1,568 27,526 35;947 40,874 33,060 45,241 4:540 6:478 ijiii 8:869 9,876 12,093 276 1,870 8,928 1,520 18,009 2,121 389 345 13,026 16,233 345 2,553 11,105 1,631 27,174 2,038 614 432 13,383 17,901 442 2,764 12,020 2,378 33,282 1,552 728 587 5,644 12,545 1,937 1,043 6,743 30 25.851 2,273 43 238 7,696 16,967 2,860 1,485 8,860 43 34,326 2,730 20 368 61.905 84,170 94,386 62,812 84,495 598 1,220 7,557 41 252 226 1,702 2,754 6,155 3,772 4,283 4,495 3,725 824 5,034 2,050 638 2,014 10,410 59 483 324 2,015 5,090 9,146 4,446 5,667 6,628 5,327 1,618 6,921 3,238 556 2,256 12,328 90 550 417 3,655 6.429 9,837 6,185 7,257 7,748 8,206 1,767 7,888 4,660 895 1,583 8,734 79 108 1,863 889 5,279 7,291 216 7,281 3,399 4,120 644 6,856 1,839 1,282 2,407 11,753 90 171 2,645 1.285 7,542 9,636 230 10,333 4,512 5,558 891 9,498 3,657 e,455 44,888 64.020 79,827 50,856 71,490 Grand total Eastern District.. 134,119 184,137 215,087 146,728 201,226 26,023 740 34,247 2,083 y45,131 3.419 11,405 790 18,130 1,888 149 7,633 55 224 78 1,189 56,500 13,873 3,940 52 3,066 195 10,802 3 350 114 1,554 80,247 18,398 8,761 54 3,262 181 13,704 601 362 197 1,328 97.566 21,361 12,525 48 4,055 10,260 49 10 19 3,286 32,231 14,432 679 1 3,275 44,422 20,920 2,212 1 4,897 113.322 160,070 200,478 76.437 111,851 16,865 13,138 2,018 2.483 19,981 17,513 2,025 3,038 25,642 22,429 2,180 3,639 5,277 3.102 1,278 525 8,431 4,882 1,753 613 34,304 42,557 53,890 10,182 15,479 8,376 781 352 136 49 1,552 483 304 7.535 18,909 200 12,429 1,258 657 149 88 1,987 597 482 10,258 25,973 211 12,905 1,641 745 183 64 2,423 578 525 11,320 29,037 229 3,504 1,070 684 239 113 1,172 658 3,715 2,849 9,870 818 5,747 1,548 1,162 216 130 1,633 929 5,158 4,576 14,539 1,015 Total AlleghenyDistrictBaltimore & Ohio Bessemer At Lake Erie a Buffalo & Susquehanna Buffalo Creek & Gauley Central RR.of New Jersey.... Cornwall Cumberland & Pennsylvania.. Ligonier Valley Long Island Pennsylvania System Reading Co Union (Pittsburgh) West Virginia Northern Western Maryland Total Pocahontas DistrictChesapeake & Ohio Norfolk & Western Norfolk & Portsmouth Belt Line Virginian Total Southern DistrictGroup A: Atlantic Coast Line Clinchfield Charleston & Western Carolina Durham & Southern Gainesville & Midland Norfolk Southern Piedmont & Northern Richmond Frederick. & Potorn. Seaboard Air line Southern system Winston-Salem Southbound 6 14,584 59 27 44 4,861 Group B: Alabama Tenn. & Northern... AtlantaBirmingham & Coast-Atl.& W.P.-West RR.of Ala Central of Georgia Columbus & Greenville Florida East Coast Georgia Georgia & Florida Gulf Mobile & Northern Illinois Central System Louisville & Nashville Macon Dublin & Savannah.... MississippiCentral Mobile & Ohio Nashville Chattanooga & St. L. New Orleans-Great Northern Tennessee Central average prices of barley, In the group of farm products, decreases in the lemons, oranges, peanuts, eern, calves, steers, hogs, live poultry, cotton, decline 2% from the to whole a as group the tobacco and wool caused month were shown for previous month. Increases in price during the sweet potatoes. oats, rye, wheat, cows, lambs, hay, onions, and cheese, evaporated Among foods price decreases were reported for butter, raw and granulated and fruits, canned milk, most meats, lard, bread, sugar. On the other hand,flour, bananas and coffee averaged higher than 1932. 1931. 1930. 197 604 671 3,701 *195 909 780 266 747 16,580 13,763 114 121 2,157 2,975 525 398 235 851 867 4,777 303 2,146 1,308 454 951 22.991 21,307 124 159 2.591 3,610 896 868 273 1,040 1,107 4.882 439 1,671 1,187 516 1,254 28,249 27,132 136 296 3,263 4,738 1,062 783 1932. 148 679 908 1,950 188 397 1,140 278 667 7,100 3,273 341 233 1.123 2,033 283 470 1931. 193 839 1,107 2,642 276 675 1.516 492 933 10,505 5.344 465 384 1,444 2.978 372 606 44.703 64,238 78,028 21,213 30,771 Grand total Southern District 83.380 118,327 137,678 47,705 67,424 Northwestern DistrictBelt By. of Chicago Chicago & North Western Chicago Great Western Chia. MUw. St. Paul & Pacific_ Chic. St. Paul Minn. & Omaha Duluth Missabe & Northern... Duluth South Shore & Atlantic Elgin Joliet & Eastern Ft. Dodge Des M.& Southern_ Great Northern Green Bay & Western Minneapolis & St. Louis Minn. St. Paul & S. S. Marie Northern Pacific Spokane Portland & Seattle.-- 1,176 14,199 2,454 16.207 3,050 411 343 3,206 309 6,794 499 1,787 3,340 7.660 1,146 1,250 21,519 3,055 23.224 4,504 2,186 1,357 5,923 360 10,399 668 2.683 5,678 9.395 1,224 1,675 27,071 3,427 28,395 5,448 9,994 1,394 11,254 485 15,902 751 3,119 8,124 13,348 1,842 1,304 8,988 2,080 5,831 3,105 83 356 3,127 115 1,992 391 1,306 1,936 2,301 792 1,916 10.206 2,671 7,478 3,725 143 485 6,211 206 2,489 486 1.680 2,436 83,181 93,425 132,229 31,864 44,159 17,931 3,066 154 14,068 11,977 2,087 894 1,558 146 1,092 456 174 14,277 241 416 11.233 242 1,496 24.505 3,699 241 19,509 16,926 3,057 1,118 2,077 283 1,053 709 173 19,448 317 279 14,598 271 1,796 27,293 4,680 353 23,924 19,554 3,942 1,305 2,816 288 1,431 1,121 209 23,559 332 418 15,425 220 1,878 4,661 1,509 15 4,872 5.800 1,637 586 1,908 12 578 214 63 3.455 239 646 6,334 3 1,373 5,155 2,258 39 6,719 8,195 2,442 906 2,295 10 073 239 58 4,265 428 810 7,885 6 1,461 81,508 110,039 128,746 33,883 44,144 167 119 182 1,900 277 1,838 133 1,395 1.042 99 500 72 4,301 12.001 39 75 7,050 1,970 770 5,417 3,155 1,874 42 287 182 177 2,821 158 8,075 285 2.014 1,892 264 692 133 5.081 17.491 41 87 10,107 2.913 450 6,779 5.681 2,552 65 358 269 243 3,008 217 2,015 383 2,710 2,418 214 946 112 5,980 21,467 49 124 12,128 3,311 674 8.307 6.035 3,558 40 2,206 343 108 925 27 2,390 648 1,243 876 321 543 229 2,725 6,525 15 113 2,910 1,192 157 2,835 3,113 1,774 40 2,906 233 179 3,577 37 2,287 1,324 2,707 852 617 495 458 3,011 9,729 25 107 3,953 1,942 371 4,736 4,495 2,619 40 44,198 68,187 74,566 31,257 46,699 Total Total Central Western Dist.Ateh. Top.& Santa Fe System_ Alton Bingham & Garfield Chicago Burlington & Quincy Chicago Rock Island & Pacific. Chicago dz Eastern Illinois Colorado & Southern Denver & Rio Grande Western_ Denver & Salt Lake Fort Worth dr Denver City-Northwestern Pacific Peoria & Pekin Union Southern Pacific (Pacific) St. Joseph & Grand Island Toledo Peoria & Western Union Pacific System Utah Western Pacifie Total Southwestern DistrictAlton & Southern Burlington-Rock Island Fort Smith & Western Gulf Coast Lines Houston & Brazos Valley International-Great Northern Kansas Oklahoma & Gulf Kansas City Southern Louisiana & Arkansas Litchileld & Madison Midland Valley Missouri & North Arkansas.... Missouri-Kansas-Texas Lines.. MissouriPacific Natchez & Southern Quanah Acme & Pacific St. Louis-San Francisco St. Louis Southwestern Ban Antonio Uvalde & Southern Pacific, in Texas & La. Texas & Pacific Terminal RR. Assn. of St. Louis Weatherford Min. Wells & N.W. 24.492 36.653 Total 59.650 54.089 38,677 Total * Previous figure. a Included in Baltimore dr Ohio RR. 7 Estimated s Included In New York Central. Wholesale Prices Decreased Slightly During April, According to United States Department of Labor. The index number of wholesale prices as computed by the Bureau of Labor Statistics of the United States Department of Labor shows a slight decrease from March 1932 to April 1932. This index number, which includes 784 commodities or price series weighted according to the importance of each article, and based on the average prices for the year 1926 as 100.0, was 65.5 for April, as compared with 66.0 for March, showing a decrease of approximately 3 of 1% between the two months. When compared with % April 1931, with an index number of 74.8, a decrease of about 12M% has been recorded. Under date of May 18 the Bureau continued as follows: Total Loads Received from Connections. Total Revenue Freight Loaded Railroads. 2,890 1,137 In the month before. The group as a whole declined 2% in April when compared with March. The hides and leather products group decreased approximately 3% during the month with all the subgroups, except other leather products, sharing in the decline. The group of textile products as a whole decreased nearly 3% from March to April, due to marked declines for cotton goods. knit goods, silk and rayon, woolen and worsted goods, and other textile products. The subgroup of clothing declined slightly. In the group of fuel and lighting materials increases In the prices of fuel oil, gasoline, and crude petroleum more than offset decreases in the prices of anthracite coal, bituminous coal, coke, electricity, and gas. Due to the sharp advance in the prices of petroleum products the fuel and lighting group increased nearly 3%7 0 over the March level. Metals and metal products showed a slight downward tendency for April. Increases in iron and steel were offset by decreases in motor vehicles and non-ferrous metals. Agricultural implements and 01111nblliE and heating fixtures showed practically no change between March and April. In the group of building materials, cement showed no change in average prices. Structural steel moved upward, while average prices for brick and tile, paint and paint materials, and other building materials continued their downward movement, forcing the group as a whole to decline approximately 1%. Mixed fertilizers showed further recession during April. as did also chemicals and drugs and pharmaceuticals. Fertilizer materials, on the other hand, increased slightly in the month. The group as a whole decreased more than 1% from the March level. Furniture averaged 2% lower in April than in March, while furnishings showed practically no change. As a whole the housefurnishing goods group declined about 1% from the month before. The general average of the miscellaneous commodity group for April remained at the March level. Increases in the prices of cattle feed, paper and pulp, and other miscellaneous items counterbalanced the further price recessions in crude rubber. Automobile tires and tubes showed no change between the two months. The average for the group of all commodities other than farm products and foods remained unchanged for the two months. The April average for all of the other special groups showed decreases from the previous month ranging from 36 of 1% for finished products to 2% for semimanufactured articles. Between March and April, price decreases took place in 271 instances, increases in 79 instances, while in 434 instances no change in price occurred. The following index numbers were also issued by the Bureau: INDEX NUMBERS OF WHOLESALE PRICES BY GROUPS AND SUBGROUPS OF COMMODITIES (1926=100.0). Comm9dity Groups and Subgroups. March 1932. April 1932. 74.8 70.1 59.5 70.3 73.4 76.3 80.6 74.3 76.2 79.9 69.9 87.5 94.8 62.0 88.4 101.6 68.2 76.9 71.4 60.7 43.4 69.0 76.2 65.4 86.4 84.4 83.7 93.7 96.1 37.4 85.7 94.3 84.1 94.5 67.5 86.6 81.5 83.9 81.0 73.4 81.2 86.6 84.3 86.9 81.3 85.1 63.4 80.6 83.5 87.9 84.2 91.9 71.5 46.9 81.2 82.1 13.3 89.3 68.3 71.5 78.3 75.7 75.9 66.0 50.2 43.5 51.4 52.1 62.3 64.2 68.3 62.3 61.4 57.1 77.3 88.5 44.7 73.4 98.8 58.7 69.0 56.2 54.9 33.5 62.7 69.5 67.9 89.9 83.5 80.4 104.4 97.5 39.8 80.8 85.0 79.7 95.3 50.5 64.4 73.2 79.3 75.0 61.5 75.4 64.4 79.7 80.6 75.3 80.9 59.7 68.6 73.2 77.1 75.4 79.1 64.7 39.2 52.4 76.8 7.2 84.5 56.1 60.8 71.5 69.3 70.9 WWWWWWWWWWW01!WW0Obr-4001t.MNt.t.W • WMO.WWVW.00011--t-0...M.V.ONNV. WWW9,0.1M0 All commodities Farm products Grains Livestock and poultry Other farm products Foods ButtAr, cheese and milk Cereal products Fruits and vegetables Meats Other foods Hides and leather products Boots and shoes Hides and skins Leather Other leather products Textile products Clothing Cotton goods Knit goods Silk and rayon Woolen and worsted goods Other textile products Fuel and lighting materials Anthracite coal Bituminous coal Coke Electricity Gas Petroleum products Metals and metal products Agricultural implements Iron and steel Motor vehicles Non-ferrous metals Plumbing and heating Building materials Brick and tile Cement Lumber Paint materials Plumbing and heating Structural steel Other building materials Chemicals and drugs Chemicals Drugs and pharmaceuticals Fertilizer materials Mixed fertilizers Housefurnishing goods Furnishings Furniture Miscellaneous Automobile tires and tubes Cattle feed Paper and pulp Rubber, crude Other miscellaneous Raw materials Semi-manufactured articles Finished products Non-agricultural commodities All commodities less farm products and foods_ *Data not yet available. April 1931. xeic;40;.-4,624nr:o6b:ootii.4.0;o56.4NiciliT4T.ice.Ocic464cioi,4844.,64cOei6mMai4wri.oici co.0.41.a.ommmoa WWWWWWWWWI, WWWWWWVO C.WWWC-C- t.t..NNt..WWWC. W WC-ON • Decrease Noted in Wholesale Price Index of United States Department of Labor During Week Ended May 14. The Bureau of Labor Statistics of the U.S. Department of Labor announces that the index number of wholesale prices for the week ended May 14 stands at 64.9 as compared with 65.1 for the week ended May 7. The Bureau continued on May 18: This index number, which includes 784 commodities or price series. weighted according to the importance of each article and based on the average prices in 1926 as 100.0, shows that a decrease of approximately one-third of 1% has taken place in the general average of all commodities for the week of May 14, when compared with the week ended on May 7. The accompanying statement shows the index numbers of groups of commodities for the weeks ended April 16, 23, 30, May 7. and 14. INDEX NUMBERS OF WHOLESALE PRICES FOR WEEKS OF APRIL 16 23, 30, MAY 7 AND 14. 1Veek Ended Apr. 16. Apr. 23. Apr. 30. May 7. May 14. All commodities Farm products Foods Hides and leather products Textile products Fuel and lighting Metals and metal products Building materials Chemicals and drugs Housefurnishing goods Miscellaneous 66.0 50.1 61.3 75.6 57.2 71.7 80.1 72.4 74.5 78.2 64.8 65.8 49.7 61.0 74.4 56.8 71.7 80.2 72.2 74.5 78.2 64.8 65.5 48.8 61.0 73.9 56.5 72.0 80.2 72.4 74.4 76.3 64.6 65.1 47.9 60.2 73.3 56.5 71.7 80.2 71.7 74.0 76.2 64.7 64.9 47.8 59.9 73.3 56.1 71.6 80.1 71.7 73.7 75.9 64.6 Wholesale Prices Again Dropped to New Low During Week Ended May 14 According to National Fertilizer Association. For the second consecutive week the wholesale price index of the National Fertilizer Association showed a fairly 3709 Financial Chronicle Volume 134 large decline. During the latest week the index declined four fractional points, while during the preceding week the index declined six fractional points. The latest index number is at a record low point, namely, 60.9, or exactly one full point lower than it was two weeks ago. A month ago the index stood at 62.3, while a year ago it was 71.4. The index number 100 is based on the average for the three years, 1926-1928. The Association continued on May 16: Eleven of the 14 groups listed in the index declined during the latest week. Only two groups advanced and the remaining group showed no change. The groups that advanced were building materials and fuel. The latter group includes patroleum and its products. The declining groups were textiles, fats and oils, house-furnishing goods, chemicals and drugs, mixed fertilizers, foods, grains, feeds and livestock, fertilizer materials, metals, automobiles and miscellaneous commodities. The largest loss was shown in the group of foods. During the latest week 14 commodities showed price advances and 44 commodities showed lower prices. During the preceding week 11 commodities showed price advances, while 38 commodities showed lower prices. Included in the list of commodities that declined during the latest week were cotton, wool,silk, lard, butter, bread, apples, cattle, hogs, copper, tin, lumber, rubber and leather. Among the commodities that showed stronger prices were eggs, flour, wheat, corn, silver, cement, coal, gasoline and cottonseed meal. The index number and comparative weight for each of the 14 groups are given below: WEEKLY WHOLESALE PRICE INDEX-BASED ON 476 COMMODITY PRICES (1926-1928=100) Per Cent Each Group Bears to the Total Index. 23.2 16.0 12.8 10.1 8.5 6.7 6.6 6.2 4.0 3.8 1.0 .4 .4 .3 1000 Group. Foods Fuel Grains,feeds and livestock_ _. Textiles Miscellaneous commodities_. Automobiles Building materials Metals House furnishing goods Fats and oils Chemicals and drugs Fertilizer materials Mixed fertilizers Agricultural implements Al! arntIngc rnmhinpd Latest Week May 14 1932. Preceding Week. Month Ago. Year Ago. 61.6 63.8 42.5 43.3 60.0 87.7 73.0 71.3 80.0 38.3 87.0 70.0 71.9 92.2 61.8 62.3 43.3 45.3 60.3 89.2 72.9 71.6 81.2 39.4 87.9 71.1 73.3 92.2 63.3 60.5 47.8 47.3 61.1 89.2 72.9 71.7 81.2 40.9 87.9 71.1 73.3 92.2 74.7 60.4 65.5 61.8 69.5 88.4 80.8 78.1 92.3 57.3 89.0 81.1 84.8 95.4 60.9 61.3 62.3 71.4 Decrease of 1 1-3% Noted in Retail Food Prices Between March 15 and April 15'-Decline of About 16% From Year Ago. Retail food prices in 51 cities of the United States, as reported to the Bureau of Labor Statistics of the United States Department of Labor, showed an average decrease of about 1 1/3% on April 15 1932, when compared with March 15 1932, and an average decrease of about 16% since April 15 1931. The Bureau's weighted index numbers, with average prices in 1913 as 100.0, were 124.0 for April 15 1931; 105.0 for March 15 1932, and 103.7 for April 15 1932. The Bureau also said, as follows, on May 19, as to course of retail food prices: During the month from March 15 1932 to April 15 1932, 27 articles on which monthly prices were decreased as follows: Butter, 9%; strictly fresh eggs, 5%; sliced bacon, hens, fresh milk, oleomargarine, lard, rice, canned corn, prunes, and bananas, 3%; cheese, navy beans, and sugar, 2%; sliced ham, canned red salmon, evaporated milk, bread, rolled oats, macaroni, pork and beans, canned tomatoes, tea, and coffee, 1%; and rib roast, vegetable lard substitute, and wheat cereal, less than 5/10 of 1%. ; Eight articles increased: Onions, 20%; cabbage, 14%; oranges, ; and leg of lamb, 3%; sirloin steak, chuck roast, and plate beef, round steak, less than 0.5 of 1%. The following seven articles showed no change in the month: Pork chops, flour, cornmeal, cornflakes, potatoes, canned peas, and raisins. Changes in Retail Prices of Food by Cities. During the month from March 15 1932 to April 15 1932, 45 of the 51 cities from which prices were received showed decreases in the average cost of food as follows: Cincinnati and Los Angeles, 4%; Bridgeport, Detroit, Houston and Minneapolis, 3%; Butte, Chicago, Columbus, Denver, Louisville, Omaha, St. Louis, St. Paul and Salt Lake City, 2%; Atlanta, Baltimore, poston, Charleston (S. C.), Cleveland, Fall River, Kansas City, Little Rock, Manchester, Memphis, Milwaukee, New Haven, New Orleans, Norfolk, Peoria, Philadelphia, Pittsburgh, Richmond, Rochester, San Francisco, Springfield (Ill.), and Washington, 1%; and Indianapolis, Jacksonville, Mobile, New York, Portland (Ore.), Providence, Savannah, and Seattle, less than 0.6 of 1%. Five cities showed increases: Buffalo, 3%; Birmingham, Dallas and Newark, 1%; and Scranton, less than 0.5 of 1%. In Portland (Me.) there was no change in the month. For the year period, April 15 1931 to April 15 1932, all of the 51 cities showed decreases: Cincinnati and Detroit, 24%; Little Rock, 22%; Kansas City, 20%; Atlanta, Columbus, Pittsburgh and Savannah, 19%; Baltimore, Chicago, Cleveland, Houston, Jacksonville, Mobile, Peoria, St. Louis and Washington, 18%; Boston, Indianapolis, Los Angeles, Minneapolis, Philadelphia and Richmond, 17%; Charleston (S. 0.), Dallas, Louisville, Manchester, Memphis, Norfolk, Omaha, Rochester, St. Paul, Salt Lake City and Springfield (Ill.), 16%; Birmingham, Butte, Denver, Fall River and Scranton, 15%; Bridgeport, NeWark, New Orleans, New York and Providence, 14%; Milwaukee and New Haven, 13%; Buffalo, Portland (Me.), San Francisco and Seattle, 12%; and Portland (Ore.), 11%. Electric Production Continues to Decline. The production of electricity by the electric light and power industry of the United States for the week ended Saturday, May 14, was 1,436,928,000 kilowatt hours, 3710 Financial Chronicle according to the National Electric Light Association. The Atlantic seaboard shows a decrease of 10.6% from the corresponding week last year, and New England, taken alone, shows a decrease of 14.3%. The central industrial region outlined by Buffalo, Pittsburgh, Cincinnati, St. Louis and Milwaukee, registers as a whole a decrease of 16.2%, while the Chicago district alone shows a decrease of 11.6%. The Pacific Coast shows a decline of 11.7% below last year. Arranged in tabular form, the output in kilowatt hours of the light and power companies for recent weeks and by months since the beginning of 1932 is as follows: Weeks Ended. 1932. 1931. 1930. 1929. 1932 Under 1931. Jan. 2_-- 1.523.652,000 1,597,454.000 1,680,289,000 1,542,000,000 4.6% Jan. 9_-- 1,619.265,000 1,713,508,000 1.816.307,000 1,733.810,000 5.5% Jan. 16.-- 1,602.482.000 1,716,822,000 1,833,500,000 1,736,729.000 6.7% Jan. 23_-- 1,598,201,000 1,712,788,000 1,825,959,000 1,717.315,000 6.7% Jan. 30_-- 1.588,967,000 1,657,160,000 1.809,049,000 1.728.203,000 5.8% Feb. 6_-- 1588.853,000 1,679,016,000 1,781.583,000 1,726,161,000 5.4% Feb. 13_-- 1,578,817,000 1.683,712.000 1,769,683,000 1,718,304,000 6.2% Feb. 20-- 1,545,459,000 1,680,029,000 1,745,978,000 1,699,250,000 8.0% Feb. 27_-- 1.512,158,000 1,633,353,000 1,744,039,000 1,706,719,000 7.4% Mar. 5.- 1,519,679,000 1,664,125,000 1,750,070,000 1,702.570,000 8.7% Mar. 12_-_ 1,538,452,000 1,676.422,000 1,735,673,000 1,687.229,000 8.2% Mar. 19___ 1,537,747,000 1,682,437,000 1,721,783,000 1,683,262,000 8.6% Mar. 26_-- 1,514,553,000 1,689,407,000 1,722,587,000 1,679,589,000 10.3% Apr. 2.-- 1,480,208,000 1,679,764.000 1,708,228,000 1.663,291,000 11.9% Apr. 9-- 1,465,076,000 1,647.078,000 1,715,404,000 1.696.543,000 11.1% Apr. 16___ 1,480,738,000 1.641.253,000 1,733,476.000 1,709,331.000 9.8% Apr. 23_-- 1,469,810,000 1,675,570,000 1.725.209,000 1,699,822,000 12.3% Apr. 30___ 1,454.505,000 1,644,437,000 1,698,389,000 1,688,434,000 11.5% May 7_. 1,429,032,000 1.637,296,000 1,689,034,000 1,698.492,000 12.7% May 14___ 1,436,928,000 1,654,303,000 1,716,858,000 1,704,426,000 13.1% MonthsJanuary ___ 7,014,066,000 7,439.888,000 8,021.749,000 7,885.334.000 5.7% February_. 8,518,245,000 6,705,564.000 7,066,788,000 6,850,855.000 6.1% March 6.781.347.000 7.381.004.000 7.580.335.000 ----- 7 3g0.2s3 PM ft_2•A • , Note.-The monthly figures shown above are based on reports covering approximately 92% of the electric light and power industry and the weekly figures are based on about 70%. Decline in Life Insurance Sales in United States During April. Sales of ordinary life insurance in April continued to decrease and reflected the general business recession of the past months, says the Life Insurance Sales Research Bureau at Hartford, Conn. Its advices May 19 added: The volume of life insurance sales in April reached a low point in the downward curve. The general decline, which for the country as a whole was 26% below sales of last April, was felt in every section of the country. However, over $24,000,000 of new ordinary insurance was paid for every working day by the people of the United States. The following figures show by sections the experience for April and for the first four months of 1932: April 1932 Compared to April 1931. United States total New England Middle Atlantic East North Central West North Central South Atlantic East South Central West South Central Mountain Pacific 74% 75 75 72 72 70 73 78 68 79 Four Months 1932 Compared to Four Months 1931. 87% 86 87 85 82 88 86 87 83 03 These figures issued by the Life Insurance Sales Research Bureau represent the experience of companies having in force 88% of the outstanding ordinary insurance in the United States. Gas Utility Sales Improve in March. Revenues of manufactured and natural gas utilities aggregated $62,009,931 in March 1932, as compared with 864,318,405 in March 1931, a decline of 3.6%, according to reports from 406 companies serving 14,039,322 customers and representing over 90% of the public utility distribution of manufactured and natural gas, it was announced on May 19 by Paul Ryan, Chief Statistician of the American Gas Association, who further states: This represents the smallest decline in revenues reported since May 1931, and indicates a distinct improvement during the first three months or the current year. In January 1932 revenues were 11.4% below the preceding year, while in February the drop was only 5.7%• The manufactured gas companies reported revenues of $33,186,305 for March, a drop of 2% from a year ago, while revenues of the natural gas concerns totaled $28,823,626, or approximately 5% less than for March 1931. Sales of manufactured gas reported for March totaled 31,919,608,000 cubic feet, a decline of less than 1%, while natural gas sales for the month were 64,577,188,000 cubic feet. a drop of 8%. A substantial part of the improvement in manufactured gas sales was due to the greatly augmented use of this product for house-heating purposes. During March 1932 sales of manufactured gas for this purpose aggregated 3.134,825,000 cubic feet, which represents an increase of nearly 19% over the corresponding month of the preceding year. This was in sharp contrast to the drop of nearly 4% which characterized this class of business in February. Throughout the country generally, industrial gas sales, both for manufactured and natural gas utilities, continued at levels considerably below the preceding year, the decline in sales of manufactured gas for industrial purposes approximating 9% for the country at large, while industrial sales of natural gas were down nearly 9% from March 1931. May 21 1932 "Annalist" Weekly Index of Wholesale Commodity Prices-Domestic and Foreign Wholesale Price Indices. The "Annalist" weekly index of wholesale commodity prices fell again to a new low of 88.7 on May 17, compared with 89.1 (revised) on May 10, and 102.5 a year ago. The "Annalist" adds: Individual leaders in the decllne were cotton, wool and the textiles, beef and pork, leather, bituminous coal, and the metals. New lows were made by copper and zinc. Wheat and flour, steers and hogs, and gasoline, however, were higher. THE "ANNALIST" WEEKLY INDEX OF WHOLESALE COMMODITY PRICES. (1913=100.) May 17 1932. May10 1932, May 19 1931. Farm products Food products Textile products Fuels Metals Building materials Chemicals Miscellaneous All commodities *Revised. a Provisional. 67.1 92.0 a70.1 135.4 95.8 108.1 96.2 81.3 88.7 .76.9 92.6 *71.1 135.7 96.4 108.1 96.2 83.3 *89.1 90.3 108.8 96.4 125.0 102.8 119.8 99.8 85.9 102.5 In other countries the April price movement generally followed our own downward, although at a more moderate rate. However, in those countries that are no longer on an unrestricted gold basis, the measurement of price levels in terms of the paper currency makes valid price comparisons difficult. Great Britain is a case in point. Her wholesale index rose sharply from 99.2 in September when the gold standard was abandoned to 106.4 in November, and then resumed its downward course, declining slowly to February, when it stood at 105.3, and then more rapidly to 102.4 for April. Sterling exchange moved in a generally contrary direction during this period, falling sharply in the autumn, and rising again slowly during the winter and spring. Its movements, however, were much more extreme than those of the price level, the changes in the latter being utterly inadequate to offset those of sterling. Consequently, although in terms of paper currency the British price level was 3.1% higher in April than in September, in terms of gold it was 20.4% lower. The decline of world prices in terms of gold during the same period has been very much less. The decline in this country was only 9.8%, yet it has here been generally more severe than in other countries. Prices in Great Britain have therefore failed to advance anything like enough to compensate for the depreciation of the pound, partly because of the tendency of prices to readjust themselves relatively slowly to new monetary conditions and partly because even in Great Britain imported goods, priced on a gold basis, account for only part of the domestic consumption. While there is undoubtedly a tendency for prices of domestic goods to follow Imported merchandise upward, the relation is by no means close. and the price level for domestic goods may remain indefinitely at a lower level. DOMESTIC AND FOREIGN WHOLESALE PRICE INDICES (1913=100.0)• • April 1932. March 1932. February 1932. April 1931. P. C. P. C. Change, Change, Month. Year. U.S. of America 94.0 106.1 91.1 92.3 -1.3 -14.1 107.9 108.1 116.4 -1.0 -8.2 Canada 106.8 Great Britain 102.4 104.6 105.3 105.7 -2.1 -3.1 421.0 a France 424.0 427.0 494.0 -0,7 -14.2 Germany 113.7 • 99.8 99.8 • 316.0 314.0 337.0 • • Italy • * Japan 122.0 119.3 • • •Not available. a July 1914=100.0. Indices Used-U. S. A. "Annalist"; Canada, Dominion Bureau of Statistics: Great Britain, Board of Trade; France, Statistique Generals; Germany, Federal Statistical Office; Italy. Bachl; Japan, Bank of Japan. Canadian prices declined 1.0% during the month, against 1.3% in the United States, but the two are not entirely comparable, since Canada has restricted her gold exports. On the Continent prices, after beinp steady or higher in March, have declined again in April. Country's Foreign Trade in April-Imports and Exports. The Bureau of Statistics of the Department of Commerce at Washington on May 16 issued its statement on the foreign trade of the United States for April and the ten months ended with April. The value of merchandise exported in April 1932 was estimated at $136,000,000, as compared with $215,077,000 in April 1931. The imports of merchandise are provisionally computed at $127,000,000 in April the present year, as against $185,706,000 in April the previous year, leaving a favorable balance in the merchandise movement for the month of April 1932 of approximately $9,000,000. Last year in April there was a favorable trade balance in the merchandise movement of $29,371,000. Imports for the ten months ended April 1932 have been 81,508,285, as against $2,078,925 for the corresponding ten months of 1930-31. The merchandise exports for the ten months ended April 1932 have been $1,703,491,000, against $2,692,383,000, giving a favorable trade balance of $195,206,000 for the ten months, against $613,458,000 in the same period a year ago. Gold imports totaled $19,033,000 in April 1932, against $49,543,000 in the corresponding month of the previous year, and for the ten months ended April 1932 were $480,999,000, as against $289,651,000 in the same period a year ago. Gold exports in April were $49,509,000, against only $27,000 in April 1931. For the ten months ended April 1932 the exports of the metal foot up $795,498,000, against $106,- 3711 Financial Chronicle Volume 134 426,000 in the corresponding ten months of 1930-31. Silver imports for the ten months ended April 1932 have been $22,158,000, as against $28,522,000 in the ten months ended April 1931, and silver exports were $16,825,000, compared with $34,936,000. The following is the complete official report: April 1932 was $215,220,400 less than in April 1931, the, figure for April of this year being only $121,704,800, against $336,925,200 in the same month of last year, a decline of 64%, as compared with a decline of 70% in March of 1932 in comparison with March of 1931. For the first four months of the year the decline from 1931 was $762,484,500. TOTAL VALUES OF EXPORTS AND IMPORTS OF THE UNITED STATES (Preliminary Figures for 1932Corrected to May 13 1932.) MERCHANDISE. F. W. Dodge Corp. reports that of the 13 districts comprising the 37 States east of the Rockies all but three showed higher construction contract totals in April than in March. April contract totals for the entire Eastern area showed an 8% gain over March in contrast with a loss of 9% between the corresponding two months of 1931. But only slight encouragement Is offered by the current pick-up since analysis discloses that the gain was entirely due to public works, especially highways. Metropolitan New York, Southern Michigan and the Chicago territory were the exceptions which did not partake in the April advance over March this year. Of the April total for the entire 37 States east of the Rockies of $121,704,800, residential building formed $28,894,700 of the total, non-residential building formed $45,515,000 and public works and utilities amounted to $47,295,100. Residential building grains over March of this year were shown in the New England, Chicago, Central Northwest, Southern Michigan, St. Louis, Kansas City and New Orleans districts. In the case of non-residential building, gains over March were shown only in the New England, Metropolitan New York, Up-State New York, Middle Atlantic and St. Louis territories. In public works the April gain over March amounted to 93% according to the monthly statistical bulletin published by F. W. Dodge Corp., while a year ago a loss of 14% was shown between March and April. For residential building the April contract record showed a loss of almost 13% from March, and for non-residential building April contracts were almost 8% smaller than the March awards. CONSTRUCTION CONTRACTS AWARDED-37 STATES EAST OF THE ROCKY MOUNTAINS. 4 Months Ending April. April. Exports Imports Excess of exports Excess of imports Increase(+) Decrease(-) 1932. 1931. 1932. 1931. 1,000 Dollars. 136,000 127,000 1,000 Dollars. 215,077 185,706 1,000 Dollars. 595,168 524,801 1,000 Dollars. 924,920 754,002 9,000 - --- 29,371 ---- 70,367 170,918 1,000 Dollars. -329,752 -229,201 EXPORTS AND IMPORTS OF MERCHANDISE, BY MONTHS. 1932. 1930. 1931. 1929. 1,000 1,000 1,000 1,000 Dollars. Dollars. Dollars. Dollars. 149,978 249,598 410,849 488,023 153,936 224,346 348.852 441,751 155,254 235,899 369,549 489,851 136,000 215,077 331,732 425,284 203,970 320,034 385,013 187,077 294,701 393,188 180,772 266,761 402,861 164,808 297,765 380,564 180,228 312,207 437,163 204,905 826,896 528,514 193,540 288,978 442,254 184,070 274,858 426,551 Exports-January February March April May June July August September October November December 1928. 1927. 1,000 Dollars. 410.778 371,448 420,617 383,928 422,557 388,661 378,984 379,006 421,607 550,014 544,912 475,845 1.000 Dollars. 419,402 372,438 408,973 415,374 393,140 356,966 341,809 374,751 425,267 488,675 460,940 407.841 4 months ended April 595,168 924,920 1,460,982 1,844,889 1,566,771 1,616,187 10 months ended April 1,703,491 2,692.383 4,078,889 4,595,257 4,065,854 4,217,994 12 months ended Dec_ 2,424,289 3,843,181 5,240,995 5.128,356 4,865,375 ImportsJanuary February March April May June July August September October November December 135,530 130,978 131,292 127,000 810,968 281,707 300,460 307,824 284,683 250.343 220,558 218.417 226,352 247,367 203,593 208,636 183,148 174,946 210,202 185,706 179,694 173.455 174,460 166,679 170,384 168,708 149.480 153,773 368,897 369,442 383,818 410,666 400,149 353,403 352,980 369,358 351,304 391,063 338,472 309,809 358,841 310,877 378,331 375,733 346,501 354,892 319,298 368,875 324,154 355,739 344,269 331,234 337,916 351,035 380,437 345,314 353,981 317.249 317,848 346,715 319.618 355,358 326,565 339,408 4 months ended April524,801 754,002 1,200,959 1,532,823 1,414,702 1,421,782 10 months ended April 1,508,285 2,078.925 3,313,945 3,538,335 3,478,270 3,550,631 12 months ended Dec_ 2.090.635 3.060.908 4.399.361 4.091.444 4.184.742 4 Months Ended April. April. GoldExports_ Imports Excess of exports_ _ _ _ Excess of imports_ SilverExports Imports Excess of exports .. _ Excs es of imports__ 1932. 1931. 1,000 Dollars. 1,000 Dollars. 49,509 19,033 27. 49,543 30,476_ ___ 49-ii6 1,000 Dollars. 329,492 108,821 Increase(4-) Decrease(-) 1931. 1,000 Dollars. 1,000 Dollars. 121 125,796 5,116 7,527 __ iii 810 ____ 2.411 10,781 9,034 -5,665 -1,507 1,747 Gold. Export,- ranuary February darch kpril day rune Full kugust 3eptember Dctober November December 1930. Silver. 1929. 1932. 1931. 1930. 1929. 1,000 1,000 1.000 1,000 1,000 1,000 1,000 1.000 Dollars Dollars. Dollars. Dollars Dollars. Dollars. Dollars. Dollars. 107,883 54 8.948 1,378 1,611 8,571 5,892 8,264 128,211 14 207 1.425 942 1,638 5,331 6,595 43,909 26 290 1,635 987 2,323 5,818 7,814 49,509 27 110 1,594 1,595 3,249 4,846 5,752 1328 82 467 -__ 2,099 4,978 7,485 40 26 550 _--- 1,895 3,336 5.445 1,009 41,529 807 _--- 2,305 3.709 8,795 39 39,332 881 -- 2,024 4,544 8,522 28,708 11,133 1,205 -_-_ 2.183 3,903 4,374 _ 398,604 9,266 3,805 -_-_ 2,158 4,424 7,314 4,994 5,008 80,289 --_ 872 4.102 8,678 32,651 36 72.547 --_ 2,168 3.472 8,369 121 9,555 6,032 5,115 10,781 21.687 28,425 4 mos.end.April 329,492 10 mos.end.April 795,498 106,426 119,087 111.274 16,825 34,936 63,738 73,475 466,794 115,967 116,583 26,485 54,157 83,407 12 mos.end.Dec. ImportsfantlarY Februari darch kpril day rune mly kugust 3eptember Dotober November December 32,905 37,844 19,238 19,033 . ____ 34,426 16,156 25,671 49.543 50.258 63.887 20,512 57,539 49,269 60,919 94,430 89.509 12,908 60.198 55,768 65.835 23,552 13,938 21,889 19,714 13,680 35.635 40,159 32,778 48,577 26.913 26,470 24,687 24,098 30,762 35,525 19,271 18,781 21,321 7,123 8,121 2,097 2.009 1,809 1,612 ____ ____ ____ __ ____ ____ ____ ____ 2,896 1,877 1,821 2.439 2,636 2,364 1,863 2,685 2,355 2,573 2,138 3,215 4,756 3,923 4,831 3,570 3,486 2.707 3.953 3,492 3,461 3,270 2,652 2,680 8,280 4,458 6,435 3,957 4,602 5.022 4,723 7,345 4,111 5,403 5,144 4,479 4 mos.end.Apr11 108.821 125,796 194,709 126,647 7.527 9,034 17,080 23.110 289,651 304,851 212,567 22,158 28,522 48,285 59,776 10 inco.end.April 480,999 612,119 28,664 42,761 63,940 396,054 291,849 ,,,,,,,,,,,,ndMec_ Valuation of Construction Contracts Awarded as Cornpiled by the F. W. Dodge Corporation Shows 64% Decline for April. The valuation of construction contracts awarded in the 37 States east of the Rocky Mountains in the month of 528,894,700 45,515,000 47,295,100 Total construction 1931-Residential building Non-residential building Public works and utilities Total construction First Four 2iionths1932-ResIdential building Non-residential building Public works and utilities Total construction Total construction Valuation. 7,653 13,886,600 5121,704,800 7,221 2,751 1,916 22,632,700 15,853.100 894,500 895,896.400 107,669,200 133,359.800 11.888 39,380,300 8336,925,200 13,247 7.488 3,431 28,690,000 26,136,000 884,600 114,024,900 164.272,800 129,485,800 24,166 55,710,600 5407.783.500 22,283 9,243 5,690 73,516,600 54,350,100 2,441,600 $329,102,300 379,846,300 461,319,400 37.216 130.308.300 31170,268,000 CONTEMPLATED WORK REPORTED-37 STATES EAST OF THE ROCKY MOUNTAINS; 1931. 1932. No. of Projects. Valuation. No. of Projects. Month of AprilResidential building Non-residential building Public works and utilities Valuation. 4,825 2,686 1,530 $37,853,300 55,058.100 59,640,100 7,832 3,089 2,337 $142,204,300 100.104,200 258.263,900 Total construction 9,041 $152,551,500 13,258 5500,572,400 First Four MonthsResidential building Non-residential building Public works and utilities 16,498 10,338 5,840 3178,449.700 231.402,000 298,911,500 25.344 12,881 8,764 $460,303,500 730,342,700 815,567,200 32.676 8706.763.200 46.989 $2006.213.400 125,675 3,249 2,439 1931. 7,174,200 6,501,000 211,400 +329,371 -16,975 EXPORTS AND IMPORTS OF GOLD AND SILVER, BY MONTHS. 1932. 4,016 2,179 1,458 Month of April1932-Residential building Non-residential building Public works and utilities 220,671 1,596 1,612 1 New Floor Space (So.Ft.) 1931-Residentlal building Non-residential building Public works and utilities GOLD AND SILVER 1932. No. of Projects. Total construction Decrease Noted in Employment in Manufacturing in Massachusetts During April As Compared with March. According to an announcement just issued by Edwin S. Smith, Commissioner of Labor and Industries, there was a decrease of 8.9% in the number employed in the manufacturing industries in April as compared with March. This statement is based on returns received from 1,065 representative establishments together employing approximately 40% of the total number of wage-earners employed in all manufacturing establishments in the Commonwealth. The amount of the combined weekly pay roll for the 1,065 establishments showed a decrease of 12.7% in April a3 compared with March, and the average weekly earnings per person employed decreased 4.3%. The Department of Labor and Industries, Division of Statistics of the Commonwealth of Massachusetts, in issuing the foregoing, further said on May 16: In April as compared with March in 1931 there was an increase of .4 of 1% in employment, but a decrease of 1.5% in the amount of the pay roll, while in April as compared with March in 1930 there was a decrease of 1.9% in employment and there was a decrease of 2.9% in the amount of the pay roll. Important factors in the decreases in employment and pay roll payments were curtailments in the manufacture of (1) cotton goods (marked decreases in Fall River particularly, and in New Bedford), (2) woolen and worsted goods (large decreases in Lawrence, and in a number of the small mill towns),(3) boots and shoes (important decreases in Brockton and vicinity), (4) electrical machinery, apparatus and supplies (except radio) (mostly in Financial Chronicle 3712 Lynn), and (5) dyeing and finishing textiles (important changes in Fall River and Adams). Of the 1,065 establishments represented In the survey,30 were not operating during the week covered by the report. None of the plants reported any overtime, in any department. Wage decreases were reported by 27 establishments, averaging 9.2%, and affecting 2,727 wage earners. Returns by cities show that there were no increases of importance in any industrial centre for which data are separately tabulated. Large decreases, both in employment and pay rolls, occurred as noted above, and in addition, in Lowell, manufacturing in general throughout the city declined to a marked degree. The collection of information from representative manufacturing establishments was begun in September 1922. Using the returns for the threeyear period 1925-1926-1927 as a base, or 100.0, a series of index numbers showing the trend of employment, has been computed. The index number for April 1932, was 56.9, indicating that the number employed in manufacturing in the Commonwealth the week ended nearest April 15 was 43.1%, less than the average number employed during the base period. The index number (56.9) for April 1932 was less by 17.8 points, or 23.8%. than the index number for April 1931 (74.7). Business and Agricultural Conditions in Minneapolis Federal Reserve District-Volume of Business During April Smaller Than in April 1931. In its preliminary summary of agricultural and business conditions made available May 19, the Federal Reserve Bank of Minneapolis states that "the volume of business in the Ninth (Minneapolis) Federal Reserve District during April was smaller than the volume in April last year. The indexes of bank debits and country check clearings adjusted to remove seasonal variations reached new low levels for the current depression." The Bank continues: Bank debits were 26% smaller than in April last year, country check clearings were 33% smaller than in April last year and there were declines in the latest reported figures for electric power consumption, postal receipts, freight carloadings, building permits and contracts, flour and linseed products shipments, iron ore shipments, grain marketings, receipts of cattle and calves, and department store sales. Increases occurred in receipts of hogs and sheep. The estimated cash income of farmers in the district from seven important items was 47% smaller in April than in the same month last year. Decreases occurred in income from wheat, flax, dairy products, and bogs. The income from rye was larger in April than in the same month last year and the income from potatoes was equal to that of April last year. Prices of all important farm products in the Northwest, except barley and rye, were lower in April than a year ago. ESTIMATED VALUE OF IMPORTANT FARM PRODUCTS MARKETED IN THE NINTH FEDERAL RESERVE DISTRICT. Bread wheat Durum Wheat Rye Flax Potatoes Dairy products Hogs Total of seven items % Aprt 1932 of April 1931. AprIl 1932. Apri 1931. $837,000 284,000 108,000 238,000 1,154,000 8,706,000 3,784,000 $4,204,000 1,525,000 63,000 588,000 1,154,000 13,917,000 6,935,000 20 19 171 40 100 63 55 815.111.000 828.386.000 53 Bank of Montreal on Crop Conditions in Canada. The Bank of Montreal has issued its first report for 1932 covering crop conditions in Canada. The report in part follows: Agricultural operations in every Province of the Dominion have been delayed by a cold, wet spring and in consequence the planting and seeding of the principal crops will probably not be completed until from ten days to three weeks later than was the case last year, when field work was ahead of the average. In the Prairie Provinces the land prepared for seeding at the opening of the season is estimated at 20,500,000 acres, which compares with 19,000,000 acres last year. Moisture conditions are better than for the past three years, and the seed bed is in good condition for germination in all areas. Rain and snow, which delayed field work for about ten days, has made seeding somewhat later than usual, but wheat seeding is now general being 30% completed in Alberta, 35% in Saskatchewan and 75% in Manitoba. Indications point to a decrease in wheat acreage and an increase in the acreage of coarse grains, seeding of which has hardly commenced. In Quebec Province very little spring plowing has been done, but recent rains and milder weather have been beneficial. Work on the land is just commencing in eastern Ontario, and in the remainder of the Province seeding is general and the land working up in a very friable condition. In the Maritime Provinces little or no work has yet been done on the land, and seeding will be later than usual. In British Columbia, where there Is an unusual amount of moisture in the ground, plowing and seeding are wel' under way, with the season three weeks later than usual. Review of Industrial Situation in Illinois by Industry During April by Illinois Department of LaborDecreases in Employment and Payrolls Between March 15 and April 15 Reported. In reviewing the industrial situation in Illinois, Howard B. Myers, Chief of the Division of Statistics and Research of the Illinois Department of Labor, states that "reductions of 6.0% in employment and 7.7% in payrolls by 1,342 Illinois industrial establishments from March 15 to April 15, constitute the most severe monthly declines that have so far been recorded in this State. "Manufacturing industries," continues Mr. Myers, "showed losses of 4.0% in employment and 7.3% in payrolls, May 21 1932 while non-manufacturing industries reported decreases of 9.3% and 8.3%, respectively, for these items. Nominal man-hours of work, according to reports from 935 establishments, were curtailed 8.5% during the month. Manufacturing and non-manufacturing industries showed equal percentage decreases." Mr. Myers also said as follows on May 18: The percentage decline in employment in Illinois industries reached a new low level for April 1932. Employment in April was 6.0% lower than In March and 21.6% below the volume of a year ago. Payroll amounts registered a drop of 7.7% from the preceding month and were 32.6% below those of April 1931. Actual operating schedules averaged 39.0 hours a week as against 40.3 hours a week in the previous month. Reductions in wage rates also continued to affect payroll figures, although such reductions were not so frequent as during earlier months this year. Sixty-four establishments introduced wage cuts of approximately 10%, affecting a total of 4,383 workers. Average weekly earnings amouuted to $22.64 for all workers as compared with $23.04 a month earlier, those of men falling from $24.94 to $24.50 a week and those of women from $15.58 to $15.15. The decline in the volume of employment and payrolls from March to April is attributable in part to the closing down of Illinois coal mines at the close of work on March 31, when the wage agreement between operators and miners expired. The effect of this closing of the mines was especially apparent in the figures for the non-manufacturing industries, which showed decreases of 9.3% in employment and 8.3% in payrolls. Manufacturing as well as non-manufacturing industries, however, shared in the sharp curtailment that was shown for April. The decreases of 4.0% in employment and 7.3% in payrolls in manufacturing were the largest since last November, and have seldom been either equalled or exceeded since the beginning of this reporting service in 1922. Every one of the nine main groups of manufacturing industries contributed to the payroll decline and all but one to the curtailment in employment. Metals, machinery and conveyances, the largest of all the reporting groups, reduced employment 4.1% and payrolls 7.4% from March to April Of the 13 industry classifications in this group, automobiles and accessories was the only one in which both employment and payrolls showed an upward trend, while one other, watches and jewelry,increased payrolls but laid off a considerable number of its workers. The iron and steel industries reported losses of 1.8% in employment and 11.6% in payrolls. Electrical apparatus another large group, showed reductions of 3.6% and 6.2%, respectively, in these items. Cooking and heating apparatus reduced employment 4.6% and payrolls 5.2%. Machinery showed losses of respectively .8 of 1% in employment and 2.2% in payrolls amount, and agricultural implements decreased employment 14.6% and payroll amounts 20.2%. Food, beverages and tobacco, the second largest of the manufacturing groups in number of workers employed, showed decreases of 3.5% in employment and 2.3% in payrolls from the preceding month. Industries reporting increases in this group were fruit and vegetable canning, dairy products, beverages, cigars and other tobaccos, manufactured ice and ice cream. The most important curtailments were in the meat packing industry, which reduced employment 3.3% and payrolls 2.1%; in confectionery, which showed decreasse of 10.1% in workers and 10.8% in payrolls; and in miscellaneous groceries, which reported losses in these items of 10.0% and 14.2%, respectively. In the printing and paper goods group, employment decreased .8 of 1% and payrolls 1.8%. Newspapers and periodicals showed an upward trend In both employment and payrolls and miscellaneous paper goods in the former item but not in the latter. Job printing, the largest industry of this division, determined the downward trend for this group with a curtailment of 2.2% in employment and 4.9% in payrolls. The furs and leather goods group registered a 2.0% decline in employment, the first since last November, while payrolls, which decreased 2.5% in March,showed a further reduction of 5.6% in April. The shoe industry was mainly responsible for the trend in this group. The largest percentage curtailment in the main industry groups during this month were shown In the manufacture of clothing and millinery, employment in these industries falling off 11.9% and payrolls 42.2%. The men's clothing industry was the main contributor to this decline with a curtailment of 20.9% in number of workers employed and 55.5% in wage payments. This was an unusually large decline, even though it was partly seasonal. The women's clothing industry showed a moderate expansion. increasing employment 2.2% and payrolls 3.8%• Employment declined 3.1% and payrolls .9 of 1% in the textiles industry group. Knit goods was the only industry in this group in which both employment and payrolls declined. Cotton and woolen goods laid off 6.9% of those employed the preceding month but increased payrolls 6.0%, average weekly hours of work increasing from 40.6 in March to 44.3 in April. Gains in both number of workers and total payrolls were shown by miscellaneous textiles and thread and twine. The stone, clay and glass products group, in which the changes from March to April are generally in an upward direction, this year reduced employment 8.2% and payrolls 3.6%. Lime,cement and plaster expanded payrolls and miscellaneous stone and minerals reported gains in both number of workers and payrolls. The losses for the group as a whole were brought about by the severe declines reported for brick-yards and glass Dooreases of 7.9% factories.in employment and 14.0% in payrolls in the wood products group were due chiefly to sharp curtailments in the furniture and cabinet work establishments, and also to the somewhat more moderate contraction in saw and planing mills. Pianos and muscial instruments and miscellaneous wood products showed an increase in operations. Chemicals, oils and paints constituted the only main manufacturing group for which an increase in employment was reported. Employment in this group expanded 1.0% while payrolls were curtailed 4.9%. In both employment and payrolls, drugs and chemicals showed an expansion, while paints, dyes and colors showed a contraction. Public utilities, one of the non-manufacturing groups in which the comparison from March to April showed increases, added 1.2% to working forces and raised payrolls 2.2%. These gains were caused for the most Pert by the railway car repair shops, which reported 26.7% more men at work than a month earlier, and payrolls 25.8% higher. Water, gas, light and power utilities decreased employment 5.0% and payrolls 4.5%. In the buidling and contracting group employment increased 8.2% and payrolls 29.0%. Both general building and road construction contributed to these Increases. The losses in the non-manufacturing group of industries were caused. first ofall, by the coal mines. In the reporting mines employment decreased 95.7% and payrolls 95.4%. The services group, including hotels and restaurants and laundering, cleaning and dyeing, decreased employment 2.3% and payrolls 1.8% during the month. Wholesale and retail trade reported losses of 2.9% and 3.0%. Increases in department stores were more than offset by the declines in other establishments, particularly in mail-order houses and milk distributing firms. Volume 134 An analysis of the industrial situation in Illinois by cities was issued as follows on May 19 by Mr. Myers: Illinois manufacturing establishments reduced employment 4.0%, payrolls 7.3%,and average weekly earnings from $20.08 to $19.38 during April as compared with March. This loss in industrial activity affected practically all sections of the State. In Chicago, decreases of 5.1% in employment and 8.6% in payrolls of factory workers were reported, the largest declines experienced for this city in any month on record. Factories outside Chicago reported losses of 2.3% in employment and 4.9% in payrolls, offsetting much of the employment gain and more than offsetting the payroll gain reported during earlier months of the year. Increases were recorded for both employment and payrolls of factory workers in only three of the fifteen cities for which figures are tabulated separately. These cities were Aurora, Decatur and Peoria. Two cities, Joliet and Quincy,reported a larger volume of employment in April than in March, but a smaller volume of wage payments, due to shorter operating schedules. In the "all other" group of cities,for which reports are combined employment decreased 1.0% and payrolls 2.5%,reversing a general upward trend that has been in evidence during the two preceding months. Employment in a number of Illinois cities has also been sharply decreased by the existing coal situation. The old wage contract between the coal operators and the coal miners expired on March 31, and as representatives of the two parties had not reached a new agreement, most Illinois coal mines closed on April 1. A few mines have continued operations and some others have reopened since April 1 and are operating under the old contract until a new agreement is reached. The demand for farm labor increased over March and building and construction work has shown some improvement, but the volume of activity in these lines is still greatly below normal. The number of jobs available at the free employment ofices of the State increased proportionately more than the registrations for work, causing a general decline in the so-called unemployment ratio. Registrations for the State, as a whole, totaled 160.4 for every 100 jobs available in April as compared with 186.1 for March. Aurora.-Twenty factories in this city reported increases of .2 of 1% in employment and 7.4% in payrolls over March. With the exception of chemicals, oils and paints, every industrial group represented by these factories showed a gain in payrolls. The ratio of registrations for work to places available at the free employment office remained practically stationary, 229.7 in April as against 230.2 in March. Bloomington -Decreases of 1.2% in employment and 7.4% in payrolls reported by 10 factories in this city were due to the curtailment of operations by metal industry establishments since other reporting industries registered increases. Outdoor work showed an improvement during April and the unemployment ratio at the local free employment office registered 147.7 as compared with 153.3 for the preceding month. A setback in employment was experienced near the close of April when the local railroad shops laid off a largo number of workers. Chicago.-Reports from 525 factories of this city for April showed decreases from the preceding month of 5.1% in employment and 8.6% in payrolls, with every main industrid classification except textiles contributing to the declines. The largest percentage decreases were recorded in the wood products, leather goods, and the clothing groups. The metal industries, represented by 183 establishments, reduced employment 4.7% and payrolls 7.4%. The stone, clay and glass products group experienced losses of 6.7% in number of workers and 10.4% in volume of payrolls. Both this group and the metals industries usually register increased activity at this time of the year. Weekly earnings of employees in reporting, Chicago factories averaged $20.92 in April; $23.00 for men and $13.63 for women. The free employment offices of the city reported a total of 221.0 registrations to every 100 jobs available in April as compared with 240.2 registrations in March. Cicero.-Eleven factories decreased employment 15.9% and payrolls 1.0%, an increase in operating schedules by a stove manufacturing plant helping to retard the payroll decline. The free employment office reported an unemployment ratio of 194.5 for April as compared with 222.3 for March. Danville.-Complete suspension of operations at a local brick-yard was mainly responsible for declines of 32.2% in employment and 34.6% in payrolls reported for April by 12 factories in this city. These factories had shown an upward trend since last December in employment and since January in payrolls. Registrations at the free employment totaled office 232.5 to every 100 jobs available as compared with a ratio of 243.4 for the preceding month. Decatur.-Seventeen factories of this city increased employment 2.0% and payrolls 4.4% from March to April. Paper and printing and food products establishments contributed to these gains. Metals industries also increased employment but showed a slight decline in payrolls. The unemployment ratio was 299.6 for April as against 291.5 for March. East St. Louts.-Employment decreased 2.5% and payrolls 2.0% in 20 reporting factories of this city. Metals industry concerns contributed largely to these declines while food products establishments showed increases in both employment and payrolls, continuing the upward trend of the preceding month. The free employment office reported an unemployment ratio of 116.6 as compared with 117.0 for the preceding month. Joliet.-Twenty-two factories of this city reported for April a 2.5% increase in employment with an 11.5% decrease in payrolls. Metals, paper and printing, and food products concerns were responsible for the payroll decline. The free employment office reported a substantial decrease in the ratio of registrations to available jobs, 278.3 for April, as against 347.8 in March. Moline.-Losses of 26.7% in employment and 32.2% in payrolls were reported by 17 factories of this city, 10 of which are in the metals group. Two agricultural implements concerns made substantial cutailments in both employment and payrolls, while foundries reduced operating schedules but maintained a fairly stable volume of employment. Peoria.-Increases of 2.5% in employment and 3.3% in payrolls were reported by 35 factories, with metals and food products establishments contributing to both employment and payroll gains. The trend in the Peoria factories, with some minor exceptions, has been steadily upward since the heavy curtailments that were reported for August 1931. The free employment office reported an unemployment ratio of 111.3 as against 136.6 for the previous month. Quincy.-Employment in 14 reporting factories increased 2.1% while payrolls decreased 4.7%. The metals industries were mainly responsible for the increase in employment, with reporting clothing establishments also showing a slight increase. The clothing group reported a definite gain in payrolls, but this was more than offset by the decline reported by the printing and paper group. The unemployment ratio increased from 107.5 for March to 115.1 for April. Rockford.-Losses of 8.6% in employment and 18.4% in payrolls reported by 41 factories of this city exceeded any previous monthly declines on record for this city with the exception of the payroll decline in July 1930. which was the same as for the current month, 18.4%. The losses for the current month were caused mainly by curtailments ofoperations in 26 report- 3713 Financial Chronicle ing metals plants. At the free employment office, 167.5 persons registered in April for every 100 jobs available as agianst 149.4 in March. Rock Island.-Ten factories decreased employment 10.9% and payrolls 11.1% between March and April. All industry groups except chemicals. oils and paints registered declines in both employment and payrolls. The free employment office reported a sharp decrease in the unemployment ratio. 191.6 for April as compared with 403.9 for March. Springfield.-Decreases of 2.1% in employment and 6.6% in payrolls were reported by 11 factories, the metals industry group contributing most of these declines. A brick-yard, a shoe company, and the paper and printing group registered an expansion. The unemployment ratio dropped to 128.6 from 134.5 in the preceding month. Sterling-Rock Falls -Reporting factories, most of which are metals establishments, decreased employment 6.1% and payrolls 18.5% between March and April. This marks the third consecutive decline in employment and the fourth consecutive decline in payrolls for these cities. Alt Other Cities.-Losses of 1.0% in employment and 2.5% in payrolls were shown by 249 factories reporting for this group of cities. Metals and food products concerns contributed largely to the declines, while only one industry group, textiles, registered an expansion in both employment and total wage payments. Statistics issued by Mr. Myers follows: EMPLOYMENT, PAYROLLS AND AVERAGE WEEKLY EARNINGS IN ILLINOIS, APRIL 1932. EMPLOYMENT. Industry. PAYROLLS. Index of Index of Payrolls Per Average Employment Per (Monthly tVeekly Cent (Monthly Cent Average Sanest! Change Average Change of Mar. 15 1925-27=100) Mar..15 1925-27=100) Co EmplOgek to Apr. 15 Apr. Apr. Apr.15 Apr. Apr. Apr. 15 1932. 1932. 1931. 1932. 1932. 1931. 1932. -6.0 All industries All manufacturing Indus_ -4.0 -8.2 Stone, clay, glass Miseell. stone, mineral_ +9.5 -3.4 Lime, cement, plaster -20.8 Brick, tile, pottery -7.5 Glass Metals, mach., conv'ees- -4.1 -1.8 Iron and steel Sheet metal w'k,hardw_ -1.5 -2.6 Tools, cutlery Cook'g & heat'g appar Brass, cop., zinc & other -9.4 -20.2 Cars,locomotives Autos, accessories +5.9 -0.8 Machinery -3.6 Electrical apparatus_ Agricultural implem'ts_ -14.6 Instrum'ts & appliances -10.5 -9.6 Watches, jewelry -5.0 All other -7.9 Wood products Saw and planing mills_ _ -13.1 Furn.,cabinet work_ +1.3 Pianos, musical instr'ts_ miffed!. wood product& +0.3 Furs and leather goods_ _ _ -2.0 -1.6 Leather Furs, fur goods Boots and shoes Miscell. leather goods + ' 26 23...8 31 Chemicals, oils paints_ _ +1.0 +4.0 Drugs, chemicals Paints, dyes, colors__ - _ -3.0 Mineral & vegetable oil_ +1.8 Miscellaneous chemcials +0.5 Printing and paper goods_ Paper boxes, bags, tubes -0.1 Miscell. paper goods_ _ +0.9 Job printing -2.2 Nesspapers, periodicals +1.2 Edition book binding_ _ -2.6 Lithographing & engrav. -0.5 Textiles Cotton, woolen goods_ _ --6.9 Knit goods -8.7 Thread and twine +4.3 Miscellaneous textiles_ _ +8.2 Clothing and millinery_ _ _ -11.9 Men's clothing -20.9 Men's shirts, furnishings -2.9 Overalls, work clothes_ _ +0.8 Men's hats, caps +1.5 Women's clothing +2.2 Women's underwear_ _ _ +9.7 Women's hats 0.0 Food, beverages, tobacco_ -3.5 Flour, feed cereals -4.4 Fruit, vegetable canning +18.8 Miscellaneous groceries. -10.0 Slaughtering, meat pkg. -3.3 Dairy products +1.2 Bread,other bak'y prod. -0.4 Confectionery 10.1 Beverages +5.1 Cigars, other tobaccos._ +22.9 Manufactured ice +10.0 Ice cream +6.9 Miffed'. manufacturing_ _ -23.8 Non-manufacturing Indus. -9.3 Trade wholesale & retail -2.9 Department stores +0.5 Wholesale dry goods-- - -3.7 Wholesale groceries- --- -6.8 Mail order houses -6.4 Milk distributing -1.5 Metal Jobbing -0.4 Services -2.3 Hotels and restaurants. -2.5 Laundries -0.9 Public utilities +1.2 Water,gas, light dr pow. -5.0 Telephone -0.6 Street railways -0.5 Railway car repair +26.7 Coal mining -95.7 Building, contracting +8.2 Building construction +4.7 Road construction +185.7 Miscell. contracting.... +5.5 -7.7 44.8 66.5 822.64 79.0 19.38 -7.3 37.5 61.1 75.6 19.88 -3.6 25.5 50.5 65.7 22.19 66.7 +20.2 24.3 52.0 19.12 +2.2 22.1 37.5 53.6 15.75 49.5 -21.0 12.0 31.8 21.30 -4.3 68.3 115.7 93.1 18.12 -7.4 29.4 56.0 75.5 14.85 95.7 -11.6 33.1 85.0 16,43 -8.8 53.2 89.8 78.9 15.17 17.1 38.8 58.1 10.95 -5.2 24.6 42.6 74.7 19.82 73.9 -1.8 33.8 56.1 19.94 9.8 17.2 20.4 -16.0 21.20 +9.5 40.7 66.6 76.4 21.59 68.8 -2.2 46.6 60.4 22.16 74.5 -6.2 21.2 36.1 16.50 80.2 -20.2 23.8 50.3 76.0 -15.9 28.7 44.2 23.36 12.63 73.7 +2.1 29.3 53.7 -8.3 14 5..6 44 0 3-8-.6 515 -14.0 2-14 4-7-.i . 15.90 33.4 49.7 -0.8 16.8 35.3 13,69 58_4. :6 9 -25.5 22.9 47.6 39.6 9 17.94 20.4 41.3 +5.1 10.5 41.6 14.66 +0.2 28.5 42.2 49.7 55.6 14.51 -5.6 54.8 63.6 91.2 89.6 20,25 97.8 78.9 -13.9 71.3 77.7 33.19 +21.2 13.51 9-10 -3.6 5-2-.3 6-1-.I 17.87 25.5 40.6 -3.6 21.1 39.8 21.81 62.6 83.1 76.2 86.2 19.73 65.9 72.9 +3.7 50.0 60.4 23.74 -5.9 74.5 98.5 73.0 91.7 25.48 74.2 76.6 -6.5 74.6 90.3 16.18 -6.4 47.9 80.8 79.2 98.2 28.77 -1.8 50.0 66.9 75.2 88.3 20.73 69.7 78.1 -6.2 42.8 57.4 19.42 82.1 88.3 -6.6 65.5 85.8 -4.9 32.6 44.6 28.08 60.1 73.1 41.11 85.5 96.3 +5.8 71.5 90.5 ------28.62 -------0.1 --33.43 ---1.3 -0.964.: -15.47 72 -:i 90.9 96.3 19.61 +6.0 123.0 151.0 102.9 108.3 10.79 67.5 98.2 -17.9 58.9 113.5 15.03 +4.5 53.7 97.8 64.2 83.6 16.14 +4.4 62.7 73.1 91.2 88.2 11.33 61.0 74.3 -42.2 26.0 47.0 11.51 47.9 62.4 -55.5 19.3 39.5 9.59 58.5 57.8 -16.4 40.3 58.4 7.97 +4.9 22.0 24.2 22.4 22.1 13.65 -28.9 11.03 8-2:i 91i +3.8 377-.:i 61-..3 12.21 +1.5 109.3 147.9 124.3 166.8 15.63 -35.9 64.-.i 7-10 -2.3 5.4-.i 7-16 22.80 23.75 -0.0 67.5 75.7 73.6 73.6 14.37 1.4 3.7 5.0 8.5 +23.0 18.93 71.0 85.0 -14.2 53.8 75.4 22.79 -2.1 69.2 90.9 74.7 84.4 31.08 +0.8 80.8 88.2 89.9 93.7 27.06 -2.9 51.7 65.6 62.3 72.4 17.53 53.3 76.9 -10.8 35.1 62.1 28.21 75.5 71.2 +15.4 65.4 61.3 15.30 77.4 74.6 +35.4 68.6 88.4 30.99 66.8 60.1 +13.7 101.0 109.3 ------+13.4 ------36.70 ___ ___ +35.9 ------24.48 28.23 -8.3 25.45 5-10 6-4-.6 -3.0 5-1-.i 6-2-.3 20.86 +4.4 84.9 103.1 87.6 96.5 20.28 58.9 67.3 64.8 82.9 27.42 -6.1 59.7 75.4 59.1 75.5 18.95 46.6 53.2 -11.4 34.6 46.7 -------1.4 ------49.10 ------+1.3 ------23.93 -------1.8 ------16.95 17.02 -2.0 16.61 81.13 91.6 -0.8 6:Ki 81:ti 82.6 96.2 30.42 +2.2 82.7 102.8 35.18 92.6 109.6 -4.5 45.1 56.3 26.11 92.0 103.0 +3.2 93.1 113.8 35.74 80.5 98.3 +1.0 105.5 129.4 23.35 55.6 64.9 +25.8 67.2 94.6 3.2 85.6 -95.4 1.9 39.5 29.77 31.78 23.4 34.1 +29.0 21.0 26.0 33.79 13.6 22.8 +30.2 17.3 19.7 227.738 1. 1 _ +169.7 6:1 37f.i 9-1.6 -1.7 --. 25 4--. 61.9 58.8 42.9 42.5 45.1 27.0 66.2 54.6 69.3 60.9 41.2 55.1 56.0 13.2 52.8 59.2 53.8 45.3 52.9 52.3 Lumber Orders Reported a Third Below Volume for Same Period a Year Ago. Although lumber orders for the week ended May 14 exceeded current production by approximately 13%, they were more than a third below the volume of new business received through the equivalent period a year ago, it is in- 3714 Financial Chronicle dicated in telegraphic reports to the National Lumber Manufacturers Association from regional manufacturers associations covering the operations of 653 leading hardwood and softwood mills. Production of these mills totaled 125,933,000 feet. Orders called for 142,346,000 feet. Shipments, 148,973,000 feet, exceeded the cut by 18%. A week earlier 635 mills produced 121,278,000 feet with orders 4% and shipments 9% above the out. The situation compared with last year, as seen in identical mill figures for the latest week and the equivalent period in 1931, shows: for softwoods, 434 mills, production 47% less, shipments 40% less, and orders 34% less; for hardwoods, 160 mills, production 49% less, shipments 45% less, and orders 42% under the volume a year ago. Lumber orders reported for the week ended May 14 1932, by 483 softwood mills totaled 130,678,000 feet, or 13% above the production of the same mills. Shipments as reported for the same week were 137,723,000 feet, or 19% above production. Production was 115,840,000 feet. Reports from 189 hardwood mills give new business as 11,668,000 feet, or 16% above production. Shipments as reported for the same week were 11,250,000 feet, or 11% above production. Production was 10,093,000 feet. The Association, in its statement, also reports as follows: • Unfilled Orders. Reports from 413 softwood mills give unfilled orders of 372,116,000 feet, on May 14 1932, or the equivalent of 10 days' production. This is based on production of latest calendar year-300-day year—and may be compared with unfilled orders of 490 softwood mills on May 16, 1931 of708,812,000 feet,the equivalent of 15 days' production. The 384 identical softwood mills report unfilled orders as 367.804.000 feet on May 14 1932, or the equivalent of 10 days' average production, as compared with 647.022,000 feet, or the equivalent of 17 days' average production on similar date a year ago. Last week's production of 434 identical softwood mills was 110,702,000 feet. and a year ago it was 210.697,000 feet; shipments were respectively 131,483,000 feet and 217,339,000: and orders received 124,688,000 feet and 188,901,000. In the case of hardwoods, 160 identical mills reported production last week and a year ago 8,530,000 feet and 16,856,000; shipments 9,814,000 feet and 17,063,000: and orders 9,615,000 feet and 16,616,000. West Coast Movement. The West Coast Lumbermen's Association wired from Seattle the following new business, shipments and unfilled orders for 216 mills reporting for the week ended May 14: NEW BUSINESS. UNSHIPPED ORDERS. SHIPMENTS. Domestic cargo Domestic cargo Coastwise and delivery_ _ _ _ 20,520,000 delivery -___ 69,995,000 intercoastal _ 30,052,000 Export 12,783,000 Foreign 39,624,000 Export 9,655,000 Rall 22,314,000 Rail 56,044,000 Rail 24,460,000 Local 7,706,000 Local 7,706,000 Total 165,663,000 Total 63,323,000 Total 71,873,000 Production for the week was 58,846,000 feet. Southern Pine. The Southern Pine Association reported from New Orleans that for 118 mills reporting, shipments were 13% above production, and orders 3% above production and 9% below shipments. New business taken during the week amounted to 24,591,000 feet (Previous week 23,016,000 at 112 mills); shipments 26,922,000 feet (previous week 22,512,000); and production 23,872,000 feet (previous week 22,627,000). Orders on hand at the fog of the week at 103 mills were 55,461,000 feet. The 107 identical mills reported a decrease in production of 31%, and in new business a decrease of 28%, as compared with the same week a year ago. Western Pine. The Western Pine Association reported from Portland, Ore., that for 123 mills reporting, shipments were 14% above production and orders 28% above production and 13% above shipments. New business taken during the week amounted to 40,155,000 feet, (previous week 29,136,000 at 120 mills); shipments 35,654.000 feet (previous week 31,565,000): and production 31,291,000 feet (previous week 27,036,000). Orders on hand at the end of the week at 123 mills were 163,244,000 feet. The 101 identical mills reported a decrease in production of 53%, and in new business a decrease of 25%,as compared with the same week a year ago. Northern Pine. The Northern Pine Manufacturers of Minneapolis, Minn., reported production from seven mills as 1,534,000 feet, shipments 2,230,000 feet and new business 1,630.000 feet. The same number of mills reported production 58% less and new business 40% less than for the same week a year ago. Northern Hemlock. Tne Northern Hemlock and Hardwood Manufacturers Association, of Oshkosh, Wis., reported production from 19 mills as 197,000 feet, shipments 1.044,000 and orders 979,000 feet. The 18 identical mills reported a decrease of 93% in production and a decrease of 34% in orders, comapred with the same week last year. Hardwood Reports. The Hardwood Manufacturers Institute, of Memphis, Tennessee, reported production from 170 mills as 9,632,000 feet, shipments 10,192.000 and new business 11,056,000. The 142 identical mills reported production 44% less and new business 40% less than for the same week a year ago. The Northern Hemlock and Hardwood Manufacturers Association, of Oshkosh, Wis., reported production from 19 mills as 461,000 feet, shipmanta 1,058,000 and orders 612,000. The 18 identical mills reported a decrease of 81% in production and a decrease of62% in new business,compared with the corresponding week of 1931. President Bodman of New York Produce Exchange Protests in Message to President Hoover Against Wheat Export Fund. A protest against the allocation of any sum to the export of wheat was made in a telegram to President Hoover on May 21 132 May 14 by Herbert L. Bodman, President of the New York Produce Exchange. Mr. Bodman's telegram follows: At the present juncture, when conservation of our financial resources are absolutely essential and part of your declared program, we protest against allocation of any part of $40,000,000 or any sum to the export of wheat. The export grain trade in America in half a century has established the trade principle that payment of export grain is against the presentation of shipping documents. The Farm Board is selling wheat on this basis now and in our opinion would not extend the consumption of American wheat abroad were they or any other government department or agency to offer credit to foreign buyers. Constant discussion of advisability of financing foreign buyers is teaching these buyers to want credit terms from our Government which they have never before expected from America and which they do not get from other exporting countries. Furthermore, these discussions tend to interfere with the normal sales of both the Farm Board and private merchants, since buyers are induced to delay purchases from the United States in the hope of being able latr to get the wheat in return for their name on a promissory note instead of for cash. France Reduces Proportion of Foreign Wheat Permitted in Domestic Milling. The maximum proportion of foreign wheat permitted to be used in the milling of flour in France was reduced from 45% to 40% by a decree published in the French "Journal Officio!" for May 8 1932, according to a radiogram on May 11 from Commercial Attache Fayette W. Allport, Paris, to the Department of Commerce at Washington. The proportion had been increased from 40% to 45% on April 2, as was noted in these columns April 16, page 2806. Exports of Wheat Halted by Russia. From the Brooklyn "Daily Eagle" of last night (May 20) we take the following: Not a single bushel of wheat was cleared for export from Russian Black Sea ports during week ended May 19. Likewise, in the preceding three weeks Russia was inactive in the world wheat export arena. Those four weeks constitute the most protracted slack since 1929 in Russia's campaign to make huge commodity shipments which help her repay credits extended for purchase of industrial equipment. Exports of wheat for the season to date have been only 70,480.000 bushels against 89,824,000 in the like period last season. However, since May 4 Russia has purchased nearly a dozen cargoes of Australian and Canadian wheat for importation at Vladivostok. This will be used to feed soldiers quartered in that territory where the crop was badly hit last season. The Soviet Government has not issued an official estimate of wheat crop harvested last summer from which this season's exports have been made. However, advices to the United States Department of Agriculture and.private sources indicated sowing process was slow and crop probably was not materially in excess of the 860,000,000-bushel estimated home needs. Competition Forces Soap Prices Down—Drop in Raw Materials Cost Also Factor. From the New York "Journal of Commerce" of May 19 it is learned that prices for soap have been subjected to sharp price cuts by the large manufacturers which, according to those in touch with the wholesale market in the Eastern and Middle Western territories, is due to keen competition as much as it is to cheaper raw materials. The paper from which we quote went on to say: One leading manufacturer has reduced prices to large distributors 15% on laundry grades, descriptions which are highly competitive, in order to meet similar reductions made by other concerns. As compared with last year, soap prices are about 50% lower, according to trade Information. The extent of the price cuts was not commented upon by sales representatives of Western soap interests yesterday, beyond the statement that quotations are lower. It was pointed out that raw materials are substantially lower, allowing a cheaper price list for the finished product. Many Materials Down. Among the raw materials employed in the soap industry which have been falling in price, in many instances to record low levels, are tallow and grease, coconut oil, cottonseed oil, whale and other fish oils, and rosin. Competitive conditions in the laundry soap trade are no worse than they always have been, according to the representative of one well-known manufacturer. Coconut oil, of which 300,000.000 pounds were consumed in soap manufacture during 1930, Is now 3c to 351c a pound, as compared with a little over Sc a year ago, and about 63.4c two years ago. The low price on one grade of rosin used in the soap making trade is $3.25 per 280 pounds. as compared with a high of $8.15 a year ago and $9.50 two years ago. Other materials are similarly lower, and chemicals entering into the manufacture of both hand and laundry soaps are 10 to 20% lower. • Hog Prices At New Low—Average for May 14 Week Drops to $3.40—Lowest Since 1898. From Chicago the "Wall Street Journal" of May 18 reported the following: The average price of hogs here for the week envied May 14 was $3.40 a hundredweight,another new low for the season and since 1898. Last week's average was 13 cents under the preceding week and represented a decline of $1.25 cwt. since the beginning of the current packing year. In the like 1931 week average price at Chicago was 86.85 cwt. Supplies were heavy and demand weak. There is considerable feeling in the meat trade that packing house sales departments have been cutting prices too liberally, with the result that the volume thus obtained has been unprofitable. Doubt is expressed that demand would be any slower had firmer price lists been maintained. As a 'eault there is a possibility that the packers may win back during the Volume 134 Financial Chronicle summer a part of their present price concessions, as more and more companies recognize the futility of attempting to get volume on such a price cutting basis. Lard Prices at New Low. The following from Chicago May 18 is from the New York "Journal of Commerce": Lard prices have weakened considerably during the past week or so and new lows reached on both spot and futures in the Chicago market. Lard is no longer a soap material, but its relation to that industry is important owing to the influence of this basic material on competing products used for both food and soap manufacture. Prime steamed lard, in tierces, for May delivery, sold this week at 3.70c.; loose lard at 3.07c., tank cars, spot Chicago, new lows. New Record Low Grain Rates on Vessels Plying Between Fort William to Montreal. The Montreal "Gazette" of May 19 publishes the following: New record low rates of 334 cents a bushel for the transportation of grain from Fort William to Montreal have been accepted in the last two days. It was announced 10 days ago that 5 cents a bushel was being offered and accepted and a rate of 4;i cents was even reported offered. Since then several ship owners have decided to lay up their vessels rather than operate at a loss. Though small steamers carry grain at this low figure, it is maintained that no mathematical computations or calculations will enable their owners to produce a profit. It is said grain cannot be carried profitably even at 7 cents a bushel, although several firms decided to continue accepting the lower rate in the hope that the situation would improve. Price Cut By Potash Syndicate-Foreign Group Announces Reduction for Summer to Stimulate Sales. In an effort to meet the unsatisfactory conditions in the agricultural field and to stimulate the sale of potash in this country local representatives of the foreign potash syndicate have announced substantial reductions in the net prices of potash salts for the summer season. In indicating this the New York "Journal of Commerce" of May 18 further said: All salts included in the list will be sold on a flat basis with no extra charge if they test higher than guaranteed minimum; pro rata allowance if they test below minimum. This is a decided departure from the custom that had been followed for the last quarter of a century, and in many cases it will mean a price reduction ranging up to $1 or more per ton of 2,000 pounds due to the fact that these salts frequently test well above the minimum. This method ofselling on a flat basis should also simplify resales it is believed. Discounts Increased. The price of high grade kainit has been reduced in price from $12.65 to $12 per ton, and sulphate of potash from $48.25 to $47.50. Summer discounts on salts for prompt shipment and equal monthly shipment from June to September, inclusive, have been increased 1% over last year, namely 12 and 11%, as against 11 and 10%, respectively. There has also been added a special discount of 2% on all orders placed prior to June 1 for shipment May to September, inclusive. This discount will also apply to orders placed prior to July 1 for shipment from Europe between July 1 and April 30 1933. The extra fixed charge previously in effect on salts sold and delivered from stocks maintained in this country has been removed. The buyer will only pay the usual wharfage and handling charges and in addition the handling out charge. Ammonia sulphate is easier. Resale lots for prompt shipment have been offered at as low as $22 a ton and it is understood that producers are willing to accept orders for June shipment at $20 a ton. Chinese Said to Control 60% of Manila Commerce. From Manila May 13 a wireless message to the New York "Times" said: The dominant position of Chinese in the trade of the Philippine Islands was admitted by a responsible Filipino official for the first time yesterday. The Chinese control 60% of the trade in Manila and probably an even higher percentage of that in the Provinces. Cotton Ginned from the Crop of 1931. The Department of Commerce will shortly distribute the annual bulletin on Cotton Production in the United States from the crop of 1931. The statistics were compiled by the Bureau of the Census from the individual returns collected from 14,151 active ginneries located in 926 counties in 19 States. The final figures of cotton ginned are 16,628,874 running bales, counting round as half bales, equivalent to 17,095,594 bales of 500 pounds each The total as shown in the bulletin is 33,094 running bales in excess of.the preliminary figures issued on March 21. At the March canvass the ginners reported the number of bales ginned and furnished an estimate of the number, if any, that they expected to gin thereafter. These estimates totaled 96,895 bales, for some ginneries amounting to as many as 600 bales. In order that the final figures of cotton ginned might represent the actual condition, an additional canvass was made of the ginneries showing considerable quantities remaining to be ginned. In some instances the ginners fell short of their expected ginnings, while in other cases they handled a larger amount than estimated at the March canvass. The bulletin shows the ginnings by States and by counties. It also shows the ginnings to specified dates throughout the 3715 season by counties. These detailed figures are of local interest and permit of a closer analysis of the statistics. The following tabular statement shows the final figures of cotton ginned by States for the last three crops. The quantities are given in both running bales, counting round as half bales, and in equivalent 500-pound bales. COTTON GINNED FROM THE CROPS OF 1931, 1930 AND 1929 (Linters are not included) Running Bales (Counting Round as Half Bales) Equivalent 500-Pound Bales. State. 1931. 1930. 1929. 1931. 1930. 1029. United St's_ *16,628,874 *13,755,518 *14,547,791 17,095,594 13,931,597 14,824,861 Alabama.-- 1,385,021 1,444,886 1,307,664 1,419,689 1,473,287 1,341,550 149,467 Arizona____ 110,922 150,545 115,061 155,409 152,839 874,356 1,434,660 863,443 1,395,869 1,906,736 Arkansas -- 1,836,132 263,766 256,337 254,126 176,560 California-171,238 258,559 Florida__._ 43,405 51,118 29,849 43,164 50,306 28,578 Georgia_..-- 1,393,715 1,597,475 1,339,835 1,392,665 1,592,539 1,342,643 714,529 Louisiana__ 876,593 704,750 797,727 899,922 808,825 MississiPPL 1,719,454 1,458,488 1,875,979 1,761,203 1.464,311 1,915,430 220,907 288,991 150,955 219,932 Missourt___ 280,367 153,337 New-Mexico 95,841 98,124 98,462 93,762 86,296 88,450 No. Caro_767,043 756,294 774,734 800,582 747,208 771,186 853,584 1,142,666 856.748 1,125,614 1,261.123 Oklahoma__ 1,235,856 So. Caro-- 1,010,271 1,015,273 833,054 1,004,730 1,000,892 830,055 504,282 594,512 376,912 515,774 Tennessee__ 371,433 577,994 Texas _____ 5,068.779 3,886,126 3,803,211 5,322,453 4,039,136 3,041,626 Virginia ___ 47,991 42,423 41,952 47.527 42,477 42,713 All other States x_ 6,467 6,423 8,877 11,944 11.702 8.539 I Includes Illinois, Kansas and Kentucky. * Includes 7,307 bales of the crop of 1931 ginned prior to Aug. 1, which was counted in the supply for the season of 1930-31, compared with 78,188 and 86,974 bales of the crops of 1930 and 1929. • Production, Sales and Shipments of Cotton Cloths in April as Reported by Association of Cotton Textile Merchants of New York. Statistical reports of production, shipments and sales of Carded Cotton Cloths during the month of April 1932 were made public May 16, by the Association of Cotton Textile Merchants of New York. The figures cover a period of four weeks. "Production during April amounted to 205,089,000 yards, or at the rate of 51,272,000 yards per week," according to the Association. "This was 10.1% less than the rate of production during the month of March." The Association also said as follows: Sales during April were 102,307,000 yards, equivalent to 49.9% of production. Shipments during the month amounted to 162.104,000 yards, equivalent to 79% of production. Stocks on hand at the end of the month amounted to 302,216,000 Yards. which, although representing an increase of 16.6% during the month, were only 4% greater than at the beginning of the year. Unfilled orders on April 30 1932 were 218,366,000 yards, representing a decrease of 21.5% during the month. These statistics are compiled from data supplied by 23 groups of manufacturers and selling agents reporting to the Association of Cotton Textile Merchants of New York and the Cotton-Textile Institute, Inc. These groups report on more than 300 classifications or constructions of Carded Cotton Cloths and represent the major portion of the production of these fabrics in the United States. Production Statistics April 1932. The following statistics cover upwards of 300 classifications or constructions of Carded Cotton Cloths, and represent the major portion of the production of these fabrics in the United States. This report represents yardage reported to our Association and the Cotton-Textile Institute, Inc. It is a consolidation of the same 23 groups covered by our reports since October 1927. The figures for the month of April cover a period of four weeks. April 1932 (4 Weeks). Production 205.089.000 yards Sales 102.307,000 yards Ratio of sales to production 49.9% Shipments 162,104.000 yards Ratio of shipments to production 79.0% Stocks on hand April 1. 259.231,000 yards Stocks on hand April 30 302,216,000 Yards Change in stocks Increase 16.6 0 Unfilled orders April 1 278.163.000 yar Unfilled orders April 30 218,366,000 yards Change in unfilled orders Decrease 21.5% Decision of Lancashire Cotton Workers on Threatened Strike to Be Made Known by June 11. Associated Press accounts from Blackburn (Lancashire) England, May 19 said: A strike affecting more than 200,000 operatives in the cotton trade was threatened to-day by a decision of the Northern Counties Textile Trades Federation to have the men vote on the question whether they were prepared to walk out. The result of the ballot will be made known before June 11, the day set for termination of the employees' notices ending all agreements on wages and hours. Census Report on Cotton Consumed in April. Under date of May 14 1932 the Census Bureau issued its report showing cotton consumed in the United States, cotton on hand, active cotton spindles and imports and exports of cotton for the month of April 1932 and 1931. Cotton consumed amounted to 367,280 bales of lint and 50,936 bales of linters, compared with 488,655 bales of lint and 54,229 bales of linters in March 1932 and 508,691 bales of lint and 50,936 bales of linters in April 1931. It will May 21 1932 Financial Chronicle 3716 be seen that there is a decrease under April 1931 in the total lint and linters combined of 157,890 bales, or 27.40%. The following is the official statement: There will be an abundance of food and feed production on cotton-belt farms this year, which will reduce still further the cash outlay for cotton growing. APRIL REPORT OF COTTON CONSUMED, ON HAND, IMPORTED AND EXPORTED, AND ACTIVE COTTON SPINDLES. (Cotton in running bales, counting round as half bales, except foreign. which la In 500-pound bales.) Egypt Withholding Cotton from Market. From Cairo a cablegram May 9 to the New York "Journal of Commerce" said: Cotton on Hand April 30- Cotton Consumed During- Cotion In Con- In Pattie Spindles Nine Active Months fuming Storage Ended Establish- & at Corn- During April April. April 30 meets, presses. (bales) (bales) (bales) (bales) (Numhes) 11932 367,280 3,937,225 1,532,987 8,163,937 23,409,246 1 1931 508,691 3,892,826 1,370,680 6,033,032 26,668,536 Year • United States Cotten-growing States New England States t nil All Other States 1932 311,773 3,223,101 1,212,576 7,721.939 16,596,850 1931 390,062 3,075,275 1,001,322 5,631,512 17,132,586 1932 44,278 573,851 267,411 233,180 5,979,474 1931 100,662 684,054 312,321 161,159 8,560,062 832,922 52,980 208,818 1932 11,229 130,273 975,888 57,037 240,351 1931 17,967 133,497 Included AboveEgyptian cotton 4 Other foreign cotton 1932 6,427 1931 9,763 1932 3,139 1931 6,898 764 American-Egyptian cotton 1932 1931 1,722 Nei Included Abovef 1932 50,936 Linters 1 1931 67,415 60,893 78,827 33,810 58,004 10,641 11,186 27,558 55,078 22,932 25,631 5,911 8,151 12,053 24,348 6,167 16,511 13,331 11,113 491,186 521,066 307,985 291,156 50,491 86,767 Imports of Foreign Cotton (500-lb. Bales). Country of Production. Egypt Peru China Mexico British India All other Total 9 Mos. End. April 30. April. 1931. 1932. 1932. 6,032 553 3,354 3,858 3,196 265 39.782 2,074 4,875 20,427 13,328 1,313 13,752 1,641 23,780 7,187 21,266 1,275 15,720 17,258 81,799 68,901 United Kingdom France Italy Germany Other Europe Japan All other Total 9 Mos. End. April 30. April. 1932. 1931. 1932. 1931. 107,798 51.580 54,695 104,811 61,455 74.970 89,454 44,085 37,829 20,962 69,622 52,075 113,186 54,112 544,563 391,871 7,396,996 5,909,669 1,090,854 970,838 882,944 385,074 408,763 541,567 1,344,296 1,455,769 607,308 649,204 2,040,013 1.023,859 560,188 1,345,988 Note.-LInters exported, not included above, were 9,355 bales during April In 1932 an 9,099 bales in 1931; 88.388 bales for the nine months ended April 30 In 1932 and 91.710 bales in 1931. The distribution for April 1932 follows: United Kingdom, 282: Netherlands, 696; Belgium, 80; France, 1,426; Germany, 4,306: Canada, 924; New Zealand, 4; Japan, 1,406; Panama, 2, BLUM Honduras, 3; South Africa, 226. WORLD STATISTICS. The world's production of commercial cotton, exclusive of linters, grown in various sources was 25.304,000 bales, counting American 1930, as compiled from In running bales and foreign in bales of 478 pounds lint, while the consumption of United States) for the year ended July 31 1931 the in lintel's et cotton (exclusive was approximately 22,402,000 bales. The total number of spinning cotton spindles, both active and idle, is about 162,000,000. Plan of Federal Farm Board to Sell Cotton Said to Have Been Favorably Received Abroad. World reaction to the announcement of the Federal Farm Board that the Cotton Stabilization Corp. is authorized to sell 650,000 bales of its cotton holdings during the next crop year has been favorable, and the statement has been taken generally as an assurance that there will be no dumping of holdings on the market, Carl Williams, member of the Federal Farm Board, stated orally May 5, according to the "United States Daily" of May 6 from which the following is also taken: a constructive "The trade of the world took the statement as showing the trade In program and as indicating that the Board has the interest of There were a said. Williams mind as well as that of the producers," Mr. very few unfavorable comments, he said. He gave the following additional information: acreage this Private estimates of the amount of the reduction in cotton have yet been made by any year range front 6 to 15%, but no estimates reduction extreme the of effect the Federal official. To this must be added normally has a considerable In sales of fertilizer to cotton growers, which year are far below those of bearing on yields. Sales of fertilizer tags this two years ago. 1931 and are only about one-third of these of all the fertilizer placed on the The drouth of 1930 left unused practically available for plants grown In 1931, fields in the spring of that year, and No such condition of held-over when extremely high yields were obtained. plant food exists this year. holding its own quite well in the face of The cotton situation in general is have held relatively well, in the face present business conditions. Prices carry-over of probably 12,500,000 to 13,000,000 of prospects for a cotton bales, the largest in history. been much larger this year than last, World consumption of cotton has the extremely large crop of last year. The but not sufficiently so to offset purchases of cotton over last year. Orient has about doubled its a small crop this year might well While the carry-over will be heavy, cotton. Egypt is reducing its acreage again, result In improved markets for will increase their planting. but China and India probably produced at the smallest cost to farmers of Last year's cotton crop was this year's crop will cost still less. The any crop in the last 25 years, but progress" in crop diversification and have growers have made "very great supplies of food and feed crops. left over from last year, in many cases, Exports of Egyptin Cotton Higher Than a Year Ago. Under date of May 12 the Department of Commerce said: The exports of cotton from Alexandria, Egypt, during April averaged about 16,000 Egyptian bales of 750 pounds each, showing a slight decrease from the weekly exports during March, averaging 22,000 bales, but an increase over the weekly exports during April 1931, averaging 13,000 bales, according to a cable received by the Bureau of Foreign and Domestic Commerce through the Department of State from Consul H.Earle Russell, at Alexandria. The total exports from September 1 to the end of April amounted to 743,000 bales against 651,000 bales for the corresponding period of last season. The arrivals of cotton at Alexandria during April averaged about 11.000 bales per week compared with 14,000 bales during March and 8,000 bales during April 1931. The total arrivals from September 1 to the end of April aggregated 831,000 bales compared with 858,000 bales for the corresponding eight months of last season. The stocks of cotton at Alexandria at the end of April amounted to 637,000 bales, showing a decrease from the stocks at the end of March, totaling 660,000 bales and from the stocks at the end of April 1931, aggregating 675,000 bales. 1931. 12,319 598 539 88 1,997 179 Exports of Domestic Cotton, Excluding Linters (Running Bales-See Note for Linters). Country to Which Exported. Temporary suspension of the sale of cotton stocks at home and abroad due to prey tiling low prices was officillly announced by the Government to-day. Exports of Cotton from India Greatly Reduced. The exports of cotton from the six principal ports of India from September 1 to April 23, amounted to 1,154,000 bales, which was considerably less than half of the exports for the corresponding period of last season, totaling 2,644,000 Indian bales of 440 pounds each, it is stated in a cablegram received by the Bureau of Foreign and Domestic Commerce from Assistant Trade Commission€r Wilson Flake, at Calcutta. The Department in announcing this May 12, added: the The decrease in the exports was general for all destinations. Thus exports to Japan from Bombay and Karachi from September 1 to about the end of March were 543,000 bales against 1,182,000 bales last season, the exports to China were 174.000 bales against 304,000 bales last season, shipments to the Continent were 228.000 bales compared with 624,000 bales and shipments to the United Kingdom were 56,000 bales against 170,000 bales last season. European Cotton Manufacturers Take More United States Cotton-Shipments for April 33% Higher Than Last Year. Shipments of American cotton to mills of the principal European cotton consuming countries continued at a higher rate during April, according to cables received in the Commerce Department from representatives abroad. Shipments in April were about 10% higher than in March and about 33% higher than in April 1931, says the Department, which on May 11, likewise said: Deliveries to British mills averaged about 34,000 bales weekly, as compared with an average of 31,000 bales weekly during March 1932,and 19,000 bales during April 1931. Total deliveries to British mills for the first nine months of the cotton season (April to August) aggregated 1,042,000 bales, an increase of 330,000 bales over the same period last year. Shipments of cotton from Bremen to Germany and other central European countries during April averaged 39,000 bales weekly, compared with 36,000 bales weekly average during March 1932, and 32.000 bales during April 1931. Total shipments for the first nine months of the cotton season aggregated 1,369,000 bales,an increase of 84,000 bales over the same months for last year. Deliveries from Havre to French spinners averaged 12,000 bales weekly, compared with 10,000 bales during March 1932, and 12,000 during April 1931. Total deliveries for the first nine months of the season aggregated 383,000 bales, a decrease of 141,000 bales from the corresponding nine months of last season. Takings of cotton by Spanish mills from Barcelona for the first nine months of this season totaled 188,000 bales, an increase of 27,000 bales over the deliveries for the corresponding nine months of last season. & Co. and Montgomery Ward Reduce Prices from 5 to 50%. Sears, Roebuck & Co. Continued declines in prices of raw materials and finished products are reflected in the mid-summer sales catalogue of Sears, Roebuck & Co., mailed to customers on May 19, by reductions in prices ranging from 5% to 49% below a year ago on selected items. Prices of the company's Allstate's Companion tires are reduced 10% from previous levels. These tires are company's second-line tires and were first introduced about this time last year. The following statement was issued by R. E.'Wood, President of the company: alone the reductions that The prices in our new sales book carry not because of lack of producers of raw materials have been forced to accept and the widespread demand, but as well the lowered cost of manufacturing economies we have effected in our own business. Financial Chronicle Volume 134 Comparison of textile prices in the new catalogue shows treduction of 40% from prices in effect in 1929. Montgomery Ward & Co. also reduced its prices, the reductions ranging from 5 to 50% below last summer's levels. Its mid-summer sales catalogue shows a 10% reduction in Riverside Mate 4-ply tires, which are Ward's second line tires. It introduces the Riverside Rambler tire, a new lowpriced tire sold in sizes for all cars. The catalogue in addition introduces a new oil-burning refrigerator for homes without electricity. This refrigerator is offered by the company at $107.50 cash and states it operates on kerosene for about three cents a day. David Webb, merchandising Vice President, issued the following statement regarding the reductions: These prices reflect the present low level of raw materials, and very substantial economies, in manufacturing and in our own business. We have made large purchases in anticipation of an accelerated demand resulting from the unusually low prices and an aggressive advertising campaign. Kerosene Price Raised by Standard Oil Co. of Ohio. The price of kerosene was advanced lc. a gallon on May 17 by the Standard Oil Co. of Ohio. The price is now 14c. at service stations and 123/2e. tank wagaon. The company also announced that the price of gasoline in Scioto County, Ohio, will be raised 2c. a gallon to the State-wide structure. Wage Cut Accepted by Glove Cutters. Effective May 31, glove cutters in Gloversville, N. Y., have accepted a 10% wage reduction, it was announced on May 17. A 15% cut was sought by manufacturers but was rejected. Partial Settlement of Strike in Building Trades in New York—Nearly All Unions Involved Accept 20 to 30% Wage Reductions—New Agreement Runs to Dec. 31 1933—Some Trades Opposed to Signing— Bricklayers Remain Out. The backbone of the building trades strike, which affected directly 30,000 mechanics and helpers, was broken on May 17 when a collective agreement on the employers' terms—wage reductions of 20 to 30%—was signed for nearly all the unions in the Building Trades Council with the Building Trades Employers' Association. The New York "Times" of May 18 from which the foregoing is taken further said: On the large construction job—Radio City, the Port Authority Building, New York Hospital, Bowery Savings Bank and Bankers Trust Building— the men are expected to return to work to-morrow. On the smaller jobs they will return to-day shortly after they receive notification of the terms of the agreement. The new contract will run until Dec. 31 1933. The Executive Committee of the Building Trades Council, of which John Halkett is President, signed on behalf of the unions in that organization and the executive committee of the Building Trades Employers' Association, of which Christian G. Norman is Chairman of the Board, signed on behalf of the employers' associations affiliated with it. Elevator Men Retect &ale. Vigorous statements of dissent were expressed last night by Frank Feeney, head of the International Union of Elevator Constructors, and the executive board of the Bricklayers. Masons and Plasterers International Union, Mr. Feeney said that the New York local union, affiliated with the international union of which he is President, would absolutely refuse to accept the $10-a--day wage scale enunciated in the agreement. The arbitration award in the bricklayers' case may be handed down today. This involves the relations of the union with the Associated Masons Contractors, Inc.. which is not affiliated with the Building Trades Employers' Association. There was considerable speculation yesterday as to whether the award would be similar to the new $12 wage scale announced by Mr. Norman's group. Most of the trades receiving $15.40 a day have been reduced to $12 a day and those receiving $13.20 have been reduced to $10 a day. While Mr. Halkett said that the signing of the contract yesterday covered all trades in the council there was some speculation as to whether some of the units would "go along." Trades Not Covered by Agreement. The agreement did not cover the following trades which have no membership in the council: Bricklayers, plasterers, marble setters, tile setters. Those whose attitude were reported to be opposed to signing the agreement were the electricians, the derrick men, steam fitters, terrazo workers, metal lathers, mathine stone workers and stone cutters. Mr. Halkett and Mr. Norman issued the following joint statement: "The Building Trades Council and the Building Trades Employers' Association signed an agreement to-day for the wage scale as put forth some time time ago. Certain union modifications were made in the proposed agreement. All men are at liberty to return to work Thursday morning. It is the hope both of organized labor and the organized employers that this action will bring about a resumption of building in the city to the end that men unemployed may find work and that there will be a general stimulation of business.' In its May 19 issue the "Times" said: The building unions which signed a new wage scale on Tuesday(May 17) notified their members to report for work to-day. Those not expected to and others not covered by the agree•report for work are the brickalyers ment between the Building Trades Council and the Building Trades Employers' Association. 3717 The bricklayers are momentarily expecting an arbitration settlement. They refused to accept the $12 scale as a substitute for the $15.40 daily wage offered by the Mason Builders' Association, which is affiliated with the Building Trades Employers' Association. The arbitration is between the union and the Associated Brick Masons Contractors, Inc. Frank Feeney, President of the International Elevator Constructors' Union, asserted that the local affiliated with his organization would not accept the $10 scale agreed to by the other unions. According to the "Times" of May 20, building trades mechanics were about evenly divided on May 19 when it came time for those who had been on strike to return to their jobs because of the compact for wage reductions signed on May 17. The May 20 issue of the "Times" said: The Executive Committee of the Bricklayers, Masons and Plasterers International Union notified William Green, President of the American Federation of Labor, that their check showed that 17 trades had returned to work and that 21 were remaining out. The employers group stated that some unions are to vote in the next few days as to their attitude and they expected a majority back soon. The list of those who returned to work,as collected by the bricklayers, was as follows: Art glass workers, boilermakers, asbestos workers, carpenters, cement workers, composition roofers, hoisting engineers, housesmiths, housesmiths helpers, painters, plumbers, sheet metal workers, slate and tile roofers, slate and tile helpers, rock men, tunnel workers and upholsterers. Those who, it was said, did not return were: Bricklayers, bricklayers' helpers, blue stone cutters, derrick men,elevator constructors, granite cutters, machine stone workers, metallic lathers, marble setters, marble polishers, marble helpers, mosaic setters, mosaic helpers, white stone workers, steam fitters, stone masons, stone setters, stone cutters, tile layers, tile layers' helpers and plasterers. Decision of the arbitrators in the case of the bricklayers and the Associated Brick Masons Contractors, Inc., will be made known to-day. Last night's "Sun" (May 20) said that a daily wage of $1.65 an hour, or $13.20 a day, was announced as a fair scale yesterday afternoon by a board of arbitration, which has been deliberating on the wage dispute between the Bricklayers, Masons and Plasterers International Union and the Associated Brick Mason Contractors. The announcement was made by Rabbi Stephen S. Wise, one of the arbitrators. The "Sun" added: The wage scale for bricklayers before the recent reductions were announced was $15.40 a day. The employers proposed a new scale of $12 a day. The arbitrators also included William A. Mayer, a lawyer, and Prof. Joseph Chamberlain of Columbia University. The board members in commenting on the award said that the item of present-day costs of living was considered as a necessary factor in the determination of the award. They added that any consideration of the wage earned by bricklayers must include the factor of their limited number of working days in the course of a year. Regarding the inception of the strike we take from the "Times" of May 2 (Monday) the following: Because of the expiration of the agreement between the Building Trades Employeers Association and unions representing 32 trade groups in the industry, involving about 30,000 of the 115,000 building trades employees now at work, the members of those unions will not work to-day, John Halkett, President of the Building Trades Council, said last night. The 30,000 men will remain out pending the signing of a new agreement with the employeers, Mr. Halkett said. How long this would be he said he did not know. He understood, however,that the employeers' association would meet to-day at its headquarters, 2 Park Avenue, to discuss the situation and resumption of negotiations with the unions. Noting May 1 that the walk-out in the building trades was imminent because of an eleventh-hour development April 30 which resulted in failure of employers and employes to reach an agreement to replace the one expiring the "Times" (May 1) said: This announcement was made by union leaders late yesterday afternoon after a long conference between the executive groups of the Building Trades Council and the Building Trades Employers' Association at 2 Park Avenue. The snag that developed was the result of a separate verbal compact made by the Elevator Constructors Association to pay their men $11.20 a day, or $1.20 above the wage scale announced by the parent association, which negotiates wages and working conditions for 32 trade groups in the building industry. With full authority to negotiate for all the constituent groups in the emploters, association, the executive committee, headed by C. G. Norman, had announced wage reductions of 25 to 30%,effective to-day. The unions had been willing to take a 15% reduction. Unity Had Seemed Assured. All the trade associations within the parent body apparently had presented a united front to the unions until Friday. Without the authority of the Building Trades Employers' Association and unknown to it, the employers of elevator constructors are said to have arranged a separate compact, verbally, on Friday [April 291 to pay the mechanics higher wages than the amount agreed upon by the employers since last February. When the Executive Committee of the Building Trades Council, led by President John Halkett, met the employers' group, headed by Mr. Norman, the union officials gave the employers' group a surprise by advising them of the defection of one of the employing trade groups. The other 31 unions then insisted that since the elevator constructors were to get $11.20 instead of$10 a day it would only be fair to give the higher rate to those whose wages had also been set for $10. This precipitated a long wrangle. Efforts were made by the employers to get in touch with the leaders of the employing elevator constructors, but they were told that the officials were playing golf or were motoring or otherwise inaccessible. In view of the impasse, an adjournment was taken at 4 o'clock yesterday afternoon and further conferences will be held soon, The stoppage is caused by the fact that it is a rule of the employes not to work in the absence of an agreement. There are 115.000 building trades workers affected by agreements between the Building Trades Council and the Building Trades Employers' Association, but of these only about 30,000 are employed. There are no more than a dozen major building construction jobs now going on in Manhattan, the principal one being Radio City. 3718 Financial Chronicle Cigarette Prices Advanced by Chain Cigar and Drug Stores-Large Grocery Chains Fail to Follow One Cent Increase. Effective May 17, the United Cigar Stores Co. of America, Schulte Retail Stores Corp. and Liggett's drug chain, advanced the price of popular brands of cigarettes to 14 cents a package, two packages for 27 cents. The Great Atlantic & Pacific Tea Co. and Safeway Stores, two of the largest retailers of cigarettes in the country did not meet the advance. Their price is 13 cents a package, two packages for 25 cents. May 21 1932 REFINED PRODUCTS-SHARP CUT IN SERVICE STATION PRICES EFFECTIVE TO-DAY-FURTHER TANK OAR PRICE REVISIONS MADE-KEROSENE HIGHER IN OHIO-TEXAS CO. INCREASES BUNKER FUEL OIL AGAIN-ALL BULK MARKETS FIRM, SALES SATISFACTORY. An active week in the refined products market brought further upward price revisions in tank ear gasoline, bunker fuel oil, and in tank wagon kerosene, but a drastic cut in service station gasoline by Standard of New York, effective to-day, May 21, the price is reduced 4c. a gallon, to 12Mc., including State tax of 3c. Effective May 16 the Texas Co. posted another advance in the price of Grade C bunker fuel oil at Tampa, Key West and Jiteksonville, at which points an increase of 5c, per barrel was put into effect, making the new price 70c. per barrel. Petroleum and Its Products-Michigan Crude AdOn May 18, Crew Levick, subsidiary of Cities Service, vanced-Oklahoma Oil Flow Reduced-California advanced its price for tank car gasoline, above 65 octane, Curtailment Approved - World Conference in Ue. a gallon, to 7Xc. The Richfield Oil Co. is also posting Session Here. The only price development of interest during the week 7)ia. at New York, Providence and Baltimore. The Standoccurred in Michigan on Tuesday when the Pure Oil Co. ard Oil Co. of Ohio has made a lc. advance in gasoline in advanced Midland County crude 10c. a barrel to a new Ashtabula, Mahoning, Portage, Summit and Trumbull counties, bringing their price in line with the State-wide structure. price of 65c. per barrel. It was learned here yesterday that while the bulk gasoline The decline of crude output for the week ended May 14 was due almost entirely to successful curtailment of Okla- market is very firm at the recently-established higher levels, homa's flow. During that week daily production declined there is some question about maintaining retail prices. from 2,240,911 barrels daily the previous week to 2,228,101 The Standard of New York's reduction of 4e. in service barrels. Reduction in Oklahoma was about 14,000 barrels station prices was therefore expected. However, this action daily. Governor Murray declares that his grip on the may be of a temporary character, it is believed, as local industry through martial law will not be loosened, stating price shading is given as the reason for this appearance of that "I don't dare list martial law. Even though the weakness. Standard of New York's tank wagon price is United States Supreme Court has declared the State cur- reduced 2c. a gallon throughout the Metropolitan area, tailment law valid, lower courts are likely to issue injunc- effective to-day. The movement of Grade C bunker fuel oil through the tions. Martial law stays on." The Supreme Court has decided that Oklahoma was local market has been satisfactory since the price was lifted within its rights in giving its Corporation Commission power to 75c. a barrel. Diesel has also been in good demand at its to prorate the flow of oil in its various fields so as to con- new price of $1.50 per barrel. Domestic heating oils have serve the liquid wealth. Its decision was rendered in a not displayed much activity during the past week, and no suit brought by the Champlain Refining Co. to enjoin the price movement was reported. There is. a little booking being done by buyers anxious to cover next winter's needs at enforcement of the State curtailment act. It is expected that by June 1 California's new proration current market levels. Kerosene has been in fair demand locally, with the price regulations will be drawn up, clarified, and made effective. Ratification of proposed revision of the State's voluntary still ranging from 53/2-60. per gallon, in bulk, for 41-43 water curtailment program has already been completed and en- white. A better tone in the export demand for kerosene dorsed by the 43 principal producing areas within the has been noted. Price changes of the week follow: State, it is declared by Neal H. Anderson, State oil umpire. May 16.-The Texas Co. posts 5c. advance in grade C bunker fuel oil Technical details for allotment on the basis of offset well Key West, Tampa and Jacksonville. New price at those points becomes conditions and a revision of the administrative branch of at 700. per barrel. the curtailment program are now being worked on. It is May 17.-Richfield 011 Co. advances tank car gasoline Mc. per gallon, hoped to have new schedules ready shortly, showing each making new price 7Mc. at New York, Providence and Baltimore. May 17.-Standard 011 Co. of Ohio advances kerosene price lc. a gallon field's allowable. throughout its territory. New price is 1214e. tank wagon and 14c. service Matters of great import to the petroleum industry through- station. Same company advances gasoline 2c. a gallon in Scioto County, Statewide structure. out the entire world were being discussed this week at the toMay 18.-Crew Levick, Cities Service subsidiary, advances tank car World Oil Conference called by Charles Arnott, President gasoline, above 65 octane, 34c. to 711c. a gallon. May 18. -Standard Oil Co. of Ohio advances gasoline lc. a gallon in bringing and Socony-Vacuum, together leaders of of pracAshtabula, Mahonlng, Portage, Summit and Trumbull counties, bringing tically every important oil-producing nation. The sessions these sections to Statewide structures. are being held in New York City. Most siginificant is the Gasoline, Service Station, Tax Included. fact that a delegation representing the Soviet Government New York 5.125 Cleveland $18$ New Orleans 118 Atlanta 195 Denver .20 Philadelphia is in attendance. .13 Baltimore 164 Detroit 13 San Francisco: Yesterday afternoon was scheduled to bring together the Boston 18 Houston 17 Third grade 125 173 Jacksonville 19 Above 65 octane-- 145 American delegation and the Soviet representatives. Mr. Buffalo Chicago 16 Kansas City 135 Premium 175 .18 Minneapolis 167 St. Louis 184 Arnott, prior to the actual meeting, declared that there Cincinnati Kerosene, 41-43 Water White, Tank Car Lots, F.O.B. would be a discussion of individual views and an effort N.Y.(Bayonne) Refinery. .0514,06 1 Chicago-4.0216-.03M New Orleans, ex_ _ $0.03n made to arrive at mutual agreements. In reply to a specific North Texas 03 Los Ang..ex_ .0484-.06 Tulsa .04t6-.0311 Government was Fuel OIL F.O.B. Refinery or Terminal query, he denied that a loan to the Soviet N.Y.(Bayonne)California 27 plus 13 Gulf Coast "0" 00 being considered by the Conference. Bunker "C" 8.75 8.75-I.00 Chicago 18-22 D 42 Diesel 28-30 1.50 New Orleans "C".... .60 Philadelphia "0 Mr. Arnott added that during the past few days nego4* 70 Gas 011. F.O.B. Refinery or Terminal. tiations have been confined mostly to meetings of separate N. V.(Bayonne)ChicagoTulsagroups. He said that the American group, representing 28 D .041 82-86 D 32-36 D U. S. Motor. Gasoline, Tank Socony-Vacuum, Texas Corp., Gulf Oil, Standard of New (Above 65 Octane) Car Lots, F.O.B. Refinery. N. (Bayonne)N. V. Y. (Bayonne)Chicago Jersey, Consolidated Oil, and others, were in accord and Standard 011, N. J.$.0511-.05, i SinclairLOOM New Orleans, ex. .05-.05M Motor, 60 coPan-Am. Pet. Co. .06 that it now remained to be seen "how closely these ideas Arkansas .06-.04M $.06M tane Shell Eastern Pet_ .063 California 05-.07 Motor, 65 ooNew Yorkcoincide and to work out mutually an agreeable basis." Loa Angeles,ea. 04H-.07 tane .07 Colonifii-Beaeon--$.0834 Gulf Ports-- .08-.051t Among the topics to be discussed and, if possible an Crew Levick Motor,standard .07M .07M Tulsa 0414-.05)f Stand. 011, N. Y. .07 a Texas .06M PennsYlvanla... agreement reached, are marketing practices, price levels, TM Water 011 Co .06M Gulf .07 B.lchfleld 011 (Cal.) .071i Continental 08 and production. warner-Quin. Co. .08ft Republic Oil •0614 Price changes of the week follow: •Below 65 Octane. a "Texaco" th .07. May 17.-Pure 011 Co. advances Midland County, Mich., crude oil 10c. a barrel. New price, 65c. Weekly Refinery Statistics for the United States. prices of'Typical Crudes per Barrel at Wells. (All gravities where A. P.1. degrees are not shown.) 31.60 Eldorado, Ark.,40 Bradford, Pa $0.78 *.g8 1.05 Rusk, Texas, 40 and over Corning,Pa .80 Salt Creek, Wyo.,40 and over Illinois .85 .tro Darst Creek Western Kentucky .90 Midcontlnent, Okla., 40 and above. 1.00 Sunburst Mont 1.25 0.81 Santa Fe Springs, Calif.,40 and over .75 Hutchinson, Texas,40 and over •.81 over--. Huntington, Calif., 26 .72 Spindletop, Texas, 40 and •.ge Petrone, Canada Winkler, Texas 1.75 .77 •Effective April 1 1932. Smackover. Ark., 24 and over Reports compiled by the American Petroleum Institute for the week ended May 14, from companies aggregating 3,661,600 barrels, or 95.1% of the 3,852,000-barrel estimated daily potential refining capacity of the United States, indicate that 2,359,600 barrels of crude oil were run to stills daily, and that these same companies had in storage at re: fineries at the end of the week, 44,798,000 barrels of gasoline Financial Chronicle Volume 134 and 124,786,000 barrels of gas and fuel oil. Reports received on the production of gasoline by the cracking process indicate that companies owning 95.6% of the potential charging capacity of all cracking units, manufactured 3,344,000 barrels of cracked gasoline during the week. The complete report for the week ended May 14 1932 follows: CRUDE RUNS TO STILLS, GASOLINE AND GAS AND FUEL OIL STOCKS, WEEK ENDED MAY 14 1932. (Figures in Barrels of 42 Gallons Each.) Per Cent Potential Capacity Reporting. District. 06..0CPCON at, t•C, Total May 16 1931..... Daily average c Texas Gulf Coast _ _ c LouLahmtk (11111 enAvt Gas and Fuel Oil Stocks. aGasoline Stocks. 6,441,000 1,701,000 6,450,000 3,992,000 8,062,000 1,996,000 2,045,000 14,111,000 16,517,000 2,359,600 15,286,000 2,183,700 64.4 44,798,000 124,786,000 59.6 45,621,000 124,449,000 95.7 17,039,000 2,434,100 6S.'2 b44,970.000 128,484,000 99.8 n 3,292.000 88.5 6,451,000 6,089.000 7711 niln 71 A 1 Cl') AAA 5 <127 (100 East Coast 100.0 Appalachian 91.8 Ind., Illinois, Kentucky 98.9 Okla., Kan., Missouri._ 89.6 Texas 91.3 Louisiana-Arkansas_ _ 98.9 89.4 Rocky Mountain California 96.7 Total week May 14_. Daily average Total week May 7 Daily average Per Cent OPer. of Total Capacity Report. Crude Runs to Stills. 95.1 95.1 lnn 3,133,000 675,000 2,154,000 1,842,000 4,099,000 1,129,000 266,000 3,219,000 5,994,000 1,104,000 4,139,000 3,304,000 8,888,000 4,659,000 638,000 96,060,000 a Stocks at refineries, except in California district, which includes stocks of finished gasoline and engine distillate at refineries, water terminals and sales distributing stations and amounts II transit thereto. b This figure is not entirely comparable with current stocks due to revisions made since original publication of this figure, from which revisions the basic information is not available by weeks. If it were possible to have made the revision the new figure would reflect somewhat lower stocks. c Included above for the week ended May 14 1932. Note.-All figures follow exactly the present Bureau of Mines definitions. Crude oil runs to stills include both foreign and domestic crudes. In California stocks of heavy crude and all grades of fuel oil are included under heading "Gas and fuel oil stocks." Net Crude Oil Stock Changes for April. Pipe lino and tank farm net domestic drude oil stocks east of the Rocky Mountains decreased 2,337,000 barrels in the month of April, according to returns compiled by the American Petroleum Institute from reports made to it by representative companies. The net change shown by the reporting companies accounts for the increases and decreases in general crude oil stocks, including crude oil in transit, but not producers' stocks at the wells. Bulk Terminals Stocks of Gasoline and Gasoline in Transit. The American Petroleum Institute below presents the amount of gasoline held by refining companies in bulk terminals and in transit thereto, by Bureau of Mines refining districts, oast of California. The Institute's statement, in full, follows: It should be borne definitely in mind that comparable quantities of gasoline have always existed at similar locations as an integral part of the system of distribution necessary to deliver gasoliie from the points of manufacture to the ultimate consumer. While it might appear to some that these quantities represent newly found stocks of this product, the industry itself and those closely connected with it have always generally known of their existence. Tho report for the week ended Aug. 22 19'31 was the first time that definite statistics had ever been presented covering the amount of such stocks. The publication of this information is in line with the Institute's policy to collect, and publish in the aggregate, statistical information of interest and value to the petroleum industry. For the purpose of these statistics, which are issued each week, a bulk terminal is any installation, the primary function of which is to supply other smaller installations by tank cars, barges, pipe lines or tho longer haul tank trucks. Tho smaller installations referred to, the stocks of which are not included, are those whoo primary function is to supply the local retail trade. Up to Aug. 22 1031 statistics covering stocks of gasoline east of California reflected stocks held at refineries only, while for the past several years California gasoline stocks figures have included, and will continue to include, the total inventory of finished gasoline and engine distillate held by reporting companies wherever located within continental United States, that is, at refineries, water terminals and all sales distributing stations including amounts in transit thereto. Gasoline at "Bulk Terminals" Figures End of Week. District. May 14 1932. May 7 1932. May 16 1931. Gasoline "in Transit" Figures End of Week. .1fay 14 1932. May 7 1932, May 16 1931. 0,906,000 9,617,000 9,310,000 2,163,000 1,847,000 2,122,000 East Coast 372,000 Appalachian 332,000 297,000 10,000 51,000 2,366,000 2,312,000 1,271,000 Ind., Ia., Ky 78,000 11,000 928,000 899,000 O)la., Kan., Mo.. 161,000 222,000 205,000 Texas Loulsiana-Ark_ 381,000 350,000 281,000 71,000 77,000 Rocky Mountain_ Total east of Calif_ 14,114,000 13,732,000 11,364.000 2,342,000 1,909,000 2,189,000 Gulf_______ Louisiana Gulf- __ Texas 109,000 326.000 156,000 293,000 178,000 271,000 61,000 67,000 Crude Oil Production Declined During Week Ended May 14 1932. The American Petroleum Institute estimates that the daily average gross crude oil production in the United States for the week ended May 14 1932 was 2,237,400 barrels, as 3719 compared with 2,251,900 barrels for the preceding week, a decrease of 14,500 barrels. Compared with the output for the week ended May 16 1931 of 2,426,800 barrels daily, the current figure represents a decrease of 189,400 barrels per day. The daily average production east of California during the week ended May 14 1932 was 1,717,900 barrels, as compared with 1,732,300 barrels for the preceding week, a decrease of 14,400 barrels. The following are estimates of daily average gross production by districts: DAILY AVERAGE PRODUCTION (FIGURES IN BARRELS). -May 1432. May 7 '32. April 30'32 May 16 '31. Weeks Ended 399,150 442,800 574,050 456,550 Oklahoma 00,450 94,200 94,850 107,800 Kansas 50,450 51,650 51,200 Panhandle Texas 61,250 47,500 48,300 50,000 56,950 North Texas 24,950 25,100 25,450 25,750 West central Texas 179,900 180,650 184,300 207,450 West Texas 56,350 56,850 55,900 56,350 East central Texas 334,850 332,900 257,450 342,500 East Texas 52,400 52,750 Southwest Texas 55,300 61,000 30,050 39,800 29,700 North Louisiana 29,500 34,950 46,750 34,600 Arkansas 34,400 109,900 156,600 110,100 Coastal Texas 112,450 37,400 34,400 30,700 Coastal Louisiana 37,600 102,150 106,050 109,550 Eastern (not incl. Michigan).107,800 17,500 8,400 20,500 Michigan 17,900 38,050 42,800 V. yomIng 38,050 35,900 Montana 6,600 8,450 6,450 7,050 Colorado 3,500 4,150 3,450 3,200 New Mexico 37,250 43,400 37,100 36,400 California 536,000 517,600 519,600 519,500 Total 2,237,400 2,251,900 2,177,500 2,426,800 The estimated daily average gross crude oil production for the Mid- Continent field, including Oklahoma, Kansas, Panhandle, north, west central, west, east central, east, and southwest Texas, north Louisiana, and Arkansas, for the week ended May 14 was 1,359,600 barrels, as compared with 1,370,700 barrels for the preceding week, a decrease of 11,100 barrels. The Mid-Continent production, excluding Smackover (Arkansas) heavy oil, was 1,336,000 barrels, as compared with 1,347,050 barrels, a decrease of 11,050 barrels. The production figures of certain pools in the various districts for the current week. compared with the previous week, in barrels of 42 gallons, follow: -Week EndedOklahomaMay 14 May 7 Bowlegs 12,800 10,600 Bristow-Slick 11,400 11,350 Burbank 11,100 11,150 Carr City 11,900 12,700 Earlsboro 13,950 13,350 East Earisboro 13,050 11,700 South Earlsboro 3,000 3,750 Konawa 4,800 4,900 Little River 17,750 17,650 East Little River 1,550 2,200 Maud 2,100 2,100 Mission 7,250 7,003 Oklahoma City 116,250 135,000 St. Louis-Pearson 20,400 17,850 Searight 3,050 3,350 Seminole 11,450 11,000 East Seminole 1,100 1,500 KansasRitz 13,350 11,300 Sedgwick County 13,150 12,550 Voshell 6,400 6,200 Panhandle TexasGray County 31,000 31,400 Hutchinson County 13,500 13,350 . North TexasArcher County 10,800 10,550 North Young County 6,250 6,000 Wilbarger County 9,800 9,650 West Central TexasSouth Young County..._ 3,550 3,750 West TexasCrane & Upton Counties 22,200 21,000 Ector County 4,400 4,200 Howard County 22,100 22,250 Reagan County 23,300 22,350 Winkler County 31,700 31,300 Yates 65,900 65,500 Balance Pecos County__ 2,700 2,350 East Central TexasVan Zandt County 50,350 49,900 East TexasRusk Co.: Joiner 105,600 108,750 Kilgore 103,300 105,900 Gregg Co.: Longview....124,000 127,850 Southwest TexasChapmann-A bbot Darst Creek Luling Salt Flat North LouisianaSarepta-Carterville Zwolle ArkansasSmackover, light Smackover, heavy Coastal TexasBarbers Hill Raccoon Bend Refuel()County Sugarland Coastal LouisianaEast Hackberry Old Hackberry Wyoming- -Week EndedMay 14 May 7 1,350 1,400 18,950 17,400 7,100 7,150 9,350 9,000 Salt Creek MontanaKebin-Sunburst New MexicoHobbs High Balance Lea County CaliforniaDominguez Elwood-Goleta Hungtinton Beach Inglewood Kettleman Hills Long Beach MIdway-Sunset Playa del Rey Santa Fe Springs Seal Beach Ventura Avenue Pennsylrania GradeAllegany Bradford Kane to Butler Southwestern Penna____ Southeastern Ohio R est Virginia 800 6,800 850 7,100 2,950 2,950 23,600 23,650 19,100 19,200 5,200 4,900 9,700 9,400 9,900 9,900 7,650 550 9,300 550 21,000 22,000 3,350 3.350 30,500 30,500 4,400 4,400 31,000 16,600 24,300 13,800 57.900 81,600 50,200 18,900 66,500 13,100 29,900 31,800 16,500 22,600 13,900 65,000 83,400 49,400 17,700 65,500 13,400 29,300 7,700 7,450 30,700 29,050 7,300 7,300 3,400 3,450 5.800 6,950 11,850 13,900 Oil Conference Held in New YorkStatement by Chairman of Soviet Russia Oil Syndicate-No Soviet Loan Involved in Conference. An international oil conference has been held in this city during the past two weeks, the preliminary conclusions reached at the private individual conferences among the leading conferees last week have been embodied in a report presented to the full conference on May 16 by a sub-committee, according to the New York "Journal of Commerce" of May 17, which also had the following to say: International The tentative conclusions in this respect are being made the basis of discussion now, and may constitute the broad outline of a final agreement. While the meeting, held at the Waldorf-Astoria Hotel, was secret and no official statement is likely to be issued for several days, at least until there Is some definite conclusion to report, it is understood that there was unanimity of opinion expressed to the effect that a stabilized price structure on a more remunerative level in the foreign field should be the aim of the conference. Price Plans Discussed. The plan is to increase both prices for bunker oil and gasoline, according to reliable authority. How this can be done without agreement on the part of Rumanian interests has not been made clear as they are not participating in the meetings, although it is understood that those companies which have substantial interests in the Balkan fields-Dutch Shell. AngloPersian and Burmah, will represent the viewpoint of the Rumanian group. The Soviet delegation is known to be receptive to any plan which would enable that country to get higher prices for its oil products than has been the case heretofore. Thus, Russia is not expected to be a sore spot in the conference. The delegation takes the attitude that the Soviet cannot 3720 Financial Chronicle properly be blamed for the demoralized price structure abroad and that others are guilty of price concessions, chiefly Rumania. From the New York "Sun" of last night (May 20) we take the following: The negotiations now being held between American and Russian oil Interests as part of the conference on a world oil stabilization program do not Involve consideration of any loan to the Russian Government, according to Charles E. Arnott, President of Socony-Vacuum Oil Corp., who is spokesman for the confernce. Mr. Arnott said negotiations in the past several days have been confined largely to meetings of separate groups. "The American group is in accord and we believe the Russians have crystallized their ideas. It now remains to be seen how closely these ideas coincide and to work out mutually an agreeable basis." Mr. Arnott said that the Kessler plan for world oil stabilization is not being considered and that present negotiations involve only the Russian and national oil companies at the conference. He said the conference was progressing and had reached a point where the national oil group had formulated definite ideas, but that there were various ways in which the things under discussion might be accomplished. Konstantin Riabovol, Chairman of the Board of Soyuzneftexport (the Soviet Oil Export Syndicate), stated on May 10: "Since our arrival in New York on May 3 upon the invitation of the heads of the Socony-Vacuum Oil Co., many statements have appeared In the press regarding the aims of the oil parleys which are to take place here in the middle of May. Some of these statements are so worded that they create the impression that Soviet oil exports are responsible for the demoralization of the world oil market. One gets the impression that the principal aim of the coming meeting is to discuss the question of Soviet oil only. "We find it necessary to state that the demoralization of the oil market cannot be due to the role played in the world market by Soviet oil products inasmuch as Soviet exports of oil constitute only about 10% of the entire world exports. The fact is that the oil business is disorganized in all markets, including those where Soviet oil does not enter at all. Also, there is ample evidence to prove that the British oil market has been disorganized in spite of the acknowledged fact that the Soviet oil marketing organization has adhered strictly to the letter of its agreement with the world oil companies concluded in 1929. Very little is said in the various statements regarding the general world economic situation which has resulted in a catastrophic drop in the prices of almost all world commodities, including oil. "Nothing is mentioned in any of the statements regarding products from Rumania and some other countries which, as is well known, are being sold in the world market at prices below those of Soviet oil products. "We wish to make It very clear that we understand that the aim of the oil meeting is to discuss the entire oil export situation and that it is not a meeting to discuss Soviet oil exclusively. Soyuzneftexport is not only willing but anxious to co-operate in measures which promise to improve the condition of the world oil markets." Independent Petroleum Association Alleges American Industry Is Threatened by Meeting of Oil Representatives - Warns "Great Monopolies" Mean "Ruin" by Use of Foreign Product. The following from Washington May 15 is from the New York "Times": Charges that a threatened boycott of "the American petroleum industry" and a prospect of the replacement of American production by foreign oil were involved in a meeting of some American and foreign oil companies scheduled to be held in New York this week were made to-day by Wirt Franklin, President of the Independent Petroleum Association of America. He said in a statement: "Division of the world's petroleum markets among the great oil monopolies, with increases in the price levels of fuel oil and gasoline, will be worked out in New York City this week by representatives of the Standard Oil and other American oil-importing corporations, the Royal Dutch-Shell, the Burman Oil Co. and the Russian Soviet. "No representatives of the consumers or of the independent American producers or of the general public have been invited to attend this meeting which plans their exploitation. "In spite of the American anti-trust statutes, this world oil combine announces that it plans to 'harmonize American production with proration in the world oil-producing countries' and that if the rank and file of the American industry does not co-operate,'the major companies in this country would still be in a position to make American co-operation largely effective through close control of their own operations'. "This is equivalent to a threat of boycott to the American petroleum Industry and the replacement of American production by foreign oil to the complete and devastating ruin of this industry." Acting Governor of Oklahoma Lifts State's Control Over Oil Wells During Gov. Murray's Absence. From the New York "Sun" we take the following (United Press)from Oklahoma City, May 20: Acting Governor Robert Burns of Oklahoma, openly defying the Governor, William H.(Alfalfa Bill) Murray.lifted the State's martial rule over 30,000 rich oil wells to-day. The militant Lieutenant-Governor acted while Governor Murray was in New York making an address on behalf of his candidacy for the Democratic presidential nomination. Law in Chile Authorizes State Gasoline MonopolyGovernment Defers Effective Date for More Propitious Time-Internal Loan Proposed. Associated Press advices from Santiago, Chile, May 18 said: President Juan H. Montero promulgated a law to-day authorizing a State gasoline monopoly, but it was understood in official and business circles that the Government would hold the monopoly in abeyance until a more propitious time for setting it up. Under the measure, approved by Congress, Chile might grant a concession for the importation, distribution and sale of gasoline to a Chilean company. The Government would participate in the profits up to 75%. The law authorizes an internal loan of 60,000,000 pesos (currently about 43,600.000) to make the monopoly effective. May 21 1932 Chilean Bureau of Mines Suggests Opening of Oil Fields to Foreign Capital. The following cablegram from Santiago, Chile, May 9, is from the New York "Times": The Bureau of Mines is urging the Government to open Chilean oil fields to exploration by foreign firms in view of the lack of funds to continue work exclusively with Chilean capital, as at first suggested. It is expected that United States, British and other interests would avail themselves of an opportunity to develop further wells begun in shale deposits and other points where the existence of oil is proved. Americans in Peru in Cablegram to Representative Garner Say Copper Duty Would Strain Amity. A cablegram as follows from Lima, Peru, May 17, is from the New York "Times": The American Society of Peru, representing all of the United States business interests here, has cabled Speaker Garner that passage of the proposed copper import duty would adversely affect friendly relations between Peru and the United States. Americans representing more than 50 United States exporters are preparing to close their businesses and return home if the bill is passed. Copper Sells at New Low Levels-Domestic Price Reduced to 53 4 Cents While Export Price Sinks to 53i. Cents a Pound. Copper established a new low price when it became available in the domestic market at 5%c. a pound delivered for the nearer months, on May 20. The price for September and the last quarter still seems to be 53Ac., also a new low price, made on May 17. Foreign copper reached a new low level when it sold at the equivalent of 53/20. a pound, c.i.f., base European ports, on May 17, against 5/ 58c. previously. It is reported that on May 19 copper was available at one center at 5.40c. Copper Exporters, Inc., whose official price remains unchanged at 63.c., c.i.f., Hamburg, Havre and London, sold a small amount of foreign copper on May 20 at 532c., %c. below its previous special price of 5%c. Sr American Brass Co. and Revere Cop per & Brass Co: Cut Prices 3z -Cent. The American Brass and Revere Copper & Brass companies have reduced prices of brass and copper material %c. a pound. Sr Price of Zinc Goes to New Low Record in East St. Louis. Prime Western zinc in the East St. Louis market reached another new low record when it sold at 2.30c. a pound on May 16. This is a decline of 73/i points from the price in effect on May 14, which was 2.353'c. The lowest price of zinc in the United States prior to 1932 was 2.95c. in 1895. Zinc price changes were noted in our issue of last week, (May 14) page 3550. Production of Portland Cement in April 51.3% Below That for Same Period Last Year-Shipment 41.6% Lower-Inventories Also Off. According to the United States Bureau of Mines, Department of Commerce, the Portland cement industry in April 1932 produced 5,478,000 barrels, shipped 6,536,000 barrels from the mills, and had in stock at the end of the month 26,487,000 barrels. Production of Portland cement in April 1932, showed a decrease of 51.3% and shipments a decrease of 41.6%, as compared with April 1931. Portland cement stocks at the mills were 10.9% lower than a year ago. In the following statement of relation of production to capacity the total output of finished cement is compared with the estimated capacity of 165 plants both at the close of April 1932, and of April 1931. The estimates include increased capacity due to extensions and improvements during the period RELATION OF PRODUCTION TO CAPACITY. Apr. 1931. Apr. 1932. Mar. 1932. Feb. 1932 Jan. 1932. 52.1% 24.8% 21.3% The month 18.7% 22.0% 41.7% The 12 months ended 57.7% 43.8% 45.2% 45.9% PRODUCTION, SHIPMENTS AND STOCKS OF FINISHED PORTLAND CEMENT. BY DISTRICTS, IN APRIL 1931 AND 1932 (IN THOUSANDS OF BARRELS). District. Production. 1931. Eastern Pa., N.J. dr Maryland__ New York & Maine Ohio. Western Pa.& W. Va Michigan Win., Ill., Ind. QC Ky Va., Tenn., Ala., Ga., Fla. & LaEast. Mo.,Iowa,Minn.& 8.Dak. W.Mo.,Neb.,Kan.,Okla.& Ark. Texas Colo., Mont., Utah. Wyo.& IdaCalifornia Oregon & Washington Total. 2,691 832 829 524 1,231 1,268 1,261 674 585 233 793 324 11,245 1932. 1,497 537 309 290 564 484 420 83 397 93 535 269 Shipments. 1931. 2,587 769 919 529 1,260 1,343 1,029 942 581 184 733 308 5,478 11,184 1982. 1,720 522 520 259 611 537 591 505 368 126 554 223 Stocks at End of Month. 1931. 6,725 2,076 3,476 2,586 4,208 1,639 4,084 1,885 777 600 1,110 589 1932. 6,014 1,924 3,190 2,045 3,772 1,548 3,636 1,483 800 398 1,072 805 6,538 29.715 26.487 Financial Chronicle Volume 134 FRODITCT/ON. SHIPMENTS AND STOCKS OF FINISHED PORTLAND CEMENT,BY MONTHS,IN 1931 AND 1932(IN THOUS.OF BARRELS). Production. Shipments. Month. 1931. January February March April May June July August September •October November December 6,595 5,920 8,245 11,245 14,010 14,118 13,899 13,549 12,092 10,762 8,161 5,974 1932. 5,026 3.971 4,847 5,478 1931. 4,692 5,074 7,192 11,184 14,200 16,077 15,545 15,172 13,671 12,360 7,156 4,142 1932. 3,393 3.118 3,973 6,536 Stocks W End of Month. 1931. 1932. 25,778 27,759 28,612 26.657 29.676 827,545 29,715 26,487 29,554 27,602 25,934 24,313 22,736 21,218 22,219 24,098 Total 126,465 124,570 a Revised. Note.-The statist es above presented are compiled from reports for Apr I. received Iby the Bureau of Mines from all manufacturing plants except four, for which estimates have been included in lieu of actual returns. Tin Output to Be Cut by Two-Month Total-Bolivians Expect Malay States and Dutch East Indies to Accept the Proposal. The following from La Paz, Bolivia, May 13, is from the New York "Times" The Bolivian delegation to the tin producers' conference reports that in the next meeting to take place in The Hague it is planned to reduce tin production in an amount equivalent to two months' production, either by totally stopping output or reducing this amount within the next three months. It is believed the Malay States will suspend production and the Dutch East Indies will accept either solution. The news brought anxiety to all circles, as the reduction in Bolivia's chief export seems to be reaching limits never before even thought of. If .a further reduction materializes, the Bolivian tin exports will hardly reach 15,000 tons yearly, instead of the 60.000 tons of 1928. Steel Output Up One Point to 25%-Price of Pig Iron and Steel Scrap Again Declines. Influenced mainly by orders from the automobile industry, -principally Ford, steel ingot production for the country has risen a point to 25%, against 24% in the two preceding weeks, according to the "Iron Age" of May 19. Engagement of steel-making capacity shows marked contrasts, the Pittsburgh district rate having declined from 20 to 18%, the lowest in many years, while Cleveland plants are operating at 38%, against 26% last week. The Detroit district, including the Ford steel plant, which has less than 2% of the country's ingot capacity, has by far the best production, 81%. The Great Lakes plant at Detroit is operating all ,of its open-hearth furnaces. The "Age" also reports as follows: This contract in producing activities finds a counterpart in the price situation. On the one hand, steel producers are successful in maintaining firm quotations on finished steel and may be laying the groundwork for a further advance by extending to billets and slabs the $2 a ton rise in the price of sheet bars announced a week ago. Raw material prices, however, continue to decline, heavy melting steel having touched new all-time lows at Pittsburgh and Chicago, bringing the "Iron Age" scrap composite down to $7.41 a gross ton from $7.62 a week ago. There is also a new low since August 1915, in the pig iron composite price, which is now at $14.06, against $14.22 a week ago, because of a general reduction of 50c. a ton at Pittsburgh and in the Valley. Meanwhile, the finished steel composite price is unchanged at 2,087c. a lb. The determination ofsteel producers to adhere to a level of prices that will give them the full benefit of savings accruing from wage reductions that went into effect this week is one of the strongest factors in the steel situation, it being conceded that without such aid in cutting down losses some of them might face financial difficulties before the end of the year if business volume does not gain substantially. The fact that some large consumers are apparently convinced now that steel prices will be maintained is indicated by an inquiry from a large fabricator of automotive parts for price protection through the first quarter of next year. Some third quarter inquiry for alloy steel bars has also appeared. Mills are not disposed to quote beyond this quarter on any product. Under present conditions, the handling of many small orders increases costs, and the makers of cold-finished steel bars have taken steps to remedy this by putting into effect quantity extras. The new base price of 1.70c. a lb., which is for lots of 10,000 lb. or more, is a reduction, but the average net price to the makers will be increased through the imposition of extras up to $2.50 per 100 lb. for smaller lots. A similar plan for sheet steel was recently proposed by some sheet producers, but did not proceed beyond the initial stage. While the Ford Motor Co.'s orders in the week have totaled only about 8,000 tons, about half of this went to a Cleveland mill. A larger steel purchase by Ford for June requirements is expected about May 25. The Ford plant is making steady progress in expanding schedules, producing 2,000 cars a day. It now appears that the objective of 100,000 cars a month will not be attained before July, the tentative schedule for June indicating an output next month of 60,000 to 65,000. However, Ford's program assures a good summer performance compared with March. April and May. Other makers of low-priced cars are also gaining. Aside from automobile business, steel orders are not n eking noteworthy gains, although it is significant that orders for bars, the most widely used steel product, have increased noticeably in at least two districts, Chicago and Cleveland. Track supply business Is also better, particularly at Chicago, as railroads begin spring maintenance work. A fairly large volume of structural steel work has accumulated, but lettings are delayed. At least two large projects in the New York district are held up pending settlement of the building trades strike. About 80,000 tons of steet for electrification work on the Pennsylvania RR. will be released upon completion of financing arrangements. If Congress approves of a bond issue of the advancing of funds by the Reconstruction Finance Corp. for a list of self-liquidating projects that have passed the engineering stage, upward 3721 of 1,000,000 tons of steel would be required, although deliveries in some cases would extend over two or three years. Large tonnage orders and inquiries have been few the past week, but the high spots are an order for 8,400 tons of pipe for export to Asia Minor, a prospective gas line in New York State that whl take 3,500 tons and an order for river barges placed at Pittsburgh calling for 2,200 tons, mostly plates. Efforts of the steel industry to prevent the use of foreign steel in public work have received a setback in New York State. the AttorneViGeneral having ruled that departments cannot make such preferencelwithout legislative authority, which does not exist. A table showing the "Iron Age" composite prices follows: Finished Steel Based on steel bars, beams, tank plates May 17 1932. 2.0870. a Lb. 2.087e, wire, rails, black pipe and sheets One week ago 2.087c. These products make 87% of Ma One month ago 2 114e. United States output. One year ago 2.0870. Jan. 5 1932 2.037e. Jan, 19 2.1420. Jan. 13 2.052c. Dec. 29 1931 2.362c. Jan. 7 2.121c. Dec. 9 1930 2.412e. Apr. 2 2.3620. Oct. 25 1929 2.3910. Dec. 11 2.3140. Jan. 3 1928 2.293e. Oct. 25 2.453e. Jan. 4 1927 2.4530. Jan. 5 2.4030. May 18 1926 2 560e. Jan. 6 2.396e. Aug. IS 1925 Pig Iron Based on average of basic iron at Valley May 171932 $14.06 s Gram Ton. $14.22 furnace foundry irons at Chicago, One week ago One month ago 14.351 Philadelphia, Buffalo. Valley and Sir15.79 nilagham. One year ago High. Low. $14.81 Jan. 5 814.06 May 17 1932 15.90 Jan. 6 15.79 Dec. 15 18.21 Jan. 7 15.90 Dee. 16 18.71 May 14 18.21 Dec. 17 1929 18.59 Nov.27 17.04 July 24 1928 an 4 17.54 Nov. 1 19.71 J. 21.54 Jan. 57 19.46 July 13 19 92 26 22.50 Jan. 13 18.96 July 7 1925 Steel Scrap. Based on heavy melting steel quoMay 17 1932, $7.41 a Gross Ton. One week ago 87.62 tations at Pittsburgh. Philadelphia 8.041 and Chicago. One month ago One year ago 9.83i High. Low. 1932 $8 11..3 53 0 Jan. 12 6 57.41 May 17 1931 7.62 Dec. 29 1930 15.00 Feb. 18 11.25 Dec. 9 1929 17.58 Jan, 29 14.08 Dec. 3 16.50 D. eo 31 13.08 July 2 19 92 15.25 Jan. 1287 13.08 Nov.22 1926 17.25 Jan. 5 14.00 June 1 1925 20.83 Jan. 13 15.08 May I 214 "Steel" of Cleveland, in its weekly summary of the iron and steel markets on May 16 stated: Slightly greater confidence is manifest in the steel industry as it goes into the fourth consecutive week operating at 24%, automotive requirements continue to braoden moderately, and the 15% wage and salary reduction takes effect. The situation remains spotty, 24% activity is not remunerative, nothing to supply a substantial lift is in sight; yet there is a more general underlying feeling that the principal hazards to a slow recovery, except perhaps the political one, have been surmounted. This confidence permeates prices. Producers are serving notice on buyers of semi-finished steel, especially sheet bars, that their raw material will cost them $2 per ton more next quarter. At Chicago there is talk of putting sheets up $3 a ton. An unofficial report advances bars, plates and shapes $1 a ton for the third quarter. Cold finished bar makers are setting their house in order by establishing a single price base of 1.70c. and imposing quantity differentials that will Increase the net cost for many users. Producers are determined to retain the savings accruing from the current wage reduction, and if the suggestion of an advance only offsets pressure on prices it will have served a useful purpose. Assembly of high and medium price automobiles has contracted sharply, but the steady gain of Chevrolet and Plymouth and the acceleration by Ford are expanding total steel requirements. The June schedule of Ford,to be adopted May 25 and be followed by substantial releases of steel, will be considerably higher than in May. From Pittsburgh. Chicago, Cleveland and Youngstown come rePorts of heavier automotive demand for strip steel, especially cold rolled. Some rush orders for sheets have been filled by Pittsburgh district mills. Detroit district mills continue to benefit from rollings for Ford, and that district's operations are the highest of the country. Following the void in April, miscellaneous car orders last week,including 50 subway cars for New York, totaled 67. The Milwaukee placed its May allotment of rails-2,000 tons-with the Illinois Steel Co. Fastening orders booked by Chicago mills aggregated 4,000 tons. American mills appear definitely to have booked 8.300 tons of steel pipe for the oil line in Irak. Current inquiry includes 4,400 tons for a gas line In western New York, 1,500 tons for the Hetch Hetchy project of San Francisco, 1,200 tons for a gas line near Syracuse, N. Y. Although actual awards continue below the 1932 weekly average, the total for this week being 5,549 tons, structural inquiry is vigorous. New projects requiring slightly over 50,000 tons have developed. Particularly at Buffalo is activity broadening. For grade elimination work the Long Island railroad will buy 25,000 tons. More reinforcing concrete bar work is maturing, though still seasonally light. Raw materials generally are sluggish, save for a somewhat better movement of pig iron in the lake district. Chicago furnaces have established a differential of50 cents for lots of 100 tons or over, quoting these at $15.50. A Delaware river pipe maker has received 5,500 tons more foreign iron. Scrap prices are soft, another 25 cent reduction being made at Chicago, and the Illinois Central railraod, like the Burlington recently, has refused to accept low prices bid for its accumulation. Cast iron pipe is down $2 to $4 at Chicago. Light rails are easier. Due to the adjustment in pig iron at Chicago, the iron and steel composite of "Steel" is off 4 cents to $29.64. The scrap composite has ceded 8 cents, to $7.13. The finished steel composite is steady at $47.62. Anthracite Shipments in April 1932 Below Those of a Year Ago. Shipments of anthracite for the month of April 1932, as reported to the Anthracite Bureau of Information, Philadelphia, amounted to 4,476,704 gross tons. This is an increase as compared with the preceding month of March, of 561,993 tons and when compared with April 1931, shows 3722 Financial Chronicle a decrease of 231,495 tons. Shipments by originating carriers are as follows. Month of - April 1932. March 1932. April 1931. Reading Co Lehigh Valley RR Central RR. of N. Del., Lack.& West. RR. Del.& Ilud. RR.Corp__ Pennsylvania RR Erie RR N.Y.,Ont. & West. Ry_ Lehigh & New Engl. RR. Total Mar. 1931. 884,925 701,646 400,366 8 , 76 607,716 461,049 378,536 218,017 235,473 696,556 550,613 348,578 536,912 595,304 467,311 314,071 230,041 175,325 894,599 776,017 410,915 587,341 705,052 440,567 490,068 165.305 238,335 919,179 666,760 301,342 422,991 543,306 371,246 327,215 205,967 140,572 4,476,704 3,914,711 4,708,199 3.598,578 Bituminous Coal and Pennsylvania Anthracite Output Again Declines. According to the United States Bureau of Mines, Department of Commerce, 4,475,000 net tons of bituminous coal and 968,000 tons of anthracite were produced during the week ended May 7 1932 as against 4,717,000 tons of bituminous coal and 1,415,000 tons of anthracite during the preceding week and 6,715,000 tons of bituminous coal and 1,021,000 tons of anthracite during the corresponding period last year. During the calendar year to May 7 1932 production of bituminous coal amounted to 112,826,000 net tons as compared with 139,155,000 tons during the calendar year to May 9 1931. The Bureau's statement follows: BITUMINOUS COAL. The first week of May records a further decrease in soft coal production The total output,including lignite and coal coked at the mines, is estimated at 4,475,000 net tons. Compared with the preceding week, this shows a loss of 242,000 tons, or 5.1%. Production during the week in 1931 corresponding with that of May 7 amounted to 6,715,000 tons. Estimated United States Production of Bituminous coal (Net Tons). 1932 1931 Cal. Year Cal. Year Week. to Date. Week EndedWeek. to Date.a 4,736,000 April 23 103,634,000 6,314,000 126,018,000 Daily average_... 789,000 1,071,000 1,052,000 1,299,000 April 30 b 4,717,000 108,351,000 6,422,000 132,440,000 Daily average_ 786,000 1,054,000 1,070,000 1,286,000 May 7,c 4,475,000 112,826,000 6,715,000 139,155,000 Daily average_ _ 746,000 1,037,000 1,119,000 1,277,000 a Minus one day's production first week in January to equalize number of days in the two years. b Revised since last report. c Subject to revision. The total production of soft coal during the present calendar year to May 7 (approximately 109 working days) amounts to 112,826,000 net tons. Figures for corresponding periods in other recent calendar years are given below: 139,15.5,000 net tons 11929 1931 187,282,000 net tons 171,238,000 net tons I 1928 171,8M,000 net tons As already indicated by the revised figures above, the total production of soft coal for the country as a whole during the week ended April 30 amounted to 4,717,000 not tons. Compared with the output in the preceding week, 1930 May 21 1932 this shows a decrease of 19,000 tons, or 0.4%. The following table apportions the tonnage by States and gives comparable figures for other recent years: Estimated TVeekly Production of Coal by States (Net Tons). TVeek Ended StateApr.30 32. Apr.23 '32. May 2 '31. May 3 '30. Alabama 163,000 163,000 221,000 325,000 Arkansas & Okla._ _ 12,000 11,000 31,000 43,000 Colorado 71,000 52,000 92,000 80,000 Illinois 176,000 142,000 683,000 836,000 Indiana 141,000 126,000 210,000 268,000 Iowa 51,000 52,000 50,000 54,000 Kansas & Missouri_ 72,000 70,000 76,000 95,000 Kentucky-Eastern 385,000 387,000 531,000 806,000 Western 106,000 134,000 124,000 169,000 Maryland 27,000 25,000 34,000 40,000 Michigan 8,000 8,000 2,000 7,000 Montana 31,000 25,000 30,000 34,000 New Mexico 18,000 19,000 28,000 29,000 North Dakota 24,000 20,000 19,000 12,000 Ohio 91,000 76,000 341,000 427,000 Pennsylvania (bit.). 1,438,000 1,568,000 1,799,000 2,484,000 Tennessee 50,000 50,000 76,000 96,000 Texas 8,000 9,000 12,000 10,000 Utah 38,000 27,000 39,000 36,000 Virginia 126,000 130,000 166,000 204,000 Washington 24,000 19,000 29,000 31,000 W. Va.-Southern b 1,137,000 1,122,000 1,291,000 1,676,000 Northern„c 444,000 442,000 449,000 621,000 Wyoming 70,000 63,000 88,000 76,000 Other States 1,000 1,000 1,000 2,000 Total bit. coal__ _ Penn. anthracite_ _ _ 4,717,000 1,415,000 4,736,000 1,406,000 6,422,000 1,695,000 8,441,000 1,716,000 April '23 Aver. a 412,000 70,000 184,000 1,471,000 514,000 100,000 138,000 620,000 188.000 52,000 22,000 42,000 59,000 16,000 766,000 3,531,000 121,000 20,000 70,000 249,000 35,000 1,256,000 778,000 116,000 6,000 10,836,000 1,974,000 Total all coal_ _ 6,132,000 6,142,000 8,117,000 10,157,000 12,810,000 a Average weekly rate for the entire month. Is Includes operations on the N.& W.: C.& 0.; Virginian; K.& M., and B. C.& G. c Rest of State, including Panhandle; PENNSYLVANIA ANTHRACITE. Production of anthracite in the State of Pennsylvania declined sharply in the week of May 7. The total output is estimated at 968,000 net tons, a decrease of 447.000 tons, or 31.6% from the preceding week. Production during the first week of May in 1931 amounted to 1,021.000 tons. Estimated Production of Pennsylvania Anthracite (Net Tons.) 1932 1931---Daffy Daily Week EndedWeek. Average. Week. Average. April 23 1,406,000 234,300 1,418,000 236,300 April 30 1,415,000 235,800 1,695,000 282,500 May 7 968,000 161,300 1,021,000 170,200 BEEHIVE COKE. The total production of beehive coke during the week ended April 30 is estimated at 11,000 not tons. This is a decrease of 400 tons from the preceding week, and compares with 23,300 tons produced in the corresponding week of 1931. Cumulative productilon during 1932 to April 30 amounts to 317,100 tons as against 518,800 tons in 1931. Estimated Weekly Production of Beehive Coke (Net -Week Ended April 30 April 23 May 2 1932. 1932. 1931. Penn.sylvanla 9,300 8,900 17,600 West Virginia 500 3,100 900 Tennessee and Virginia_ _ 1,200 800 1,900 Colo., Utah & Wash_ 400 400 700 Region__ United States total_ __ Daily average 11,000 1,833 11,400 1,900 23,300 3,883 Tons.) 1932 to Date. 266,100 19,100 21,400 10,500 1931 to Date.a 456,200 60,200 52,000 16,400 317,100 3,049 584,800 5,623 a Minus one (lay's production first week in January to equalize number of days In the two years. Current Events and Discussions The Week with the Federal Reserve Banks. The tinily average volume of Federal Reserve bank credit outstanding during the week ended May 18, as reported by the Federal Reserve banks, was $1,944,000,000, an increase of 849,000,000 compared with the preceding week and of 81,027,000,000 compared with the corresponding week in 1931. After noting these facts, the Federal Reserve Board proceeds as follows: On May 18 total Reserve bank credit amounted to $1,988,000,000, an Increase of $69,000,000 for the week. This increase corresponds with increases of $18,000,000 in money in circulation and $18,000,000 in member bank reserve balances and a decrease of $40,000,000 in monetary gold stock offset In part by an increase of $28,000,000 in Treasury currency, adjusted, and a decrease of $7,000,000 in unexpended capital funds, non-member deposits, &c. Holdings of discounted bills increased $7,000,000 at the Federal Reserve Bank of San Francisco, and decreased 85,000,000 at Chicago, $4,000,000 at Cleveland and $6,000,000 at all Federal Reserve banks. Tho System's holdings of bills bought in open market declined $2,000,000, while holdings of United States bonds increased $13,000,000, of Treasury notes $11,000,000 and of Treasury certificates and bills $57,000,000. Beginning with the statement of May 28 1930, the text accompanying the weekly condition statement of the Federal Reserve banks was _changed to show the amount of Reserve Bank credit outstanding and certain other items not included in the condition statement, such as monetary gold stocks, and money in circulation. The Federal Reserve Board's explanation of the changes, together with the definition of the different items, was published in the May 31 1930 issue of the "Chronicle," on page 3797. Tho statement in full for the week ended May 18, in comparison with the preceding week and with the corresponding date last year, will be found on subsequent pages, namely pages 3780 and 3781. Changes in the amount of reserve bank credit outstanding and in related items during the week and the year end May 18 1932, were as follows: Bills discounted Bills bought United States Govt. securities Other Reserve Bank credit Increase (+1 or Decrease (-) Since May 18 1932. May 11 1932, May 20 1931: S 8 465,000,000 -6,000,000 +316,000,000 41,000,000 -2,000,000 -90,000,000 1 466,000,000 +81,000,000 +867,000,000 16,000,000 -3,000,000 TOTAL RES'VE BANK CREDIT_ _ I ,988,000,000 +69,000,000 +1,094,000,000 Monetary gold stock 4,274,000,000 -40,000,000 -498,000,000 Treasury currency adjusted 1 799,000,000 +28,000,000 +7,000,000 Money in circulation 5,499,000,000 +18,000,000 +810,000,000 Member bank reserve balances 2 192,000,000 +48,000,000 -219,000,000 Unexpended capital funds, non-memberdeposits, &c 421,000,000 -7,000,000 +13,000,000 Returns of Member Banks in New York City and Chicago-Brokers' Loans. Beginning with the returns for Juno 29 1927, the Federal Reserve Board also commenced to give out the figures of the member banks in New York City as well as those in Chicago on Thursday, simultaneously with the figures for the Reserve banks themselves and for the same week, instead of waiting until the following Monday, before which time the statistics covering the entire body of reporting member banks in the different cities included cannot be got ready. Below is the statement for the Now York City member banks and that for the Chicago member banks, for the current week, as thus issued in advance of the full statement of the member banks, which latter will not be available until the coming Monday. The New York City statement of course also includes the brokers' loans of reporting member banks. The grand aggregate of brokers' loans the present week records a decrease of $24,000,000, the amount of thesa loans on May 18 1932 standing at $414,000,000, a now low record for all time since these loans were first compiled in 1917. Loans "for own account" decreased during the week from $383,000,000 to $367,000,000 and loans "for account of out-of-town banks" from $48,000,000 to $41,000,000, Financial Chronicle Volume 134 and loans "for account of others" from $7,000,000,000 to $6,000,000,000. The amount of these loans "for account of others" has been reduced the past 27 weeks due to the action of the New York Clearing House Association on Nov.5 1931 in restricting member banks on and after Nov. 16 1931 from placing for corporations and other than banks loans secured by stocks, bonds and acceptances. CONDITION OF WEEKLY REPORTING MEMBER BANKS IN CENTRAL RESERVE CITIES. New York. May 18 1932. May 11 1932. May 20 1931. Loans and investments—total 6 604,000,000 6,673.000,000 7,925,000,000 Loans—total 3,879,000,000 3,890,000,000 5,266,000,000 On securities All other 1,840,000,000 1,845,000,000 3,025,000.000 2,039,000,000 2,045,000,000 2,241,000,000 Investments—total 2 725,000,000 2,783,000,000 2,659,000,000 U. S. Government securities Other securities 1 759,000,000 1,826,000,000 1,474,000,000 966,000,000 957,000,000 1,185,000,000 Reserve with Federal Reserve Bank__ Cash in vault 850,000,000 43,000,000 821,000,000 40,000,000 815,000,000 45,000.000 Net demand deposits Time deposits Government deposits 5 092,000,000 5,094,000,000 5,869,000,000 766,000,000 776,000,000 1,248,000,000 120,000,000 139,000,000 16,000,000 Due from banks Due to banks 68,000,000 67,000,000 88.000,000 1,098,000,000 1,133,000,000 1,227,000,000 Borrowings from Federal Reserve Bank_ Loans on secur, to brokers & dealers: For own account 367,000,000 For account of out-of-town banks 41,000,000 For account of others 6,000,000 Total On demand On time Loans and investments—total 414,000,000 383,000,000 1,270,000,000 48,000,000 185,000,000 7,000,000 176,000,000 438,000,000 1,631,000,000 315,000,000 350,000,000 1,292,000,000 88,000,000 339,000,000 99,000,000 Chicago. 1,352,000,000 1,353,000,000 1,912,000,000 903,000,000 916,000,000 1,298,000,000 520,000,000 383,000,000 528.000,000 388,000,000 750.000,000 548,000,000 449,000,000 437,000,000 614,000,000 262,000,000 187,000,000 248,000,000 189,000,000 330.000,000 284,000,000 Reserve with Federal Reserve Bank_ Cash in vault 196,000,000 15,000,000 196,000,000 15,000,000 188,000,000 15,000,000 Net demand deposits Time deposits Government deposits 885,000,000 382,000,000 20,000,000 882,000,000 1,247,000.000 382,000,000 660,000,000 23,000,000 4,000,000 Due from banks Due to banks 172,000,000 284,000,000 186,000,000 292,000,000 231,000,000 351,000,000 1,000,000 1,000,000 1,000,000 Loans total On securities All other Investments—total U. S. Government securities Other securities Borrowings from Federal Reserve Bank_ Complete Returns of the Member Banks of the Federal Reserve System for the Preceding Week. As explained above, the statement for the New York and Chicago member banks are now given out on Thursday, simultaneously with the figures for the Reserve banks themselves and covering the same week, instead of being held until the following Monday, before which time the statistics covering the entire body of reporting member banks in 101 cities cannot be got ready. In the following will be found the comments of the Federal Reserve Board respecting the returns of the entire body of reporting member banks of the Federal Reserve System for the week ended with the close of business on May 11: The Federal Reserve Board's condition statement of weekly reporting member banks in leading cities on May 11 shows decreases for the week of $137,000,000 in loans and investments, $116,000,000 in Government deposits and $30,000,000 in borrowings from Federal Reserve banks, and Increases of $64,000,000 in net demand deposits and $4,000,000 in time deposits. Loans on securities declined $64,000,000 at reporting member banks In the New York district, $7,000,000 in the Chicago district and $86,000,000 at all reporting banks. "All other" loans declined $12,000,000 in the New York district, $10,000,000 in the Boston district, $8,000,000 in the Cleveland district and $39,000,000 at all reporting banks. Holdings of United States Government securities declined $13,000,000 In the Boston district, $7,000,000 in the San Francisco district and $19,000,000 at all reporting banks, and increased $8,000,000 in the New York district. Holdings of other securities increased $12,000,000 in the New York district and $7,000,000 at all reporting banks. Borrowings of weekly reporting member banks from Federal Reserve banks aggregated $175,000,000 on May 11, the principal changes for the week being a decrease of $13,000,000 at the Federal Reserve Bank of San Francisco and of' $5,000,000 each at Cleveland and Chicago. A summary of the principal assets and liabilities of weekly reporting member banks, together with changes during the week and the year ended May 11 1932, follows: Increase (-1-) or Decrease (—) Since May 11 1932. May 4 1932. May 13 1931. 5 Loans and investments—total— --19,140,000,000 —137,000,000 —3,638,000,000 Loans—total On securities All other Investments—total U. S. Government securities Other securities 11,717,000,000 —125,000,000 —3,208,000,000 4,977,000.000 6,740.000,000 —86,000,000 —2,069,000,000 —39,000,000 —1,139,000,000 7,423,000,000 —12,000,000 —430,000,000 4.144,000,000 3,279,000,000 —19,000,000 +7,000,000 +169,000,000 —599,000,000 3723 Increase (+) or Decrease (—) Since May 11 1932. May 4 1932. May 13 1931. Reserve with F. R. banks Cash in vault Net demand deposits Time deposits Government deposits Due from banks Due to banks Borrowings from F. R. Banks 1,682,000,000 208,000,000 +14,000,000 +7,000,000 —153.000,000 —18,000.000 11,146,000,000 5,709,000,000 369,000,000 +64,000,000 —2,631.000,000 +4,000,000 —1,689,000,000 —116,000,000 +248,000,000 1,235,000,000 2,787,000,000 —15,000,000 —604,000,000 —45,000,000 —1,601,000,000 175,000.000 —30,000,000 +153.000,000 Resolution Ordered Favorably Reported by House Committee Requests President Hoover to Call International Conference on Monetary Exchanges and Silver—Eight Governments Sounded by Committee on Silver Parley. On May 13 the House Committee on Coinage, Weights and Measures, ordered favorably reported a resolution requesting the President to invite interested Nations to join with representatives of the United States at an international conference on monetary exchanges and silver. The resolution proposes that the conference discuss the "adjustment of national currencies to the gold standard," methods of correcting the dislocation of international trade and international exchange, the revaluation of silver wherever it is used as money or in monetary reserves, the raising of commodity prices to levels "sufficiently high to restore normal bases of economic relations." The proposed conference, says the resolution, would have "as its motivation the desire to improve the condition of all participating countries in exchanging commodities and services within and among such countries." Representative Somers is Chairman of the House Committee which ordered the resolution favorably reported. As to the attitude of President Hoover toward the conference Associated Press advices from Washington May 13 said: The President and Congress drew nearer to agreement to-day on the method of studying the rehabilitation of silver with the approval of the resolution directing the Chief Executive to call an international conference. Last-minute changes in the program as presented by Representative Somers were said to have overcome administration objections. The New Yorker and the committee agreed that the resolution should include a proviso specifying that nations participating should consider the maintenance or restoration of the gold monetary standard in countries desiring it and the adjustment of monetary exchanges between such countries. President Hoover had objected to a proposal directing him to call an International conference to consider silver and nothing else. When the resolution can be brought before the House for action is problematical, but its sponsors hoped to-day that it could be passed next week. The text of the resolution as approved by the Committee follows: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the President is authorized and requested to invite all interested countries of the world to join with representatives of the United States at an international conference, to be participated in by as many countries as may be willing to send representatives, and having as its objects: (1) The adjustment of national currencies to the gold standard; (2) the correction of the dislocation of international exchanges; (3) the re-evaluation of silver wherever used as money and as monetary reserves; and (4) the raising of commodity price levels to a point sufficiently high to restore the normal basis of economic relations between private debtors and creditors; such conference, having as its motivation the desire to improve the condition of all participating countries in exchanging commodities and services within each such country and among such countries, and such conference having as the matters for its consideration and for recommendation to the participating nations for action the following: 1. The maintenance or restoration of the gold monetary standard within such countries as are desirous and capable of employing it, and the adjustment of monetary exchanges among such countries and other countries; 2. The discontinuance of the debasement of silver and silver coins and the discontinuance of sales by Governments of silver obtained from the coins or monetary reserves of such Governments; 3. The restoration of debased silver coinage to its former fineness; 4. The absorption into coinage or Governmental monetary reserves of additional amounts of silver; 5. Means by which cover operations in silver may be reversed; and 6. Such other methods dealing with monetary and exchange conditions as may be appropriate to follow the purpose of the conference. In a Washington dispatch May 13 to the New York 'Times" it was pointed out that another proposal dealing with silver which has attracted widespread interest lately is a joint resolution introduced in the Senate by Senator Hayden and in the House by Representative Somers, permitting the President to receive silver at the rate of one and one-half ounces to the dollar from foreign nations in payment of their debts to the United States Government. The dispatch added: When Representative Somers introduced the resolution for a conference he said that the silver problem, being international in scope, could best be solved by international co-operation. He felt it desirable, he told the House, that a reasonable relationship should be established between silver and gold, but said this did not mean Financial Chronicle 3724 that these two metals should be placed upon the normal production ratio, nor that bimetalism should be adopted. He said it appeared that at present no nation alone was in a position to restore the falling price of silver. "Many different peoples," Mr. Somers said, "are engaged in the commerce of the world; some use gold, some can only use silver. Changes in the values of these metals are, therefore, always disturbing, but when the difference in value is as great as at present the channels of trade naturally dry up, and the result is chaotic." Indications that Congress will be asked to direct President Hoover to call an international conference for increasing the price and use of silver were forthcoming on March 23 after the House Coinage Committee disclosed it had been sounding economists and government officials in eight countries on the advisability of such a meeting. A dispatch from Washington, on March 23, to the New York "Herald Tribune," noting this, also had the following to say: Satisfied by some of the first responses, a strong sentiment in the House Committee favors an eventual proposal for executive action. In compliance with a Senate resolution along this line the President considered such a meeting late last spring but found that objections were raised informally by Great Britain. The Committee's action evoked widespread interest because it embraced activity in international relations without the advice of the State Department and marked a degree of rising sentiment for a moderate form of bi-metalism. Somers Wants Silver in Reserve. Representative Andrew L. Somers, Democrat, of New York, the Chairman, said he favored the inclusion of an appreciable amount of silver in the monetary reserves as part of a program to widen the base of the currency system. This is the position taken also by a good many members from the West. Mr. Somers argued that the absence of enough gold to support the currencies of the various countries was crippling commerce and industry. The failure of the Committee to consult with the State Department before communicating with foreign officials raised the question as to whether the Logan Act, concentrating the handling of diplomatic relations in the White House and the State Department, had been violated. State Department officials indicated they would not raise the question and Chairman Somers denied that the law had been broken. He pointed out that the Committee had not approached governments but had simply directed questions to people of recognized standing in foreign countries. The White House, it was disclosed to-night, is ready to meet the House Committee and perhaps head off a resolution by having Henry L. Stimaon, Secretary of State, and his subordinates in the State Department testify to the efforts already made in vain by the Administration to pave the way to a silver conference. The Administration opinion is that the chances of general participation in such a meeting have continued to wane, although Mr. Somers holds that Great Britain may now be more amenable since it has been forced to modify the gold standard. Suggests Prompt Action. The letter of the House Committee Chairman to the foreign officials cited the tentative conclusions of the Committee and requested advice, adding, "May I ask whether you believe that prompt international co-operation is not only desirable but imperative at this time and whether it can be effected only through international conference?" Those to whom the letters were sent included: Sir Robert Horne, former Chancellor of the British Exchequer. Montagu Norman, Governor of the Bank of England. Sir Josiah Stamp, British economist. Clement Moret, Governor of the Bank of France. Senator Joseph Caillaux, a former French Premier. Sir Herbert S. Holt, President of the Royal Bank of Canada. Augustin Legirette, President of the National Bank of Mexico. Alberto J. Pani, Mexican Minister of Finance. Hans Luther, President of the Reichsbank. Sir Osborne A. Smith, Governor of the Imperial Bank of India. Tsuyi Pei, Manager of the Bank of China. Professor Gustav Cassel, of the University of Stockholm. Americans to whom the letter was sent included S. Parker Gilbert, Owen D. Young and Otto H. Kahn. From Associated Press accounts from March 23, we take the following: Washington, The letters, sent as a part of the special silver investigation ordered by the House, asked suggestions of ways to boost silver prices as well as business generally. They inclosed copies of a preliminary statement by the Committee, Feb. 25, before it began hearings on the silver question. This statement expressed the opinion that since the silver problem is international in scope it seems it "can best be solved by international cooperation, but whether this co-operation is possible at this time is a question that must be determined." "It appears desirable that a reasonable relationship should be established between gold and silver," the statement said, "but this does not mean that these two metals should be placed upon the normal production ratio, nor is bi-metalism envisaged. "To all appearances there is no other way of restoring world values except by giving a general validity to the purchasing medium of the East, since that part of the globe embraces more than 50% of the people of the world. "Unless international trade is revived it is not possible /or this or any other nation to continue developing its natural resources and producing its wares. Therefore the urgency of immediate action in this respect is apparent to all. "Unemployment, international obligations, tariffs and budget deficiencies, the problems which face every parliamentary body in the world, are perplexities that can never be solved until monetary equilibrium is restored, and as long as the ability to exchange the fruits of our labor is non-existent with the problem of one having too much and the other too little will be us forever." It has been recommended by some witnesses in the Committee's hearings that a tri-party agreement among Canada, Mexico and the United States to use all the silver produced in North America would bolster its price. Several others have proposed that silver—as well as gold—be used as a part of the reserve held by gold standard countries against paper money. Some bankers told the Committee that while England a year ago would have opposed such a conference they thought the changing situation had brought a more favorable attitude on the part of the British. May 21 1932 Letter of Sir Reginald McKenna of Midland Bank Read at Senate Committee Hearing Declares International Co-operation on Silver Imperative. At the silver hearing, on March 25, of the subcommittee of the House Committee on Coinage, Weights and Measures, Representative Somers (Dem.), of Brooklyn, N. Y., Chairman of the subcommittee, placed in the record a letter from Sir Reginald McKenna, President of the Midland Bank, Ltd., of London, declaring it to be imperative that international co-operation be effected on the silver question and that "reasonable stability" can be given to silver values only through international action. We quote from the "United States Daily" of March 26, which gave as follows the text of the letter: My dear Mr. Somers: If the honor had been mine of being a member of the House of Representatives I should have voted for the resolution of which you have sent me a copy and of which the heading is H. Res. 72. In answer to the specific question you put to me, it is my belief that prompt international co-operation is not only desirable but imperative at the present time, and that a reasonable stability can be given to the value of silver only through international action. As you are so good as to ask for my opinion I give it freely. Report of House Committee Favoring International Conference on Monetary Exchanges and Silver Suggests that Conference be Held not Later Than July 1—Urges Commodity Price Raising—War Debts Discussed. The House Committee on Coinage, Weights and Measures submitted to the House on May 14 its report bearing on its study of silver and monetary exchanges. Along with its report the Committee presented to the House its resolution requesting the President to invite interested nations to join an international conference for "the restoration of the commodity price level," and added (we quote from Associated Press accounts): "The raising of the commodity price level should have instant appeal to those nations which are debtors to the United States if for no other reason than that international debts will be reduced in inverse ratio to the rise in commodities. . . . "The nations which decline to attend a conference which will be called for the sole purpose of re-establishing the normal basis of economic relations between debtors and creditors, thus materially favoring such nations as are debtors of the United States, will automatically have served notice on this country that their true intention is not to reduce their debts . . . but rather to induce our Government to establish the principle of the capacity to pay at a time when that capacity is virtually non-existent." The Associated Press adviees from Washington May 14 (as given in the New York "Herald Tribune") also said: This statement was included in a lengthy partial report the committee submitted after a three months' investigation ordered by the House of silver and monetary exchanges. Minority Views. Five Republican members of the Committee signed a minority report. They indorsed the resolution for the conference but said they could not agree with some conclusions drawn by the full Committee in its report. They did not explain with what conclusions they found fault. The full Committee said: "It is well to bear in mind that the war debts must be paid. They must either be paid by those who owe them or by the taxpayers of the United States. Every nation is anxious to pay these debts, provided it can secure the money. If we can raise commodity prices we automatically reduce these debts which can then be paid. If commodities are kept where there is no profit in their production, then the American taxpayer will pay these war debts. The choice is clear. There is no other alternative." The Committee proposed that the conference be convened not later than July 1 1932, and recommended: "That it be conveyed to the proposed conferees that, as debts of all nature are fixed and measured in money but in fact are paid in commodities or their proceeds, the problem should be approached from the angle of the price level which can be most effectually controlled through the money systems because these systems have disproportionate powers of leverage on the large body of commodities through the price level which regulates their movement." Signers of Maloney Report. The majority report was signed by Representative Randolph Perkins, Lloyd Thurston, Thomas Amlie, Victor Christgau and George J. Schneider. The majority found that "the raising of the level of commodity prices is the most urgent need of the world to-day." "Most plans proposed to accomplish this comprehend only inflation of the credit structure without the desired effect on commodity price levels," they added, "and are, therefore, to be dismissed as unsound. "World commodity price levels can only be raised soundly and effectively through strengthening the metallic hasea of the money systems by cooperative international action; not by addition to any already overburdened credit structure." As to the report we likewise quote from the Washington dispatch May 14 to the New York "Times" the following: The result of the dislocation of money and commodity prices was described as a paradox of want in the midst of plenty. "All witnesses agree that the dislocation of exchanges is one of the basic causes of world depression which had drawn in its vortex one nation after another during the last two years," were the words of the report. As to war-time debts owed this country by foreign nations, the report said: "Every nation is anxious to pay these debts, provided it can secure the money. If we can raise commodity prices, we automatically reduce these debts which can then be paid. If commodities are kept where there is no profit in their production, then the American taxpayer will pay these war debts. The choice is clear. There is no other alternative." Volume 134 Financial Chronicle lithe price of silver could be raised frail thirty to sixty cents an ounce, the result would have the same effect as the discovery of a new gold mine, producing and making available to the world $3,000,000,000 of gold, the report contended. This would bring an immediate rise in commodity prices and bring the world back on the road to prosperity. Somers Explains the Report. Representative Somers in an interview emphasized that the committee had suggested nothing which even smacked of bimetalism. "Not one member of my Committee," he said, "comes from a silverproducing State, but we all want to protect the gold standard for this country by raising the price level so as to restore capacity to pay all debtors. Otherwise, repudiation both at home and abroad stares us in the face. "Practically all bonded indebtedness in America being 'payable in gold coin of the present standard of weight and fineness,' it is absolutely imperative that we should make every effort to protect the gold standard. "The integrity of the gold standard can only be maintained by raising the price level of commodities, because debts of every nature, while measured in gold, can be paid only in the commodities, labor or services produced by the debtor. We must not lost sight of the fact that money, like every other commodity, is subject to the natural laws of supply and demand, so that if the supply of money is reduced for any reason, money will rise In terms of commodities or, to put it the other way, the commodity price level will go down. "When silver was largely discarded as auxiliary money shortly after the war the European nations did not realize that they were automatically reducing the world volume of money, first by taking away from the silver money still remaining in use a part of its gold value, and second, by causing frightened capital in the Far East to convert silver into gold and to hoard that gold. The world money system, which had been functioning from time immemorial on the two cylinders of gold and silver, is now being asked to function on one cylinder only. "The volume of money had thus naturally risen in terms of commodities, and as commodities have fallen debtors have been obliged to produce more and more commodities to meet the same fixed obligations. This spells bankruptcy to the debtors or repudiation to the creditors. Loss in Foreign Competition. "One after the other, nations have been obliged to repudiate their obligations either through moratoria or by leaving the gold standard. They have put up tariff barriers •by way of defending their markets from dumping by countries whose cost of production is based on depreciated money. "To-day America vies in world markets in open competition with nations whose costs of production are based on cheap exchange, and therefore we in the United States are obliged to continually lower prices to meet this competition. "Our producers and workers, on the farms and in the factories, are now competing with Chinese coolie and Spanish labor at a 55% disadvantage; they are competing at a 40% disadvantage with Japan and Mexico, at a 24% with British and 26% with Scandinavian labor. "Obviously we must in time lose our entire foreign trade under these circumstances. As long as we produce a surplus of wheat, cotton, copper, oil, tobacco, automobiles, &c., we must sell abroad. "No local measures of reflation silver, who feel that an international can effectually alter the world price level, but a concerted effort by international co-operation can unquestionably raise it and I know of no other means to accomplish this objective than by making world money more plentiful by giving to silver its pre.war gold value. "This can be easily accomplished by reverting to pre-war money policies which dignified silver as the auxiliary metal in the Western money system. This requires simple International action, which we propose to bring about by requesting the President to call a conference, and, if at that conference a better plan is offered, I am all for it." Senators Question Change. In the Senate the Somers resolution was received with some doubts by advocates of the rehabilitation if conference should be restricted to that metal. "That's too large an order," Senator King of Utah said. Senator King's Resolution. Ile felt that it would be wiser to make the scope of the Somers resolution more in line with a joint resolution Mr. King introduced on April 5. That resolution would authorize the President to call a conference, "for the purpose of considering and devising plans to increase the use of silver for monetary and other purposes, including the restoration of silver to its proper monetary status as a part of the primary and basic money of the world." Senator Ring said that he would call up his resolution at the first opportunity and added that sentiment for an international conference was constantly growing. Stating that he had received letters and telegrams of approval from various foreign countries, he said that Joseph Caillaux, former French Premier, approved the idea of bimetalism, as did many other prominent men abroad. The suggestion had been made that in lieu of a Governmental conference, members of Congresses or Parliaments should meet to discuss the silver situation. All over the world a demand that something should be done to improve the economic situation was giving impetus to a silver conference. Senator Wheeler of Montana, another Senator of a silver-producing State, WU not enthusiastic over the Somers resolution. "I fear the effect of a conference, because the President has not been sympathetic towards such a plan, and I am afraid the delegation he would appoint would not be heartily in favor of the idea," he objected. "I think the proper plan is to institute bimetalism through my bill, or one almost similar," he added. "Great Britain would follow our lead, and if she did so, other countries would fall into line. In my judgment, unless something is done, we will be a long time getting out of the depression. Bimetalism would do more to raise commodity prices than anything else. It would increase the purchasing power of the Orient and Latin America and do an enormous amount toward restoring our trade." Pressure from Western States producing silver, such as Arizona, Montana, Nevada and Utah, is steadily growing in Congress. An extract from the House Committees report follows: Effect of Silver on Commodity Prices. The effect that silver has had upon the commodity prices of the world world may be traced back as far as the year 1335, when the Parliament, meeting in the City of York, the then capital of Northern England, passed a statute prohibiting the exportation of good money and bullion and the Importation of bad money. The extraordinary rise of commodity prices in the latter part of the fourteenth century was due to Governmental manipulation of the monetary system, while debasementa in the fifteenth century brought to the Old World exactly the problems we are struggling with today. The dislocations and economic disturbances of the sixteenth century 3725 likewise find their origin in the supply of silver, not the shortage of it this time, but its abundance through the overproduction of the South American mines. Since Great Britain's enthronement of gold through Lord Liverpool's Coinage Act in 1816, silver prices have steadily declined except when temporarily affected by wars of the principal nations. Thia continuous drop of silver was paraleled by a similar drop in commodity prices. That this relation between silver prices and commodity prices continues to the present time is shown by the Federal Reserve chart covering the years 1913-31, which evidences that silver is the precursor of major commodity price movements and, hence, may be considered the key commodity. Figures of Federal Reserve Bank of New York. This chart, originally compiled in 1930 by the Federal Reserve Bank of New York, shows the course of silver prices superimposed upon the course of the general ccintnodity price level from 1913 to the end of 1931. It will be noticed that until the beginning of the war the average price of silver fluctuated around 60 cents an ounce. In 1918, under the Pittman Act, the United States Government was authorized to sell silver to the Indian Government at $1 an ounce. On this basis some 200,000,000 ounces were sold. What effect did it have on silver? If we look to No. 1 on the chart we will notice that the advance in silver prices was stopped and held stable during the months that this act operated. We further observe that scone very few months later the movement in commodity levels is rather strikingly reflected. In late 1919, the Government of the United States announced that it would sell silver in large amounts. As a result, the course of silver turns down, as will be seen under No. 2 of the chart. Several months later there is an almost identical drop in the commodity price level. In 1920, the British Government debased its silver coins and sold its surplus upon the markets of the world. The drop in silver as shown by the chart is followed by a similar general fall in commodity prices. For a period from 1921 to 1925 silver was relatively steady, as was the level of commodities. In 1925, the Royal Commission on Indian Currency and Finance sat in London under the chairmanship of E. Hilton-Young. As a result of their deliberations, India was put upon a gold bullion standard. Gold reserves were to be partially created through the sale of silver rupees, consisting of several hundred million ounces. The threat of dumping by India of hug,, amounts of silver on the markets of the world laid the basis for the monetary dislocation which we are still witnessing. The depression in the price of silver is again followed, as the chart shows, by a like decline in price levels. Again, in 1928 and 1929, Indo-China and Belgimn demonetized, melted up and sold silver coins in the world markets. The course of silver prices shown on the chart dropped downward to its present low level of approximately 28 cents an ounce. The course of commodity price levels corresponded with the same downward movement. The blow which silver received during the interval of twelve years Is attributable to Governmental action and not to an abnormal increase of silver production, as no increase has taken place. Debasement and demonetization and the flight of capital which they superinduced are the direct consequences of Governmental acts. If the stability of money has thus been destroyed by Governmental acts, it can be restored by the same process and, therefore, this Committee is convinced that it is possible to restore confidence in money, stabilize its purchasing power and raise commodity prices through the instrumentality of sound legislation and administration. Effect to Be Studied of Silver Payments.—Departments to Explore Possibilities tor Settlement of Foreign Debts,Says Senator Hayden. After a conference with President Hoover at the White House on May 10, Senator Hayden (Dem.) of Arizona, (according to the "United States Daily") stated orally that the President had agreed to submit to the various interested departments of the Government Senator Hayden's resolution authorizing payment of the foreign debts of the United States in silver. The "Daily" of May 11 continued: The purpose of the study, Senator Hayden said, would be the "thorough exploration of the possibilities and the effects of the resolution." The Investigation would show what it would mean to take a large quantity of silver and how much would be likely to be offered. Senator Hayden's resolution would authorize the acceptance of payments in silver at the rate of 11/a fine ounces for each dollar owing. No such payment would be accepted, however, if the debtor government intended to melt or debase its own coins to make the silver payment. . . . Senator Hayden said that silver payment at the rate of 1% ounces for each dollar would be paying 66 2/3 cents an ounce for the silver taken in in debt payments, but the market price of silver now is only 30 cents an ounce. The immediate effect of the adoption of his resolution, Senator Hayden said, would be to raise the price of silver towards the level of 66 2/3 cents an ounce. Annual debt payments being received by the United States amount to about $269,000,000, the Senator said. This sum, if paid in silver, would not have an adverse effect on conditions. Bernard M. Baruch Advises United States to Initiate Silver Conference—Immediate Action Would Be Beneficial, He Tells House Committee on Coinage. The United States should take the initiative in calling an international conference on the silver question, Bernard M. Baruch, financier, testified on March 23 before the subcommittee on silver of the House Committee on Coinage, Weights and Measures. Edwin F. Chinlund, comptroller of the International Telephone & Telegraph Co. was also a witness, said the "United States Daily" of March 24, which likewise said: "Co-operative action among to the purchase and segregation the market price of silver and represented by silver—increase the principal governments affected tending of silver," Mr. Baruch said, "would increase thus—to the extent that Oriental wealth is the buying power of that region." Enumerates Principles. Mr. Baruch, enumerating "certain principles which seem clear to me," said: "(1) That this is a subject of international application and one in which all action ought to be international; 3726 Financial Chronicle "(2) It is obviously a subject that merits study, perhaps negotiation, and certainly composition of conflicting interests; "(3) It seems quite clear to me that the matter requires international co-operation for study, the reaching of conclusions and the taking of action." "Further," Mr. Baruch said, "I see no reason why such international approach should not proceed at this time, and I see a good many reasons why it should proceed at once. "In general, I agree— "(1) That the demonetization of silver in various nations, which began in the last century, threw large quantities of that metal (in excess of the former requirements of the arts) on the markets, and that this glutting of the markets depressed the price of silver; "(2) That several Oriental nations have from time immemorial used silver as a token of wealth and as a medium of exchange, and that the accumulations of individuals were and still are represented by stocks of silver; "(8) It goes without saying that influences which depreciated the exchange value of these stocks of silver impaired the buying power of these nations; "(4) That the demands of the war on the resources of the Far East caused enormous shipments of silver there because it was the medium in which purchases had to be made due to the customs of those countries; Bullion Value Increased. "(5) That even these unusual shipments of silver were not sufficient, bullion the that value of silver exceeded its nominal value; result the with "(6) That after the war the demonetization and revaluation resulted in gold coverage in India and China and threw great quantities of silver on the market, depressing the price of silver and—to the extent that Oriental wealth and buying power are represented in silver hoards—impaired that buying power. "On all these facts, of which I am reasonably certain, it seems to me that co-operative action, among the principal governments affected, tending to the purchase and segregation of silver, would increase the market price of silver and thus—to the extent that Orinetal wealth is represented by silver—increase the buying power of that region. "The quantities involved and the money necessary to effectuate such a policy are not very great. I believe that anything we can do to retrace the steps of excessive deflation and restore the purchasing power of all countries is a right thing to do so long as it is absolutely insured against excessive inflation. Avoids Bi-Metalison Issue. "In my own mind, I try to keep consideration on a simple basis, such as I to and avoid any consideration that might involve bi-metallinn. have stated, The reason I do this is because other conjectures invade a controversial field in which I can not claim the qualifications of an expert" Mr. Chinlund told the Committee that he believed the objective of helping world business would have to be achieved through "international co-operation," and he urged a more stable currency, asserting that "our outstanding need is tg have money on a stable basis so people will know the thing they are dealing on will be on that basis long enough to complete the transaction." Transvaal Gold Output at Record Figures, The Transvaal gold output in April, as reported by the Johannesburg Chamber of Mines, was 949,796 ounces. A cablegram May 13 to the New York "Times" said: This is greatly in excess of the April production in 1931, which was 882,337 ounces. Is It Is below the record production of 960,035 ounces in March of the present year, but with that exception it is the largest monthly output, and it makes the aggregate output of the four completed months, 3,760.627 ounces, as against 3,547,848 in the corresponding period of 1931, which was itself the largest recorded production for the months included. Siam Suspends Gold Standard. Under date of May 14 the Department of Commerce at Washington issued the following announcement: Effective May 11 the baht has been revalued, resuming the relationship to sterling which obtained prior to Great Britain's suspension of the gold standard in September 1931, according to a report to the Department of Commerce yesterday from Assistant Commercial Attache Charles E. Brookhart, Bangkok. According to the present arrangement, the pound sterling is again held equal to 11 bahts. The Siamese Treasury in quoting exchange has set the buying rate in Bangkok for sterling at 10.80 bahts and the selling rate in Bangkok for sterling at 11.20 bahts, per pound. Local bank quotations are based on a selling rate of 33 cents per baht for demand drafts on New York* this rate is only nominal. Possibility of French Move to Restore Silver—Raymond Patenotre, Deputy, Asserts Herriot and Caillaux Back Bimetalism.—He Advocates Ratio of 45 to 1, With a Monetary Reserve of 3% in Silver. The following account from Porto Rico May 18 is from the New York "Times:" The next French Government will support a policy of international bimetallic standard of currency, Raymond Patenotre, Deputy and one of the wealthiest men in the country, said in an interview with your correspondent to-day. Patenotre accompanied former Premier Laval to Washington in an effort President to to win over President Hoover to his views and to induce the call a monetary conference. He failed at that time to convince either he admits, mission, the in experts financial French Mr. Hoover or even the have a conference but he now says the President seems willing at least to he has completely called, and. on the French side, M. Patenotre asserts his point of view. won over Joseph Caillaux and Edouard Herriot to important figure most a be to is When it is remembered that M. Herriot possibly will be Finance In the new Government and that M. Caillaux would go far toward swinging Minister, it will be realized that this support financial Prance into line. Bank Could be Overruled. officials flatly oppose a change Pir While it is true that Bank of France that their influence is naturfrom the monometallic, or gold, standard and appointments, and when they ally very strong, their positions are political May 21 1932 are at odds with the Government they must either resign or change their attitude. "The world's gold stocks are insufficient for the volume of transactions." M. Patenotre said, "and the production (of gold), far from increasing, is going to diminish after 1934. A return to bimetalism would permit a revival of international trade. It would give back their purchasing power to the Asiatic races. It would reduce hoarding and, in short, reverse the present deflationary trends and start the world back toward normalcy. "If we don't do something, capitalism is doomed. It don't consider bimetalism the only way out, but monotetallsm must be abandoned, and it seems to me that a bimetallic standard is the best solution." What M. Patenotre has in mind is setting a definite ratio of gold to silver at one to forty-five. This would be done at an international monetary conference at which the Banks of France and England and the Federal Reserve System would at least agree to adopt bimetallsm to the extent of making the currency reserve 3% in silver and the rest of the reserve in gold. In the case of France, for instance, that would mean about $300,000,000 in silver. M. Patenotre feels there are great objections to the bimetallsm which the United States tried, in a limited way, by the compulsory purchase of silver during the nineteenth centruy. He holds that one country acting alone cannot adopt the policy effectively. If an international agreement were reached, he says, the fluctuations in the value of silver and its ratio toward gold would be kept at such a minimum as to permit the ratio to stand for at least five to ten years. Needless to say, the adoption of the Patenotre plan would mean a reversal of France's traditional policy, which is firmly for the gold standard and for a slow and cautious return to normal conditions. Prof. Kemmerer on U. S. and Gold Standard—Problem of World Not to Find Substitute for Gold Standard But of Establishing Later on Better Standard— Likelihood of Commodity Price Rise With Continuance of Gold Standard. The great problem before the world to-day is not the problem of finding a substitute for the gold standard but of making the gold standard a better standard, Edwin W. Kemmerer. Research Professor of International Finance at Princeton University and financial advisor to numerous Governments, declared on May 18 in a talk on "The United States and the Gold Standard," broadcast on the Halsey, Stuart & Co. program. Dr. Kemmerer said: "The gold standard is far from being perfect. The value of gold, when viewed over long periods of time, unfortunately, has been very unstable. During the past generation, however, the value of silver has been even more unstable than that of gold and during the long period of bimetallism ending about 1873. when gold and silver were linked together under the influence of the bimetallic ratio in France, the world's monetary unit was likewise very unstable. The world has had extensive experience with managed paper currencies and they have practically always ended in disaster. It is too early to judge of England's recent experience, which has lasted only eight months, but it Is clear that the predominant sentiment in England is to return to the gold standard at an early date." There is no evidence, in Dr. Kemmerer's judgment, that the world is suffering to-day as it was from 1873 to 1895,from an enduring scarcity of monetary gold. Dr. Kemmerer also pointed out some significant facts to refute the claim that the difficulty is chiefly due to maldistribution of the world's stock of monetary gold, saying: "The world's stock of monetary gold at the present time is about 11.4 billions of dollars and of this amount the United States has about 35%; France about 26% and the rest of the world 39%. The best evidence we have seems to show that the United States in a normal year does about 35% of the total amount of business done in the advanced countries of the world so that our present percentage of the world's stock of monetary gold is only about our percentage of the world's total business. In view of the comparatively high development of our currency and banking system in the United States, it is probably true that we do not normally need as much as 35% of the world's stock of monetary gold, but our fair proportion would not ye very gar below this figure." Dr. Kemmerer,who, during the past 30 years has been the currency expert to three foreign countries, including Mexico, and- financial advisor to nine others, including Colombia, Chile, Poland and China, as well as currency and banking expert to the Dawes Committee in Germany and France, took occasion in his talk to define the exact meaning of the gold standard, which is a puzzle to many, saying: Briefly defined, the gold standard is a currency system in which the unit value, be it dollar, pound or franc, in which prices and wages are customarily expressed, and in which debts are contracted, consists of the value of a fixed quantity of gold in a free gold market. In the United States the unit of value is the gold dollar, which contains 23.22 grains of pure gold. Inasmuch as there are 480 grains of gold to an ounce, an ounce of gold can be coined into 520.67 of U. S. gold coin. We have free coinage of gold In the United States: therefore, anyone can take pure gold bullion in any quantity to an American mint and have it minted into gold coin, receiving $20.67 (less certain petty charges for assaying and refining) for each ounce of gold he takes to the mint. Thus, in the United States, to say that an ounce of gold is worth $20.67 is like saying that a foot is twelve inches long." Turning to the business situation, Dr. Kemmerer expressed the opinion that the great trouble to-day is that the people in this country who have money, the bank deposits and the bank credit, are afraid to use them. Physical volume of production in the United States to-day is about 25% less than it was three years ago. The amount of money reported in circulation is about 15% more. The general price level is 24% less. The bank deposits of reporting member banks are only about 16% less. In contrast to all these facts, Dr. Kemmerer emphasized our bank deposits by Volume 134 Financial Chronicle which, through the use of bank checks, we perform about 90 of our total business, are circulating at only about one-half the rate of three years ago. In other words, he said, a given amount of deposits is doing only about one-half the money work it was doing in 1929. In conclusion Dr. Kemmerer said: "If the world is not experiencing an enduring shortage of monetary gold, and if the recent heavy decline in the commodity price level is due chiefly to the psychological factor of a break in confidence—namely shell shock from the collapse of 1919—accentuated by the unfortunate conditions in Europe resulting from the war, we may expect that, within a short time, the fundamental forces, which history shows make for a fairly uniform rate of economic growth throughout the world, will again dominate the situation. In that case, if the world continues to use the gold standard, as I believe it will, the commodity price level will probably rise again to something like what it was during the 811-year period of comparatively stable wholesale prices which ended with the stock market crash of 1929." Reported Rush in Turkey to Buy Gold. From Istanbul, May 20 United Press accounts to the New York "World-Telegram," said:• A public rush to buy gold began to-day after the Government issued a decree compelling all resident's to declare all foreign money, checks and bonds possessed at home or abroad. Senator Borah Holds World Recovery Dependent on Settlement of Reparations, Disarmament and Restoration of Silver. Predicting that the year 1932 will stand in history as one from which genuine prosperity dates or one commemorative of the worst misery, Senator Borah (Rep.), of Idaho, asserted in the Senate, May 5, that only the settlement of the reparations questions, sincere world disarmament and restoration of silver to its 1925 position could accomplish a return of satisfactory economic conditions. The "United States Daily" of May 6, from which we quote, further reported Mr. Borah as follows: The Idaho Senator called upon "the nations of the earth to do something to relieve citizens of taxation." and to avoid further loaning of funds beyond the ability of the people to pay. He said there could be no constructive purpose in raising taxation, nor in adding to the availability of funds for borrowing so long as the purchasing power of "more than half of the human family" has been almost completely destroyed. Failure at Lausanne Predicted. Senator Borah declared it was evident now that the present Geneva conference on armament limitation will fail. The projected conference at Lausanne on economic matters likewise is doomed to fail of any constructive conclusions, he said, and added "the timidity of governments is making people restive and resentful." Senator Borah, replying to a question by Senator Fletcher (Dem.), of Florida, whether he favored stabilization of commodity prices, declined to "go further in advocating restoration of silver than to the position it occupied in 1925." Prior to that time, he declared, all of that part of the world which used silver was making progress. Price Declines Cited. "Then there was the movement to force the countries that were using silver to turn to gold," he continued. "Commodity price declines kept pace with the decline in the value of silver, until now we have one-half of the human family of the earth on a barter basis. It is on a basis that absolutely precludes the trading between nations. Their purchasing power has been destroyed, and yet the only policies we have offered here are policies of increased taxation and more loans." With reference to the Geneva Conference, the Idaho Senator asserted that nothing was going to be accomplished because the European statesmen did not want to accomplish anything. He said there was a general belief to this effect, and also that the outlook was already having its effect. Sees Investors Discouraged. "And why not?" he asked. "Why should there be anything but discouragement for investors and for those seeking to maintain the lifeblood of commerce and industry, when we know that 75% of the budgets of all nations are the results of war, past or anticipated. Some of them even are as high as 85%. "If that conference fails to limit armaments; if it fails to lift any of the burdens on the taxpayers of the nations whose delegations are there assembled, then the taxpayers know that they are again launching on a new and longer road with the same burdens as of old. There is nothing in that to encourage the investor; there is nothing in that to encourage new vitality when nations are without credit, without money, when their people are borne down by taxes and without money and millions are unemployed. Calls Governments Timid. "We do not do things in this country by revolutions in the sense that word is used, but here, as elsewhere, the people are restive and resentful because they recognize that Governments are not meeting the purposes for which they were established. "That is the answer. The timidity of Governments is recognized. There is not a leading statesman in all Europe who does not to-day know that reparations will destroy Europe. There is not a leading statesman there who does not know that failure to disarmament will sink the people under the load." Senator Borah argued that fundamental changes were necessary. It is not the fault of the system, nor of the fact that wealth is concentrated, though he would have that different, he said, but the fact that administration of wealth has been improper; that is the basic difficulty. He added that there had been appeals for courage and for confidence but observed that a sick man might have both of these and yet succumb unless a surgeon were provided to remove the trouble. The need obtains, according to the Senator, for those "who hold the reins of power to grapple with the problems on a more liberal basis." "Unless they do that," he continued,"things will happen that are beyond human language to describe." The Senator recalled the request of the Senate a year ago that the President invite the nations into a silver conference, and Senator Smoot (Rep.), 3727 of Utah,interjected the information that England and France had declined to participate. "Perhaps they did," said Senator Borah, "but I do not believe a serious effort was made to get together. I have had no proof that a serious effort was made." Gold Distribution Cited. Senator Borah related that United States and France had in their possession about 70% of the world's monetary gold stock. These two nations, he said, have approximately 170,000,000 people, while the population of the rest of the world was given at about 1,500,000,000. Thus, he calculated, there was about $3,000,000,000 in gold for use by the remainder of the world in trade, and that meant a per capita fund of only about $2. "It seems to me," he added, "that the world must get away from this gold mentality. It seems to me there must be more money. Urges "Pronounced" Silver Policy. "It signifies nothing that we have all of the wealth that we are reputed to have, nor that France has all of the wealth that she is credited with having. Rome had as much wealth when she fell as she had at the height of her power, and France had wealth when Louis XIV was dominant. China has untold wealth. All of these things are true, and since they are true why can not they be allowed the use of a medium that was good enough for 3,000 years." Senator Borah advocated a "pronounced policy" by the United States respecting silver. If such a policy were evident, he said, he was sure there would be a conference result from it. The influence of the United States was held by the Senator to be such that a conference could not be avoided, and he argued that "it surely would accomplish something." Senator Borah Urges Silver as Currency Basis—"Gold Dollar is no Longer an Honest One," He Declares in Citing Fluctuations—Demands Stabilization— Senator Says it is as Necessary as Balancing Budget and Granting Idle Relief. Monetary stabilization is as urgent a necessity during the present session of Congress as balancing the budget and granting relief to the unemployed, Senator Borah said in a Senate speech on May 16. The Senator is quoted as follows in a Washington dispatch to the New York "Times": "With the constant fall of prices and the constant diminishing of returns," he said. "it is impossible for any one to give any reasonable estimate as to what will be required to balance the budget. "If we cannot, before we adjourn, work out some reasonable plan which will stay the fall of prices; if we cannot, in other words, aid the farmer and the business man to balance their budgets, this talk of balancing our budget, in my judgment, will never be realized." In his speech Mr. Borah renewed his old plea for the use of silver as a currency base. "We must take up the question of the stabilization of the dollar," he said. "The gold dollar is no longer an honest one. A farmer may go to sleep with a $1,000 mortgage on his land and, by reason of the fluctuating value of the gold dollar, wake up to find that he owes an additional 10%. "How many suicides must we have, how many persons go insane, how many farms must be sold under the hammer, how many businesses be closed up, before we take a single step to stabilize the value of the dollar?" Mr. Borah said that stabilization must be accomplished "either through the Federal Reserve System,or some other method which the Congress may point out." He contended that silver never has fluctuated "since the time of Abraham," more widely than gold, quoting statistics to show that between 1879 and 1896 the gold dollar rose 27%;that from 1896 to 1920 it fell 70%, and that from 1920 to September 1927. it again rose 56% in value. "The business world cannot continue under the condition of affairs," Senator Borah added. "There will be a collapse. If we have no remedy for the fluctuating value of gold which is now in hiding, now being hoarded, which retreats the minute trouble comes, it is impossible for the business world or agriculture to continuo, and the balancing of the budget would be an iridescent dream. "Silver has never fluctuated in value to a greater degree than gold, except when it has been legislated against by Government. If we take the course of gold, and its value, its purchasing power, and that of silver, from the time of Abraham down to recent days, we find that the fluctuating value of silver has not been greater than that of gold at any time "It may not be that action in regard to the silver question is the solution of greater basic money, but if that is not it, then the Federal Reserve Board, with its discount and rediscount and eligible capacities, should undertake to do more than it has yet undertaken to do in order to stabilize the value of the American dollar." Mr. Borah spoke during a temporary cessation of hearings on the House Geldsborough bill, which recently has been the subject of hearings before a Senate Banking and Currency subcommittee, under the Chairmanship of Senator Walcott. This bill would direct arbitrarily that the Federal Reserve System maintain commodity prices at a predetermined level. F. J. Lisman in Letter to Representative Rainey Urges that France Be Called Upon Under Debt Agreement to Provide Marketable Securities in Exchange for Those Now Held in United States Treasury. A suggestion, by F. J. Lisman, in a letter addressed by him to Representative Rainey of the House Ways and Means Committee, proposes that France be called upon, in accordance with the terms of the war debt funding agreement to provide marketable securities in exchange for those now held in the United States Treasury. The bonds,said Mr.Lisman, "would equal the principal of the French debt to us, amounting to nearly $4,000,000,000." "Such bonds" he adds "sold on a 4% basis, . . . would yield approximately $2,000,000,000 or nearly the entire amount of the current year's Treasury deficit." "These $2,000,000,000 of French bonds" continues Mr. Lisman "could even now be sold to a syndicate, either in whole or in part, at around 4.60 to 4.75% basis, netting a little under $2,000,000,000, according to Mr. 3728 Financial Chronicle Lisman "such action would not only fully protect our gold reserve but would have other desirable repercussions on our problems and those of Europe and the world at large." Mr. Lisman's letter to Representative Rainey follows: When the ratification of the settlement of the debt of France to the United States was first reported to the House of Representatives on May 29 1926, and again just before it was ratified on Dec. 11 1929, you went on record with a strong dissent from the terms which you thought were far too liberal to France. I do not find in your speech at the time, nor in the speech of Mr. Hawley, who reported the treaty out of the Committee on Ways and Means, any references to paragraph 7 of said treaty, which, presumably, for this reason seemed to have completely escaped the attention of not only the public but of Congress and other Washington authorities. In some of the recent investigations made for me by Melville W. Thompson of 232 Park Ave., who, during the war, was Chairman of the War Board and known for years as an outstanding annalist of complex intercorporate and international situations, has come across and reported to me this paragraph seven which reads as follows: "Article 7—Exchange for Marketable Obligations—France will issue to the United States at any time, or from time to time, at the request of the Secretary of the Treasury of the United States,in exchange for any or all of the bonds issued hereunder and held by the United States, definitive enwaved bonds in form suitable for sale to the public, in such amounts and denominations as the Secretary of the Treasury of the United States may request, in bearer form, with provision for registration as to principal and (or)in fully registered form,and otherwise on the same terms and conditions, as to dates of issue and maturity, rate or rates of interest, if any, exemptions from taxation, payment in obligations of the United States issued after April 6 1917, and the like, as the bond surrendered on such exchange." France will deliver definitive engraved bonds to the United States in accordance herewith within six months of receiving notice of any such request from the Secretary of the Treasury of the United States, and pending the delivery of the definitive engraved bonds, will deliver, at the request of the Secretary of the Treasury of the United States, temporary or interim receipts in form satisfactory to the Secretary of the Treasury of the United States within 30 days of the receipt of such request, all without expense to the United States. The United States, before offering any such bonds or interim receipts for sale in France, will first offer them to France for purchase at par and accrued interest, if any, and France shall likewise have the option in lieu, of Issuing any such bonds or interim receipts,to make advance redemption, at par and accrued interest, if any, of a corresponding principal amount of bonds issued hereunder and held by the United States. "France agrees that the definitive engraved bonds called for by this paragraph shall contain all such provisions, and that it will cause to be promulgated all such rules, regulations, and orders as shall be deemed necessary or desirable by the Secretary of the Treasury of the United States, in order to facillatte the sale of bonds in the United States, in France or elsewhere, and that if requested by the Secretary of the Treasury of the United States, it will use its good offices to secure the listing of the bonds on such stock exchanges as the Secretary of the Treasury of the United States may specify." This paragraph means in plain language that France agrees to give to the United States in exchange for bonds of the Government of France of a par value running up into the millions, which the United States Treasury now holds, other bonds of such par value as is suitable for the French market and bearing rates of interest and containing other provisions similar to the Treasury bonds which the United States Government has issued, in order to finance the loans which it made to France during the war. The French Government also, in effect, agrees to apply to the stock exchanges of Paris and other cities to list such new bonds and to do everything which might reasonably be required by the United States Government to facilitate the sale of these bonds in France or elsewhere. The bonds in question would equal the principal of the French debt to us, amounting to nearly 84,000,000,000, payable over 55 years, at interest rate averaging about 3%. Such bonds sold on a 43(4% basis (which is the approximate cost of the money to the United States) would yield approximately $2,000,000,000, or nearly the entire amount of the current year's Treasury deficit. These $2,000,000,000 of French bonds, could even now be sold to a syndicate, either in whole or in part, at around 4.60 to 4.75% basis, netting a little under $2,000,000,000. In view of the fact that there is a feeling—whether justified or not— that the large gold movement to France and the control of European finances by France are not altogether separate from French politics, which In turn, irrespective of the reasonable security to which France is entitled, complicates the whole world political and trade economic situation, it would not appear to be amiss to ask France to live up to this treaty which was duly signed by the high contracting parties in 1926 and ratified by the French Parliament and our Congress in 1929. This treaty should be every bit as sacred and irrevocable as the Versailles Treaty. This letter is written for the purpose of drawing your attention, as well as that of other people, to this apparently overlooked or forgotten paragraph seven, so that the United States authorities may make the request upon France to live up to this treaty. Such action would not only fully protect our gold reserve, but would have other desirable repercussions on our problems and those of Europe, and the world at large National Association of Mutual Savings Banks Favors Commission to Negotiate with Foreign Governments on War Debts in Accordance with Alfred E. Smith's Proposal Endorsed by Group of Railway Brotherhoods. At its annual meeting in New York yesterday (May 20) the National Association of Mutual Savings Banks adopted a resolution favoring the appointment of a commission to negotiate with foreign countries on adjustment of war debts, as proposed by Alfred E. Smith and endorsed by a group of railway brotherhoods. The resolution follows: Whereas, a prompt settlement of the uncertainties regarding the intergovernmental debt situation is a pre-requisite of any permanent revival of employment and of business in the United States: Now Therefore, Be It Resolved: That the National Association of Mutual Savings Banks. representing over 13,000,000 member depositors with aggregate deposits of over 810,000,000,000 endorses the suggestions made to the President of the United States by eight American railway brother- May 21 1932 hoods for the immediate appointment of a commission to negotiate with foreign countries for an equitable adjustment of the debt due to the United States from foreign governments on the basis of the active co-operation on the part of such debtor governments in the stimulation of international trade between them and the United States. Representative Rainey Endorses Proposal of Railway Brotherhoods Asking President Hoover for Stay on Foreign Debts—Urges Lowering of Tariff Walls. Representative Rainey in a statemerit issued on May 14 endorsed the petition of the railway brotherhoods to President Hoover, in which a moratorium on foreign debt payments is urged. The petition is given elsewhere in our issue to-day. In his statement Representative Rainey said "we now have deposited with our Treasury Department foreign bonds amounting to over $11,000,000,000. All the foreign Governments which owe us money, except Austria, and that amount is small and negligible, have deposited their bonds with us. There are 13 of these Nations so depositing bonds. Under the terms of our agreement with them we cannot sell these bonds on our own markets or on the markets of the country issuing them until we can sell them at par and accrued interest. They are all gold bonds." He added: By lowering tariff walls we can restore international trade, and a restoration of international trade will mean that these bonds will go back to par In the countries which issued them, and whenever they do we can dispose of them. It is not necessary to cancel foreign debts. They have already paid us in bonds, and whenever we can restore the value of our bonds and their bonds we can sell their bonds and get our money. A dole in this country is inevitable unless we can restore international trade. In full, Representative Rainey's statement follows: I have read with a great deal of interest the statement of the railroad brotherhoods addressed to President Hoover. This is the first statement I have seen from a responsible organization which points out exactly the reasons for the unfortunate economic condition in which this country now finds iyself. They correctly call attention to the fact that our policy of isolation is responsible for the fact that our railroads and all our industries are discharging men and reducing salaries. The nations of the world are interdependent and they must trade with each other. Foreign nations owe us immense amounts and they cannot pay us in gold. They can only pay us in goods, and our foolish policy of Isolation makes this impossible. Our exports at the present time are the lowest they have ever been since 1904. They are less than one third of our exports in 1927. This means less business for our railroads—less goods and products to haul to the seaboard, less goods and products of foreign origin to haul from the seaboard back to points of distribution throughout the country. It means that our ships are laid up and are rusting in our wharves. And this is entirely due to our absurd system of tariffs. Germany and 29 other nations protested against the rates of the HawleySmoot bill and Germany pointed out clearly in her protest to the State Department what would happen. She would be compelled to buy less goods from the United States. England is now arranging her inter-Empire low tariffs and high tariffs as to the rest of the world. Flight of American Capital. The flight of American capital is proceeding with alarming rapidity, and it is seeking investment now beyond foreign tariff walls, employing hundreds of thousands of foreign laborers. No wonder 8,000,000 unemployed walk the streets of our cities. No wonder the farmers are suffering a depression undreamed of in the history of the nation. No wonder our factories are closing. We can grant further moratoriums, but they must be granted in return for trade advantages, and trade advantages can only be accomplished by lowering tariff walls all over the world. The President recently vetoed the tariff bill which presented the only method possible of lowering tariff walls throughout the world. We now have deposited with our Treasury Department foreign bonds amounting to over 811,000,000,000. All the foreign Governments which owe us money, except Austria, and that amount is small and negligible, have deposited their bonds with us. There are thirteen of these nations so depositing bonds. Under the terms of our agreement with them we cannot sell these bonds on our own markets or on the markets of the country Issuing them until we can sell them at par and accrued interest. They are all gold bonds. Lowering of Tariff Walls Would Restore International Trade.. By lowering tariff walls we can restore international trade, and a restoration of international trade will mean that these bonds will go back to par In the countries which issued them, and whenever they do we can dispose of them. It is not necessary to cancel foreign debts. They have already paid us in bonds, and whenever we can restore the value of our bonds and their bonds we can sell their bonds and get our money. A dole in this country is inevitable unless we can restore international trade. Another constructive proposition which the President might propose, but will not propose, is an amendment to our Federal Constitution which would permit the Federal Government to provide a shorter work week and a shorter work day for industries doing an Inter-State business, and which can regulate wages in those industries so that wages will not be reduced. In addition to restoring international trade we must have more consumers in the United States, and in order to obtain more consumers we must have more men with money to buy and with leisure to enjoy the things they themselves produce. Shortening the work week and enabling us to employ men in staggered hours and thus employ more men will accomplish this result. The time has come when the men who work with machines in this machine age must have a larger share in the wealth these machines produce. It can no longer, practically all of it, go to employers. We have before us to day the challenge of a great communistic nation and we must meet it. We must furnish our workmen with employment or we must suffer the consequences. The right to work is a right which belongs to every man,and the result of the existence of a capitalistic nation depends upon its willingness and its ability to furnish work for men who are willing Volume 134 Financial Chronicle and able to work. If it fails to do this the consequences are apparent, and the statement of the brotherhoods indicate what the consequences may be. The country is indebted to the brotherhoods for the plain, forceful. indusputable declaration they have just issued in their plea to President Hoover. and the whole thing is up to him. If the policies of his party keep him from suggesting to Congress the obvious remedies, the time has come to turn this Government over as speedily as possible to a party which will Carry into effect the suggestions of the railroad brotherhoods. Group of Railway Brotherhoods Appeal to President Hoover for 25-Year Moratorium on Foreign Debts— Action Urged in Behalf of Labor—Warns of Dole— Proposal Similar to That of Alfred E. Smith— International Trade and War Debt Commission Proposed. An appeal to President Hoover to stay the demand for the payment of the war debts owed the United States was made on behalf of labor by representatives of several railway brotherhoods on May 13. The rail labor heads personally appeared at the White House to present their plea to President Hoover, their plan being along the lines of a recent proposal suggested by former Governor of New York Alfred E. Smith for a moratorium on international debts and cumulative cancellation based on consumption of imports from the United States. The New York "Herald Tribune" of May 14 in its account of the brotherhoods' petition said: It was not disclosed what the President's reaction was to the proposals read to him in petition form at a private conference with the labor executives, but the latter will carry their appeal to-morrow direct to the leaders of Congress. Almost heresy to Congressional ears, their petition minimizes the importance to the Treasury of foreign debt cancellations, declares them to be a part of the burdens of now outlawed war, speaks of them as a "pound of flesh" and demands that they be laid aside to allow re-establishment of foreign trade. Dole Called Alternative. The appeal goes so far in its contention that the forgetting of war debts will restire world trade and domestic confidence as to threaten a demand for a dole as an alternative to acceptance of the debt program. The labor plan calls for a 25-year moratorium and the cancellation of the debts of each country in proportion to its imports from the United States each year, the cancellation not to exceed 25% of the total value of each country's American imports during the year. The names of the indorsing organizations and their representatives who made up the delegation to the White House follow: Brotherhood of Locomotive Firemen and Enginemen, D. B. Robertson, President. Order of Railway Conductors, S. N. Berry, President. Brotherhood of Railroad Trainmen, A. F. Whitney, President. Switchmen's Union of North America, T. C. Cashen, President. Order of Railroad Telegraphers, E. J. Manion, President. American Train Dispatchers' Association, J. G. Luhrsen, President. Brotherhood of Maintenance of Way Employees, F. H. Fllozdal, President. Smith Program. Although the labor chiefs did not mention Mr. Smith's name in their petition, their program is almost exactly the one which the former New York Governor boldly urged here on April 13, to the amazement of leading Democrats gathered at the Jefferson Day dinner. The one difference was that Mr. Smith proposed a 20-year rather than a 25-year moratorium. The fact that a formidable group now adopts completely his war-debt program, hitherto spurned by Congress, was held to be another feather in Mr. Smith's cap. His political camp in the Democratic pre-convention campaign was congratulating itself only two days ago that the domestic relief program urged by Senator Joseph T. Robinson, Democratic leader of the Senate, was advanced by Mr. Smith several months ago. The Robinson proposals are now largely incorporated in President Hoover's compromise plan. The heads of the railway brotherhoods in their petition to President Hoover said: It would be with great reluctance that those we represent would ask for a dole. On the other hand, Mr. President, what other alternative is there available? Everything else suggested has either failed or has been denied. Ifsomething is not immediately done we will be obliged to demand a dole. Along with their petition the heads of the brotherhoods submitted a draft of a joint resolution, as follows, to carry out the proposal urged by them: It is hereby resolved by the Senate and House of Representatives of the United States of America in Congress assembled: That the President of the United States is hereby authorized and instructed to appoint a Commission of five members to be known as "the International Trade and War Debt Commission"; That the five members of this Commission shall consist of one representative of labor in the United States, one representative of the farmers of the United States, two outstanding business leaders of the United States and one financial expert of the United States; That this Commission is hereby empowered and instructed to confer with foreign governments to determine and institute the most practicable measure for restimulating international trade and exports from the United States; That this Commission is hereby empowered and instructed to inform each foreign government owing war debts or reconstruction loans to the United States Government, that the ultimate settlement of all such debt problems with each separate government is dependent on the degree of co-operation that each individual foreign government exhibits and institutes in its effort to restimulate and increase imports from the United States: That the President of the United States is hereby authorized in regard to annual Payments due the United States under the Young Plan to grant a 25-year moratorium to each debtor country individually, provided such country shall stipulate that such relief would be helpful in realizing the purpose of this resolution and provided that such country shall agree to cooperate thoroughly and by every possible means to aid the United States accordance with the proposals of to regain and develop its foreign trade in country shall agree to the aforesaid Commission; and provided that such declare a similar moratorium on war reparations payments; 3729 That this Commission is further empowered and instructed to make agreements with each of these foreign governments that each year throughout the duration of its 25-year moratorium part of its war debt and reconstruction loan obligations to the United States shall be canceled in proportion to its imports from the United States during each such year; provided that such cancellation in any such year shall not exceed 25% of the total of its imports from the United States during that year; And it is hereby further resolved: That in our desire to gain prompt settlement and the power of immediate action in the present world emergency: Every possible effort will be made by the Congress of the United States to prevent the acts and agreements of this Commission from being obstructed or interfered with in any way by political factors or political considerations; That the President of the United States is hereby instructed, in appointing the members of or in dealing with this Commission, to ascertain to the best of his ability that no political factors or political considerations in any way obstruct or interfere with the fastest possible settlement of the present crisis in international trade. The following is the petition of the railway brotherhoods to President Hoover: %- Mr. President, we come to you representing large groups of laboring people of America. We have suffered for years from the deadly contraction which has been steadily throttling business activity and curtailing the movement of cars over our railroads. Various authorities place the number of unemployed in the country at approximately 8,000,000, and the number is increasing daily. There are on the average about three additional people dependent on the support of each one of the unemployed. In the last few years employment has declined over 30%. payrolls have declined over 50% and the prices of farm products have declined over 55% —and it is getting worse. The total pay of railroad workers alone has been cut by over $1,000,000,000. Mr. President, if we had come to you to make a plea for ourselves— selfishly—that would be our right because our wives and children are suffering; because the future of our homes and the security of our Jobs are in danger; because the unemployed members of our brotherhoods have been driven nearly to desperation, but as great as this motive may be there is still a greater cause that brings us here. Mr. President, the entire country—the whole world—is confronted with a very grave situation. We have come here not to discuss theories nor to quibble over rights and wrongs, but we have come here to face a condition and to urge immediate action to deal with it. Warn of Dole. Within a short time the Congress of the United States will adjourn in order to have time to deal with political matters. Mr. President, we have come here to tell you that unless something is done to provide employment and relieve distress among the families of the unemployed, we cannot be responsible for the orderly operation of the railroads of this country—that we will refuse to take the responsibility for the disorder which is sure to arise if conditions continue. Nor will we accept responsibility for the demands that will surely be made upon representatives of the Government and which we predict will be more far-reaching than any yet made,including the dole. It would be with great reluctance that those we represent would ask for a dole. On the other hand, Mr. President. what other alternative is there available? Everything else suggested has either failed or has been denied. If something is not immediately done we will be obliged to demand a dole. The unemployed citizens whom we represent will not accept starvation while the two major political parties struggle for control of Government and, meanwhile, fail to observe the rapid approach of a critical situation that threatens our whole country and our very existence. Mr. President, because of the gravity of the chaos now impending, it is our duty to give the consitutional Government of the United States full warning and to offer recommendations. Mr. President, we have already given you evidence of our sincere interest in this regard. We are not Socialists, we are not Communists, nor are we anarchists. This is evidenced by our decision a few months ago to accept, for one year, a 10% deduction from our pay—but Mr. President, those men who are daily leaving our ranks in steadily increasing numbers and joining the army of unemployed are also adding to the lists of discontented and distressed citizens. Growing Demand for Change in Business and Social Structure. There is a growing demand that the entire business and social structure be changed because of the general dissatisfaction with tbe present system. We cannot longer ignore this situation. Mr. President. we recognize that business activity and earning power are essential to the stability of capitalism and are essential to our hope for unemployment relief and better wage scales. With this understanding fully in mind, we are greatly alarmed at the continuing decline in payrolls and employment and the futility of any and all measures so far proposed to meet these emergencies. Mr. President, labor in the United States is well organized. The central organizations of every union have large and able staffs of workers and millions of dollars of capital at their disposal. In an effort to meet the problems that confront us with sanity and common-sense understanding, we have gathered the following facts and statistics: It is usually stated that periods of prosperity end and periods of depression begin as a result of over-production, but as a matter of fact it is under consumption. However we are not here to argue that point, as it is evident that the main cause is that in periods of prosperity productive facilities far outrun the buying power of the markets—gluts in the markets for the products of important industries develop—this is obvious. Displacement of man-power by machine-power without proportionately shortening the workday has played an important part in bringing about present unemployment conditions. Interdependence Between U. S. and Foreign Countries. It is also obvious that the degree of interdependence between the United States and foreign countries during the last decade was developed to a high extent previously unknown in history. We are not talking now about entangling alliances; we are not talking now about political relations—we are talking about economic facts. In 1928 money leaving the United States was only for such important items as interest on foreign funds invested in the United States; expenditures by American tourists abroad; net payments for new loans, investments and deposits abroad: charitable and missionary contributions abroad; the remittances of immigrants to their home countries, and payments for freights amounted to well over $2.500,000,000. Also in 1928, money entering the United States, only because of such important items as expenditures of foreign tourists in the United States; interest on American private funds invested abroad; the United States 3730 Financial Chronicle balance of export shipments of commodities and the net increase In longterm foreign investments in the United States and a small amount of gold, amounted to $2,500.000,000. The money leaving the United States and the money entering the United States in 1928 for these items was less than three billions of dollars, and prior to 1923 the annual total of these items was considerably smaller. This means, Mr. President, that the industries and the railroads of the United States were geared up during the last decade to a point where the stability of their activity, their earning power, and their ability to employ labor was dependent not alone upon our own demands and our purchasing power but upon the maintenance of international trade at levels that were reached in the years before this depression began. However, our exports at the present time are running at the annual rate of $1,500,000,000, or at levels not seen since 1904, whereas in 1927 our exports amounted to $4,800,000,000. Our industries and our railroads, therefore, have lost well over $3,000.000.000 in the annual rate of export trade, and it is a well known fact that a little pressure can start a long chain of unfortunate events, or a long chain of happy events. When our industries and our railroads lose over $3,000.000,000 annually of their markets, it not only has an adverse effect upon the workers but wipes out a substantial part of their profits. The tendency under such circumstances is for the industries and the railroads to curtail operating costs as much as possible, and this means smaller payrolls and increasing unemployment. The loss of export markets has thus forced a much greater loss in the buying power of our domestic markets, as the means of subsistence is taken away from millions upon millions of people. The future stability of wage scales, the future stability of our purchasing power, and the future security of the jobs of those still employed are threatened to such a degree that this should not continue further. Speak in Behalf of Labor. Mr. President. for the safety of our government and for the happiness of our homes—in the name of those employed and unemployed whom we represent, we most earnestly urge that this deadly contraction be stopped. Millions of other countrymen, we feel sure, join us in this request. Labor has examined facts and statistics further in order to determine what the pressure is that has started and is prolonging this chain of unfortunate events. As we have stated, we came to two basic conclusions: 1. A depression begins and is prolonged by productive facilities that are too great for the buying power of the markets. Reduced purchasing power accentuates the condition. 2. The interdependence of the United States and foreign countries economically is now, for the first time in history, so great that the United States cannot expect to recover from this depression while ignoring the difficulties of foreign countries. There is a natural tendency in all periods of prosperity to expand the productive facilities of business in search of further profits; but we have found that the ending of the recent period of prosperity and the aggravation of the present depression is due also to some extent to another source of pressure. That source of pressure is from the war debts. Commercial failures in the United States in recent years have reached levels never before known. Receiverships and the liquidation of businesses have been large in number and many more are impending, but the pressure from war debts has not been relieved. Pressure from War Debts. We have concluded that the pressure from war debts operates as follows: Foreign countries should have paid us in the fiscal year ending June 30 1932 about two hundred and fifty millions of dollars under the Young Plan. Under this same plan in the fiscal year 1933 they should pay us $280,000,000 and increasing amounts every year thereafter until the distant year 1983—fifty-one years hence—when they should pay us over $400,000.000. Foreign countries can pay us in only three ways: 1. By sending us paper money. 2. By sending us gold. 3. By selling goods to get money to pay us. Foreign paper money is not valid in the United States. We have made it difficult for our debtors to pay us war debts in anything but gold. By doing this we have drained the gold from most of the debtor countries: and some of them have been forced to the verge of bankruptcy and many off the gold basis. This has made it even more difficult for them to pay war debts and has made it even more impossible for them to buy the products of our Industrial and farm laborers which we, as railroad workers, wish to haul to the seacoasts. This situation made it necessary for our debtors to endeavor in a mad rush to build exchange and credits with which to pay us. In this endeavor, through exchange restrictions and export bounties and other means of encouragement, our foreign debtor countries have forced export balances on an unwilling world market and in the same stroke have cut the buying power of the world markets by raising tariffs far above the economic levels of labor protection in an effort to keep imports smaller than exports. Mr. President, this added pressure in an effort to grind out of foreign laborers the means with which to build exchange—not to buy the products of our own American labor, who so greatly desire to sell—but to pay service on non-productive debts—this pressure which was largely responsible for the initial gluts of the world markets—this pressure which is becoming more burdensome every day—has not yet been relieved and no attempt, apparently, has been made to relieve it. War Declared Illegal. Mr. President, incidentally, may we point out that these non-productive debts were incurred as the result of war—and war Is an international instrument since declared illegal by the United States of America and the countries signatory to the Kellogg-Briand Pact. Mr. President. in the effort to build exchange and credits to meet service on these debts. it has been impossible for our debtors to continue importing from us at former rates, and it has made it necessary for the Governments of each of our debtor countries to force export balances in every way possible. In relation to the gross figures of international trade, these $250,000,000 a year are not large, but it is the transfer problem which makes the leverage so tremendous that the pressure on the shoulders of labor is many, many times greater. Our debtors, in an effort to force export balances, have brought about a situation where there are all eager sellers and no eager buyers—prices of the products of industrial labor and agricultural labor have been forced down 35% and 55% respectively; the United States foreign trade has shrunk over $600,000.000 and the annual production of the United States industrial laborer and the United States farmer has been forced downward 20 to 30 billions of dollars. Mr. President, this $250,000,000 is not much larger than the annual Postoffice deficit in the United States, which our people never have worried about very much. May 21 1932 Why, under such conditions, do we shout, "but a loan is a loan and a contract is a contract?" Why do we talk about having loaned in good faith and the sanctity of agreements to pay? Why should we continue to frantically demand that pound of flesh which Is closest to the heart? Why should we demand the flesh closest to the heart of our brother laborers abroad when at the same time it means the ruination of our own earning power, our own economic system, and the ruination of the American home? Although we are Americans in every sense of the word, we cannot forget the fact that many of us continue the line of correspondence that was first established with kinfolks across the sea many years ago, when our ancestors first set feet on American shores. Furthermore, the bond of fraternalism encircles the world and everywhere the workers have some things in common. If this problem had been In the hands of labor alone, we predict it long since would have been settled. However, we are not here to haggle over an international fraternity, nor to argue about rights and wrongs, nor to discuss abilities to pay or methods of transfer. Does the National pride and honor require us to spend 10 to 40 dollars in order to collect one dollar? Does the national pride and honor require Us to starve our wives and children? Does the national honor require us to continue to suffer greater and greater hardships indefinitely? Does National honor require all of America—laborers, farmers, white-collar workers, industrial and transportation organizations—to plunge headlong into greater suffering and disorder? No, it does not. We have been called obstuctionists and Socialists and whatnots. But we would most respectfully remind you that organized labor, in addition to being interested in providing jobs and a living for those it represents, has invested millions of dollars in American securities and we are vitally interested in bringing about a resumption of operations of our railroads, our other industries and our farms. We urge a return of our foreign markets. All of the finer element, of Americanism in us require us to Insist on an immediate return to industrial health, regardless of all petulant theories and regardless of ad imaginery obstacles. Mr. President, continued suffering and impending disorder are not necessary and, therefore, in the name of those for whom we speak and all thinking peoples, we ask that immediate action be taken on our plan of relief and reconstruction which we herewith respectfully submit, otherwise these organizations will be compelled to support a dole for the unemployed. Opposition by other groups of railway labor men is indicated in another item in this issue of our paper. Six Railway Brotherhoods Dissent from Views of Those Favoring 25-Year Moratorium on Foreign Debts— Statement Presented to President Hoover. Opposition to the action of a certain group of railway brotherhoods, in appealing to President Hoover for a moratorium on foreign debt payments, was registered on May 16, when representatives of six other groups of brotherhoods submitted a statement to President Hoover in which they stated that "we believe the war debt plan in question to be hastily conceived and unsound in principle." The statement of the opposing brotherhoods follows: Newspapers of May 14 announced that the chief executives of certain railway labor organizations had submitted to the President of the United States a plan for the handling of debts owed to our Government by foreign nations, with a statement supporting their request for adoption of the plan. Unfortunately, this plan and statement were Issued, or published, in a manner that might give the impression that they had the indorsement of railway' labor, generally. We desire, therefore, to make it clear that the position of the organizations submitting the statement to the President is not shared by the railway labor organizations we represent. The question was discussed at a meeting of the Association of Railway Labor Executives, representing all railway labor, but this association did not Indorse the plan. The labor executives who submitted this plan to the President are not only a minority of the Chief Executives' Association, but they represent only a minority of railway labor, as well. They spoke only for their own organizations. We believe the war debt plan in question to be hastily conceived, and unsound in principle. We consider it to have been first offered primarily as a part of a factional dispute in one of the major political parties. We share the belief expressed in the published statement that economic conditions in the country to-day call for immediate constructive action on the part of the Federal Government, but we cannot agree that the proposed war debt plan will be of any assistance in this situation. On the contrary, we feel it would shift an additional burden to the American taxpayer and American industry, thus retarding economic recovery. G. W. Laughlin, Brotherhood of Locomotive Engineers. George M. Harrison, Brotherhood of Railway and Steamship Clerks. Freight Handlers, Express and Station Employees. Martin F. Ryan, Brotherhood of Railway Carmen of America. A. 0. Wharton, International Association of Machinests. John F. McNamara, International Brotherhood of Firemen and Oilers. John J. Hynes, Sheet Metal Workers International Association. Dispatches from Washington May 16 stated that the above named wera joined in their views by: The International Brotherhood of Iron Steamship Builders. The International Union of Blacksmiths and Drop Forgers. The Brotherhood of Railway Signalmen. The Brotherhood of Sleeping Car Conductors, The National Association of Marine Engineers. The Association of Masters. Mates and Pilots. The International Brotherhood of Electrical Workers. The International Association of Longshoremen. The brotherhoods seeking a moratorium (to which detailed reference appears elaowhere in these columns to-day, wore: Brotherhood of Locomotive Firemen and Enginemen, D. B. Robertson, President. Order of Railway Conductors, S. N. Berry President. Brotherhood of Railroad Trainmen, A. F. Whitney, President. Switchmen's Union of North America, T. C. Cashen, President. Order of Railroad Telegraphers, E. J. Manion, President. American Train Dispatchers' Association, J. G. Luhrsen, President. Brotherhood of Maintenance of Way Employees, F. H. Fflozdal, President. Volume 134 Financial Chronicle Paris Denounces Inflationary Ideas—French Market Asserts World Prices Cannot be Raised by Currency Experiments—Called "A Crazy Dream"—Weakness of Dollar Exchange Ascribed to Effect of Congressional Proposals on Europe. From Paris .advices, May 13, to the New York "Times" we quote, in part, as follows: The weakness of dollar exchange during the present week was generally ascribed to the bad effect made by the inflationary demonstrations of the American Congress on countries which still maintain the gold standard and remain attached to classic monetary policy. Authoritative financial circles here still hold the belief, however, that no present danger in that respect exists. More surprise is felt in banking circles at the manner in which prominent British financiers and politicians like Runciman, Churchill and Sir Robert Horne continue publicly to assert economic theories which are entirely opposite to those which they publicly professed before the fall In sterling. Inflation Held Insufficient. In surveying the controversies which are carried on in various countries, financial Paris feels that the idea which seems to be spreading that multiplication of credits and currency tokens without a proper monetary basis might cure the world depression is a crazy dream. The conviction is positive that monetary inflation would not be sufficient in the present state of markets to send world prices up. The example of France itself is cited, where both superabundance of currency and a large supply of idle capital exists, yet where prices do not recover. But the further belief is held that even if paper inflation were to raise paper prices, confidence in the currency would be shaken as it always is when inflationary ideas prevail, and that the result would be complete unsettlement of markets and even greater disturbance than to-day's international dealings. Interest in Communication. Much interest was taken in the communication made to the Bank of Settlements meeting at Basle by Charles Rist, formerly Deputy Governor or the Bank of France, arguing that any considerable rise in prices is Improbable and that, instead of seeking to force prices up to the level they reached in the exceptionally high year 1925, world economy ought, on the contrary, to adapt itself to a lower level. It is also suggested in financial circles here that, when the English approve measures to force up prices and when a German professor advises the American Government to cover its deficit by printing paper dollars, they are really hoping for a rise of prices in other countries, not in their own. The English are in fact expressing gratification that their prices rose only 10% as a result of the heavy depreciation of sterling. The belief of financial Paris may be summed up as showing that, even If all countries were to agree to raise prices through general depreciation of the currencies, nothing would actually be changed, since costa would eventually rise in proportion to prices. If is admitted that for a short time higher prices would tend to stimulate production. But it is thought that this, under all the circumstances, would make the crisis worse instead of curing it. Gustav Cassel Foresees "Managed" Money—British Economist Discusses Gold Standard in Rhodes Lecture at Oxford—Faith in Metal Shaken. Rejecting the "classic theory of the gold standard," under which the supply of money automatically adjusted itself to the international exchange of commodities, as having ceased to exist under modern conditions, Professor Gustav Cassel, delivering, on May 7, the first of the three Rhodes lectures for this year at Oxford, said the gold standard of the future would always be a "controlled" or "managed" standard, a standard subject to deliberate influence. Special correspondence, May 7, from London to the New York "Times" (printed in the May 15 issue of that paper) indicated as follows what Professor Cassel had to say: The idea that gold reserves in themselves had scene peculiar power of conferring value upon the currency went to pieces during the war, Professor Cassel said. The whole world was forced at that time to see that the value of a currency was determined by the abundance or scarcity of the means of payment provided. The old popular faith in a definite and objectively given value of gold as the common basis for the world's monetary system was shattered, he continued, by the fall in the value of that metal, measured by the American price index, which ensued upon the piling up in the United States of a surplus of gold during and after the war. Faith in Gold Impaired. At the worst of the inflation, in 1920, gold, measured in American prices, fell to about 40% of its pre-war value. Belief in gold as an ideal standard of value was so impaired that some intelligent economists seriously opposed the restoration of the gold standard. In spite of such fully justified objections, Professor Cassel said, a return to the gold standard WRS necessary in the first half of the twenties as the only means of averting economic and social catastrophe and of rendering possible a convalescence of the world's economy. The experience which followed has a deep importance for our comprehension of the nature of the gold standard, Professor Cassel continued. The United States carried through a process of deflation by which the price level of commodities was reduced in round figures from 250 to 150 and consequently the value of gold increased from about 40 to about 07% of its pre-war value. This price level was held for some years and the new gold value thereby acquired a certain stability. Other countries desirous of restoring their currencies to a gold standard basis had to fix their commodity price level in a certain proportion to that of the United States. "The dollar was originally a paper currency regulated so as to maintain a definite parity with gold," Professor Cassel continued. "The connection was now reversed, the paper currency being regulated independently and the dollar being stabilized at a purchasing power determined absolutely by U. S. A.'s management of its currency, while the value of gold had simply to adjust itself to this value of the dollar. United States Influence. "The power of the United States in this manner actually to control the value of gold is explained by the fact that America's domestic supply 3731 of means of payment could be maintained independent of her supply of gold. On the one hand America was so rich that she could accept vast quantities of gold and store them by, without utilizing them for extending the supply of means of payment. On the other hand, she possessed so huge a stock of gold that she could transfer almost any sum that foreign countries could possibly take without therefore needing to restrict her supply of means of payment. In these circumstances the American supply of means of payment could be regulated as America found suitable. The value of gold had to bow to the value thus fixed of the dollar. "The task of maintaining a certain gold standard was for other countries practically reduced to the task of keeping the currency's dollar exchange at a fixed parity. Thus the world's monetary system had arrived at the rather peculiar situation that it was built on a common unit of value, the dollar, which, within wide limits, was determined arbitrarily by the American monetary authorities. This situation was rendered only the more peculiar by the fact that in the United States itself there was no unanimity on what ought to be the aim of American monetary policy and that the Federal Reserve System denied the very possibility of a conscious regulation of the value of the dollar and refused any responsibility for the development of that value. Stabilization of Dollar. "There had been for several years a movement in the United States in favor of a 'stabilization of the dollar,' and this question had in several forms been brought before Congress. In March 1928 a bill was introduced in the House of Representatives, where it was proposed that the Federal Reserve System should 'promote the stability of commerce, industry, agriculture and employment; and a more stable purchasing power of the dollar . . .' This formulation is characteristic of the confusion of ideas with regard to monetary stability which at that time prevailed in the United States. "Being invited to give evidence on this bill before the Committee on Banking and Currency, I endeavored to free the monetary program from all foreign and irrelevant points of view. I also found it necessary to avoid talking of a 'stabilization of the dollar,' an expression which was subject to many misunderstandings and was certain to arouse a great deal of influential opposition. I formulated the program thus: 'The first purpose of the Federal Reserve System is to keep up the gold standard, that is to say, to keep the dollar at a purchasing-power parity with gold.' Then the System should 'use the influence it may have upon the value of gold, in co-operation with other central banks, to prevent unnecessary fluctuations in that value.' "This simple and perfectly clear recommendation, which in fact embraces everything that has to be said about the objective of monetary policy, never led to any result. The United States went to meet the disastrous development of the following years, without any definite idea whatever of what should be the aim of its monetary policy. Gold's Natural Value. "In the United States, as in the whole world, a vague idea prevailed that gold had in itself a natural value and that the several gold currencies had simply to adjust themselves to this value whatever fluctuations they might undergo. Indeed, people seem mostly to have been inclined to believe that fluctuations in the value of gold were a myth, and, at any rate, that there was no possibility of ascertaining such fluctuations, still less of controlling them. This state of mind is doubtless the explanation of the complete Passivity in the attitude of the authorities toward a monetary development fraught with the most momentous consequences." The most natural object for future monetary policy, Professor Cassel said, was a certain stabilization of the purchasing power of money. Opinions might differ as to the exact measure of stability, but a time of violent fluctuations of all monetary units was certainly not appropriate for a prolonged discussion of the most refined methods of measuring the purchasing power of money. Stabilization of the value of money, according to any reasonable standard, would be infinitely better than the complete instability from which the world had had to suffer during the last few years. • Gustav Cassel Critical of United States—Says Curb on Foreign Loans Disturbed World Economy. The following London account, May 14, is from the New York "Times": Professor Gustav Cassel, the Swedish economist, delivered at Oxford, to-day, the second of this year's Rhodes memorial lectures on "The Crisis in the World's Monetary System." "In America it has been contended," he said, "that the splendid development during the '20s was largely the result of inflation of the credit structure of the country. It is even said the huge American loans to foreign countries during this period were based upon inflated credit and that, in so far as an amount of prosperity in the outside world has succeeded in developing on the basis of the American advances, it has had no solid foundations. "This representation is entirely false. It is a singular lack of judgment when American export capital is represented as a sign of an unsound credit policy, whilst the truth is this export of capital was the only means possible of maintaining equilibrium in the country's balance of payments. When, from 1928 onward, America began to retain her savings for herself, the equilibrium of the world's economy became fundamentally disturbed." Easy Money at Paris as Gold Accumulates—French Treasury's New Loan Taken Through Use of Idle Bank Balances. Under date of May 13 a Paris message to the New York "Times" said: The Bank of France gold reserve increased 477,000,000 francs during the week covered by Thursday's [May 12] statement, while its foreign credits decreased 446,000,000, the ratio of gold cover rising from 70.88% to 71.51%. Sterling continues weak, apparently through intervention by the Bank of England, which not only bought francs this week but also dollars. The Bank of France is believed possibly to have sold sterling exchange. The great ease in money continues; even the issue by the Treasury of three billion francs in three months to one-year bonds had no tightening effect. This action had been expected since the beginning of the year, and the issue is being subscribed through use of a relatively small proportion of the idle balances carried by private banks at the Bank of France. The weekly bank return showed decrease of 1,276,000,000 in bills discounted, of 392,000,000 in circulation, and of 781,000,000 in private deposits. 3732 Financial Chronicle Bank of England Buys Much Cold—Purchase of £2,012,665 of Metal in Bar Largest Since September. According to a London cablegram May 14 to the New York "Times" surprise was caused by the Bank of England's announcement that it bad bought £2,012,665 of bar gold May 14, its first big purchase of gold since the gold standard was abandoned in September last. The cablegram added that bullion dealers are ignorant of the source, but suggested that the metal had been accepted by the Treasury on an exchange account. With reference to the above the "Times" in its May 15 issue said: Since the suspension of gold payments by Great Britain last September, the Bank of England bas bought none of the Transvaal gold arriving weekly at London and offered on the London market. Prior to the abandonment of gold payments, the Bank frequently bought up all the arriving gold, frequently amounting to £1,000,000 or more per week, although on occasion Continental markets managed to secure the bulk of it. The price in sterling at which the Bank of England can buy gold is stipulated in the Bank Act, and purchases of gold on the open market made by the Bank prior to September were effected at a price averaging near 84s. 10d. per fine ounce. With the suspension of gold payments and the depreciation of 20 to 25% in the pound sterling's international value, the price of bar gold has risen correspondingly. Last week it was quoted at 113s. 7d., and has ranged around that figure during the past six or seven months. At this price it was supposed that the Bank of England could not make purchases on the market. There have been reports, however, in the international market that the British Government and the Bank were planning to accumulate a gold fund in connection with the appropriation by Parliament of £150,000,000 for purposes of controlling the movement of sterling exchange. Sir John Simon in British House of Parliament Indicates That United States Has Not Made Known Attitude Toward International Monetary Conference. From London May 13 the New York "Times" reported the following: In reply to a question from Winston Churchill, Sir John Simon, the Foreign Secretary, told the House of Commons to-day he had no information concerning the United States' attitude toward an international monetary conference. Then he added with sarcasm he supposed Mr. Churchill was familiar with press reports purporting to tell exactly what the United States was going to do. Later in the session Sir John talked about the disarmament conference, indicating he had no information on that matter either, other than what was contained in the "flood of words" pouring out of Geneva. He said his attitude was one of "qualified optimism and an unqualified determination to pursue results." George Lansbury, leader of the Labor Opposition, said aviation should be internationalized. Mr. Churchill made a suggestion, the adoption of which would postpone disarmament a long time. It was that, before trying to disarm, Great Britain must study the political and economic causes for the maintenance of armies. All this wisdom was wasted on empty benches, as most of the members had left town to get an early start on their Whitsun holiday. Smaller Central Banks Abroad Rebuilding Gold Reserves. Paris advices May 13 to the New York "Times" stated that smaller Central banks of Europe are showing very strikingly the results of the gold shipments from the United States since the suspension of gold payments by Great Britain. The account continued: In the Central banks of Belgium, Holland, Switzerland and Italy gold reserves have increased in the aggregate $475,000,000 since the beginning of September. Gold holdings of the Central banks of Czechoslovakia, Rumania and Jugoslavia have also increased, but those of Austria and Poland have f dlen slightly and the Reichsbank gold reserve is lower. Total gold reserves of the smaller European Central banks now aggregate $1,731,000,000, as against $1,252,000,000 at the September date last year. Holdings of foreign bills, the gold-exchange reserve, have decreased in reasonable proportion to this increase of gold. Increased Export Movement in Wheat Viewed as Favorable Trade Factor by S. H.Logan of Canadian Bank of Commerce—Composition of Loans of the Bank in Autumn of 1929 and at February 1932— Attitude Toward Currency Inflation. "The industrial expansion which commenced in January reached its peak in the latter part of March and the first of April and the trend is now downward, although, of course, there are exceptions to the present general movement," states S. H. Logan, General Manager of the Canadian Bank of Commerce. "The reopening of navigation on the Great Lakes was followed by larger exports of wheat, a welcome development considering the continuous decline during February and March." Mr. Logan on May 5 also stated: At a time when the world's credit system is a popular topic of discussion, we show in the following table a classification of this institution's loans and other credit advances in the autumn of 1929 and at February 1932. As the Bank's operations extend practically over the whole of Canada, the figures amy be taken as representative of Canadian bank credit in Its entirety: May 21 1932 I. Governments and municipalities 2. Public utilities, insurance companies, trust companies, automobile finance companies, &c_____ 3. Farmers and ranchers 4. Grain, flour, meats, Sc 5. Manufacturers: Agricultural implements, iron and steel, mining, automobiles, textiles, wearing apparel, Sc 6. General stores and sundry wholesalers and retailers 7. Lumbering Industry, including pulp and paper— 8. Contractors, builders, Sc 9. Call loans, loans on securities to security houses, underwriters, &c 10. Sundry dealers and traders, and individual customers of the Bank throughout the Dominion 11. Trade paper discounted, sterling and foreign bills of exchange purchased Mr. Logan went on to say: Nov. 1929. $43,000,000 Feb. 1932. 1155,000,000 24,000,000 32,000,000 78,000,000 22,000,000 26,000,000 37,000,000 41,000,000 29,000,000 13,000,000 14,000,000 30,000,000 17,000,000 9,000,001) 10,000.000 55,000,000 33,000,000 83,000,000 42,000,000 21,000,000 10,000,000 $413,000,000 6291,000,000 The figures in general illustrate the trend of economic events during the period covered, for the percentage decline in total loans is close to that in business activity, although it should be kept in mind that bank credits is a revolving fund, liquidation of loans and fresh advances occurring every day. But specifically, loans to Governments and municipalities reflect the support that banks afford these bodies when public financing is difficult. As might be expected, loans to public utilities and other concerns grouped in Item 2 show the least decline, for borrowing among some of' this class is not so regular as in others and frequently only for short periods. The outstanding feature in respect of loans to farmers and ranchers is that repayment, while at a slower rate than in most other classes, has been satisfactory considering the severity of depression in agriculture. Items 4, 5, 6. 10, and 11 reflect not only the smaller volume of products moving in trade channels, but also the decline in commodity prices and in stocks of goods, manufacturers and merchants having replaced their stocks held in 1929 with lower-priced goods and reduced the size of their inventories. Further in regard to these classes, it will be recalled that in the autumn of 1929 abnormally large stocks of grain were held in this country in contrast with the smaller holdings that naturally followed the short crops of 1931. As is well known, building has slackened greatly during the past year, which accounts mainly for the reductions in Items 7 and S. for the majority of loans therein were to lumbermen and contractors. The marked change in call and other loans resting on securities grouped In Item 9 probably requires no extended explanation, as there have been drastic liquidation and depreciation in securities the world over. It is sometimes suggested that more credit should be granted industry but, while the banks would welcome an increase in their loans, commercial and industrial firms would not accept the money at the moment if it were offered to them, for they could not employ it to advantage. Given a stimulus to commodity prices, bank loans would turn upwards. Canada, however,is a seller in the world markets ofsuch basic commodities as wheat, lumber, metals, pulp, paper, and fish, the prices for which are, unfortinately, determined by world conditions and there is not much that can be done here to raise them. It is a question of the prices that an economically sick world can pay for such commodities. Another proposal is that the currency be inflated and the Canadian dollar depreciated in terms of the gold exchanges. That course has some advantages to certain producers and exporters, but on the other hand Canada has been a large borrower abroad and what we would gain on the one hand would be largely, if not entirely, offset by what we would have to pay for the increased value of the United States dollar or the pound sterling, as the case may be, in order to pay our foreign debts and to import commodities that must be purchased abroad. Canada cannot be fairly compared with the United States, Great Britain or France because they, apart from inter-Governmental debts, are creditor Nations which have a constant flow of money coming to them from abroad. Canada. on the other hand, is a debtor Nation. Our successive waves of prosperity have usually occurred during periods of extensive construction of railways, highways and manufacturing plants, when large sums for investment were being poured into the country. So far as one can judge the situation at present, our great construction era is over for at least a few years, and our next prosperity should arise from increased commodity prices and from economies in production. Such a process is usually slow, but bank loans will again readily expand when the demand occurs. Fiscal Agents of Hamburg-American Line 6% Bonds Receive Remittance for Payment of June 1 Coupons. Speyer & Co.and J. Henry Schroder Banking Corporation, as Fiscal Agents for the Hamburg-American Line First Mortgage 63'% Marine Equipment Serial Gold Bonds, announce that they have received the regular remittance for the payment of the June 1 1932 coupons of these bonds. Maintenance of German Mark's Value—Government's Policy Believed to Bear on Foreign Debt Service. From Berlin May 13 a wireless message to the New York "Times" said: The Chancellor's reiteration In the Reichstag on May 11 on the Government's determination to maintain stability for the mark, even if new restrictions on foreign payments are thereby initiated, was considered here as addressed to holders of German bonds. It was interpreted to mean that, if the Government is obliged to choose between letting the reichsmark depreciate and curtailing the service on foreign bonds the latter course would be adopted. Continuance of the full service on the bonds hereafter still depends on maintenance of an adequate trade balance in Germany's favor. Confident forecast is impossible. In the meantime, however, the mark holds decidedly firm on the international market. German Bank to Liquidate—Deutscher Creditverein Reported to Have RM2,000,000 in Recent Crisis. The following from Berlin May 16 is from the New York "Evening Post:" Deutscher Creditverein, controlled by the Hugenberg group, has decided to liquidate. Capital of 2,000,000 reichsmarks was lost in the crisis. It is anticipated that creditors to the extent of 4,500,000 reichsmarks will eventually receive payment in full when frozen assets of the bank can be liquidated. Volume 134 Financial Chronicle In the first post war years Deutscher Creditvereln carried out several large transactions as an investment trust for industrial enterprises controlled by the Hugenberg group and the National Party. Of recent years, the bank has been of little importance and the liquidation creates no impression on the Douse. Stuttgart Municipal Council Would Have Germany Limit All Incomes to $2,850. Associated Press accounts from Stuttgart (Germany), May 12, said: If the Stuttgart Municipal Council had its way no person in Germany, not even the greatest industrialist, would receive an income of more than 12,000 marks (about $2,850) a year. The Council decided to-day to ask the Wuerttemberg Diet to sponsor a motion in the Reichstag that would apply the 12,000-mark limit to every one in the nation and would affect both earned and unearned income. The National Socialists, Social Democrats and Communists supported the resolution, which was adopted after an all-night session. Danish Bacon Plants Act to Resume After Lockout. Under date of May 11 the New York "Times" reported the following from Copenhagen: Work will be resumed in the Danish bacon factories to-morrow, to the relief of the nation, whose economic existence has been threatened by the lockout. The butchers to-night joined the other parties in accepting the official arbitrators' proposals and exporting will recommence a week from Friday. Three hundred thousand pigs have accumulated for slaughtering. Advices to the same paper from Copenhagen May 7 said: The great lockout in Denmark's bacon industry was virtually ended to-night. After a week's stoppage of bacon exports.to England, involving a loss of $200,000, the workers and the co-operative slaughter-houses accepted the public mediators' proposals, which already had been accepted by private slaughter-house owners. It is generally expected that slaughtering will be resumed Thursday. The suspension of the Danish bacon plants was noted in our issue of May 7, page 3365. Cancellation Through Sinking Fund of Portion of City of Berlin Bonds. Speyer & Co., as fiscal agents, have purchased for cancellation through the sinking fund $888,500 bonds of the City of Berlin 25-year 63/2% gold loan of 1925. This represents the fourteenth sinking fund installment. Out of an original issue of $15,000,000 bonds there remain outstanding $11,355,000 bonds. Statistics of Consolidated Municipalities of Baden. Blyth & Co., Inc., as bankers for the Consolidated Municipalities of Baden, announce under date of May 17 the receipt of the following information with respect to the external sinking fund 7% gold bonds from Badische Kommunale Landesbank: 1930. 1931. 12 Months Fiscal Period to Marsh 31— $48,422,248.80 846,365,868.20 Revenues 49,261,189.20 47,744,331.60 Expenditures 132,708,366.00 130,732,497.00 Assets 64,758,004.80 62.967,693.80 Liabilities 48,858,543.20 48,078,380.80 Funded debt (loans) 67,950,361.20 67,764,803.40 Net assets 3,215.938.20 Profits from cities' public works Capital and real estate of the taxable population 511,424,689.80 482,579,622.60 Republic of Poland to Redeem $700,000 of Its Outstanding 8% Gold Bonds. Dillon, Read & Co., as sinking fund trustee, announce that $700,000 of the outstanding Republic of Poland 25-year sinking fund external 8% gold bonds, dated Jan. 1 1925, will be redeemed at 105% and accrued interest on July 1 1932 out of moneys to be paid to them by the Republic of Poland under the sinking fund agreement. The bonds which have been designated by lot for redemption will be paid at the office of Dillon, Read & Co. in New York City. Hungary to Supplement Exchange Restrictions By Import Embargoes. In a Budapest cablegram May 9 to the New York "Times" it was stated that Hungary will follow Austria's example and supplement its exchange restrictions by the imposition of import embargoes, according to Trade Minister Kenez. The cablegram went on to say: M. Kenez said the system of import permits had not originated in Hungary but had been forced on the Government by exclusionist policies abroadl He asserted he did not believe in the system and expected no improvement to result from it. The drafting of the list of imports to be prohibited will be concluded in a few days and the embargoes will be immediately imposed. Czechoslovakia's"Gold Treasure" Increases in 1931. Under date of May 18 the Department of Commerce at Washington issued the following statement: Czechoslovakia's "treasure fund" has steadily increased,and now amounts compared with $1,038,000 at the end to $1,083,000 at the end of 1931, as 3733 of 1930, or an increase of about $45,000, according to a report to the Commerce Department from Assistant Trade Commissioner in charge, Prague. Immediately after the establishment of the Republic a "treasure fund" was started. The fund was created by voluntary gifts of gold, coins and other valuables and is held as a national reserve. Czechoslovakia Increases Luxury and Import Turnover Taxes. Effective May 11932, the Czechoslovak turnover tax and the luxury tax were increased by one-half, according to a measure recently passed by Parliament, says a cablegram received May 2 in the Department of Commerce from Commercial Attache Bliss, Prague. In making this known the Department stated: The import turnover tax was formerly 2% of the duty-paid value The former luxury tax was 12% of the on most imported goods. duty-paid value on imported goods and was applicable on a list of products classed as luxuries, including various fruits, sausages and cheese, and other fine food products: many fine textile items and manufactures thereof: trunks of leather; furniture of non-European wood; toys: manufactures of precious metals; perfumery, and cosmetics. There are similar sales and luxury taxes on domestic products. Curbs on Exchange Effective in Rumania—Export of Lei Restricted to National Bank—Prague to Replace Notes by Coins. From the New York "Times" we quote the following from Bucharest, May 18: Rumania now completes the list of Cental European countries that have imposed exchange restrictions. Accordimg to new regulations effective to-day, exchange can be bought only through the National Bank. Export of lei can be made only through the National Bank and export of foreign currencies is prohibited altogether. The Government declares these measures have been made necessary by similar steps taken by other countries and by exchange speculation which has reduced the National banks' holdings, although the National Bank can provide the necessary exchange for paying of foreign commercial debts. The same paper reported the following from Prague. May 18: The Czechoslovak National Bank decided to-day to approve the agreement made by its Governor, Dr. Pospichil, with the Government whereby metallic coinage is to be substituted for the 10 and 20 crown notes now in circulation. Since these notes total $14,000,000 and metal coinage, unlike notes, requires no gold cover, the practical effect of this measure will be a 13;i% currency inflation, with a corresponding profit to the Government. Rumania Requires Certificate of Origin for All Imports. Effective May 5 1932, all shipments of goods to Rumania must be accompanied by a certificate of origin, legalized by a Rumanian consul, according to a cablegram received in the Department of Commerce from Commercial Attache Sproull Fouche at Bucharest. Egypt Applies a Surtax on All Imports. Effective May 12 the Egyptian Government applied an additional tax of 1% ad valorem on all imports, according to a radiogram received in the Department of Commerce on May 13 from Commercial Attache Charles E. Dickerson Cairo. Financial and Economic Review of Amsterdamsche Bank N. V. of Amsterdam, Holland. The Anisterdamsche Bank, N. V., of Amsterdam, Holland, makes available the 31st issue of its Financial and Economic Review, published quarterly by the Statistical Department of the Bank. It contains a detailed report on all circumstances which have been of influence on the financial and economic conditions of Holland during the first quarter of 1932. The report is usually preceded by an article written by one who is an authority on the subject dealt with. This time there is an article by Hans Martin, Secretary of the Royal Air Service Company, regarding "THE CIVIL AVIATION IN HOLLAND." League of Nations to Call Hungarian Parley. A wireless message, May 13, from Budapest to the New York "Times" said: The Hungarian Government, which three months ago requested the League of Nations to call a round-table conference of Hungary's creditors at Budapest, was notified to-day that the League had agreed and would nominate an important financial authority to preside. It is hoped here the conference will take place in September. Financial Expert of League of Nations Urges Austrian Deflation—Declares Wage and Price Cuts Are Essential to Maintain Gold Standard. Associated Press advices from Vienna, May 7, stated: Rost Van Tonnigen, League of Nations financial expert to Austria, told this country to-day that "a general deflation policy, involving a drastic 3734 Financial Chronicle reduction in wages and prices, is essential if the Austrian people wish to maintain the gold standard of their currency." He made his statement in a report of 47 pages covering the first quarter of 1932. The report also said the League of Nations Council in its May session would negotiate a short-term credit of about $14,000,000 to Austria, which was recommended by the Financial Committee. Survey of Hungary's Financial Condition by International Institute of Finance—Believes Interest of American Bondholders Would Best Be Protected by Unified Bankers' Consortium or Protective Committee. In order to prevent any future discrimination against American holders of Hungarian bonds, the Institute of International Finance is of the opinion "that continued concerted action is necessary." The Institute believes "that the interest of the American bondholders would be best protected by the formation at the proper time of a unified bankers' consortium or of a general protective committee." According to a special bulletin of the Institute, issued May 13 by Dean John T. Madden, Director, an unfavorable trade balance, the withdrawal of foreign credits, and the inability to borrow abroad are the chief reasons for Hungary's inability to remit foreign exchange for the payment of principal and interest on the outstanding external debt, excepting the League of Nations Loan of 1924. The Institute of International Finance is conducted by the Investment Bankers' Association of America in co-operation with New York University. The Institute states that, unable to obtain new foreign credits and confronted with withdrawals from abroad, Hungary first drew heavily on the foreign exchange balances of the central bank, then established stringent foreign exchange restrictions, and finally on Dec. 23 1931 declared a moratorium on the transfer of the debt service on all but one of its external loans. The combined gold and foreign exchange holdings of the National Bank of Hungary have declined, the Institute adds, from $54,394,000 at the end of 1927 to $19,900,000 on April 7 1932. The unfavorable trade balance is due largely to the drop In world prices of agricultural products and to the faulty economic policies of the Succession States which have prevented a normal flow of trade between these States, the bulletin stated. The "Bulletin" indicates that Hungary's ability to obtain adequate amounts of foreign exchange in order to liquidate its external obligations depends upon its capacity to achieve and maintain a sufficiently large export balance. This balance can be obtained primarily by the removal of some of the trade barriers which interfere with the movement of trade between Hungary and its neighbors. The "Bulletin" also has the following to say: A removal of trade barriers might be accomplished either through the broad co-operation of the various Continental European countries or through the establishment of a customs union embracing several States. As long as economic and political conditions in Europe remain unchanged it is doubtful whether it will be possible to transfer into foreign exchange the funds of the bondholders accumulated in Hungary. The entire external debt of the country amounted to $717,000,000 at the end of 1931. Of this amount more than $500,000,000 has been contracted in post-war years for the rehabilitation of the country. Interest and amortization payments alone require an annual amount of $50,196,300, which, in the absence of any important invisible export items, has to be met almost exclusively by an excess of merchandise exports. In spite of the sharp decrease in imports during 1930 and 1931, the excess of exports amounted to only $15,500,000 in 1930 and $4,400,000 in 1931. Obviously, this unfavorable balance was far from adequate to cover even Interest payments on the external debt. Under present conditions it appears that the total external indebtedness of Hungary is out of proportion to the country's balance of trade and to its present ability to pay principal and interest in the currencies of the creditors. In fairness to the Hungarians, however, the fact should not be overlooked that, at the time when these loans were made, prices of agricultural commodities were higher than to-day, world trade was continuously expanding, the national income of the country was growing, and the entire external debt service absorbed only about 7% of the estimated national income. While Hungary's difficulties are, to a large extent, the result of the post-war economic policies of the Succession States and of the present world-wide crisis, the excessive Government expenditures in recent years, In connection with public works, and the Government's participation in industrial enterprises have contributed to the country's economic plight. Expenditures of the Government, as well as those of the political subdivisions, although reduced, still are too large, and taxation has reached a point where it greatly interferes with industry and trade. The Hungarian Government has published a list of loans to which it proposes to give preferential treatment in case sufficient foreign exchange should become available to permit conversion of pengo into foreign currencies, the "Bulletin" said. It added: Practically all the loans included in this list are held In Europe. American bankers have protested against this discrimination and their attitude has been brought to the attention of the Department of State and the Financial Committee of the League of Nations. May 21 1932 Austria to Declare Transfer Moratorium in Default of League of Nations. On May 16 an announcement by the Department of Commerce at Washington said: Unless financial assistance is granted by the League of Nations, Austria will declare a transfer moratorium on payments due foreign creditors, it is generally held in financial circles here, according to a cable to the Commerce Department from Commercial Attache Gardner Richardson, Vienna. In an open letter to the League of Nations, the Chancellor described present Austrian finances and stated that because of diminishing resources of the National Bank it would be impossible to continue both the allocation of foreign exchange for necessities and foreign debt services unless financial assistance were rendered. That Austria cannot wait definitely for results proposed in recent economic rehabilitation plans was also suggested by the Chancellor. A cablegram, May 13, from Vienna to the New York "Journal of Commerce" said: • Despite the continued efforts to correct the financial and political difficulties with which Austria is faced it is becoming the general opinion that a moratorium on foreign exchange transfers will become impossible to avoid. Negotiations continue at Geneva, but thus far there has been no definite plan through whidi it will be certainly passible to continue to make foreign exchange transfers. It is expected that if a moratorium is declared the loans issued under one auspices of the League of Nations will be exempt. This was also the sense of the edict of the Hungarian exchange moratorium several months ago, under which it was stated that available exchange would be used to pay League debts. The League loans were issued under guarantees by several European countries, including Great Britain, France and Italy. They are first charges on revenues. Foreign Debts Hit $300,000,000. The funded foreign debt of Austria approximates $300,000,000, which must be serviced currently. In addition there is a contingent liability of about $250,000,000 resulting from the Government's guarantees of such concerns as the Credit Anstalt. The National Bank reports low gold reserves and has an obligation to the Bank for International Settlements falling due. In the same paper, May 14, it was noted that recently Joseph R. Swan, President of the Guaranty Co., and John Schmid, Vice-President of the Chase National Bank, sailed for London to confer with British bankers on Austrian finances. The account added: The American bankers, it is understood, represent American creditors of the Credit Anstalt. Last year American banks agreed to a two-year standstill agreement on their extensions to Credit Anstalt. It is understood that the agreement is to be considered void in the event of an Austrian moratorium. Rumanian Restrictions on Foreign Currency in Effect. Details of the Rumanian restriction on foreign currency, which went into effect May 14, were announced by J. Rosendahl, technical counselor to the Rumanian Legation, with offices at 1819 Broadway, who, according to the New York "Times" of May 15, made public the following telegram from his Government: "Beginning to-day the Council of Ministers prohibits the importation of foreign currency. All mail remittances containing bank bills will be turned over to the National Bank, which in turn will deliver the value in Rumanian lei. Travelers are permitted to retain foreign currency up to the value of 20,000 lei (about $1201, which they are requested to declare at the customs upon entry. Any amount in excess of that sum will be exchanged into Rumanian lei. Travelers in transit through Rumania are allowed to keep their entire amount of foreign currency, but are required to declare it and present the bills upon entering and leaving the country." Rumania Reported As Hoping for Loan from France. Bucharest advices, May 11, are taken, as follows, from the New York "Times": Rumania, which alone of all the States of Southeastern Europe has thus far met her foreign obligations without the assistance of exchange restrictions, has finally arrived at the point where she also must take drastic steps to meet her budget deficit and heavy commitments abroad. She hopes for a $40,000,000 loan from France with which to meet the service on her foreign debt, but to make up the budget deficit the Government can see no means now except to resort to disguised inflation in the form of an issue of Treasury bonds. These bonds, according to the scheme of Finance Minister Argetoianu, would be issued to the amount of $62,500,000, hale a fixed value, and be authorized as a means of payment in addition to regular bank notes. This is inflation of a sort, but since Rumania's total note issue is only $175,000,000 it is thought the plan can be safely indulged in, and Charles list and his French fellow experts who have been examining Rumania's finances and recommending economies are believed to approve It. It is also highly likely that Rumania will request a reduction of the Interest rate and perhaps also the principal of her foreign obligations. Poland Establishes Fund to Guarantee Fertilizer Sales. In order to induce the Polish fertilizer manufacturers and intermediate credit institutions to adopt a more liberal credit policy toward domestic sales, the Polish Government has set up a fund of 6,000,000 zlotys (about $673,000) as a guarantee against losses on the sale of fertilizers, according to a report from Consul C. Warwick Perkins, Warsaw, made public by the Department of Commerce on May 13. The Department's announcement further says: Reimbursement of a part of any loss incurred on sales of fertilizer during the period from December 1931 until May 1932, is guaranteed by Volume 134 Financial Chronicle the fund up to 15% of the credits extended, the report states, but no payments will be made until next year, after it becomes evident that the credits are definitely uncollectable. The fund is to be available only in connection with the financing of domestic products it is reported. It is to be supplemented, in the event that the original sum should prove insufficient, by contributions from the industry, apportioned according to the relative turnover of the individual factories. A special committee has been created by the Ministry of Finance to administer the fund, it is stated. This method of stimulating the use of fertilizer was undertaken by the Government after a thorough study of the problem confronting the producers and consumers which is said could not be worked out satisfactorily. The manufacturers, it was decided, could not make further price reductions, and the effect of the economic depression on the capacity to pay of Polish agriculture had set definite limits to the extension of uninsured credits. Report of Closing of Austrian Stores in Protest Against Government's Currency Restrictions. From the New York "Sun" we take the following (Associated Press) from Innsbruck, Austria, May 20: Retailers throughout this city closed their shops this afternoon in protest against the Government's income and currency restrictions which, they assert, are damaging to business. Portugal Adopts 6-Year Public Works Plan. Beginning July 1, 1'ortugal will put into effect an elaborate year public works plan for the "conservation and development of national resources," it is stated in a report to the Commerce Department from Commercial Attache R. C. Long, Lisbon. The Department on May 6 in indicating this added: Approximately $420,000 in additional funds was appropriated during March for the construction or repair of schools and highways, completion of hospitals and orphanages, and improvements at ports in the Azores. Authority was also granted for expenditures necessary to the completion of workmen's dwellings in Lisbon. Actual work on the Leixoes harbor project, which involves deepening the harbor to 30 meters and constructing a new dock and breakwater, was commenced on March 13 by Spanish and Italian companies. A loan of 30,000,000 escudos (approximately $900,000 based on exchange during the first quarter of 1932) was issued in January as a part of the authorized Internal loan of 100,000,000 escudos, which is for the purpose of subsidizing improvement on state-owned railway lines. This initial portion will be expended during the remainder of the current fiscal year. Italy Appropriates $62,600,000for Unemployment Relief. An additional billion lire ($52,600,000) has been appropriated for public works in Italy to relieve unemployment, according to a report to the Commerce Department from Commercial Attache Mowatt M. Mitchell, Rome. The announcement, May 16, by the Department of Commerce, further said; Of this amount, 750,000,000 lire will be allocated for Northern, Central and Southern Italy to be used for flood control, road building and repair of villages and buildings damaged by landslides. One hundred and six million lire will be utilized in the reparation of earthquake and war property damage, and 94,000,000 lire for accelerating work on the direct railway lines from Bologna to Firenze, Piacenza to Cremona, and Firenze to Salsomaggiore. The remaining 50,000,000 lire will be used for work on the aqueduct which is to supply potable water for a large part of the Puglie Province. Virtually all the above mentioned projects are now under way. (Lira equal to about 5 cents, United States.) Convention of the Postal Union of the Americas and Spain. On May 12 the New York Post Office issued the following announcement: Postmaster Riely announces that the convention of the Postal Union of the Americas and Spain, concluded at Madrid, has been put into operation by Argentina, Bolivia, Brazil, Chile and Colombia (in addition to Cuba, Dominican Republic and Uruguay, previously announced). The maximum amount of indemnity payable In case of the loss of a registered article in the regular mails is $3 instead of $3.85. The weight limit for letters (also packages paid at the letter rate), and commercial papers, is 4 pounds 6 ounces. The maximum dimensions for printed matter and commercial papers is 18 inches in any direction, except when in the form of a roll the dimensions are 30 inches by 4 inches. As regards parcel post, the maximum indemnity payable for the loss, rifling, or damage of an ordinary parcel post package weighing up to 11 pounds is 25 gold francs ($4.83), and for a parcel weighing over 11 pounds it is 40 gold francs ($7.72). Argentine Patriotic Loan of $128,000,000 Authorized. On May 13 Associated Press advices from Buenos Aires said President Agustin P. Justo's administration initiated to-day the machinery for flotation of a patriotic loan modeled after the American Liberty loans of the World War,following final approval of the measure by the Argentine Congres3 late last night. A 6% bond issue of 500,000,000 pesos ($128,800,000) is the administration's first step toward easing credit, restoring normal circulation and meeting the need for ready cash. From subscriptions the government will be able to pay more than 100,000,000 pesos ($25,000,000) in back salaries to public employees, an equal amount in debts to merchants 3735 and a large overdraft owed Banco Na,cion since before the revolution. The bill authorizing the loan was passed by the Argentine Senate on May 12; it had been adopted by the Chamber of Deputies the previous week. From Buenos Aires, May 13, a cablegram to the New York "Times" stated: Officially inspired news reports say that more than 300,000,000 pesos already have been subscribed, presumably in large part by individuals and private institutions rather than banks. No details as to the price of the issue have been revealed and the proposed autonomous control board has not been appointed. Nevertheless the immediate rediscount of the bonds in the Conversion Office is now legal, enabling the government to obtain funds to pay back wages and pressing debts. No date has been fixed for completing discussion of the budget, but the Finance Committee of the Senate has raised the total expected expenditure to 886.677,972 pesos, of which 301,558,225 are for debt service. The "Times" in its May 14, issue said: The Argentine Government intends to proceediimmediately with the printing of the Patriotic Loans bonds, which will be issued in series of 50,000,000 to 100,000,000 pesos each, it was learned in New York last night. On May 14 an Associated Press account from Buenos Aires stated: Some financial observers have predicteethat not more than one-third of the loan will be subscribed, but Congressional authorization includes the power to take a maximum of 240,000,000 pesos from the gold repository. reducing the reserve from 47 to 36%. • President Justo at Opening of Congress Declared Argentina Will Meet Debts. With the convening of the 69th Congress on May 2, the President of Argentine, Agustin P. Justo, reiterated Argentina's intention of fulfilling her foreign obligations and declared that political enemies of the administration would be sternly dealt with. United Press advices, May 2, from Buenos Aires to the New York "Herald-Tribune" added: Congress had been convened in extraordinary session since March 28. considering a financial reorganization of the government, but to-day was the first time the legislative body, which was elected last November, had held a regular session. "We must effect the strictest economies, without, however, damaging the country's future or failing to fulfill our financial promises since we must honor the nation's signature in order to maintain the credit which later we and our successors will need," President Justo declared. "The constitutional normality of the country," he said, referring to the political situation,"has not been affected by disorders of any nature. . . . You may be certain that I won't tolerate any disorders. If any are attempted, they will be immediately dominated. "The government," President Justo asserted, referring to the League of Nations, "Is a firm believer in the need of our ample collaboration at Geneva. This is in keeping with Argentina's efforts for justice and peace, besides providing an opportunity to maintain close contact with new commercial policies originating there." Associated Press accounts from Buenos Aires, May 2, stated: Although he (President Justo) mentioned Argentina's participation in the world disarmament conference, urged the "fullest co-operation with the Institution at Geneva," and said Argentina's foreign relations were most friendly, he did not mention the League of Nations specifically nor did he recommend that this nation re-enter it. The message, read personally by the President, revealed preoccupation with finances. "Despite the difficulties of the country," he said. he was firmly resolved to continue paying foreign obligations promptly. Argentina's long-term public debt at the end of 1931 amounted to 2,397,572,000 pesos (8618.000,000), he said, of which the foreign debt was 993,719,000 pesos (8256,000.000) and the internal debt was 1,403,853.000 pesos. The Nation also owed a floating debt on Feb. 28 1932. of 1,224,579,000 pesos ($316,000,000). The president said internal taxes, decreed In the closing days of the late de facto government and which had Yielded $53,200,000 in two months, must be maintained, but promised a reduction as soon as feasible. Argentina Decides to Drop 1870 Accountancy Methods. The following Buenos Aires cablegram May 19, is from the New York "Times." The Argentine Government, whose system of accountancy operates under methods Instituted in 1870, has decided on reform. With the present antiquated system of recording receipts and payments it is impossible to determine the exact totals of floating debts and other capital accounts. For this reason the Government has named a committee of experts to draft a bill providing for a new system which will be submitted to Congress shortly. Brazil Votes Credit of 61,440,000 for Relief of Drouth Sufferers. Associated Press advices May 18 from Rio De Janeiro, Brazil, stated: Provisional President Getulio Vargas to-day decreed an extraordinary credit of $1,440,000 for the Ministry of Interior to be used in public works relief measure for Northern drouth sufferers. Bolivian Congress Ends Long Session. The following from La Paz, Bolivia, May 14, is from the New York "Times": Congress adjourned at 1 o'clock this morning after nine months of work that has received unfavorable comment from the press in general. The financial reorganization of the country after the revolution of 1930 and within the narrow limits afforded by the economic depression has been a hard task and nothing definite has been done. 3736 Financial Chronicle The budget approved by Congress is described as unreasonable by the leading papers, which add that it is difficult to judge with optimism the benefits that it may give the country. According to law, an ordinary sitting of Congress will be inaugurated Aug. 6. Formation of American Committee on Brazilian State and Municipal Loans. According to an announcement on May 16 by the Institute of International Finance, an American Committee on Brazilian State and Municipal Loans has recently been formed consisting of the following members: Robert C. Adams, Vice-President, Bancamerica-Blair Corp. W. H. Eddy, Vice-President, Chase Harris Forbes Corp. Nevil Ford, Vice-President, The First National Old Colony Corp. Jerome D. Greene, Lee Higginson az Co. Ralph D. Kellogg, Vice-President, Baker Kellogg & Co., Inc. Victor Schoepperle, Vice-President, The National City Company. Francis M. Weld, White, Weld az Co. W. F. Williams, Vice-President, J. G. White at Co., Inc. The announcement by the Institute also says: The Committee was formed to facilitate representations to, or negotiations with, the Federal Government of Brazil with respect to those Brazilian State and Municipal loans in default which appear to be prevented from complying with their external obligations primarily because of the inability to obtain dollar exchange. It is not intended that the Committee supersede the negotiations of banks or fiscal agents with individual Brazilian States or Municipalities but that it shall supplement and reinforce such negotiations. The necessity for joint action among the bankers forming the Committee results from the fact that the Federal Government of Brazil has injected itself into the State and Municipal financial situations and that it controls the foreign exchange market in Brazil, so that without its consent conversions of Brazilian into American currency cannot be effected. Among the objects that the Committee desires to achieve are to impress upon the public and the Governmental authorities in Brazil the asrious nature of the State and Municipal defaults, to co-operate with competent bodies representing American bondholders of Brazilian State and Municipal loans and further to keep in touch as far as possible with the activities of bodies representing European holders of such loans for the purpose of preventing possible discrimination in favor of the latter against American bondholders. The Committee has recently directed a communication to the Finance Minister of the Federal Government of Brazil, Dr. Oswald.) Aranha, informing him of the existence and objectives of the Committee and requesting information concerning the steps the Federal Government of Brazil proposes to take in the release to the States and Municipalities of foreign exchange to facilitate resumption of their external debt service. The Committee was formed pursuant to a recommendation of the Institute of International Finance which had stated in its bulletin on Brazil of December 31 1931 that "a closer co-operation between the various banking houses interested in Brazilian State and Municipal loans would facilitate uniform treatment of outstanding maturities." Funds For Payment of Interest and Sinking Fund of San Paulo Coffee Realization Loan. Speyer & Co. and J. Henry Schroder Banking Corp., U. S. A. fiscal agents for the State of San Paulo 7% Coffee Realization Loan of 1930, report that, while 10 months' interest and sinking fund on the outstanding bonds require $12,935,000, the total amount receivable for 10 months (ended April 30 1932) of the second year of the Coffee Realization Plan's operation from the sale of pledged coffee and from the special tax, was equal to $15,643,928. Of this amount there has been received, or is in transit, $14,998,928 (including the equivalent of £574,641 at $3.66 per L); the balance of $645,000 has been deposited with the bankers' agents in San Paulo in milreis, and its remittance is expected in the near future. Extension for 60 Days by Chase National Bank of Loan to Cuba. According to Havana advices, May 14, the Chase National Bank of New York has extended for 60 days the $20,000,000 Loan to the Cuban Government. Peru's Temporary Abandonment of Gold Standard Approved by Peruvian Congress—Action by Central Reserve Bank of Peru. Announcement that Peru's temporary abandonment of the gold standard has been approved by Congress was made in Associated Press accounts from Lima (Peru) on May 17, which also stated: A bill relieving the Central Bank of its obligation to exchange notes for gold under the so-called "Kemmerer law" was approved last night by a vote of 62 to 20. It was introduced by Finance Minister Ignacio Brandariz. The Bank was authorized to restore operation of the gold standard clauses in the law, which was drafted by Dr. Edwin W. Kemmerer, financial adviser from Princeton, when "the Board of Directors believe the time has come to re-establish the gold standard," and upon approval of its decision by the Finance Minister. Under the new measure the Central Bank may buy bar gold, gold coin and foreign drafts, but independently of the gold backing of the sol. That means that any such operations would not affect the gold reserve. The sol was quoted in unofficial dealings at four to the dollar yesterday. Its par value is 28 cents. Earlier Associated Press accounts from Lima (Peru) May 14 are also quoted as follows: May 21 1932 After a long uphill fight, the Peruvian Government decided to-day to abandon the gold standard "for a temporary period." The first intimation of the decision came when persona attempting to buy foreign drafts at the banks found that sales had been stopped as no quotation was available. Then word was given out that the Finance Minister was sending a bill to Congress affecting the monetary policy. Although there was no official quotation for the sol, it was learned unofficially that it was being quoted at five to the United States dollar. Its par value is 28 cents. The Superintendent General of Banks said that he understood local bankers had suspended quotations until the publication of the Finance Minister's bill, after which new rates would be set. Suspension of the gold standard will stop automatically the operation of the "Kemmerer law," which stipulates that only the Reserve Bank may sell foreign currency. Circulation of the sol with gold backing decreased onethird in the last eleven months, and is now around 40,000,000. The Reserve Bank has been making shipments to cover drafts sold on New York and has been retiring notes in amounts equal to these shipments. The last movement of gold was April 21, when about $1,000,000 was shipped. A Lima cablegram May 14 to the New York "Times" had the following to say: The Central Reserve Bank of Peru to-day gave up its .thirteen-month struggle to keep Peru on a gold basis, and the directorate suspended the sale of sterling and dollar drafts. Sterling, which was selling at 13.30 soles on Friday (May 131, went to 18 this morning and the dollar was quoted at 6 soles to-day [May 14], compared with 3.60 on Friday. The reorganized Central Reserve Bank, which began operating under Dr. Edwin Kemmerer, was set up in April of last year with a gold reserve of approximately 66,000,000 soles ($18,500,000). The demand for drafts on New York and London has diminished the reserve to 42,000,000 soles ($11,750,000). The exchange rate will now be determined by the demand for the limited amount of export bills coming on market. The following is from the May 15 issue the "Times:" For months Peru has made a supreme effort to maintain the sol at its par value of 28 cents United States gold and less than three weeks ago drastic decrees were put into effect in an effort to stabilize the currency, says The Associated Press. One of them provided that deposits made by pulicial or administrative order could not be made in a foreign currency except under certain conditions and that interest earned by deposits of foreign money in Peruvian banks would be taxed 25%. The other decree ordered that, beginning June 1, all foreigners arriving In Peru would be required to carry at least 2,000 soles. Service on Peru's foreign debts was suspended a week ago and the moratorium was extended for another six months on Jan. 24 of this year. At that time the hope was expressed that the Rol could be maintained at par value. From Washington May 18 an announcement by the Department of Commerce said: The Executive may make certain modifications in the contract between the Government and the Central Bank relative to the redemption of the Bank's notes under a law just approved by the Peruvian Congress. according to a cable to the Commerce Department yesterday from Commercial Attache M.L. Bohan, Lima. Since the adoption of the recommendations of the Kemmerer Commission early in 1931, the Central Bank has redeemed its notes in gold or gold exchange. Under the new law the obligations of the Bank to redeem its notes In this manner is suspended. During the period of suspension, the cable stated, the Dank may, when convenient, buy and sell freely gold bars and coin at prices equal to or higher than the rate of 2.3738 soles per gram of fine gold, at which the Bank was previously required to redeem its notes. Similarly, the Bank may buy and sell foreign exchange at rates equal to or better than that determined by adding to the former gold parity of the sol (28 cents U. 8.) the cost of the transfer of gold to Now York or London. These operations, however, must be effected without drawing on the present gold reserve, which will be maintained intact. Central Dank notes are to be full legal tender for public and private debts. During discussion of the measure the Minister of Finance was quoted as saying that neither the Government nor the Central Bank is contemplating exchange control. There have been no exchange transactions by the Bank in the last two days. During that period a tentative street rate of four soles to the dollar has prevailed. This was also the Bank's buying rate on May 17. No definite rate has been established yet. Proposed Peruvian Taxes Would Affect Foreigners— Measure Would Levy on Commercial Enterprises and Individuals—Congress Decrees Tax on Deposits of Foreign Money. Special correspondence as follows from Lima May 2, Is from the New York "Times" of May 15: The Peruvian Congress is now considering a measure which provides for the taxation of foreign colonies consisting of more than 7,000 persona, which may cause many Japanese and Chinese, who comprise the largest foreign groups here, to leave the country. A possible labor shortage on the haciendas is indicated if the measure is successful, as well as the driving up of food prices through the efforts of leading Japanese and Chinese, who control most of the market gardens near the towns and the essential food sources in the markets. Italian, British, French, German and American residents would also be affected by the measure, which would fix an annual tax ranging from 300 to 1,000 sole on all commercial, industrial and similar establishments, a tax of 300 sola annually on professional persons and an annual individual tax of 150 sole on artisans and workers. Commercial and industrial establishments would also have to Pay between 500 and 8,000 sole for a permit to trade, but this tax would be levied only once. Married foreigners with children over 21 years old and registered as Peruvian citizens would be exetnpt from the taxes, but foreigners to whom the measure would apply could take out naturalization papers only by payment of five times the amount of the tax. Congress has decreed that judicial and administrative deposits must be made in Peruvian money, unless they are for compliance with obligations contracted in foreign money. This measure was adopted to combat speculation and stabilize monetary conditions. Under the decree foreign money deposited in banks prior to April 26 will be subject to a tax of 25% of the interest accruing. All contracts signed within the country in which foreign money is specified are subject to a surcharge of 25% of the taxes which they would Volume 134 Financial Chronicle 3737 pay under ordinary circumstances, but the Minister of Finance has interpreted the decree as meaning that such contracts are not subject to the surcharge if made before April 20. Property and real estate owned abroad and foreign securities and money transmitted as legacies are subject to a 25% surcharge on the normal taxes. A decree dated April 27, with the purpose of preventing the immigration of impecunious foreigners, declares that after June 1 aliens desiring to reside in Peru must possess at least 2,000 sols in gold. Another decree of the same date provides that all authorization for the residence of State pensioners abroad is canceled and that they must return to Peru within sixty days. If they do not comply their pensions will be suspended until they return. Quota System on Imports Proposed in Chile. A bill was introduced in the Chilean Congress on May 11, which would require the licensing of imports, establishing fixed quantities of the various products to be admitted, and allocating quotas for supplying countries of imported merchandise, it is stated in a cablegram received May 13 by the Department of Commerce from Commercial Attache Ralph H. Ackerman, Santiago, Chile. Peru Speeds Reprisal Against United States Tariff— Bill for 300% Import Duty—Counters Copper Levy Project. The following Lima (Peru) cablegram May 14 is from the New York "Times": Guatemala Establishes Package Tax on Imported Merchandise. Legislative decree No. 1818, presumably effective once, imposes a surcharge of five cents per package on all imported merchandise, whether dutiable or not, says a cablegram received on May 10 by the Department of Commerce at Washington from Assistant Trade Commissioner J. E. Dyer, Guatemala City, Guatemala. A bill placing a surcharge of 300% ad valorem on all imports from the United States was put on the order of the day to-day for immediate consideration by Congress. It is designed as a reprisal for the proposed new duty on copper entering the United States, and members of the Government say it will be passed by Congress and be enforced. The "Times" May 15 likewise said: Dr. Alberto Freundt Resell, Foreign Minister of Peru, announced last Thursday that the leading republics of Latin America had begun diplomatic negotiations with a view to forming a customs union for united defense and concerted reprisals against the tariff policy of the United States. He said Peru and Chile had almost reached an agreement concerning the measures to be taken together and Argentina and others were expected to enter this accord. Dr. Freundt declared then that action had been suspended on a bill for the levy of a 300% duty on all imports from the United States, pending the outcome of Peru's diplomatic efforts in Washington, but that the bill would be enacted if the new copper duty were authorized by the United States. He intimated Chile was preparing similar action. Right to Seize Land Decreed in Mexico—Governor of Hidalgo State Can Declare Stores or Factories "Public Utilities"—United States Smelting, Refining & Mining Corp. Affected—Confiscation Feared. Expropriation of any privato property declared by the Governor to be a "public utility" is authorized by a decree issued on May 1 in the State of Hidalgo, effective as from May 10, it was learned at Mexico City May 13, said a message on that date to the New York "Times," which further said: Throe per cent of the value of the property would have to be paid to the owner upon seizure from him, and the balance within 20 years, with 4% on the unpaid balance. The term "public utility" would apply, under the decree, not only to public services but to natural resources, factories or commercial establishments or any other property "tending to benefit the State or its residents." The Governor of the State would be the judge as to its "public utility." The present Governor of Hidalgo is Bartolome Vargas Lugo. From Washington May 16 the same paper reported the following from Washington: The United States Smelting, Refining & Milling Corp. is the principal American concern operating in the State of Hidalgo in Mexico which has passed a law making private property liable to confiscation "for public utility uses" on payment of 3% of its value, with 20 years allowed for payment of the rest. The corporation owns extensive silver and gold mines in Hidalgo and has operated them for 25 years. The region is rich in silver and gold, and many other mines are there, some British-owned. The State Department, however, has received no complaints from American concerns regarding the now law, nor has it received official reports regarding the legislation from Mexico City. The law is regarded as radical, but the State Department would not comment on it to-day, since it Is a matter of domestic legislation in a foreign country and there has been no overt act against American property. Presumably, should American mines be taken under the law, recourse would be had to the courts to determine the constitutionality of the legislation. Jose Cruz y Colts, President of the National Mexican Chamber of Commerce, has expressed the opinion that the law is uuconstitutional. Additional advices (Associated Press) from Mexico City May 15 stated: American and British investments totaling several hundred millions of dollars are jeopardized by the new "public utility law" of the State of Hidalgo. Jose Cruz y Cells, President of the National Mexican Chamber of Commerce, declared to-day. The law makes private property liable to purchase "for public utility uses" on payment of 3% of its value. Twenty years is allowed for payment of the other 97%• The measure provides that if the State Government decides, after several years of control, that a property is not suitable as a "public utility," It may be returned to the private owners, who must reimburse the State for all payments made under the condemnation proceedings. The Chamber of Commerce President declared the law made it possible for the State to seize a rich mining property by paying only 3%, and loot it by working the rich ore veins, and then hand back the worthless remainder to the original owners. Hidalgo produces between 10 and 20% of the world's silver. "This is an assault against private ownership," said Senor Cruz y Cells. "It will cause serious menace to commerce and industry, and the lack of confidence it promotes will have a lasting harmful effect. Under the lack of security resulting from this law, who would want to invest any capital in that Stater Ile predicted the measure would be declared unconstitutional. Hundreds of mines dot the hills around Pachuca. Hidalgo's capital, and Real del Monte, its sister town. Silver mining has been carried on there for centuries. Japan Will Try to Control Her Foreign Exchange Rates. Associated Press advices from Tokio May 11 said: A bill empowering the Government to control the foreign exchange rate will be introduced at the forthcoming special session of the Diet, it was announced to-day. The Government declared, however, that there is no intention of controlling foreign trade. In printing the above the New York "Times" of May 12 stated: The yen, which was valued at 49.84 cents when backed by gold, was quoted yesterday at 32.69 cents, having fallen more than a third in consequence of Japan's departure from the gold standard last Dec. 13. Heavy payments to the United States had then reduced the reserve to about $250.000,000. An announcement May 14 by the Department of Commerce at Washington said: The impending increase in currency circulation is causing consideration possible flight of capital, according to a cable to the Commerce Department to-day from Commercial Attache II. A. Butts, Tokyo. A further decline in silk prices is anticipated on account of a probable small dectine in cocoon production and reeling. The Government has definitely decided to assist banks with frozen real estate loans. by Government officials of control over exchange to curb Japanese Shipping Seeks Further Government Aid. A subsidy of 20,000,000 yen (about $6,600,000 at current exchange) has been requested by Japanese shipping interests to aid services on foreign routes, which are feeling the effects of trade shrinkage and excess tonnage, it is stated in a report from Consul Leo D. Sturgeon, Tokyo, made public by the Department of Commerce. The Department's further announcement May 10 said: Since 1914 Japanese cargo has increased 10% while tonnage has expanded 50%, thus placing Japan third among merchant marine countries of the world and resulting in a relatively great loss through idle tonnage. Tne major financial difficulties faced by Japanese shipping have been the fall in value of the pound sterling; the inability to increase freight rates without loss of trade and the certain loss in revenue by maintaining old rates: and the diversion of important American and Australian cargoes to vessels other than Japanese, under the Chinese boycott. The problem was partially met during 1931 by working agreements between the larger Japanese shipping companies, but this has not sufficed to relieve the acute situation in general, and many characters have bad to cancel contracts. Prohibition of importation of foreign tonnage has also been sought as a partial remedy. Foreign Investors Sought by Chinese—Government Works Out Plan to Attract Capital to Build Up New Industries. In its May 15 issue the New York "Times" reported the following (special Correspondence) from Shanghai April 13: New attempts to attract large investments of foreign Capital to China are to be made by the Central Government under a detailed plan worked out by the Ministry of Industry and just submitted to the Executive Yuan for approval. Three different forms of foreign investments in Chinese enterprises are contemplated under the new scheme, namely, enterprises jointly owned by the Chinese Government and foreign investors, Chinese Governmentowned enterprises financed by loans from abroad and special concessions to be granted to foreign interests. The whole scheme has been formulated under the terms laid down by the late Dr. Sun Yet-sen, China's revolutionary leader, in a book entitled "Plan for the Industrialization of China." In the case of joint Sino-foreign enterprises the foreign investors will be expected to assume full responsibility for the planning and technical launching and operation of the factories or industries, and will be asked to furnish machinery and equipment, as well as technical experts. The Chinese Government will insist upon owning 51% of the stock of such enterprises, but reserves to itself the right of selling 25% of the stock to private Chinese investors, who will be forbidden to sell their holdings to foreigners of any nationality. Chinese Law to Rule. It is proposed that import duties on machinery and equipment needed for the launching of these enterprises may be reduced or canceled at the discretion of the Ministry of Industry. Chinese corporation law and Chinese tabor laws must be observed in all cases, and if disputes arise between the foreign investors and the Chinese Government, Chinese courts are 3738 Financial Chronicle the foreign investors must to-decide the disputes under Chinese law, and specifically waive the protection of extraterritoriality. must be employed, hi SoIfar as possible Chinese labor and Chinese experts abroad Chinese and the National Government reserves the right to send by the students, who must be introduced and placed for foreign training investing companies In this way the Government hopes to develop a large corps of superintendents and technical experts. memIn the cases of joint Sino-foreign enterprises a majority of the the general bers of the board of directors, the chairman of the board and manager must be Chinese. forIn industries established by the Chinese Government by means of eign loans the Government reserves to itself full power of administration, disbursements. and receipts but will permit foreign lenders to supervise money is Where concessions are granted, and the investment of Chinese general supernot involved, the Government reserves to itself the right of vision. All grants will specify that at the end of the life of the concession capital, shall the properties of the companies concerned, except working compensation. pass to the Chinese Government without payment of any life The government will also reserve the right to purchase after half of the of profits of of the concession has expired, and in any case a percentage or to Industry of such concessions must be paid annually to the Ministry the Government Treasury. President Hoover Signs Resolution Under Which Name of Porto Rico Is Changed to Puerto Rico. On May 17 President Hoover signed the resolution providing for the change in the name of Porto Rico to "Puerto Rico." The resolution was given in our issue of May 7, page 3389. Aid of Reconstruction Finance Corporation Asked for Porto Rico—Governor Beverley Calls on President Hoover to Urge His Support for Move to Extend Scope of Act. President Hoover's support for extending the benefits of the Reconstruction Finance Corporation to Porto Rican banks was sought on May 14 by Governor J. R. Beverley of the Island, who called at the White House to discuss general conditions in the possession and particularly the banking situation there. In indicating this, Washington advices May 14 to the New York "Times" continued: He said conditions in Porto Rico "are not good, although I am very optimistic over the outlook." "I would like," he said, "to have the Reconstruction Finance Corporation Act extended to Porto Rico, so that the banks there can liquidate some of their 'frozen' collateral." Governor Beverley said that Felix Cordova Davu Davila, Resident :the:United States, had already introduced a Commissioner of Porto Rico In. bill in Congress to do this, lieexplained that the Porto Iticon banks did a land banking business, lending money on long-term securities. Consequently, he said, a considerable part of their paper was tied up. He added that Porto Rico would produce the largest sugar crop in its history, and also had the largest coffee crop since the11.928;cyclione. Porto Ricans, he declared, were seeking to expand the industries they now have rather_than to bring in new ones. Creation of American Bank in Virgin Islands Proposed --Approaching Expiration of Franchise of National Bank of Danish West Indies. The creation of an American bank in the Virgin Islands, w-here the banking situation has become serious, is now being fostered through the Treasury Department, Ray Lyman Wilbur, Secretary of the Interior, stated orally May 6. 7, This is learned from the "United States Daily" of May say: to which went on up an American Following an investigation of the feasibility of setting Treasury and the Secrebank, a conference of bankers, the Governor of tho was'agreed that an Ameritary of the Interior was held May 4, in which it banking system should be can institution to operate under the American established. that the critical banking Secretary Wilbur called attention to the fact expiration next year of the situation arose because of the approaching West Indies. The followfranchise of the National Bank of the Danish bankinesituation wasIsupplied at the ing additional information on the Department: an end to long-term Expiration of activities of the Danish bank has put have been seriously handiloans. As a result, agriculture and industry the bank has been colcapped. In view of its approaching termination, and long-term loans. lecting as rapidly as possible on mortgages will bring about greater business The introduction of an American bank monetary system in the islands. stability and will introduce the American At present Danish money is used there. Default Premier Stevens Acts to End New South Wales Premier. as Stevens Mr. —Swearing in of May 15 is from The following from Sydney (N. S. W.) • "Times": York the New to after succeeding J. T. Lang was Premier Steven's first official act £300,000 (about $1,100,000) on social services, pay charges amounting to endowments, on which the Lang including widows' pensions and family Government had defaulted. Government's intention to honor the Premier Stevens proclaimed the resumption of normal banking "Premiers' plan," forecast the immediate to the State of control over its by public departments and the restoration obstructionist orders to civil servants own revenues. All of Mr. Lang's have been rescinded. now stands at £4,000,000, comThe total default in New South Wales internal interest. prising £3,200,000 oversea interest and £800,000 May 21 1932 An item regarding the removal of Premier Lang from office appeared in our issue of May 14, page 356. From Sydney May 13 the "Times" reported: J. T. Lang, extremist Laborite Premier of New South Wales, was dismissed from office to-day by Sir Philip Game, British Governor of the State. B. S. B. Stevens, leader of the Opposition and member of the United Australia party, was commissioned to fonn a Government. It is expected that Parliament will be dissolved next week and a general election will be held immediately. Extraordinary street demonstrations followed the news of the dismissal. Many partisans celebrated vociferously and the City spent an anxious night. Mr. Lang had played into the Governor's hands by committing a technically unconstitutional act. He had distributed an order to heads of the Government departments forbidding them to pay any funds into the Commonwealth Bank under the Enforcement Act that attaches the State revenues in consequence of Mr. Lang's default on loan interest due in New York and London. The Governor asked Mr. Lang to withdraw the order. Mr. Lang refused, whereupon the Governor demanded his resignation. Mr. Lang gave it, doubtless preferring dismissal, which would rive him an election cry, to seeking dissolution of Parliament. Stevens Sworn In. Mr. Stevens was sworn in as Premier immediately and asked for time to form a Ministry. The Governor granted him the week-end. It will not be necessary for the new Ministry to meet Parliament. Mr. Stevens will probably obtain a dissolution next week and he and his colleagues will go to the country as the Ministry of the day on a policy of economy, honoring obligations and adherence to the Premier's plan. The Stevens party is greatly outnumbered in the present Legislative Assembly. The new Government will immediately release the Federal and State taxation papers locked away by Mr. Lang, As New South Wales may now be regarded as having returned to the Premiers' plan, the decrees attaching State revenues will be reviewed at a special meeting of the Commonwealth Cabinet in the morning. Mr. Lang retired to the country. He left his office in a private car with the laconic remark: "I've finished here." The same paper in Melbourne advices May 18 said: With the dismissal of J. T. Lang as Premier of New South Wales and the triumph of the United Australia party at the State election in Victoria, all six States of the Australian Commonwealth are now governed by ministries pledged to enforce internal economies and pay external debts. Although the new ministry in New South Wales has tenure only until the election on June 11, it is almost certain to be returned with an overwhelming majority. Besides the fact that a large majority of citizens of New South \Vales are opposed to debt repudiation, the State approached too closely to civil war in the closing days of Mr. Lang's Premiership for the electorate to take any risks. The situation became so threatening that the Commonwealth Government was enrolling special constables to protect its property in New South Wales. One precautionary measure was boarding up of the windows of the Commonwealth Bank in Sydney. The fact that so militant a leader of labor as Mr. Lang was dismissed without disorder was a conspicuous vindication of the system of Government evolved in the British Empire. For months the Governor had been urged to oust Mr. Lang and the latter was socially ostracized by many. Intervention Was Refused. The British Government rejected all appeals to intervene. As long as Mr. Lang obeyed the law he enjoyed all the privileges of an elected leader of the State, but when he flouted the law he was summarily dropped. Thus the Governor upheld the highest principles of democratic Government. President Hoover Signs Bill Passed by Congress Making Debentures of Intermediate Credit Banks Eligible for Rediscount by Federal Reserve Banks. President Hoover signed yesterday (May 20) an amendment to the Federal Farm Loan Act, widening the powers of Federal Intermediate Credit banks and giving greater latitude in financing the credit needs of farmers. The amendment authorizes the Federal Intermediate Credit banks to accept drafts drawn on them by co-operative marketing associations and permits the rediscount by Federal Reserve banks of notes discounted by the Intermediate Banking members. The bill passed the Senate on April 25, and it was passed by the House on May 16 by a viva voce vote. References thereto appeared in our issues of April 30, page 3207 and May 14, page 3566. Three-Fold Farm Relief Program of Farm Bureaus Reported Favorably to Senate—Equalization Fee and Export Debentures Among Proposals. Associated Press advices from Washington, yesterday (May 20), stated: The three-fold farm relief plan of the major farm organizations, calling for the equalization fee, export debentures, and a domestic allotment plan of distributing was'reported favorably to-day by the Senate Agriculture Committee, The Committee made only minor changes in the wording of the measure as presented by the National Grange, the National Farmers' Union and the American Farm Bureau Federation, which agreed upon and drafted it. The measure authorized the Farm Board to put into effect any one or combinations of the three plans when considered necessary to assist agriculture. Assurance of production costs of the portion of crops domestically consumed is the basic aim of the bill. The measure provides for marketing agreements with co-operatives to permit withholding of commodities from market on payment to those organizations of the cost of impounding. After estimates of probable losses, costs and charges to be paid under these agreements, the Board would fix the equalization fee, which would be collected as prescribed by the Board, either on processing, sale or transportation of the commodities. The export debentures would be issued by tho Treasury to farmers co-operative or other producers on shipments abroad and would be onehalf the duty on imports. Financial Chronicle Volume 134 Crop Production Loans by Department of Agriculture to May 7 $61,579,621. Farmers in the South and Northwest have received the bulk of the 1932 crop production loans made by the Department of Agriculture, it was stated in Associated Press accounts from Washington May 12, which further stated. The total for all States on May 7 was $61,579,621. Of this amount $29,794,556 went to ten Southern States and $25,089,970 to ten in the Northwest. The last day for filing applications in all States except in the Northeast ,was April 30, but with more than 100,000 appllcations on hand then the loans are still going out at the rate of about $500,000 daily. Several weeks will elapse before the final total is compiled. North and South Dakota farmers received the largest amount. In North Dakota 38,222 loans totaling $8,237,148, or an average of $215.51 each were made, while 29,949 farmers in South Dakota got $7.019,656, averaging $234.39 each, Loans totaling more than $4,000,000 were made in Georgia, Montana, North and South Carolina. They totaled more than $3,000,000 in Arkansas, Mississippi and Tetuaesee. , No loans have been made in Connecticut or Rhode Island. Loans by States. The loans by States and regional offices follow: StateAmount.' Sate.4 mount. Alabama $1,634,759 Nevada $36,186 Arizona 93,698 New Hampshire 5,242 Arkansas 37,751 3,926,373 New Jersey California New 28,132 Mexico 408,663 ' Colorado 69,168 916,888 New York Delaware 8,941 North Carolina 4,138,385 Florida 8.237,148 251,650 North Dakota Georgia 165,132 4,874,231 Ohio Idaho 582,882 854,790 Oklahoma Illinois 239,536 64,713 Oregon Indiana 21,132 324,352 Pennsylvania__ Iowa 4,327,253 303,457 South Carolina Kansas 7.019,656 359,393 South Dakota 1,271.670 Kentucky 747,022 Tennessee 3,033,690 Louisiana 2,375,446 Texas 242,819 Maine 288,874 Utah 640 Maryland 49,110 Vermont 973,922 Massachusetts 4,022 Virginia 553,348 Michigan 283,595 Washington 119,891 1,121,818 West Virginia Minnesota 612,836 3,981,099 Wisconsin Mississippi 612,334 917,336 Wyoming Missouri Montana 4,164,853 $61,579,621 1,316,773 Total Nebraska StateWashington Minneapolis St. Loots Memphis Dallas Regional Offices. StateAmount. $15,589,816.58 Salt Lake City 22,704,692.00 Spokane 3,601.166.00 13,169,348.50 3.536,052.25 Total Amount. $2,047,735.72 930,810.00 $61,579,621.05 Reduction in Interest Rate of Wichita Land BankAction Attributed to Activities of Reconstruction Finance Corporation. The Federal Land Bank of Wichita has announced a reduction of 1% in its interest rate, made possible, it was explained, by a reduction in the amount of interest it has to pay on its debentures which are its chief source of funds for lending. The following additional information was provided by the bank. This is learned from Wichita (Kan.) advices May 18 to the "United States Daily" which also had the following to say: The reduction in interest rates Is attributed largely to the activities of the Reconstruction Finance Corporation in strengthening the condition of commercial banks and checking failures and to its offer to purchase any unsold issues during February and March, also to the passage through the Senate of the bill amending the Federal Reserve Act making these debentures eligible as security for loans by Federal reserve banks to member banks. This reduction makes the rate of interest which the borrowers pay not over , for the local lending institutions cannot add more than 3% to the bank's rate of interest. The bulletin reports an increase in the volume offarmers' notes discounted amounting to 3% in April, compared with the previous month and an Increase of 24H% during the last 12 months. The farmers' notes now being held by the bank for 20 institutions amount to approximately $3,000,000. The bulletin says: "Livestock loan companies and agricultural credit corporations now in process of organization are expected to increase the volume of the bank's business very materially. Many localities need the services of such lending corporations, to supply credit to farmers which has necessarily been restricted because of the decline in bank deposits. "Stockmen with breeding herds of cattle and bands of sheep need credit for longer periods than Is supplied by short-time loans from commercial banks, even when such loans are readily obtainable. The Federal Intermediate Credit Bank may discount loans with maturities not longer than one year and,if the loans are secured by breeding animals, with the privilege of renewal for another year, and possibly further renewals, if the value of the collateral is maintained. "The Federal Intermediate Credit Bank does not compete with commercial banks and other financing institutions which make loans to borrowers. The bank supplies credit for agricultural purposes when local credit is not sufficient. It does this by discounting for banks, livestock loan companies, agricultural credit corporations, and other financing institutions, loans which they have made to stockmen and farmers, thus increasing the supply of credit available for extending agricultural operations." C. L. Jackson Elected President Baltimore Federal Land Bank and Intermediate Credit Bank-E. P. Crider Becomes Secretary. The election of Charles S. Jackson as President of the Federal Land Bank and allied Federal Intermediate Credit Bank of Baltimore was announced by the boards of directors of both institutions on May 12, it is learned from the Baltimore "Sun" which also said: 3739 Mr. Jackson succeeds Vulosko Vaiden in both positions. Mr. Vaiden recently vacated his Baltimore post on receipt of an appointment from President Hoover as a member of the Federal Farm Board at Washington. Mr. Jackson was promoted from the dual position of Vice President and Secretary of both banks. He is a West Point graduate and was formerly Secretary of Central Bank & Trust Co. of Parkersburg, W. Va. Announcement also was made of the election of E. P. Crider as Secretary of both the Federal Land Bank and Federal Intermediate Credit Bank. Mr. Crider has had an extensive banking experience in Virginia. He was recently Cashier of the Commercial Bank & Trust Co. of Danville. and prior to that time an officer of other banks in that State. R. G. Merrick Elected President Maryland-Virginia Joint Stock Land Bank Succeeding Hugh L. Pope. Robert G. Merrick was elected President of the MarylandVirginia Joint Stock Land Bank at a meeting of directors on May 11, succeeding Hugh L. Pope, according to the Baltimore "Sun," from which we also quote as follows: Mr.Merrick also replaced Mr.Pope recently as President of the Equitable Trust Co., which owns the Joint Stock Land Bank. The Maryland Virginia Joint Stock Land Bank was organized by an Act of Congress and is under the supervision of the Farm Loan Board of Washington. This bank has approximately 600 mortgage loans on farms. aggregating $2,500,000 in Maryland and Virginia, with 90% of the loans In Maryland. The Maryland Virginia owns practically no real estate. Mr. Merrick has had wide experience in the mortgage loan business throughout the United States. Tribute to H. G. S. Noble, Former President of New York Stock Exchange, Upon Completion of HalfCentury of Service in Behalf of Exchange. The Governing Committee of the New York Stock Exchange took occasion, in resolutions adopted May 11, to record their "profound appreciation of the invaluable services" of Henry G. S. Noble, who has rounded out 50 years of service in the interest of the Exchange. Mr. Noble has been a member of the Exchange since April 20 1882, when he purchased the seat of his grandfather, Henry G. Stebbins. Mr.Stebbins had been a member of the Exchange since 1831, so that the Stock Exchange seat has been in the possession of the family for more than 100 years. Mr. Noble was born in Staten Island in 1859, and attended the College of the City of New York. Prior to joining the Exchange he served an apprenticeship as a clerk in his grandfather's brokerage firm, Henry G. Stebbins &T Son, and for several years after his election as a member of the Exchange.he made his office with that firm. In 1885 he formed the firm of Noble, Mestre & Doubleday,later changed to Noble & Mestre, and continued with them until their dissolution in 1902. He then joined the firm of DeCoppet & Doremus, with which firm he still makes his address, although he retired from the firm in December 1928. Mr. Noble was elected a member of the Governing Committee in May 1887, and is still an active member, serving as Chairman of the Law Committee and a member of the -He was Business Conduct and Conference conimittees. President of the Stock Exchange from May 1914 to May 1919, during the World War, and was Chairman of the Special Committee of Five which had entire charge of the Exchange during the period of its closing following the outbreak of the war in 1914. He later described that troubled period in Stock Exchange history in a book, "The New York Stock Exchange in the Crisis of 1914." His grandfather had also been President of the Exchange during a war period, serving in 1863 as well as in 1851 and 1858. Mr. Noble was this week (May 9) re-elected a trustee of the Gratuity Fund, a position he has occupied since 1914. He has been Chairman of the Trustees for several years. The following are the resolutions adopted by the Governing Committee of the Exchange on May 11: Fifty years ago, on April 20 1882, Mr. Henry G. S. Noble was elected a member of the New York Stock Exchange. During that half-century he has served the Exchange as a member, Governor and President. He has seen the Exchange grow and expand from a comparatively small market to a great economic force exerting a world-wide influence. He contributed to that growth by the clarity of his vision, the power of his personality, his wisdom, and his abounding courage in days of trial and economic crisis. His fundamental faith in the Exchange, his belief in its high purpose, his loyalty to its principle of fair dealing, were the inspiration of his persistent and devoted work for the promotion of its beet interests. His courage did not exhaust itself in its defense or its high development. He defended the Exchange with a firm faith in its purpose: he advocated the freedom of the market place; he fought the intrusion of fraud and sought the drastic punishment of those who would violate the high ethics governing the Exchange. He never compromised where either truth, honesty, duty or loyalty was an issue. He held the policies of the Exchange as high ideals and he maintained firmly, through these years of change and growth and advancement, his fine philosophy of life and service. Such is the man who still honors the Exchange with his membership and gives his untiring efforts to the promotion of its prosperity. Mr. Noble's membership has been in his family for more than 100 years. Ile inherited his membership from his grandfather, Mr. Henry G. Stebbins, who Joined the Exchange in 1831, served as a Governor for a number of years, and was President in the years 1851. 1858 and 1863. Mr. Noble has been a Governor for 34 years. He has served on nearly all the Standing Financial Chronicle 3740 Committees of the Exchange and on many Special Committees, the most important of which was the Special Committee of Five appointed when the Exchange closed in 1914 owing to the outbreak of the World War. During the World War Mr. Noble served as President of the Exchange, 1914-1919, a time of crisis, of danger unprecedented, of problems hitherto unimagined. A world at war, business stopped, the Exchange itself threatened and attacked at home, feverish excitement which clouded the vision and justment of many men, a loosening of restraint, a weakening of moral fibre; such were the conditions that confronted the Exchange. But Mr. Noble brought to his high office patience, experience, diplomacy, courage and patriotism, and carried us through the great upheaval with a splendid record of service, stability and co-operation. He left an imperishable mark on the history of the Exchange. This half-century milestone of service is an occasion on which to voice our feelings towards our friend, Therefore, Be It Resolved, That the Board of Governors of the New York Stock Exchange do hereby record their profound appreciation of the invaluable services Mr. Henry G. S. Noble has rendered to the Exchange and do hereby testify to their admiration, gratitude and affection for him. Be It Further Resolved, That this preamble and resolution be spread upon the minutes of this meeting, and that a copy thereof, suitably engrossed, be presented to Mr. Noble. May 21 1932 with accountants and committee investigators gathering evidence to support his contention that "bull pools" and "bear raids" have caused undue pressure on securities with consequent artificial fluctuations in the value of shares. The dispatch also said: He Is expected to return to Washington to-morrow and lay his plans before the steering committee of the full committee, also headed by Senator Norbeck. These plans are understood to call tentatively for two or three days of open hearings to demonstrate what has been "uncovered" to date. Then further secret investigations will be pursued. When Mr. Gray was in Washington a week ago for a hurried conference with the steering committee, he said his agents were working on the accounts of about a dozen large operators in an effort to trace deals that he believed showed evidence of concerted action to force certain stocks to change positions in accordance with preconceived plans. Minimum Margin Requirements on Short Sales on New York Stock Exchange Set at 10 Points. According to the New York "Times" of May 19 members of the New York Stock Exchange were notified by telephone Seymour Ballard Named to Nominating Committee on May 18 by officials of the Exchange that margin requireof Chicago Stock Exchange to Succeed Wayne ments on short sales of customers should be increased to a Hummer. minimum of 10 points. Previously the "Times" noted the At a meeting of the Nominating Committee of the Chicago minimum requirements of many brokerage firms had been Stock Exchange on May 6, Seymour Ballard was nominated five points on stocks selling between 10 and 20, and 50% for to serve on the Nominating Committee for the year 1933, those selling below 10. The account in the "Times" May 19 to fill a vacancy caused by the inability of Wayne Hummer, continued: previously nominated to serve, due to other duties and The new requirement, it was said, was merely the restatement of an responsibilities outside of the Exchange. Mr. Hummer informal opinion of the Committee on Business Conduct, given to several recently. The majority of Stock Exchange firms, however, had not pointed out to the Committee that he is Chairman of the firms learned of the informal ruling and had maintained their old margin requireIllinois Committee of the Reconstruction Finance Corpora- ments. With the oral notification, all brokers are expected to revise their requirements at once. tion, which takes a considerable of his time. Figures of Brokers'Loans Covering Past Seven Months Made Available by Montreal Stock Exchange— Borrowings by Members at $54,991,145 on Oct. 3 1931, Decline to $18,922,577 on May 5 1932. The executives of the Montreal Stock Exchange recently asked members to submit periodically the total of their borrowings on Canadian securities, it is learned from the Montreal "Gazette" of May 14, from which we also take the following: These figures reveal a remarkable decrease in the short period in which they have been compiled, the period from Oct. 3 1931 to May 5 1932. Montreal Stock Exchange members' loans on Canadian securities on Oct. 3 of last year totaled $54,991,145, while on May 5 of this year loans had shrunk to $18,922,577. These figures, it will be readily understood, make up only a small proportion of the call loans made by Canadian banks, as the figures submitted include only borrowings by members of the Montreal Stock Exchange and not those of any of the other exchanges in this country. Neither do they include the borrowings of bond houses or bond affiliates of stock exchange members. The comparative figures given above cover a period of intense dullness in the market and the heavy decrease shown in the 7-month period would indicate that a large percentage of the public have no doubt paid for and taken up their stocks. Figures as to members' loans for the bull market period 1928-29 unfortunately are not available, but it is a well known fact that the loans of a number of houses were each, during that period, well in excess of the total member loans for May. The current situation as to loans to members of the local exchange would appear indicative of a remarkably strong technical position and confirms a statement frequently heard that there is less stock in brokers' officers than is generally supposed. In the following llst is given Montreal Stock Exchange members' loans on Canadian securities: $22.758,561 18,922,577 $54,991,145jApril 7 1932 25,573,685 May 5 1932 Oct.31 1931 March 3 1932 The foregoing figures do not include loans on foreign securities, but only borrowings of members of the Montreal Stock Exchange on Canadian securities, and not those of other exchanges in Canada. Nor do they include as has already been pointed out, the borrowings of bond houses or bond affiliates of stock exchange members. San Francisco Curb Exchange Reported As Eliminating Dues. The following from San Francisco, is from the "Wall Street Journal" of May 9: Governing board of the San Francisco Curb Exchange has ruled that, effective June 11932. members' monthly exchange dues will be eliminated. Resumption by Senate Committee of Inquiry Into Trading. On May 19 the Senate Banking and Currency Committee resumed its hearings in Washington into Stock Exchange trading. On that day the investigation centered in the operations of an alleged pool in the common stock of the Radio Corporation of America to which we will refer further another week. Our last reference to the inquiry into stocktrading appeared in our issue of April 23, page 3011. On May 17 a Washington dispatch to the New York "Times" stated that William A. Gray, the Senate Committee Counsel had been in New York for more than two weeks, working Stock Exchange Brokers were notified also that the Exchange did not regard short commitments adequately margined when they were merely hedged by long commitments. The conservative policy, it was stated, was to require adequate margins for the long stock as well as for the short commitments. Margins Doubled in Most Cases. Adoption of the 10-point minimum represents, on the average,an increase of 100% in margin requirements on short sales, as the average price of all stocks listed on the Exchange is now approximately $15 a share. Such an increase is likely to hamper the operations of a few short sellers, brokers said yesterday. A 10-point margin is equivalent to 66 2-3% of the average price of stocks listed on the Exchange, and is approximately three times the margin demanded on most stocks purchased for the long account. The ruling on margins on short sales follows a series of regulations restricting or regulating short selling issued in the last year. About a year ago, the Exchange began to require its members to give regular information concerning the short position of its customers, and the data demanded have been amplified from time to time. Last September the Exchange barred short selling for two days after the suspension of the gold standard by Great Britain. Previous Restriction on Shorts. Soon afterward a ban was placed on sales for the short account at a price lower than the previous transaction. This rule gave priority to the liquidation oflong stock. Finally,in February,the Exchange announced, that beginning on April 1, brokers would have to obtain "separate authorization" from their customers for lending stock to the short interest. Formerly the margins on transactions for the short account were generally the same as those for the long account. The increase in margins is said to be passed on the feeling that, owing to the great deflation in stock prices since 1929, short commitments are more dangerous than long transactions and may result in severe losses to brokers who do not require conservative margins. The Exchange's action, therefore, is regarded as the converse of that in 1929 when margins as high as 50% were demanded on long commitments. The message of the Exchange telephoned to members on May 18 is reported as follows: The present newspaper publicity indicates that there is a misunderstanding among the members of the Exchange as to the existing margin requirements of the Committee of Business Conduct which had been In effect for more than a year. In the case of long accounts the margin to be required and maintained must adequately finance the debt. The policy of the Committee in regard to short accounts is that a minimum charge of 10 points must be demanded and maintained irrespective of the price of the stock. This margin must be computed entirely separately from the margin necessary in accounts where the customer has both a long and short position From the New York "Journal of Commerce" of May 19, we take the following: Stocks Are Low. The compilations of financial observers show that the average price of all common stocks on the exchange on May 1 was $13.75 and that of preferred stocks $31.64. The exchange's own compilation showed an average of all listed stocks on that date of $15.34, a new low point. Ofthe stocks listed, 16% sell at $2 a share or lower, another 20% between $2 and $5, and another 20% between $5 and $10, making 56% of all listed stocks at below $10. The 10-point requirement, In addition to the premiums shorts have had to pay for borrowing stock, makes short selling expensive, in the lower-priced shares, it is pointed out. E. A. Pierce & Co. Adopts 10-Point Minimum. From the New York "Times" of May 18 we quote: The 10-point minimum on short sales was adopted this week by E. A. Pierce dr Co., a commission house with branches in about 40 cities. A partner in the firm said yesterday that the action had been taken because the market's decline had made short selling much more dangerous than when prices ofstocks were at higher levels. The recent move, he said, corresponds to the tendency noted in the bull market of 1929. when margins in long consignments were advanced 30 to 50% of the price of the stock, and margins were barred on inactive and low-priced Issues. 3741 Financial Chronicle Volume 134 Ruling of New York Stock Exchange on Unit Stock Purchases. A circular has been addressed (May 16) to members of the New York Stock Exchange calling attention to the rules governing the purchase of units of one share of a number of prominent stocks, in which it is stated that actual purchases are unobjectionable when contemplated on a commission basis. It is added: "Where, however, such plans contemplate the sale of securities to the public by members of the Exchange as principals, or where non-members of the Exchange are sponsoring such plans, the Governing Committee has ruled that such arrangements are in the nature of investment trusts and subject to Section 2 of Article XW of the rules adopted by the Governing Committee." The notice was issued as follows: Following a meeting of the Governing Committee to-day, the following circular was issued: COMMITTEE ON BUSINESS CONDUCT. Mag 16 1932. To the Members of the Exchange: The attention of the Committee on 13us1ness Conduct has been called to the practice of suggesting to customers the purchase of units of one share of a number of prominent stocks. In some instances, these suggestions are made in connection with a plan in which a particular number of selected stocks are purchased. Such recommendations when they contemplate the actual purchase of securities on a commission basis are unobjectionable. Where, however, such plans contemplate the sale of securities to the public by members of the Exchange, as principals, or where non-members of the Exchange are sponsoring such plans, the Governing Committee has ruled that such arrangements are in the nature of investment trusts and subject to Section of Atricle XIV of the Rules adopted by the Governing Committee pursuant to the Constitution, which reads as follows: "Sec. 2. No. member or firm registered on the Exchange shall be associated with an investment trust, whether management, restricted management, or fixed type, either by participating in its organization or management or by offering or distributing its securities, unless the Committee on Stock List shall have previously determined that it has no objection to such association and shall not have changed such determination." Until such plans are approved by the Committee on Stock List in accordance with the foregoing rule, members shall not be associated with them either by participating in their organization or management or by offering ortdistributing such securities. ASHBEL GREEN, Secretary. by New York Stock Exchange Accounts in States and Foreign Countries Asked for as of May 16. The New York Stock Exchange, which on April 26 called for information on the short position of accounts in each State and each foreign country, as of April 30, has asked for similar information as of May 16, in the following circular issued May 14: "Short" Data Called for —Information as to NEW YORK STOCK EXCHANGE. Committee on Business Conduct. May 14 1932. To Members of the Exchange: With reference to the last paragraph of the circular issued by the Committee on Business Conduct on Jan. 11 1932, in regard to data to be submitted covering short sales, the Committee now directs that the separate letter referred to us therein shall embrace the following information as of the close of business May 16 1932: (1) The total number of accounts in which there is a short position. (2) The number of such accounts in each State of the United States and In each foreign country. Omit detail as to account names, number of shares and name of stock. Please make this report as soon as possible, but in any event not later than May 23 1932. ASHBEL GREEN, Secretary. The previous circular was given in our issue of April 30, page 3194. Notice of New York Stock Exchange States That Agreement to Loan Securities Can Be Consummated Only by Actual Delivery. A notice as follows was issued May 13 by Secretary Green of the New York Stock Exchange: NEW YORK STOCK EXCHANGE. Committee on Securities. May 13 1932. To the Members: the by call to the directed attention Committee on Securities to I am fact that an agreement to loan securities constitutes an Exchange Contract which can be consummated only by an actual delivery and becomes a failure to deliver if the securities are not delivered on the delivery date. The loan does not automatically expire in the event of a failure on the par of the lender to make delivery and interest or premium should be paid whether delivery is made or not. Members, however, may by mutual agreement cancel such item, unless it has been cleared through Stock Clearing Corporation. In case of non-delivery, the borrower may "buy in" the stock. ASHBEL GREEN, Secretary. Stock Clearing Corporation Announces That Delivery of Federal Government Securities Will Hereafter Be Made Through the Central Delivery Department of the Corporation. The Stock Clearing Corporation announced on May 18 that deliveries of Federal Government securities, heretofore made directly between offices of Clearing member firms, would, beginning May 20, be made through the Corporation's Central Delivery Department. The notice follows:. STOCK CLEARING CORPORATION. 8 Broad Street, New York. May 18 1932. Stock Clearing Corporation directs that beginning Friday morning been have made directly May 20, the following deliveries which heretofore between the offices of Clearing member firms, be made through the Central Delivery Department of this Corporation: (a) Deliveries of all United States Government Liberty Loan bonds, (b) deliveries of United States Treasury notes, (c) United States Certificates of Indebtedness, (d) United States Government bills, whether listed or unlisted on the New York Stock Exchange. Use forms 071B, 072B, over-stamped United States Government, to handle these deliveries through the Central Delivery Department, viz., a green colored charge ticket 072B stamped United States Government, sample of which is attached. The use of this triplicate charge ticket (form 072B stamped United States Government) will eliminate the use of "creditcharge" ticket form 044B with perforated margin, so far as deliveries of the above securities are concerned. The second form required is buff colored form 071B stamped United States Government or credit actual list covering the above securities. Use the credit actual list to summarize the deliveries you are making at any one time. Debit and Credit Contingent Lists in duplicate (buff colored forms 05C and 057 stamped United States Government) must be made out and delivered to your Day Branch Cage. Also form 045A (3-way ticket) will be required and should be made out and handled just as heretofore. No delivery of the above mentioned securities shall be made through the Central Delivery Department until two Debit and two Credit Contingent Lists, governing the securities to be delivered, have been sent to Day Branch Cages. Failed to Receive and Failed to Deliver Lists must be sent to Day Branch Cages not later than 2.45 P.M. The Central Delivery Department hours for receiving and delivery cleared stocks as now in operation will be adopted for delivery of securities discussed in this circular. Redeliveries may be made through the Central Delivery Department in accordance with instructions given In Circular 636. On all failed deliveries of above United States Government Securities the Stock Clearing Corporation directs that these failed deliveries be delivered through the Central Delivery Department, applying the same method now used for other failed bonds. Compare Circular SCO-891. Call for a supply of stationery at your Day Branch cage on and after Thursday, May 19 1932. For further information call in person—do not telephone—at the Managers' Office, Day Branch, 8 Broad Street. L G. PAYSON, Secretary. Ruling of New York Stock Exchange on "Buy-In" Orders. Under date of May 19 a notice issued by Secretary Green of the New York Stock Exchange said: NEW YORK STOCK EXCHANGE. Committee of Arrangements. May 19 1932. To the Members of the Exchange: of interpretation In order to prevent misunderstandings in regard to the the rules governing the closing of contracts(Chapter IV of the Rules adopted by the Governing Committee pursuant to the Constitution), the Committee of Arrangements calls the attention of members to the fact that a member who issues a buy-in and simultaneously offers securities for sale for cash against the buy-in must, in case his offer is accepted under the buy-in, actually deliver said securities in accordance with the rule and may not, by consent or otherwise, fail to make such delivery. ASHBEL GREEN,Secretary, Toronto Stock Exchange Removes Price Restrictions. Press advances May 18 from Toronto stated: Announcement was made to-day by the committee of the Toronto Stock Exchange that effective to-morrow all listed stocks comprising those of banks, loans and trust companies, Canadian Canners and Westons would be returned to the free list. These stocks have been "pegged" since Great Britain abandoned the gold standard on Sept. 19 1931. Minimum Price Restrictions Lifted by Montreal Stock Exchange. Canadian Press accounts May 18 from Montreal said: The minimum price restrictions on all eight bank stocks listed on the Montreal Stock Exchange will be removed to-morrow, and on May 25 the minimum will be lifted from National Breweries, Ltd. Only five stocks will then have minimums in force, these being Power Corporations, Price Brothers common and preferred. Ogilvie Milling and Ottawa Light, Heat and Power. Watson & Chambers, Montreal Brokerage Firm, Discharged from Bankruptcy. It is learned from the Montreal "Gazette" of May 14 that in a decision handed down the previous day by Chid Justice Greenshields in the Superior Court, the firm of Watson & Chambers, Montreal stockbrokers, which went into receivership last fall at the time of Great Britain's abandonment of the gold standard, was discharged from bankruptcy. The Chief Justice found that the firm's bankruptcy was due to business misfortunes and not to any misconduct on the part of the partners or management. The "Gazette" went on to say: In his judgment, Chief Justice Greenshields after examining the report of George S. Currie, trustee, decided that the members of the bankrupt firm had not committed any of the offences mentioned in the Bankruptcy Act nor had they been guilty of any misconduct with respect to their property or affairs. 3742 Financial Chronicle According to the report of the authorized trustee, His Lordship pointed out the assets of the firm at the time of the receiving order against them were worth more than 70 cents on the dollar on the amount of unsecured liabilities. A subsequent shrinkage in the value of the assets, he was convinced, was due almost entirely to the decline in the market price of securities generally and not to any condition for which the members of the firm could be held responsible. The petition of the firm to be discharged from bankruptcy was therefore granted. W.F. Maclaier acted for the firm. Volume of Outstanding Bankers' Acceptances at $879,038,870 April 30 Declined $32,251,844 in Month. The volume of outstanding bankers' acceptances decreased $32,251,844 during the month of April, leaving the total on April 30 at $879,038,870, which is compared with a total of $1,422,021,675 on the same date in 1931. Figures revealed on May 18 by Robot t H. Bean, Executive Secretary of the American Acceptance Council, indicate a continuance of the steady decline in acceptance volume which has ben in effect for the past six months. A portioit of this reduction may be ascribed to seasonal influences, but there is undoubtedly a growing tendency toward lower acceptance totals, particularly by New York City banks, says Mr. Bean, who addq: The current survey shows that of the reduction of $32,000,000 there was a contraction in the volume of acceptances created by New York City banks which amounted to $30.000,000, bringing the total volume for these banks down to $702,000,000, the lowest total since September 1927. Acceptances to finance imports declined in the month 210,800,000, export acceptances declined $6,500,000. acceptances for the purpose of financing goods in American warehouses went off $17,300.000, and bills for the purpose of creating dollar exchange were $5,000,000 below the Previous month's total. The only increase in the classification of acceptance credits was in the volume of bills based on goods stored in or shipped between foreign countries, which advanced $6,900,000. The total volume of bills now outstanding for imports and exports are at the lowest point since any compilation of acceptances figures were first made. This, of course, is a result of the very heavy reduction in our National foreign trade. The volume of imports and exports showed, for the month of April, a combined total of only $263,000,000. The current survey of the Council reveals a further increase in the holdings of bankers' acceptances by the reporting accepting banks. On April 30 these banks held a total of $455,000,000. or nearly 52%, of the total volume outstanding. These holdings were divided, $187,000,000 of their own bills held in portfolio, and $267,000,000 of other banks' bills. On the same date the Federal Reserve banks held to: the account of foreign correspondents $297,000,000 and for their own account $46,000.000, making a total of $799.000,000, leaving a total of only $80,00,000 for dealers' portfolios and other investors. In view of such a concentration of bill holdings in a few hands the bill market has had continued difficulty in getting bills enough to supply the requirements, particularly as the making of new bills has steadily decreased. The demand for credit of any kind is undoubtedly very light at this time, but there is a question whether the banks are using their acceptance facilities as fully as possible. Borrowers need credit at the lowest possible rate, which is the acceptance rate, and the market is in very great need of a good volume of prime bills. The very largo drop in the volume of bills made by New York banks raises the question whether part of this reduction could not be overcome by a more active search for new acceptance credits, thus giving the bill market an increased supply of the type of bills that are now eagerly sought by investors. May 21 1932 For President, William S. Dowdell. For First Vice-President, Philip B. Weld. For Second Vice-President, Joseph 11. Walker. For Treasurer, Kenneth G. Judson. For Governors: Eric Alliot, William A. Boger, Frank J. Knell, Elwood P. McEnany, John H. Pilieger, Henry H. Royce, Simon J. Shlenker, Gordon S. Smillie, Max W. Stoehr, Herbert K. Webb, and J. Victor di Zerega. For Inspectors of Election: William 0. Bailey, E, Malcolm Deacon, and Byrd W. Wenman. The Nominating Committee consisted of Edward K. Cone, Chairman; William J. Jung, William Wieck, Frank H. Wiggin, Thomas F. Cahill. Decline of $31,828,369 in Deposits in New York State Savings Banks During April—Withdrawals Intended to Meet Needs Incident to Reduced Employment and Lower Salaries—Total Deposits Exceed Five Billion Dollars. New York State mutual savings banks in April paid out to their depositors $31,828,369 more than they received, according to the Savings Banks Association of the State of New York, which in its May 13 "News Bulletin," says: This amount was withdrawn from mutual institutions during the month by those who had saved for an emergency and who consequently have funds available during the present time of need. The major portion of the reduction in deposits occurred in Manhattan and Brooklyn, where unemployment is greatest. For the most part the funds withdrawn did not mean closed accounts. Rather the savers took only such money as was needed the current living expenses. The present trend coincides In general withfor similar periods of depression in the past. Despite the large withdrawals, the number of accounts in the banks declined only 2,069. The need for funds arose from reduced employment, smaller salaries, increasing number of dependents and pressure to reduce indebtedness. The April 1 reduction in interest rates by many of the banks probably accentuated the withdrawals slightly. A very tiny fraction of the withdrawals went into speculation. Growing popular realization of the importance of savings accounts and increasing popularity of the mutual banks for this purpose was again attested. New accounts opened during the month totalled 90.319 and were in excess of any April since 1925 excepting 1931. New deposits likewise exceeded any April since 1925 excepting that of 1931 and totalled $148,387,774. The mutual banks were thus more greatly used than in almost any month in recent years. Despite the appreciable April withdrawals the resources of the mutual banks remain enormous. The amount due depositors April 30 was 35,233,966,657. Depositors wbo have had the misfortune to need their funds have obtained them with no reduction in principal, such as savers who have placed their funds in many other forms of investment have experienced. The contrast with funds placed in various types of securities and those placed in the mutual banks is most impressive. Compared with the amount which savers have accumulated during the depression to date, the April withdrawals are negligible. The depression brought a wide realization of the need for emergency reserves. From Dec. 1 1929 to May 11932, savings deposits in the State rose $98,501,112, as individuals accumulated reserves. The increase came both in already established accounts and in a large net addition to the number of savers. The increase In number of accounts during the depression thus far has been 836,536. The report by Groups for the month of April is as follows: Accounts. Detailed statistics made available by Mr. Bean follow: TOTAL OF BANKERS' DOLLAR ACCEPTANCES OUTSTANDING FOR ENTIRE COUNTRY BY FEDERAL RESERVE DISTRICTS. Federal Reserve District. Aprt130 1932. March 31 1932. April 30 1931. 1 2 $54,054,579 702,780,819 15.078,157 12,563,260 2,301,083 10,990,594 50,959,945 2,025,542 1,245,325 1,100,000 1,749,380 24,192,405 a 4.. 6.. a 7 8 9 10 11 12 Grand total Decrease $879,038,870 $54,266,760 732,358,886 15,154,946 12,935,245 2,455,009 9,662,853 52,080,058 2,074,650 1,553,344 1,000,000 2,409,625 25,359,338 8101,898,240 1,119,440.557 22,236,036 20 149,213 7,314.249 10,117,425 75,453,795 2,445,177 4,553,327 400,918 2,523.354 49,491,384 Group I Group Ha Group III' Group Iv Group V 5,858 3,479 4,803 44,773 31,808 5,545 4,184 5,753 43,566 33,340 $8,685,346 4,733,150 7,647,314 85,282,907 42,039,057 $8,595,094 5,317,613 10,288,502 99,858,577 56,156,337 90.319 92,388 8148.387,774 $180.216,143 11911,290,714 81,422,021,875 32,251.844 542,982.805 a One bank not reporting April 30 1932. March 31 1932. April 30 1931. Imports Exports Domestic shipments Domestic warehouse credits Dollar exchange Based on goods stored In or shipped between torelan countries 5117,950,293 198,858,734 19,895,082 230,382,172 17,774,002 $128,786,074 205,384,548 19,541,722 247,623,056 22,739,832 5211,064,233 360,283,412 32,892,486 238,140,903 73,107.286 294.198.587 287,215,482 506,533,355 CURRENT MARKET QUOTATIONS ON PRIME BANKERS' ACCEPTANCES MAY 17 1932. Days— 30 80 on Dealers' Dealers' Buying Rate. Selling Rale, 1% 1% 1% Si% Si% 34% Days— 120 150 180 Dealers' Dealers' Buying Rate. Selling Rage. 1 li% 1.S4% 1149, I% 1 Si% 1 Si% Annual Election of Officers of New York Wool Top Exchange to Be Held June 6—Nominees for Offices. The following have been nominated for offices of the New York Wool Top Exchange, these offices to be filled at the annual election to be held on June 6: Withdrawals. Closed. Group I Group ha Group III. Group IV Group V CLASSIFIED ACCORDING TO NATURE OF CREDIT. Deposits. Opened. Number of Open Accounts April 30 1932. Apra 30 1932. 470,912 347,577 474,835 2,752,388 1,738,567 $380,377,045 223,487,804 371,752,719 2,899,158.580 1,379,212,509 5.784,279 •Three banks not reporting. Amount Due Depositors $5,233.986.657 Volume of Commercial Paper Outstanding as Reported to New York Federal Reserve Bank. The following was released on May 14 by the Federal Reserve Bank of New York: Reports received by this bank from commercial paper dealers show a total of $107,800,000 of open market conunercial paper outstanding on April 30 1932. On earlier dates the figures were as follows: 1931— Oct. 31 Nov.30 Dec. 31 1932 8210,000,000 Jan. 31 173,684,384 Feb. 29 117,714,784 Mar. 31 5107,902.000 102,818,000 105,806,000 New York Court of Appeals Rules That Depositors in Closed Bank of United States Cannot Use Deposits As Offset Against Liabilities on Notes. The New York Court of Appeals rules on April 27 that depositors in the Bank of United States, now in liquidation,, cannot offset deposits in the bank against their liability on notes, if it is shown that the maker is solvent. A dispatch from Albany April 27 to the New York "Times" said: Volume Financial Chronicle 134 Ida Braverman, who endorsed a note of $1,006.55 for Isadore Braverman, Inc. had $155.40 in the bank when it was taken over by the State. The bank also held the note. She offered to pay the amount less her deposit and demanded the note. This was refused on the ground that she was not entitled to have her deposit offset the note. The Appellate Division gave judgment for the amount due on the note, minus the deposit, but the highest court disallowed the deposit offset and directed the holder of the note to recover the full amount. "While principles of justice and equity require that a setoff be allowed where the litigation is between parties," Judge Hubbs wrote in the opinion, "another equitable principle comes into operation when the litigation Is between a depositor and the receiver of an insolvent party. In such a situation the rights of general creditors have intervened and equity requires that the assets of the insolvent party be equally distributed among such general creditors." Trial of Joseph A. Broderick, New York State Superintendent of Banks, Growing Out of Failure of Bank of United States—Efforts to Save Bank Through Merger Plans Blocked He Said by Officers—Leading Financiers Sought to Aid in Reorganization. On May 6, Joseph A. Broderick, New York State Superintendent of Banks, at his trial incident to charges of neglect of duty in failing to close the Bank of the United States before he did, under took the defense of the course he pursued in attempting to save the institution. Mr. Broderick has continued on the stand during the week, reciting at length his efforts in behalf of the institution. From the New York "Herald Tribune" of May 7 we quote the following regarding Mr. Broderick's testimony of May 6: In an effort to establish one of the vital reasons that prompted him to postpone the closing of the institution until Dec. 11 1930, Mr. Broderick reviewed the circumstances of the market crash in the fall of 1929 and the subsequent decline of the financial world, asserting that by the spring of 1930 conditions were at such a low ebb that every financial institution in the United States was fighting for its life. During the fall of 1929 and the immediate subsequent period, he said, it was the general opinion of every official in the Department of Banks that "the failure of any banking institution at this time would be a spark which would set the whole city aflame." Stresses Danger to All. "The closing of one bank," he declared. "affects confidence in all other banks. If a bank is closed which has a particular clientele, then every other institution serving a similar clientele is forced to meet extraordinary de mends. Like wildfire, there is always a run on surrounding banks. It is awfully hard to stop when the fire has been set." Max D. Steuer, the special prosecutor, made a strenuous effort to have this testimoney barred from the record, but Judge Donnellan sided with the defense counsel, Martin Conboy, holding that the Superintendent could describe the conditions which may have had a part in his decision to delay the closing of the bank. The law,added the jurist, gave the Superintendent wide discretion in the matter. Mr. Broderick said that he was concerned not only with the Bank of United States but with the fate of every one of the 1,800 institutions in the State, that he wanted to defer as long as humanly possible the firing of any sparks that might bring on a panic in the financial world and force the closing of scores of these institutions. His testimony was in line with evidence elicited during the cross examination of many of the State's witnesses and Governor Roosevelt who had declared that for more than a year before the bank's closing Mr. Broderick had been making efforts to have it merged with some stronger institution. Mr. Broderick delivered his testimony in earnest and frank manner, with evident resentment at the contention of the prosecution that be had not acted in the best interests of the community. He agreed with Judge Donnellan that the protection of depositors of a bank was paramount, but left the inference that in delaying the closing of this particular bank he was preventing possible disaster to, other institutions and was thus protecting other thousands of depositors. The Superintendent's review of his rise from modest beginnings as a newsboy to high office in the banking world and official position presented another of those familiar pictures of the poor boy who became famous.... He was an office boy in a bank where he rose to Assistant Secretary; be became a bank examiner, Secretary of the Federal Reserve Board and eventually,Vice-President in charge of the foreign department of the National Bank of Commerce. He was appointed to his present post on April 22 1929. Mr. Broderick described the disorganized condition in which he found the Department following the regime of Frank H. Warder, now serving a term in Sing Sing for acceptance of a bribe. There were but 60 examiners for all of the institutions througnout the State, he declared. He was occupied with prodigious labors in reorganizing the Department to deal effectively with the subsequent developments brought on by the market crash, he said. Knew Marcus and Singer. In coming to the period of his conduct of the Bank of the United States, he said he had met Bernard K. Marcus and Saul Singer, President and Executive Vice-President, respectively, at a luncheon in the period between his appointment and the time he took office and that he received" a good impression" of them. They had been in the pool to rescue the City Trust and were not among those who attempted to back out of their responsibilities, he added. Ile dented that he knew that a campaign to sell stock units to depositors was in progress at the time of the first examination of the bank during his regime, adding that in any event it was not a novel plan as the Chase National Bank and the Chase Securities Corp. had made a similar issue. On May 10, Superintendent Broderick detailed his efforts to effect a merger of the bank, with other institutions, as to which we quote the following from the New York "Times' of May 11: For the first time since the Bank of United States closed its doors in morning of Dec. 11 1930. the the faces of its 400,000 depositors on the story of the efforts made to save the institution in the last two and onehalf months of its existence was told yesterday by Joseph A. Broderick. State Superintendent of Banks. 3743 Testifying in his own defense at his trial before Judge George L. Donnellan and a jury in General Sessions, Mr. Broderick held judge. jury and spectators spellbound for five hours as he unfolded a story of mergers that did not quite materialize and of liquidation projects that fell through after It had seemed nothing could prevent their success. The story was not complete. Mr. Broderick had only described the events of the hectic period down through Nov. 24 1930, about two weeks before the bank was closed, when court recessed for the day. He had, however, described to the jury the workings of the banking world. He had told of his own efforts to save the institution, of how be worked an average of nearly 20 hours a day for weeks and he had told of the support given him by Governor Roosevelt and the active co-operation furnished by the leading bankers and financiers of the city, State and Nation. Says Bank's Officers Foiled Plans. These rust moves to save the bank, all merger negotiations, followed closely on the heels of receipt by him on Sept. 18 of a report of one of his examiners showing that the surplus of the Bank of United States had been wiped out. Of these early proposals, Mr. Broderick said, most were defeated by the cupidity of the officers and directors of the shaky bank itself. They wanted more for their stock than the institutions which were willing to take them over were willing to pay. One merger plan which he was confident would be executed with the Bank of Manhattan Trust Co. fell through, he said, solely because it was opposed by Sau Singer, Executive Vice President of the Bank of United States. Mr. Singer's opposition, he testified, was, according to information he received, based on his belief that through a merger with the Manufacturers Trust Co., also under discussion at the time, his son, Herbert, would be assured of a successful legal career. Toward the end of November, when the merger offers were few and the question of liquidation of the bank's assets came to the fore, a liquidation plan whereby the Manhattan company was to take over the assets, for which an agreement was drawn,failed because attorneys for the Manhattan company inserted a cancellation clause in the contract. Throughout his testimony, Mr. Broderick made it plain that the chief bankers of the city, as well as of the Federal Reserve System, were working with him to try to save the Bank of United States. Mortimer N. Buclmer, Chairman of the board of the New York Trust Co.; the late Paul M. Warburg, then Chairman of the Manhattan company; Eugene Meyer, Chairman of the Federal Reserve Board; J. Herbert Case. Acting Governor of the Federal Reserve Bank of New York; Charles E. Mitchell, Chairman of the National City Bank,and many others were mentioned by Mr. Broderick as having participated at one time or other in moves to save or salvage the bank. The Most Promising Plan. At the close of the day Mr. Broderick was describing the most promising plan of all, that publicly announced on Nov. 24 1930, under the terms of which the Bank of United States was to be merged with the Manufacture's Trust, the Public National Bank and the International Trust Co. in a new institution which Mr. Case was to head. Just why this plan, apparently acceptable to all concerned, broke down, Mr. Broderick had not described at adjournment. In spite of the willingness of the bankers of the city to aid in solving the situation, it became apparent as Mr. Broderick proceeded with his testimony, under questioning by his attorney, Martin Conboy, that few of the city's larger institutions were willing at any time to merge with the Bank of United States. In fact, the only banks actually mentioned in merger negotiations were the Manhattan Co. and the three which agreed to the The other institutions of the city, howNov. 24 four-bank merger plan. ever. according to Mr. Broderick, were ready and willing to extend financial assistance to insure the success of the measures contemplated. Mr. Broderick on the stand for the third day, began his story with the receipt of the examiner's report and his immediate calling of a meeting of the chief officers of the Bank of United States at the bar association, Bernard K. Marcus, President; Saul Singer, Simon H. Kugel, C. Stanley Mitchell, Chairman of the board, and the McArdle brothers, the bank's accountants, were present. Due to unavoidable delays, he said, this meeting was not held until Sept. 29. "I told them," testified Mr. Broderick, "that the report was drastic, but that I did not intend to discuss it; that what I wanted was immediate action. I told them I had come to the conclusion that an immediate change in management must be made; that I didn't think the present officers were satisfactory because of their past associations with the bank's borrowers; that the way out was a merger. They agreed with me." The next day, he said, he telephoned George L. Harrison, Governor of the Federal Reserve Bank, and asked him to put Marcus in contact with Mr. Warburg. This was done and later Marcus told him the merger had "gotten started." At the same time Park A. Rowley, Vice-Chairman of the Manhattan Co., was "looking over" the proposition. About this time, Mr. Broderick said, he gave Kugel an extra copy of the examiner's adverse report which he belived was turned over to the Manhattan Co. Early in October, he said, Marcus told him merger negotiations were also under way with "Jonas and the Public Crowd." The Jonas referred to was Ralph Jonas, then Chairman of the Manufacturers Trust. During October. he added, there was not a day he did not hear about one or the other of the two proposals. Finally the Manhattan Co. plan reached a definite program, that bank offering one share of stock for three Bank of United States stock units, part to be held back until liquidation of the weak bank's assets was completed. Marcus, however, he said, insisted on a two-for-one exchange and early in November these negotiations ended. Reassured by Reserve Governor, On Oct. 29, a newspaper printed a story of the proposed merger with the Manufacturers Trust and Public National. He was surprised that this should have been done before a definite conclusion had been reached, he said, but was reassured by Mr. Harrison, who told him Mr. Jonas had reported to him the deal was "tied up satisfactorily." Mr. Harrison was so confident success of the plan was assured that he sailed for Europe Nov.5. About the same time, he said, he was informed by one of the McArdles that when the Manhattan Co. negotiations were broken off Mr. Rowley said that if the Manufacturers-Public deal fell through the Bank of United States might come back and negotiate further with his bank. Thesame day, he said, Mr. Rowley told him he had broken off the negotiations when he did because he and his affiliates "did not like the trading proclivities" of the Marcus-Singer group. However, on Nov. 10, he testified, Mt. Jonas told him that because of "market conditions" the Public National-Manufacturers deal was off. That night he went to the Federal Reserve Bank and found there, Mr. Jonas, Mr. Case, E. Chester Gersten. President of the Public National, Randolph Burgess, Deputy Governor, and Mr. Buckner, all there to discuss the Bank of United States situation "We can't merge," Mr. Broderick quoted Mr Jonas as sayin "Things are pretty bad in the market. We can't go ahead." Mr. Gerste./.., he conhe thought tinued, said the situation should be handled as a "community 3744 Financial Chronicle proposition," and to this Mr. Case agreed, explaining that that was the reason he had asked Mr. Buckner, then Chairman of the New York Clearing House Association, to be present. After a dinner to State and National bank examiners which furnished the excuse for the gathering, Mr. Broderick said, the discussion was resumed, the Public and Manufacturers representatives conferring in one room, while he outlined the situation to Mr. Buckner, Mr. Case and other Federal Reserve officials in another. "We discussed means of reviving negotiations with the Manhattan," said Mr. Broderick, "and means of obtaining co-operation of the Clearing House banks." Before the dual conference broke up, he said. Mr. Jonas told him the Bank of United States situation was not as bad as "it appears on the surface." The next day, nevertheless, he called on Mr. Rowley and asked him if he would renew merger negotiations, informing him the other deal was off. While he was there, he said, Mr. Rowley received a telephone call from Mr. Buckner, who had called at the request of Mr. Case to see, like Mr. Broderick, if the Manhattan Co.'s interest could not be revived. Mr. Buckner, however, Mr. Broderick said, did not ask the Manhattan Co. to merge with the Bank of United States: he sought to have them take over the weaker institution no a liquidation basis. The superintendent, nevertheless, continued to urge a merger and did not leave until Mr. Rowley had promised to take up the matter with his bank's other officers. Interested Paul U. Warburg. That afternoon, the witness continued, he called on Mr. Rowley again and at the same time saw Mr. Warburg. "Paul M. Warburg was my closest business friend," Mr. Broderick explained. "I took a position at Washington with the Federal Reserve at his suggestion and was there four years while he was on the Federal Reserve Board. Our fiendship continued throughout our business lives. When I contemplated a change I saw him; when he had a program in mind he called me. I talked on this occasion, though, strictly on a business basis. I said I thought the Bank of United States, in the right hands, would be a good business proposition." He got in touch with the Bank of United States officers later that day, he said, and found that Marcus and one of the McArdles had already talked with Mr. Rowley,seeking to revive his interest in merging on a stockexchange basis. Mr. Rowley told them, Mr. Broderick was informed, that any stock deal was difficult, since the Clearing House had suggested the taking over of the Bank of United States on a liquidation basis. That afternoon when he saw Mr. Rowley, the superintendent said, the banker told him: "Those fellows didn't know their luck. They had a good deal they could have taken last week and they let it go by." As Mr. Broderick progressed in his recital he became bitter at times as he considered the Bank of United States might have been saved with ease if its officers had not been so short-sighted. The jury, bored during the Previous five weeks of the trial by a mess of dry documentary evidence, listened intently to every word as the superintendent continued to unfold the picture of his efforts to save the bank. Rebuked Officers of Bank. Told the next day by one of the McArdles that Singer had balked at the Manhattan company merger because of his hope of furthering his son's career if the Manufacturers merger went through, the Superintendent "became rather peeved at the trading with the two merger groups" and called a conference of all the chief officials of the Bank of United States. It was held at the Biltmore, he thought. "I told them I was utterly sick and tired of the way they had handled negotiations," he recalled. "I said they had acted like amateurs and that their little petty jealousies within their own group were ruining them. I said, 'I demand and insist that you work as a unit.' I told them I believed I could revive the deal, but that no personal considerations must arise in the future." The next day, Nov. 12, Mr. Broderick called on Mr. Warburg and Mr. Rowley to see if any conclusion had been reached. He suggested they hold back stock to be offered in exchange as a guarantee and added he believed the good-will of the Bank of United States might be worth as much as $10,000,000 if the institution were taken over by the Manhattan Co. Mr. Warburg told him he would take the matter up with "his people." Late that afternoon, however, he telephoned Mr. Warburg and was told the Manhattan company was "not interested in any merger involving issue of stock, but that we would be interested in taking the matter up on a liquidation basis." Mr. Broderick then went to the Federal Reserve Bank where he conferred with Mr. Case and Chairman Meyer. Desultory conferences took up much of the next two days. Saturday, Nov. 15, he said, was spent at the Federal Reserve. In the afternoon, he said Mr. Gersten and Mr. Jonas told him in the presence of Mr. Buckner and Mr. Case that they were making progress with a new merger plan to involve only their own banks. He warned tham he must approve it before it could become effective and asked "How about the Bank of United States?" They promised to consider how they could take it in the merger. Conferred With Morgan Lawyer. This conference did not break up until 3 a. In. and adjourned only to meet again at 2 o'clock in the afternoon in a lawyer's office on 42d St. Mr. Broderick, however, did not go home. He slept a few hours in a Federal Reserve dormitory and then hurried to his office. There, at 9 o'clock, he conferred with Basil O'Connor, Governor Roosevelt's law partner, and Lansing Reed of Davis, P_lk, Wardwell. Gardiner & Reed, attorneys to J. P. Morgan & Co.,and to a number of banks, as to the legality of an "overnight" bank merger. This, the attorneys finally decided. could not be legally done. This done, he talked with Mr. Rowley on the telephone and then with Mr. Case, who asked him to attend a conference at the office of Charles E. Mitchell. There, he outlined the situation to Mr. Mitchell, and Mr. Rowley. who was present, promised his bank would give a decision in 24 hours if a definite proposition were put to it. From the National City Bank, the Superintendent went to the adjourned Manufacturers-Public National conference and thence to Marcus's home where the Bank of United States officers were assembled. At the Manufacturers-Public National meeting, he said, Mr. Gersten told him that if an audit then in progress showed the Bank of United States to have $4,000.000 in assets over liabilities his group would take it over on the basis of an exchange of one share of stocic foe five Bank of United States units plus an additional share after liquidation had been completed. He relayed this to the Marcus group and as a result a representative was sent to confer with Ralph Jonas. At midnight, however, the representative telephoned that Mr. Jonas had told him that "on advice of outside parties we had oetter let the matter rest for the present." The next day Mr. Broderick learned the Clearing House committee had met the previous night and reached the conclusion that the Manhatatn Co.deal would be best. Roosevelt Held Meeting on Bank. On Monday morning, he said, he went to Governor Roosevelt's home and conferred briefly with the Governor, Lieut. Gov. Lehman and Mr. May 21 1932 O'Connor. Returning in the afternoon, be found there Mr. Mitchell, George W. Davidson of the Central Hanover Bank & Trust Co. and Albert Leffingwell of J. P. Morgan & Co. The Governor,he added, had conferred by phone with Seward Prosser of the Bankers Trust and Albert H. Wiggin of the Chase National. The Governor, in opening the meeting, asked the co-operation of everyone to solve the Bank of United States tangle, Mr. Broderick said. Both Mr. Davidson and Mr. Mitchell, he testified, pledged themselves to support the situation in "every possible way" and added that even though it might not be possible to get the support of the clearing house as a grout), individual banks could raise whatever money was needed. They were sure, according to Mr. Broderick, that $30,000,000 to $40.000,000 would be available to the merged institution in case of withdrawals, and were absolutely confident that if the merger could take place over night confidence would not be impaired and there would be no withdrawal of deposits. Late that afternoon,Mr. Broderick said, Governor Roosevelt telephoned him and told him he thought it desirable to put a definite proposition up to the Manhattan company. That night the Superintendent went again to the Federal Reserve Bank and conferred with Bank of United States officials, urging them to submit a proposition to the Manhattan company. The bankers told him, he said, "they were not at all interested." The next day Mr. Reed and Colonel Joseph Hartfield of White & Case suggested a new plan by which the Manhattan company was to give one share of stock for eight Bank of United States units plus an option on Manhattan company stock at $100 per share, this to be a liquidation proposition. He was told by the attorneys, he said, that he could go to the Manhattan company and state that a "group downtown" would subscribe a $5,000,000 or $10,000,000 guarantee fund. They made it plain. however, the promise of this fund was based on hope and was not a definite promise. Took Matter Up with Bank of United States. First, he said, he took the matter up with the Bank of United States officers, who told him they regretted it, but would not give him authority to make the proposal because they were already directly in touch with the Manhattan company. "I told them this new plan was the only way out I could see," said the Superintendent,"and that I thought it was fair. I told them I hoped they would come to a prompt decision since I was convinced they had lost the confidence of the banking community and bad come to the point where they were about to lose mine." After further delay the Superintendent insisted Mr. Marcus and the rest get disinterested advice. They went to Mr. Wiggin, who conferred with Mr. Warburg. Finally they agreed to the plan and both they and the Manhattan company. Mr. Broderick said, called directors' meetings to ratify the agreement. Attorneys for the two banks worked throughout the day drafting the agreement, Mr. Broderick said, and all went along smoothly until the Manhattan company's lawyers inserted a clause permitting them to withdraw from their agreement if the Bank of United States should lose $50,000,000 in deposits in the 20 day period before the transfer of assets and liabilities could be legally effective. This did not please the Bank of United States officers nor the bankers who had promised a guarantee fund. Mr. Broderick said,.and late in the afternoon he went to a meeting called in Mr. Wiggins office at which Mr. Leffingwell, Mr. Buckner and Walter J. Frew of the Corn Exchange Bank were present. Mr. Wiggin said he "didn't see how the banks could stand for" the change in the agreement, Mr. Broderick said, and phoned Mr. Warburg and told him the guarantee would not be furnished unless he agreement definitely stated that the Bank of United States was to be taken over. This being unacceptable, he told Mr. Warburg so far as the bank was concerned the deal was off. "Then Mr. Wiggin turned to me." said the witness, "and said, 'What can we do now?' I said we could go back to the Manufacturers Public deal and Mr. Buckner agreed. I said he could also continue the bank under new management and with new capitalization or that we merge It with still some other institution. Case Was to 11cad Bank. "Mr. Wiggin said he didn't think he would go along unless Mr. Case or myself would become head of the new institution. I declined. Mr. Case said it didn't appeal to him, but if necessary be would do it. He finally agreed that if the banks to be combined wanted him he would accept, but first, he said, be must get in touch with Mr. Meyer and with Governor Harrison, who 1.1813 in Berlin." On Sunday, Nov. 23, the group met at the Federal Reserve Bank, Mr. Case having finally agreed to accept. After a conference which lasted until 6 o'clock in the morning a merger agreement was reached whereby the Public, the Manufacturers and the International Trust were to merge and absorb the Bank of United States, the witness said. Under the terms of this agreement the new bank was to exchange one share of its stock for five Bank of United States units, units held by the Bankus Corp., the bank's chief affiliate, were to be canceled and all officers and directors of the Bank of United States were to tender formal resignations. Besides, Bank of United States officials were to give up all salary contracts and they and the directors were to guarantee the new bank against loss through liquidation of the Bank of United States. Four hours later, this being 10 o'clock on the morning of Nov. 24, a formal notice of the Impending merger WAS issued. It listed Mr. Case as Chairman of the board. the Messrs. Frew, Buckner, Davidson and Rowley as directors and members of the executive committee, Mr. Gersten as president, and Nathan Jonas as vice chairman. When Mr. Broderick resumes the witness stand this morning his first task will be to explain why this merger, apparently so definitely assured, fell through. He will then go on and relate the subsequent attempts to save the Bank of United States which ended early on the morning of Dec. 11, a few hours before he ordered the inatitution closed. On May 11, Superintendent Broderick continued to further depict tile efforts to save the bank, the "Times" of May -12 thus reporting what he had to say: Up to 10 hours before the Bank of United States was closed on the morning of Dec. 10 1930, Joseph A. Broderick, State Superintendent of Banks, had every reason to believe that the large banks of the city would come to the rescue of the institution, he testified yesterday at his trial before Judge George L. Donneilan and a jury in General Sessions. It was only a few t mutes before midnight on Dec. 10, be said, that he learned that an agreement whereby the bank was to continue under new management with $30,000,000 in new capital fund to be subscribed by the banks balding membership In the New York Clearing House Association, had fallen through because of the withdrawal of two of the banks involved. The identity of these institutions, whose action made the closing of the Bank of United States inevitable, ho did not disclose. The story of the final collapse of Mr. 13roderick's two and a half months of almost incessant effort to slye the Bank of United States by merger Volume 134 Financial Chronicle or reorganization came near the close of yesterday's short ..ossion of the trial. An early recess until to-day was granted to allow Mr. Broderick, who in spite of the trial is still responsible for the operation of the State Banking Department, to hurry to his office to preside at the organization meeting of the recently created State Banking Board. Runs Were Cause of Closing. Before he left the court room, however, the Superintendent, under questioning of his attorney, Martin Conboy, asserted that until this last effort to save the Bank of United States failed he never had had proper reason to close the institution. As a matter of fact, he explained, it was not the actual collapse of the reorganization plan but the runs on several of the bank's branches, which had started the preceding day and were sure to become increasingly serious, that led him to the conclusion that to conserve the assets of the institution he must close it. Even the decision of the Clearing House banks that they would not go through with their agreement to save the bank did not for a while cause the Superintendent to give up all hope. He did not give up, he said, until his personal appeal to the bankers, assembled at the Federal Reserve Bank of New York, had failed in spite of his warning that they were making the "most colossal mistake" they ever had made. Defeated in his effort to save the bank, Mr. Broderick still fought on to salvage what he could for the institution's 400,000 depositors. Before he left the meeting room he had obtained a pledge from the assembled bankers that their institutions would loan up to 50% on deposits in the Bank of United States. He included this pledge in his formal notice of the closing of the bank, which was pasted on the doors of each of its 59 offices on the morning of Dec. 11. For hours, it developed, Mr. Broderick despaired of having an opportunity to address the assembled bankers, who had ignored his repeated requests to be allowed to join them in their conference room and make his plea for the bank. It was only through the intercession of Thomas W. Lamont of J. P. Morgan & Co. and Owen D. Young, who is a director of the Federal Reserve Bank, that he was successful. The two had strolled out of the conference room and come into the adjoining chamber where Mr. Broderick was waiting. He told Mr. Lamont of his desire to address the bankers, and the Morgan partner said, "I'll see to that," and returned to the conference room with Mr. Young. A few minutes later Mr. Broderick was summoned. Recalls Appeal to Bankers. When he entered the room, he said, he found there, in addition to Mr. Lamont and Mr. Young, Jackson Reynolds, President of the First National Bank and of the Clearing House Association; Charles E. Mitchell of the National City Bank, Henry E. Ward of the Irving Trust Co., Percy H. Jackson of the Bankers Trust Co., Mortimer N. Buckner of the New York Trust Co., Albert H. Wiggin of the Chase National Bank, Charles Sabin of the Guaranty Trust Co., Governor George L. Harrison of the Federal Reserve Bank, J. Herbert Case, Chairman of the Federal Reserve Bank, and several others. It was Mr. Harrison who had devised the reorganization plan which so nearly succeeded. "I'Old them," Mr. Broderick testified, "that I wanted to speak to them about the Bank of United Stztes and of its place in the general banking situation. I told them it occupied a rather unique position in New York City; that it had 400,000 depositors; that it served every section, and particularly the neighborhood districts; that in point of people served it was probably the largest bank in New York. "I said it had thousands of borrowers, that it financed small merchants, especially Jewish merchants, and that its closing might and probably would result in widespread bankruptcy among those it served. I warned that its closing would result in the closing of at least 10 other banks in the city and that it might even affect the savings banks. The influence of the closing might even extend outside the city, I told them. "The unfortunate choice of the name of the bank, I warned, might have an extremely bad effect abroad. and I told them no one could tell what the ramifications might be. "I said frankly that I did not like the policies and practices of the bank and that I was convinced the officers were of a type which might better never have been in the banking business, but I added that they were not the only such officers in the city and that I had to be patient with them and try as I best could to correct their errors and reform their methods. Warned of "Colossal Mistake." "I reminded them that only two or three weeks before they had rescued two of the largest private bankers of the city and had willingly put up the money needed. I recalled that only seven or eight years before that they had come to the aid of one of the biggest trust companies in New York, putting up many times the sum needed to save the Bank of United States, but only after some of their heads had been knocked together. "I asked them if their decision to drop the plan was still final. They told me it was. Then I warned them they were making the most colossal mistake in the banking history of New York." This warning, Mr. 13roderick said, failed to impress Mr. Reynolds, who Informed him the effect of the closing would be "only local." Then Mr. Broderick argued for and won his plea that the banks agree to make loans to the Bank of United States depositors. Even this did not conclude his argument. He turned to the applications of the Public National Bank and the Manufacturers Trust Co. for membership in the Clearing House Association, then pending. He pointed out that these two banks, recently named in merger negotiations with the Bank of United States, might be seriously affected by the closing and urged that their applications be approved immediately so that when he closed the Bank of United States at 9 o'clock in the morning the two institutions might have behind them the full resources of the Clearing House group. No answer was given to hint, but the late editions of the newspapers that morning carried the formal statement in the form of an advertisement that the Public and Manufacturers had been admitted to the Clearing House and that the Association's resources were behind them. As a result these two banks, which like the Bank of United States had been affected by runs, pulled through. "Before I left the conference," added Mr. Broderick, "a gentleman whose name I will not mention told me that if I were wise I would get down in black and white the assurance of the Clearing House committee that loans would be made to Bank of United States depositors. I did, and the agreement was written out and signed." Plea of Lehman Also Failed. When he left the conference, Mr. Broderick said, he telephoned to Lieut.-Gov. Lehman, who had been in touch with him several times during the day, and told him of the decision. Mr. Lehman, he said, asked him to go back to the conference and ask those present to remain in session until he could arrive and talk to them. This he did, said the witness, and about an hour later—it was then 1.30 a.m.—Mr. Lehman came to the office and added in vain his plea to Mr. Broderick's. 3745 From the Federal Reserve Bank, said Mr. Broderick, he went to the office of Isidor J. Kresel, counsel for the Bank of United States, where the officials and directors of that institution were assembled. Before his arrival—about 4 a. m.—they had heard of the failure of the last move to save their bank and had adopted a formal resolution asking Mr.Broderick to take it over. "'We have lost our last fight,' I told the directors," said Mr. Broderick. "'but we are not beaten yet.' I told them I considered the bank solvent as a going concern and that I was at a loss to understand the attitude of askance which the Clearing House banks had adopted toward the real estate holdings of the Bank of United States. I told them I thought it was because none of the other banks had ever been interested in this field and therefore knew nothing of it. Would Not Have Closed It Sooner. "I was almost exhausted; I had had practically no sleep for three nights. During this trial I have heard so many directors testify as to what I said to them that night and I have tried to search my mind for some remarks that have been attributed to me. They said I told them the bank was solvent. I am confident what I said was that it was solvent as a going concern." "In your judgment," asked Mr. Conboy, "was there any time prior to Dec. 11 when you felt you should have closed the bank?" "No," answered Mr. Broderick. "Even two and three days before the closing I felt that I had no basis for taking over the institution. At that time I conferred with my chief assistants and asked what they thought. Their judgment concurred with mine." "Was your conduct ever influenced as to this bank by anything but what you conceived to be your duty as Superintendent?" "It was not." When he took the stand yesterday for his fourth day of testimony, Mr. Broderick resumed his story where he had left it the night before, with the projected four-party merger of the Bank of United States, Manufacturers Trust, Public National and International Trust. This merger, as he had explained before, apparently was assured and nothing to change the situation had developed until Dec. 6, although there were daily conferences among the interested parties in which he took no part, although he was informed daily of the situation. Superintendent Broderick's testimony of May 12 was described as follows in the "Times" of May 13: His long story of his efforts to save the Bank of United States completed, the cross-examination of Joseph A. Broderick, State Superintendent of Banks, was begun yesterday by Max D. Steuer. special prosecutor. in General Sessions where Mr. Broderick is on trial before Judge George L. DonneRan and a jury. Mr.Stoner made it evident that he intended to devote little time to trying to shake Mr. Broderick's story of his efforts to save the bank, but he would endeavor to prove from Mr. Broderick's own lips that examiners' reports on the bank should have impelled him to close it long before he did. Mr. Broderick was unruffled and repelled Mr. Steuer's efforts to show that on the basis of examiners' reports submitted in 1929 drastic action should have been taken against the bank. Mr. Steuer made much of the fact that a special report showing the condition of the bank's affiliates which were heavy borrowers from the institution, had not been sent to the Federal Reserve Bank, Mr. Broderick brushed this aside, however, with the statement that a representative of the Federal Reserve had been present at a conference of examiners at which this situation was uiscussed in detail. Denies Report Was Deleted. Mr. Stemmer made much, too, of the fact that the main 1929 report on the Bank of United States, compiled by Joseph Zweeres, examiner, had been changed so that severe strictures on the bank's officers were deleted. Mr. Broderick was insistent that the report merely had been corrected and "modified" and flatly denied that he had even ordered these alterations made. Mr. Broderick conceded it was unusual to have an examiner read his report to the executives of a bank as previous testimony had shown Zweeres did, but pointed out that it was done in this case because Zweeres had discussed certain phases of the report 'with under executives of the institution it was only fair that he talk of them to the bank's operating heads. As to a supplementary report, which criticized the loans to affiliates, Mr. Broderick said it was actually a memorandum to Mr. Zwoeres. He conceded the size of these loans was contrary to the "spirit of the law." but refused to agree with Mr. Steuer that they also violated the letter of the law. Broderick Explains Discrepancies. At several points Mr. Steuer read from testimony given by the Superintendent at the Attorney-General's investigation of the bank crash. Seeming discrepancies, Mr. Broderick told him, were owing to the fact that his memory of happenings at the present trial had been refreshed by consulting records and therefore was much bettor than on the hearings of a year ago. Only briefly, at the start of his cross-examination, did Mr. Steuer refer to Mr.Broderick's story of his efforts to save the bank. He merely brought out that after Oct. 1 1930, nearly every banker in the city, Governor Roosevelt, Lieut.-Gov. Lehman and many others were actively interested in the attempts to save the Bank of United States. During the day there were several tiffs between Mr. Steuer and the defense counsel, Martin Conboy and John Kirkland Clark. most of them occasioned by Mr. Steuor's insistence on reading into the record documents which neither defense attorney considered of any importance. The second trial of Superintendent Broderick, charged with alleged neglect of duty in failing to close the Bank of the United -States before he did, was brought under way in New York City on April 6. The previous proceedings were declared a mistrial as was noted in our issue of Feb. 27, page 1487. On March 26, New York Supreme Court Justice John Ford denied the change of venue asked for by the Superintendent. In the New York "Evening Post" of March 26,it was stated: Justice Ford based his decision on the grounds that a change of venue would cause too great an inconvenience to the many witnesses in the case, that the health of Special Prosecutor Max D. Steuer would not permit his traveling to another county, and that with modern means of communication a jury outside of New York County would be just as familiar with the circumstances of the bank failure as a jury here would be. It is stated that it was Mr. Broderick's contention that so many persons in New York were interested directly or indirectly in the failure of the bank that it would be almost 3746 Financial Chronicle impossible to obtain a jury that was not influenced in some way and that it was hence impossible to obtain a fair trial here. The new jury as finally impanelled in the present proceedings was indicated as follows in the New York "Times" of April 7: John J. McNally,617 West 170th St.. office manager,foreman. J. Bleyer Hulse, 745 Riverside Drive, unemployed accountant. Valentine J. Green,433 East 51st St.. marine surveyor. Arthur J. Brown Jr., 1235 Park Ave., machinery dealer. Harry Wirtz, 2353 Second Ave., general foreman of substations, New York Edison Co. Andrew Fleming,311 West 33rd St.,retired employment bureau manager. Edward M. Richardson, 133 East 61st St., securities dealer. Arthur Lobo, 250 West 88th St., architect. James W. Spence, 293 Riverside Drive, industrial engineer. Otto H. Heuman, 1150 Fifth Ave., sales manager. Lytton Berkso, 110 West 96th St., sales manager. .Alec R. Turner, 3647 Broadway, accountant. Regarding the opening of the trial we quote the following from the New York "Times," of April 5: A Jury in General Sessions before Judge George L. Donnellan to-day heard Max D. Steuer, special prosecutor, outline the often-told story of the organization of the Bank of United States, the involved financial transactions that marked the formation of its affiliates and its close. Mr. Steuer was laying the groundwork for the prosecution in the trial of Joseph A. Broderick, State Superintendent of Banks, who Is accused of neglect of duty in failing to close the bank before he did. The trial, it is expected, will last two months. The special prosecutor, after objections from the defense regarding statements concerning the condition of the bank before Mr. Broderick took office, declared that examiners called the attention of Mr. Broderick to the bank's affairs in July 1929. "That was before the stock market crash," Mr. Steuer pointed out. He then described a conference Mr. Broderick held with the officers of the bank and the bank's attorney, Isidor J. Kresel. That conference, he asserted, was held in the offices of the Bar Association, "rather than in the office of the State Superintendent of Banks, where it should have been held." Martin B. Conboy, the defense attorney, will require the greater part of to-morrow for his opening address to the jury, and the actual taking of the lengthy testimony will begin Friday. Mr. Broderick was tried once before on the same charge, but the trial ended when it was found that one of the jurors had been a depositor in the Bank of United States. The misdemeaner with which he is charged carries a maximum penalty of three years in prison and a fine of $500. Mr. Steuer began his address to the jury after a briefsession during which the two vacant seats in the jury box were filled by Lutton Berkson, sales manager, of 110 West 96th St., and Alec R. Turner, accountant, of 3647 Broadway. Sixty-four of the 200 talisman were examined before the jury was chosen. None Were Depositors. All the jurors declared they had not been depositors in the Bank of United States and that they were not acquainted with the 100 or more witnesses, including Governor Roosevelt, who may be called. From the New York "Herald Tribune" of April 8 we take the following: "The last thing a banking superintendent wants to do is to close a bank and tie up the money of depositors during the liquidation of assets," was the essence of the reply made yesterday by counsel for Joseph A. Broderick, State Superintendent of Banks, on trial before Judge George A. Donnellan In General Sessions on the charge of neglect of duty in delaying the closing of the Bank of United States. Martin Conboy, Mr. Broderick's attorney, related how the Superintendent had labored for weeks in an effort to save the institution through merger, but that at the last minute the negotiations had fallen through and there appeared no alternative but to close the bank's doors on Dec. 11 1930. Following Mr. Conboy's outline of the case In behalf of his client, Max . Steuer, the special prosecutor, placed his first witness, Hyman S. Lipshutz, on the stand. Mr. Lipshutz was bookkeeper for the City Financial Corp., one of the affiliates of the closed bank. Court Suggests Stipulation. As Mr. Lipshutz began a protracted statement of the complicated ramifications of the bank's relations with its numerous affiliates, Judge Donnellan suggested that much time could be saved if counsel for both sides got together on a stipulation as to the condition of the bank when Mr. Broderick took office as Superintendent in April 1929. Attorneys for the defense readily agreed to the proposal, but Mr. Steuer demurred. At the close of the session, however, Mr. Stoner also decided to accept the suggestion, and went into conference with the defense on the nature of this stipulation. It is to be submitted to the Court to-day, and Is expected to cut at least a month from the duration of the trial. In dismissing the detailed story Mr. Steuer had given of the bank's condition prior to Mr. Broderick's advent in office, Mr. Conboy said: "Mr. Broderick was not connected with the Bank of United States. He isn't Mr. Marcus, Mr. Singer, Mr. Kresel or any one else connected with the bank. The Federal Reserve System examined the Bank of United States at the same time that Mr. Broderick's examiners did in April 1929, and permitted the institution to remain in the System up to the time It was closed." Says Merger Seemed Successful. Mr. Conboy then reviewed the efforts Mr. Broderick made to prevent the closing of the institution. "He devoted his very life," he said,"without thought of self, to save the money of the depositors. He went without sleep and worked day and night, acting as a devoted public servant." Mr. Conboy related how the proposed merger seemed successful and how, two days before the bank was closed, the Federal Reserve had issued a statement naming the proposed directors for the merger. At the last minute the plan fell through, he said. Mr. Lipshutz was going into the history of the bank's affiliates when Court was adjourned until this morning. Raising of Fund for Liquidation of Assets of Closed Bank of United States Reported Nearly Completed. It was learned on April 5, said the New York "Times," that the backers of the so-called Untermyer plan for liquidation of the assets:ofithe defunct Bank of United States May 21 1932 with eventual full payment to depositors expect shortly to be able to report that the $8,000,000 necessary to assure the working out of the proposal has been raised. The account in the paper quoted further said: Superintendent of Banks Joseph A. Broderick then will be formally asked to approve the plan, which calls for the turning over of the as yet undistributed assets of the bank to the liquidation corporation formed to cash them in and over a period of time pay off the 408,000 depositors. Last December, when the Banking Department paid a Christmas dividend of 15% to the depositors, raising the total percentage of deposits returned to 45, It was expected that another dividend of 10 or 15% might be paid around April 1. This was not based on any statement made by the Banking Department, but on the fact that the Untermyer plan originally provided for the taking over of the assets of the bank early in 1932 and the payment by April of such a dividend. The Banking Department has been steadily liquidating the assets of the bank and now has a considerable sum available for dividends. However, due to the unsettled conditions in security and real-estate markets it has been indicated that Department officials feel that the proper procedure is to hold the cash to safeguard the undisposed-of assets. Besides, it is understood that the cash now available would permit the payment of only a small dividend. In January, at the close of the official drive to raise the $8,000.000 necessary for the working out of the Untermyer plan, it was learned that about $6,000,000 had been raised or pledged. Of this about half was raised from the indicted directors of the bank and the balance from the 22,800 stockholders. Since that time the backers of the plan have continued their efforts. It is understood that the total pledged now exceeds $7,000,000. The backers, it was said, are confident that the balance will be raised in a week or so and that within two weeks the plan can be formally submitted to Mr. Broderick, who already has approved it in principle. Under the terms of the plan a 15% cash dividend is to be paid depositors within 90 days of the transfer of the bank's assets to the corporation and within six months an additional 10% is to be paid. These payments, with the 45% in cash already disbursed by the Banking Department will bring the total cash payments to 70%. For the balance of their claims depositors are to receive debentures of the liquidating corporation bearing 3% Interest and payable over a term of years. It is the belief of the backers of the proposal, most prominent of whom is Samuel Untermyer, that if the plan is made effective not only will the depositors be paid in full, but that the directors and stockholders who subscribe to the $8,000,000 fund will in time receive a profit from their investment An item regarding the plan appeared in our issue of Jan. 2, page 75. J. J. Pulleyn Bankruptcy—Claims Against Executor of Berardini Estate. The following is from the "Wall Street Journal" of Apr. 7: Irving Trust Co. has been appointed receiver in bankruptcy for the assets of John J. Pulleyn, whose voluntary petition in bankruptcy, individually and as an executor of the estate of Michael Berardini has been filed in Federal District Court. Incomplete schedules filed list liabilities at $1,633,763 and assets of $271,717. Of the liabilities secured creditors' claims total $143,000 and unsecured creditors $1,490,763. The Michael Berardini estate consists of private banks operated In Boston, Philadelphia, Pittsburgh and Naples. Italy, and minor real-estate holdings, as well as approximately all the shares of the Berardini State Bank in New York. Under the will of Michael Berardini, Mr.Pulleyn and three sons of the deceased, Philip, Michael Jr., and Modesto, were named executors of the estate. The M. Berardini State Bank was closed by the State Banking Department Oct. 31 1931, and its closing necessitated the simultaneous closing of the unincorporated banks owned by the estate In other cities. It has been held by the courts of New York State that an executor is personally responsible for all debts incurred in carrying on a business under a will. The institutions with which Mr. Pulleyn has been affiliated during the 40 odd years of his banking career have not and never have had any relations directly or indirectly with the closed Berardini banks and are in no way affected by their failure. Governor Roosevelt Defends Joseph A. Broderick, New York State Superintendent of Banks—At Trial of Latter on Charges Growing Out of Failure of Bank of United States Takes Share of Responsibility in Not Closing Institution Sooner. Governor Franklin D. Roosevelt of New York, appearing voluntarily on April 29 in behalf of his appointee, Joseph A. Broderick, State Superintendent of Banks, willingly and emphatically assumed part of the responsibility for the failure of Superintendent Broderick to close the Bank of United States sooner than he did. In the New York"Times" of April 30, from which we quote, it was stated that the Governor's appearance at the trial, before Judge George L. Donnellan and a jury in General Sessions, was brief, only thirty-five minutes being taken for his examination. Max D.Steuer, special prosecutor, it is stated, objected to nearly every question put to the Governor and to every answer made. The account in the "Times" of April 30 also said in part: Mr.Steller objected vigorously to the Governor's assuming of resPonsiWitty, contending that Mr. Broderick was wholly responsible for his own acts. In this Judge Donnellan upheld him, ruling, however, that the fact that Mr. Broderick conferred with the Governor regarding the defunct bank might have bearing on whether or not the failure to close the institution was "wilful," as the indictment charges. Questioned by Conboy. The Governor's action in taking part of the responsibility for the delay in closing the bank came while he was being asked by Martin Conboy, defense counsel, what he knew of Mr. Broderick's attempts to save the institution. Mr. Steuer objected to this line of questioning but was overruled. Volume 134 Financial Chronicle "If it please the court," began the Governor after the argument had been settled, "I have to go back to the first period of 1929. As I remember it, that autumn there were approximately 200 banking institutions in the State of New York under the jurisdiction of myself and the Superintendent of Banks that were in a somewhat weakened condition because of the stock market crash." The Governor emphasized the word "myself." Because of the objections of Mr.Steuer that his statements were "hearsay," the Governor was not allowed to testify as to conferences he knew Mr. Broderick had with financiers with a view to saving the Bank of United States. He was allowed, however, to tell of a conference in which he participated at his New York City home in October 1930,some two months before the bank was closed. "What were the conditions of those negotiations and with whom were they?" "Those conversations were with Russell C. Leffingwell of J. P. Morgan & Co., with Charles E. Mitchell of the National City Bank, with George W. Davidson, I think, of the Central Hanover—is that right?" "Of the Central Hanover," prompted Mr. Conboy. "And my recollection is," continued the Governor,"possibly with Seward Prosser of the Bankers Trust Co. The Lieutenant-Governor was there." Mr. Steuer successfully prevented the Governor, however, from telling what took place at this and other conferences he called. The Governor was permitted to testify, however, that there were two merger proposals under discussion from the date of the first conference until a few hours before the bank was closed on the morning of Dec. 111930. The first of theso involved the Bank of Manhattan Trust Co.and the second,the Public National Bank, the Manufacturers Trust Co., and the International Trust Co. Throughout the Governor's stay in the court room Mr.Steuer fought to prevent answers to questions having to do with Mr. Broderick's fitness for office. Governor Is Unruffled. Many times during the examination by Mr. Conboy—Mr. Steuer did not cross-examine--both the prosecutor and Mr. Conboy shouted angrily at each other. The Governor, however, remained unruffled, on several occasions smiling at the judge when Mr. Steuer attacked the line of questioning. At one point Mr. Conboy asserted that in reality it was the State's Chief Executive and not Mr. Broderick who was on trial. This was after the Governor had admitted he was "usable to attend to everything that takes place in connection with every department in the State of New York." To this Mr. Steuer objected. "We are not trying the Governor at this time," he interjected. "Maybe we are," said Mr. Conboy, "we are not so sure about that. Judge DonneIlan cut the argument short. Another argument ensued a few minutes later when the Governor turned to Judge DonneIlan and observed: "The Governor of the State has a positive obligation to assist and help his banking superintendent If the banking superintendent asks for It. "I certainly think he has," said the Judge. "Now, as a part of that duty, the Banking Superintendent was asked by me during the whole period from the fall of 1929 down to the fall of 1930 whether"—began the Governor. Mr .Steuer objected to the statement and the Governor sought leave to ask the Court a question. This Mr. Steuer denounced as "absolutely Improper," whereupon Judge DonneIlan told the prosecutor that if he wished the jury would be excluded while the question was being asked. This suggestion apparently enraged the prosecutor. He was not going to be put in the position of asking the withdrawal of the jury, he declared, nor appear to be seeking to withhold any information from the jurors. "I say that for the Governor, in the form of a question, to deliver a lecture to fritter away the people's case is uttlerly improper," he shouted. "If the Governor wants to ask your Honor any question, surely this is neither the time nor the place to ask it. The defendant is here represented by competent attorneys and they have had every opportunity to confer with the witness. You cannot, I submit, attempt to do away with the people's case by any lecture, speech, inquiry or in any other way." . . • Governor's Testimony Continued. Continuing, the Governor told of having conferred with Mr. Broderick and with Lieut.-Gov. Lehman about the bank before the meeting at his home. He was not permitted to testify as to what Mr. Broderick had told him of the condition of the institution. In reply to a question by the Court he said his only knowledge of the "real condition" of the bank was that reported to him by the Superintendent Tower the close of the examination there was another flare-up by Mr. Steuer when the Governor, asked about the reputation of Mr. Broderick for honesty, integrity, ability and competency, asserted there was "none higher in the whole State of New York." The prosecutor challenged the right of the Governor to make such a characterization. The law, he said, dictated that the answer must be "good or bad." A moment later, when Mr. Conboy asked what he knew Mr. Broderick's reputation to be in banking circles, the Governor smiled and said "excellent." This concluded the direct examination and Mr. Conboy so informed Mr. Steuer. In the first part of his interrogation the Governor testified he had first heard of Mr. Broderick's ability while serving in Washington during the Wilson Administration. At that time Mr. Broderick was chief examiner and later Secretary of the Federal Reserve System. Mr.Steuer objected to these statements. . Before the Governor took the stand Robert Adamson, director and VicePresident of the bank, concluded his testimony, begun the day before. By agreement, the Governor was called as a defense witness before the prosecution's case was closed. After the Roosevelt restimony, Mr.Steuer called another director. Arthur W. Little, to strengthen his charge that the directors had not been informed of adverse reports on the bank submitted to Mr. Broderick. Alfred L. Rosener of 125 East 72d St., a broker, testified briefly about the transactions involving repurchase of units of the bank's stock at their sale price after the market price had fallen. Alexander S. White, former Vico-President of the bank's several financial affiliates, was then called. Elsewhere we refer to the testimony of Superintendent Broderick. Appeal Denied Three Officers of Bank of United States—Appellate Justices Decide B. K. Marcus and Saul Singer and Herbert Singer Must Serve Terms. The Appellate Division of the Supreme Court upheld n May 20 by a vote of 4 to 1, the convictions of three officers of the Bank of United States—Bernard K. Marcus, 3747 Saul Singer, and Singer's son, Herbert—on charges of misapplying the funds of that institution. The "World Telegram," reporting this, said: "It would be difricult," the Court held, "to imagine a clearer case of misapplication of corporate funds. No one can defend this transaction and no one has seriously undertaken to do so." Marcus and the elder Singer were sentenced to State's Prison for from three to six years, and young Singer was given an indeterminate term in the penitentiary, carrying a maximum of three years. Governor Meyer of Federal Reserve Board Says United States Will Maintain Gold Standard—Goldsborough Price Stabilization Bill Opposed—A. C. Miller of Reserve Board Also Heard by Senate Committee—Mr. Meyer Says Reserve Governors Were Advised to Push Credit in Behalf of Business —Open Market Policies. At a hearing on May 17 before the Senate Banking and Currency Committee Eugene Meyer, Governor of the Federal Reserve Board, made known his opposition to the Goldsborough bill (directing the Federal Reserve System to act in stabilizing the purchasing power of the dollar), and at the same time, in response to a question from Senator John J. Blaine Jr. (Republican) of Wisconsin, Mr. Meyer asserted, "There is not the slightest doubt in the mind of any responsible official about either the ability or the intention of the United States to stay on the gold standard." He added that every Nation that had gone off the gold standard wanted to get back on it as soon as possible. Opposition to the Goldsborough bill (we quote from the "United States Daily") was also expressed on May 18 by Adolph C. Miller, member of the Federal Reserve Board, who further asserted that in order to repair "the breakdown in the organization of the world which is the most colossal in 100 years," we should "exercise a little patience, a little forbearance, have more faith in recovery through normal processes, and where we can expedite matter." According to the Washington correspondent of the New York "Times" Mr. Meyer on May 18 disclosed that the Reserve Board on May 17 instructed the Governors of the 12 Reserve Banks to go home and find ways and means of spreading cr.( dit according to the Board's present policy. The "Times" account from Washington May 13 also said: This was taken to mean that the Governors were told to influence member banks to extend credit to business. Since the passage of the Glass-Steagall credit expansion bill Reserve banks have purchased about $650,000,000 in Government bonds, at the rate of $100.000,000 a week. Mr. Meyer stated, adding that the purchasing program would continue as conditions justified. Senator Couzens questioned Mr. Meyer as to what factors actuated the Board's Open Market Committee in outlining the rate of purchase. The Governor stated that the purchases were motivated by constant discretion "from day to day" fields "Mandate" Unwise. Mr. Meyer in his testimony asserted that even though the United States has an important place in the world it cannot alone control the world price level, especially in the face of a condition "more serious than we have ever known." He said that "a great deal" of good has been done by passage of the Reconstruction Finance Corporation Act and other rehabilitation legislation, but that "it takes time for such measures to be reflected." Readily admitting his opposition to the Goldsborough and Fletcher measures, he said the "germs of some good ideas" existed in both, but that a "mandate" to the Reserve Board to restore price levels was well nigh impossible of fulfillment. "It would be unwise for Congress to commit itself to such a mandate, to so fixed and rigid a program," he declared. Senator Couzens mentioned a plan to control reserves, but Mr. Meyer said he objected to this as much as to controlling price levels. "I wouldn't want to be entrusted with such a power." he said In speaking of the Goldsborough-Fletcher bills. "I don't think any small group of men should be entrusted with fixing price levels." "Has there been any effect yet On the wholesale commodity price level as a result of purchasing Government securities by the Reserve banks?" Senator Costigan asked. "I think there has," Mr. Meyer answered. "It does not show up in a rise, but there is an arrest of the decline. Holds Bankers Lack Optimism. "In our meeting yesterday with the Governors of the 12 Reserve banks,'.1 be continued, "we discussed the wholesale commodity prive level and ways and means of making more effective the open market policy in bringing to industry, agriculture, construction and the like the results aimed at. "I think the Governors are going back to their respective communities to endeavor more aggressively to bring this about." "Is there adequate capital in the country as a whole?" Senator Couzens inquired. "I think there is," Mr. Meyer replied. Mr. Couzens hold that Mr. Meyer's conclusion was that the Reserve bank could do nothing "to get money to business" until "the bankers get In a proper mental attitude." Mr. Meyer declined to criticize all the bankers, but said "they, with the rest of us, lack optimism." He declared the Board was endeavoring to "accelerate" the minds of bankers and business in general. Government bond purchases call for "good discretion" on the part of the Open Market Committee, Mr. Meyer stated. Senator Couzens suggested that the minutes and resolutions used by the Open Market Committee's Executive Committee in determining these purchases would be 'of interest to the public." Mr. Meyer answered that he did not think stenograpnie mese taken or the whole proceedings noted. "Youlhave executive sessions now and then," he commented 3748 Financial Chronicle Mr. Meyer said enactment of the Goldsborough-Fletcher bills "can't do any good and might do harm," and that passage of the Goldsborough bill in the House was a "disturbing factor" in the world. Senator Fletcher ventured that the "money power" would rather have discretion left in the Reserve Board than to have a law passed. "I don't think a Congressional resolution can contemplate all the circumstances," Mr. Meyer said of the two bills, adding that such a law "would be inappropriate." Senator Blaine led Mr. Meyer into a discussion of the gold standard. Alluding to what be said are $203,000,000,000 of private debts, Mr. Blaine asked: "How are we going to stay on the gold standard?" "You might as well ask a man how be is going to play a piece on the piano," Mr. Meyer sharply replied. "There is nct the slightest doubt in the mind cf any responsible official of the ability or intent of the United States to stay on the gold standard. "No nation has gone off except through necessity. There are none that do not want to return to a metallic basis. Neville Chamberlain, British Chancellor of the Exchequer, recently said that his country must return to a metallic base." Senator Blaine essayed more questions along the same line, but Mr. Meyer said the discussion was not pertinent, and Chairman Norbeck announced that the witness wished to leave at noon. "I know it's embarrassing. I know of his unwillingness to answer; I will withdraw the question," Mr. Blaine retorted. "Haven't we been off the gold standard ever since the Reserve Board was created, and been really on a management basis?" Senator Brookhart asked. "Decidedly not," Mr. Meyer said. Adolph C. Miller, member of the Reserve Board since 1914, opposed both bills, commenting that "stabilization may be another word for inflation." When Mr. Brookhart opened the subject of a $2,000,000,000 currency issue to pay the soldier bonus and "help prosperity," Mr. Miller said that the bills contemplated turning the Reserve System into a "town pump." Mr. Miller said instructions to the Board to maintain a price level would result "in a worse situation, and lead to a breakdown." He urged "faith and patience" in the present crisis, and advised the Committee to "keep hands off the sick patient." He said that if the Reserve Board had "had such a charter" as provided in the bills. conditions would have been actually worse a few years ago. Some Committee members accused Mr. Miller of "wanting to let Nature take its course," but he smilingly denied this. He regarded the Board's open market Jperations as quite normal and in keeping with the situation. W. C. Hushing, of the American Federation of Labor, and Robert G. Elbert, a New York investment broker, favored the bills, but Fred C. Mills, Professor of Economics and Statistics at Columbia University. opposed them. Professor Irving Fisher of Yale, who recently appeared for the plan, reiter.ted his approval. At the close of the hearing Chairman Norbeck announced that no more testimony Will be taken and that the Committee will take the bill under consideration. The Goldsborough bill, recently passed in the House, directs the Reserve Board, as a Government policy, to stabilize the dollar at the average 1921-29 purchasing power, through controlling the volume of credit and currency. The other bill, which Senator Fletcher has introduced, carries the same direction on a 1926 basis, by "expanding and controlling credits and currency." It is understood the 1921-29 average would be about the 1926 level. From the "United States Daily" of May 19 we take the following: The Michigan Senator (Couzens) asked if the Federal Reserve banks are decreasing their purchases of Government securities. Mr. Meyer responded that purchases would be continued at a "rate to be determined as conditions justify." He said there was no fixed schedule. "You have not fixed any time to discontinue these operations?" asked Senator Fletcher. ... Responding to questions by Senator Fletcher, the Reserve Board Governor said the bill before the Committee can not "do any good" and may "do harm." The passage of the bill by the House, he said, was "very disturbing." "What did it disturb?" asked Senator Brookhart (Rep.), of Iowa. "It disturbed people all over the world, the newspapers and writers," was the answer. "Since I don't see that the bill is capable of doing any good and is capable of disturbing, I oppose it." "Breakdown" With Goldsborough Bill Predicted by Mr. Miller. Mr. Miller asserted that the Goldsborough bill would result in a situation worse than the present and would "eventually result in a disastrous breakdown." If the bill had been in operation in 1926-1927-1928, the "situation would be worse than it is," he said. "Stabilization may easily lead to inflation," Dr. Miller told the Committee, adding that "it almost always does." "This measure will insure from time to time inflation, speculative booms and speculative collapses, in my opinion," he said. "It is possible to help out to some extent in the process of business acceleration, and likewise to be of some effect in putting on the brakes at other times, but it is not possible to start in motion an economic system which is in completely moribund condition, we must watt until nature has started the work of restoration." Asked by Representative Goldaborough (Dem.), of Denton, Md., who was given permission to ask questions, if the open market operations of the Federal Reserve System had not been helpful during the period 19221928, Mr. Miller replied that they were of dubious value, and that they helped in the development of the problems of the past three years. It was partly due, he said, to the fact that certain elements of the Federal Reserve System had been "pretty thoroughly infected with the theory of price-level stabilization." Inequalities of Movement of Prices Cause of Trouble. At the afternoon session, Frederick 0. Mills, professor of economics and statistics at Columbia University in New York city, discussed the "price aspects" of the proposal. He declared that he was not speaking against a policy of inflation, but against the particular proposal to restore the 1926 price level. While sympathetic with the objectives of the bill, he said, he regards it as the result of an oversimplified conception of the problem and a faulty idea of the powers of banking groups. "It is the inequalities of price movements, not their changes, which are disturbing to business," Mr. Mills said. He exhibited a number of charts to illustrate his thesis. May 21 1932 Since July 1929, for instance, he explained, the prices received by farmers had declined 58%, a greater percentage than other prices. During the same period, wholesale commodity prices declined 35%; retail food prices, 34%; per capita earnings of factory workers, 26%; prices paid by farmers, 24%; cost of living, 21%; building material prices, 11%; construction costs. 9%. Inequalities Remain, Mr. Mills Declares. Restoration of any particular price level, Mr. Mills said, does not correct the inequalities as between various groups of prices. It might, after a certain point, in the upward movement, Intensify inequalities. A definite objective, he said, ought not to be put in the law. There are inequalities, too, in the additions to debt burdens, Mr. Mills declared. The debtor measures debt burden by the price of things he has to sell. The debt burden of the farmer has doubled, he said, while the debt burden of the salaried man, whose salary has not been reduced, has not changed. From 1925 to 1929, Mr. Mills pointed out, credit expanded 20%, while the level of wholesale prices declined 7%. Had it been mandatory at that time for the 1925 price level to be maintained, he said, it would have been disastrous, because the additional credit would probably have found its way into speculation rather than into wholesale prices. Banking authorities cannot control the direction of credit, the witness said. A soldiers' bonus would show up first in a rise in price of consumers' goods, Mr. Mills said, which is already a favored group. Currency Expansion Supported by Former Senator Owen—Denies Money Would Be Unsound and Says It Would Ease Credit. The issuance of a sufficient volume of money to overcome hoarding and contraction of credit and currency due to stock, commodity and real estate losses was recommended on May 12 by former Senator Robert L. Owen following appearance of reports that a deficit of $3,000,000,000 was indicated in the United States Treasury statement. In the New York "Times" of May 13 the former Senator was quoted as follows: Expanding currency to replace hoarded money and hoarded credit would restore National income and Nation a revenues and would automatically balance the budget and enable nuisance taxes to be repealed. This is proposed in the Patman bill for compensation of World War veterans, but the objection is made that such money is fiat money,or unsound money. This objection to issuing new money to pay soldiers' compensation, or to pay Government internal improvements, or to pay a current deficit, has no justification for the reason that the money has behind it all the gold which can be commanded by the Treasury, the Reserve banks or by the credit of the United States and its taxing power. To call such money fiat money is due to a lack of information or normal understanding, or ordinary intelligence, or lack of good intent. Secretary of Treasury Mills Opposed to Goldsborough Bill Directing Federal Reserve System to Act in Stabilizing Purchasing Power of Dollar—Views It Disturbing Factor at Home and Abroad. Secretary of the Treasury Mills informed the Senate Banking Committee on May 17 that passage by the House of the Goldsborough dollar stabilization bill "was a disturbing factor, both at home and abroad" and that the Federal Reserve Board is unanimously opposed to it. Mr. Milis's letter was in response to a request for an expression of his views on a bill introduced in the Senate by Senator Fletcher (Dem., Fla.) virtually identical with the Goldsborough measure passed by the House. Secretary Mills made known his views in a letter addressed to Senator Norbeck (Rep.) of South Dakota, Chairman of the Senate Banking and Currency Committee, as follows: Dear Mr. Chairman: In your letter of April 21 you requested a report from the Treasury Department on S. 4429, entitled "A bill to restore and maintain the average purchasing power of the dollar by the expansion and contraction of credits and currency, and for other purposes." Under the terms of this bill the Federal Reserve Board, the Federal Reserve banks and the Secretary of the Treasury would be charged with the duty of making effective a policy that the average purchasing power of the dollar in the wholesale commodity markets for the year 1926 shall be restored and maintained by the expansion of credits and currency through the powers of the United States and its agencies. In my opinion it would not be possible for the Government of the United States to carry out such a mandate. Price levels are dependent upon a large number of factors that are beyond the coatrol of the Federal Reserve System, the Treasury Department,or any other agency of the Government, and I do not believe it would be wise to impose upon them a duty and a responsibility which they could not discharge. Such an attempt would tend to undermine the confidence of the people in the various agencies of the Government and the results would be unfortunate. In this connection, a subcommittee of the Committee on Banking and Currency of the House of Representatives held extensive hearings on the subject matter of a bill having a similar purpose, which has passed the House of Representatives and has been referred to your Committee. During the course of these hearings Governor Meyer of the Federal Reserve Board and Dr. Goldenweiser, Chief of its Division of Research and Statistics, appeared oefore the Committee and testified very Nib' as to factors which are beyond the control of legislation of this character which would render it ineffective. For your convenience, I inclose CODY of the part of these hearings which contains this testimony. I may add that the passage by the House of the bill referred to was a disturbing factor both at home and abroad, and that the members of the Federal Reserve Board unanimously oppose the enactment of legislation of this character and approve the position taken by Governor Me* or in his testimony on this subject. Very truly yours, OGDEN L. MILLS, Secretary of the Treasury. Volume 134 Financial Chronicle Professor Irving Fisher Favors Goldsborough Bill— Contends It Insures Further Open Market Operaations by Federal Reserve Board--Also Indorses Steagall Bill for Guarantee of Deposits. The adoption of the Goldsborough bill, which directs the Federal Reserve Board to restore commodity prices by its control over credit and currency, was urged on May 13 by Professor Irving Fisher of Yale before the Senate Banking and Currency Committee. He also urged legislation to create jobs for the unemployed and expressed the hope that such measures would bring an upswing. The New York "Times," in its Washington advices May 13, further indicated as follows what Professor Fisher had to say: The economic situation, Professor Fisher said, has never been as serious as in the past few weeks. The country is rapidly coming to the parting of the ways, with no very definite idea of where it is going, he declared. The indications are, he said, that there either will be a big upturn soon or further deflation, and he declared that if the latter came there was practically no bottom. "On the other hand," he said, "it may go up. If I made a bet I would bet that it would soup." This brighter picture, he said, was dependent in part upon the success of the present effort of the Federal Reserve System, by its open market operations, to expand credit. He felt it essential also that Congress should mandate the Board, by adoption of the Goldsborough bill, to continue its present policy. "If you do not issue this mandate we do not know how far the Board will'go," ho said. "In my mind, it would be disastrous if they stop now." Approves .Steagall Bill Also. Professor Fisher said he did not think the policy should be left to the discretion of a few men on the Board. Passage of the Goldsborough bill, he said, would end the "danger" of the Board's being swayed by one faction or another, lie urged reporting the bill without amendment in order to avoid any unnecessary delay. He said somo newspapers had pictured the measure as one similar to the Patman bonus payment proposal, which called for large scale currency inflation, lie said he did not consider the Goldsborough bill subject to criticism on that basis. Adoption of the Goldsborough bill, he said, should be supplemented by enactment of the Steagall bill to protect bank depositors, as an emergency measure, and legislation to make the bank reserves vary with the activity of deposits. Another step, he said, should be legislation to provide work for the unemployed, either along the lines of the program offered by President Hoover or by bond issues for construction as suggested by Senator Wagner and Owen D. Young. Discusses Shrinkage in Wealth. In 1929, Professor Fisher said, this country and its people had the largest debt in history—$203,000,000,000—partly as a result of the war and of speculation. The country's wealth, he said, was estimated then at about $360,000,000,000 and that had shrunk, according to some calculations, to $180,000,000,000. He felt that there had been a real liquidation on the stock market, but that liquidation in many other directions had by no means been complete. Varying the gold content of the dollar and stabilization of the price of silver, Professor Fisher said, might be wise as future plans to aid world rehabilitation. He asked the Committee to concentrate on the bill before it. C. V. Gregory, of Chicago, Editor of"The Prairie Farmer," and Frederic 0. Brencktnan, Washington representative of the National Grange, advocated speedy adoption of the bill. Mr. Gregory painted a gloomy picture of conditions in Illinois, based to a considerable extent on the shrinkage of farm income. He said this had dropped from an average of $10,000,000,000 in the whole country for the 1920 to 1929 period to about $4,500,000,000 in 1931 and that the farmers had little left except for paymeitt of taxes and debts. Mr. Brenckman submitted a statement in behalf of his organization calling for legislation such as the Goldsborough bill and an effective plan for guarantee of bank deposits. At the conclusion of to-day's testimony the question of closing the hearings arose, as no other witnesses were present. Senator Gore said that only advocates of the Goldsborough bill had testified and that he would like to hear the other side. Owen D. Young Favors Farm Equalization Fee— Alfred E. Smith Also Indicated as Favoring Senator Robinson's Proposal in Relief Bill—Views of B. M. Baruch. Owen D. Young, Chairman of the Board of the General Electric Co., indicated on May 11 his approval of Senator Joseph T. Robinson's proposed $2,000,000,000 unemployment relief bond issue and of an equalization fee on wheat as "an experiment." Mr.Young's views wore expressed as follows in a statement issued by him May 11: Senator Robinson's proposal in the Senate to-day seems to me to be the first comprehensive program which has been offered to correct our present situation. On the one hand, it should restore confidence by its insistence on a balanced budget, thereby keeping the bonds and the money of the United States sound. On the other hand it undertakes affirmatively to put men and materials, now idle, at work to provide us with necessary, productive, and self-liquidating construction. By a 30-hour week, work and earning power will be spread to a large number of the unemployed The relief fund will be available as advances to proper auhoritics to tide over present suffering. Economies in Government operation and heavy taxes to balance a budget can, and I think will, be faced with much greater courage and confidence when they are part of a program which contemplates as a whole the relief of suffering, affirmatively putting men back to work, and starting business in materials. The experiment with the equalization fee on wheat I believe worth making in the interest of the farmers. If successful there, it can then be extended by experience to other agricultural commodities. In any event, all agricultural products should feel quickly the restoration of confidence and buying power which Senator Robinson visualizes as a result of his plan. This plan Promptly 3749 adopted should aid in putting to work the increase in our money volume and bank credit now being provided by the Federal Reserve. From the New York "Herald Tribune" of May 12 we quote the following: Since Mr. Young already had made a similar bond issue suggestion to members of Congress, his indorsement of Senator Robinson's bill did not surprise observers. The Robinson bill even has been referred to in some quarters as "the Young plan." . . . Similar approval of Senator Robinson's measure cam from Bernard M. Baruch, and Alfred E. Smith, avowed Presidential candidate, issued a statement pointing out that he had antedated Senator Robinson by at least four months, with a $2.000,000 bond issue. Senator Robinson's move has precipitated a scramble of Democratic potentialities to get on the bond issue band wagon, with Senator Robinson himself, who was Vice Presidential candidate with Mr. Smith four years ago, coming out of the paddock as an additional "dark horse." Having encountered criticism for his failure to state his position on the equalization fee definitely in his Watertown IN. Y., May 9] speech, Mr. Young openly advocated the fee on wheat as an experiment which, If successful, could be extended to other agricultural commodities. . . Smith Recalls Own Proposal. Mr. Smith recalled that he had made a suggestion similar to Mr. Robinson's last January and "on Feb. 14 I definitely recommended practically just what Senator Robinson offered as a program." Mr. Smith then outlined his own program. His statement follows: "I have been asked my opinion about the program offered by Senator Robinson. I first suggested this at the Jackson Day dinner on Jan. 8. when the National Committee was in session at Washington. Later or Jan. 31, in an article published in a syndicate of newspapers throughout the United States, I amplified that, and further, in another article on Feb. 14. I definitely recommended practically just what Senator Robinson offered as a program. "Specifically, I proposed the following: "1. That an emergency public works administration be set up to function for a period of a year, or until the emergency is over. "2. That there shall be a single emergency public works administrator appointed by the President. The emergency administrator shan divide the country into suitable regions, each under an assistant administrator, to carry out the purposes of the Act, and he shall have the power to appoint necessary assistants without reference to civil service rules, but only for the emergency period. He shall also have the power to borrow employees from the various esxiting construction departments, and shall be responsible not only for allocating moneys for public works, but also for inspecting, keeping records of and speeding up orogress on Federal and local projects financed under the Act. Monthly reports shall be made by the administrator to the President on the progress of work, and these shall be printed for public distribution. Would Give War-Time Power. "3. That the emergency administrator shall have powers corresponding to those of the various Federal administrative agencies created in 1917 to prosecute the World War. "4. That there shall be a prosperity bond issue of $3,000,000,000, of which $1.500,000,000 shall be for Federal public works, $1,400.000,000 shall be for the purchase of sound public works bonds or debentures of States and their subdivisions, including quasi-public agencies and authorities, such as the Port of New York Authority, and $100,000,000 shall be for loans to limited dividend housing corporations for construction of low-priced housing accommodations. The prosperity bonds shall be sold to the general public by a drive similar to the Liberty loan drives in denominations of $50 and upward, without commissions to brokers or middlemen, at par, and at a rate of interest of 4ji %. The prosperity bonds for Federal public works shall have a life of ten years. Those for the purchase of State and local public works debentures and for housing loans shall run for 20 years. "5. Tho $1,500,000,000 for Federal public works shall be distributed as follows: "(a) $500,000,000 for Federal aid on State highways, including advances to the States to be deducted from future Federal aid. ''(b) $150.000,000 to meet 50% of the cost to the States and their subdivisions of highway bridges and tunnels, including bridges and tunnels within municipalities on main routes. "(c) $125,000,000 to meet 50% of the States' share of railroad grade crossing eliminations. "(d) $125,000,000 to meet 50% of the railroads' share of railroad grade crossing eliminations. "(e) $100,000.000 to meet 50% of the States' share of highway grade crossing eliminations. "(f) $250,000,000 for additional Federal building construction in Washington and throughout the country. "(g) $250,000,000 for additional river, harbor, drainage, reclamation and related improvements. Would Speed Local Improvements. "8. The $1,400,000,000 for the purchase of State and local public works bond issues shall be to purchase at par State and municipal bonds for needed local improvements which can be promptly put under way. The State and local bonds shall bear interest at the rate of 4M %, and shall have a life of not more than 20 years and shall, of course, be issued in full conformity with the constitutional and statutory provisions of the State affected, and after investigation of the soundeness and reliability of such investments. No bonds of any State or municipality shall be bought unless designated by the Governor of the State in question as a State emergency public works administration. "7. The loans of not to exceed $100,000,000 to limited dividend corporations for low-priced housing construction, shall be at an interest rate of not to exceed 5% for a period not to exceed 20 years, and shall be made only where such housing is needed. "8. There shall be an emergency finance committee of three appointed by the President with the consent of the Senate, to approve all purchases of State and municipal bonds, and all loans to limited dividend housing corporations. One member of this committee shall be an engineer with experience in public works, one shall be an architect with experience in low-cost housing. "9. Allocations for each Federal public works project, for each purchase of State or municipal bonds, and for each housing loan shall be made on the basis of the number of men to be employed, the number of industries affected directly or indirectly, the promptness with which the work can be undertaken, and completed, and benefit to the country generally and the locality affected." Mr. Baruch said: "If associated with a balanced budget, the proposition is necessary, sound and will be effective." Mr. Smith said that the idea of a Federal bond is,sue for funds which would purchase State and mnuicipal securities occurred to him when he 3750 Financial Chronicle was informed last winter that the City of New York had a possiule credit of $400,000,000 which w ui not now utilizable. Col. Leonard P. Ayres of Cleveland Trust Company Regards Policy of Federal Reserve in Buying Government Securities of $100,000,000 Weekly Most Helpful Development in Depression—Primary Money and Derivative Money Analyzed—Decline in Industrial Production and International Trade. Among other things Col. Leonard P. Ayres,Vice-President of the Cleveland Trust Company of Cleveland, Ohio, discusses, in the May 15 "Business Bulletin" of the company, the rapidly declining international trade, this applying not merely to our own exports and imports "but of international trade all over the world." "If international trade is to continue to dry up and shrink away," says Col. Ayres, "the result will be that the nations of the world will have to accept permanently lower standards of living." Col. Ayres is of the opinion that "the Federal Reserve System has adopted an aggressive policy that is the most hopeful development in the history of this depression." He goes on to say: The Reserve Banks are buying Government securities at the rate of $100,000,000 a week. The money paid for these securities is deposited In member banks which promptly use these funds to pay down their indebtedness at the Reserve Banks. Already the process has gone so far that the Now York banks are out of debt at the Federal, and the larger banks in the interior cities are rapidly moving into the same condition. In Now York the process has gone farther than that. The banks are not only out of debt, but they have excess reserves in the form of unemployed funds. In these circumstances interest rates on deposits in New York have fallen so low that corporations are moving deposits from that city to interior banks. As the Reserve Banks continue their open market operations, as they term these purchases of securities, banks in general throughout the country will pay off their borrowings and accumulate excess reserves. These will be idle funds seeking employment. Until recently nearly all member banks have been heavily in debt to the Reserve Banks. The history of banking since the war shows that under such circumstances banks will not readily extend credit unless Impelled by abnormal conditions such as prevailed in the sopeculative period. They will, however, alwasy seek to sue idle funds, for they must in order to meet expenses. This means that if the Reserve System adheres to its now policy, the banks will shortly be seeking safe investments, and looking for safe commercial loans. The Federal Reserve System has Inaugurated a period of credit exponsion which is displacing the long process of contraction, and already bank deposits have begun to increase. Previous financial moves initiated at Washington have been defensive in nature. They included the National Credit Corporation, the Railroad Credit Corporation, the Reconstruction Finance Corporation, and the Glass Steagall Act. They were designed to prevent breakdowns. Now we have a measure that is an ,aggressive counter-attack, designed to combat the depression. It is a powerful attack, for these open market purchases are the credit equivalent of gold Imports. As to derivative money and primary money, Col. Ayres has the following to say in the Cleveland Trust Company "Bulletin": Derivative Money. There is only about throe-fourths as much bank credit in existence in this country now as there was in the summer of 1929. This means that there has been a great shrinkage in the volume of the money with which most of the nation's business is transacted. The money that we use is of two kinds, which we may term primary and derivative, and the money which has suffered the severe shrinkage in volume is the derivate money. It consists of the bank credit that is represented by most of the checks that we receive, as for example those that come to us from corporations as salary payments or dividend payments. Primary money is the currency that we carry about with us in the form of coins and bills, and which we use to make most of our ordinary small purchases. When we think about money we normally and naturally think of this primary money, for it is in this form that we see it every day, and count it, and spend it, and perhaps deposit it in our savings accounts. reality, however, this primary money is only about one-tenth of all the money the country has and uses in normal times. The other nine-tenths consists of the derivative money paid out and received in the form of bank checks, and with which most of the business of the country is transacted. In the diagram (this we omit.—Ed.] the upright columns represent the amount of bank credit in existence in this country per capita of the population, in each year since 1873. This shows the derivative money available for use. The columns represent the per capita totals of the loans, discounts, and investments of all banks in June of each year up to 1932, and in April of this year. Sixty years ago the per capita total was about 50 dollars, and it constantly increased until it amounted to more than 500 dollars in 1929. It has now fallen to less than 371 dollars. In making the computations the broker loans for the account of others have been included since 1926,for they would have been bank credit in the earlier years if such transactions had been customary then. The diagram furnishes an answer to the familiar question that asks where all the money that people have lost has gone, and who has it now. The answer is that most of the money that has been lost has gone out of existence, and nobody has it. The currency, or primary money, is still with us, but the derivative money, or bank credit, has greatly shrunken. The losses are large, and real, and widely distributed, and for the most part they do not represent gains for anyone. A light curved line runs through the upper ends of the columns in the diagram. This is a trend line, and for the past three years it is carried out horizontally, because we cannot know whether or not the long rising trend of the past years Is to be resumed. The black silhouette of the small lower diagram shows the percentage deviations from this trend lino. In depresthe long period of nearly 60 years the most severe of the previous sions brought declines below the trend line amounting to only about 5%. The decline In this depression is nearly 24%. loan Is Bank credit, or derivative money, comes into existence when a account made at a bank. The banker credits the amount to the deposit it enters also and it, against checks draw of the borrower so that he can May 21 1932 on the books as a loan. Thus both the bank loans and the bank deposits have been increased, although no currency has been used in the transaction. Increasing business activity swells the amount of derivative money, and depression reduces it, for then loans are paid down and not renewed. That has been happening in this depression on an exceptionally largo scale, and particularly so in the case of collateral loans which existed in heavy volume In 1929. Primary Money. The bills and the coins that make up the currency we regularly carry use for ordinary small purchases, are primary we around with us, and which money. All our money is either derivative money or primary money, and derivative money, which is bank credit, has already been discussed in another section of this issue of the "Bulletin." This section relates to primary money,which is not merely currency, but that and some other things as well. The two diagrams IThese we omit.—Ed.. at the foot of this page represent the monthly fluctuations in all our primary money during the past 15 years. The one on the left shows the composition of our primary money by kinds, and the one on the right shows it classified by uses. Of course the total areas and the upper contours of the two are identical, but in their internal classifications they arc different. Primary money is of three kinds. One consists of Treasury currency, including coins and bills that are not Federal Reserve notes. The second kind is gold, and the third is Federal Reserve credit. This last element furnishes elasticity in the money supply. The diagram shows how it increases in volume each autumn to meet the needs of crop moving and of holiday trade. The diagram on the right shows that primary money is used in circulation, and for member bank reserves, and as other deposits, &c., in the Reserve Banks. The important principle behind these diagrams is that any change in the supply of our primary money must be reflected in both of them, and the nature of the change will determine how the diagrams would be affected. If Congress should adopt one of the fiat money proposals recently advocated In Washington, and print two and a half billions of new money, the result would be a sudden increase in the Treasury currency, together with a nearly complete wiping out of Federal Reserve credit on the left, and an increase in money in circulation on the right. We should then have brought back an old-fashioned rigid money system, and largely disassociated our banks and our money from the control of the Federal Reserve System which we instituted to introduce flexibility into our monetary matters. A much wiser plan than that for combatting the depression has been adopted, and the diagrams show how it is beginning to be effective. The Reserve System is increasing Federal Reserve credit, and the diagram on the left shows how it is commencing to widen out. The result is that member bank reserves on the right are beginning to expand. That kind of increase in primary money makes possible tenfold increases in derivative money. This policy persistently followed as the Reserve System plans to do, is far safer and vastly more promising than an increase in treasury currency. Regarding industrial production and international trade Col. Ayres makes the following observations: Industrial Production. The fluctutations of business activity over long periods of years have been shown in several diagrams recently published by this bank. One of them showed the monthly fluctuations of business activity in this country since 1790. Another presented similar data from 1831 to 1932, and still another covered the period since 1854. The data used in all these diagrams to represent business activity during this century are those for industrial production as recorded by the Federal Reserve Board, and adjusted by this bank to show fluctuations above or below the computed normal level. The data given in the small table within the accompanying diagram (This we omit.—Ed.) bring this index as nearly up to date as the available figures will permit, and may be used to bring up to date any of the three long diagrams referred to above. Any slight discrepancies between these present figures and those previously printed are duo to revisions in the index that have recently been made by the Federal authorities. The resulting changes are not so important as to interfere with carrying forward the records of the long diagrams. The index for March reached a new low at 42.2% below normal,and unfortunately it now appears to be nearly sure that another new low will be recorded for April. In March there were declines in the figures of nearly all the manufacturing groups and particularly sharp ones in iron and steel, automobiles, and tobacco products. There were increases in the data for lumber, and for leather and shoes. In mining there were good increases in the figures for the output of both bituminous and anthracite coal. International Trade. International trade is rapidly declining, both in volume and in value. This is true not merely of our own exports and imports, but of international trade all over the world. In a fundamental sense there Is probably no aspect of the great depression that is of more serious importance than this one, and none that is more difficult of solution. If international trade is to continue to dry up and shrink away, the result will be that the nations of the world will have to accept permanently lower standards of living. In the diagram the heavy black line represents the course of the gold value of the exports and imports of 39 countries during the past 12 Years The dashed line shows the changes in their volume as measured in metric tons. The data are taken from the statistical records of the League of Nations. The figures for 1932 are based on the record for this year that are so far available. In the case of both lines the average for the 12-year period is taken as equal to 100. and the data for the several years are shown as percentages of that base. From the depression year of 1921 to the peak prosperity year of 1929 world trade steadily and rapidly increased in volume and in value. Since 1929 there has been a rapid and continuous decline, so great in extent that the International Chamber of Commerce estimates that the dollar value In world trade in 1932 may not exceed 35 or 40% of that of 1929. The advance shown in the diagram prior to the depression was not a mere Postwar increase. It was a continuation of an almost steady growth that had been going on for over 100 years, and which had been a characteristic feature associated with the steady development of economic prosperity during that long period. International lending is one of the essential features of international trade. Nations that are developing their resources, and are large producers of raw materials, but have not yet assembled large accumulations of capital, are debtor nations. They borrow by selling corporate bonds to the inve•tors abroad. The creditor nations have more capital than Is required at home, and they lend by buying these securities. The repayments are in reality made by the balances between the exports and imports of goods among the debtor and creditor nations. Before the war we were one of the debtor nations, but since that time we have been a creditor nation. Those processes of international lending and repayment have been going on for a great many years, and have steadily grown as world trade has increased. They were sharply curtailed during the wave of security speculation that swept over the world in the late prosperity period, and reached Volume 134 Financial Chronicle tg greatest excesses in this country. Since then international lending has almost ceased, and as a result world trade is declining and will probably continue to recede, for it cannot be revived without international loans, and foreign corporate bonds are everywhere regarded with deep disfavor. In normal times we export about 8% of our manufactured goods, and about 18% of our agricultural products. Our industries and our agricultural resources have been developed to capacities at least that much in excess of domestic needs. If we are to lend no more funds abroad, as is now widely advocated, we must be prepared to accept permanently much of the corresponding shrinkage that will result from the curtailment of our foreign markets. The stoppage of international lending leaves unsolved the problem of how to restore international trade. Meeting in Washington of Governors of Federal Reserve Banks—Continuance of Open Market Policy As Credit Stimulant. In indicating the policy agreed upon at the meeting in Washington this week of the Governors of the 12 Federal Reserve banks with the Federal Reserve Board an announcement issued on May 17 by the Board said: Governors of the Federal Reserve Banks met to-day with the Federal Reserve Board and it was decided to continue open market operations by the purchase of Government securities, the extent and amount to be determined from time to time as conditions justify. The Washington correspondent of the New York "Journal of Commerce" in its account of the meeting May 17, said: Officials who attended the meeting including Secretary Mills, ex-officio Chairman of the Board; Gov. Eugene Meyer of the Board; Gov. George L. Harrison, of New York Reserve Bank, and others declined to amplify the formal announcement. They said it spoke for itself. Observers, however, interpreted the statement to leave the way open for the Open Market Committee of the System, consisting of the Governors, to slow down the volume of purchases from the $100,000,000 a week prevailing in the last five weeks, if conditions justify. Can Increase Buying. On the other hand, should any speeding-up become necessary as conditions might change, such a move could be made by the System. When the campaign for heavy purchases was inaugurated, it had been anticipated generally that $600,000,000 or more in governments would be taken by the Reserve banks over a six weeks' period, although no formal announcement to that effect was made. If purchases for the current week are on the average of the last five weeks $600,000,000 will have been added to the portfolios of Reserve banks. Holdings of Government securities by Reserve banks the week of May 11 amounted to $1,385,000,000, which was $787,000,000 greater than the year before and the record for the System. No confirmation could be obtained from the Governors or the Board of a sharp difference of opinion between New York and other Eastern bankers and those in the interior as to the open market policy. It was reported, however, that interior banks thought that the heavy buying camplagn should be terminated, while a majority of members of the Reserve Board and the Eastern banks stood for no reversal of policy. Diverse Views Stressed. The impression existed that there had been no unanimous agreement within the System as to the open market policy as it has existed since April 13, the first week in which the $100,000,000 a week average purchase was inaugurated. Even some members of the board were said to feel that the policy existing prior thereto of the acquisition of Government security at a much slower rate should be maintained. Before April 13 Reserve banks for some time had been acquiring about $25,000.000 a week. Following a meeting of the Governors here, however, when Administration leaders were called into conference, the $100,000,000 a week policy was adopted. Some officials said that it was felt the results of the drive have been favorable, and while there was no expansion of loans by member banks or credit forced into commerce and industry, member banks have been put In a position to expand their loans when there is any demand for commercial money. Reserve balances of member banks are higher and their indebtedness to Reserve banks lower, both favorable factors. The principle of the heavy buying campaign was to force credit into business channels to increase commodity prices. Bankers and Industrialists Named As Committee of 12 to Co-operate with Reconstruction Finance Corporation to Further Credit Expansion—Owen D. Young, Chairman—Action Taken by Governor Harrison of New York Federal Reserve Bank Understood As Backed by Washington Administration. Under the Chairmanship of Owen D. Young a committee of 12 has been named,consisting of bankers and industrialists, to co-operate with the Reconstruction Finance Corporation and other agencies to widen the use of Federal Reserve credit. The announcement of the move was made on May 19 by George L. Harrison, Governor of the Federal Reserve Bank of New York, whose statement follows: Governor Harrison of the Federal Reserve Bank of New York has called together a committee composed of bankers and industrialists for the purpose of considering methods of making the large funds now being released by the Federal Reserve banks useful affirmatively in developing business. Its purpose also will be generally to co-operate with the Reconstruction Finance Corporation and other agencies to secure more co-ordinated and so more effective action on the part of the banking and industrial interests. The Committee held its first meeting this afternoon at the Federal Reserve Bank. The membership of the Committee, which may be enlarged later, is as follows: Owen D. Young, Chairman, General Electric Co. Mortimer N. Buckner. Chairman, New York Trust Co. Floyd L. Carlisle, Chairman, Consolidated Gas Co. Walter S. Gifford, President. American Tel. & Tel. Co. Charles E. Mitchell. Chairman, National City Bank. 3751 William C. Potter, President, Guaranty Trust Co. Jackson E. Reynolds, President, First National Bank Alfred P. Sloan Jr., President, General Motors Corp. Walter C. Teagle, President, Standard Oil Co. of New Jersey. A. A. Tilney, Chairman, Bankers Trust Co. Albert H. Wiggin, Chairman of Governing Board, Chase National Bank. Clarence M. Woolley, Chairman, American Radiator & Standard Sanitary Corp. Press accounts of the meeting in Washington this week of the Governors of the 12 Federal Reserve banks indicated that Governor Harrison of the New York Reserve Bank had conferred (May 16) with Eugene Meyer Governor of the Federal Reserve Board and Secretary of the Treasury Mills. Both Messrs. Mills and Meyer are said to have later in the week been visitors to New York. The Washington correspondent of the New York "Times" in noting this May 19. said: Information reaching the capital of the organization of a committee of leading industrialists to put to work the hundreds of millions of dollars in credit, released by the Reserve banks in the last six weeks, explained to observers here the sudden visit to New York yesterday and to-day of Secretary Mills and Eugene Meyer, Governor of the Reserve Board. Mr. Mills returned to Washington late to-day. The understanding was that he had conferred with President Hoover relative to the formation of the super-committee and that the President was in accord with the idea. It is a well-known fact that the President had been disturbed at the apparent lack of co-operation of the commercial banks of the country in the credit expansion drive. Complaint Made of the Banks. The Reconstruction Finance Corporation, organized partially as a stabilizer to the banks in order that they might feel free to make more liberal extensions of credit, has already loaned half a billion dollars, a considerable portion going to the financial institutions. The Federal Reserve banks through open market operations have liberated more than half a billion dollars in the last six weeks through the purchase of Government securities On the other hand, it is asserted, the bank; have not passed the benefits of these relief measures on to their customers, although the banks maintain that there is no demand for commercial loans. This was one of the problems discussed at the recent meeting of the Governors of the Federal Reserve banks which decreed a continuation of the open market policy. A factor in the lack of results from the reconstruction drives has been the legislative uncertainty. However, officials believe that the legislative situation is beginning to become clarified and that when it is cleared up, It will give an opportunity for the application of the full force of the Reconstruction Finance and Federal Reserve expansion policies. Hope was expressed in high Administration circles for important results in dissipation of the depression, following the New York announcement. The New York "Herald Tribune" of May 20 indicating that Messrs. Mills and Meyer had participated in the initial meeting of the committee of 12 on May 19, said: For some time past it has been common knowledge that Mr. Hoover was giving earnest attention to the apparent failure of commercial banks to give aid in the official efforts to expand credit throughout the country. The nature of the work which the Committee has to do is made clear in the recent statements of the Federal Reserve System. Since late February the System has been buying Government securities, first at the rate of $25,000.000 a week, and more recently at the rate of $100.000.000 a week. The result of these unprecedentedly heavy purchases of Government securities has been the building up of $300.000,000 of excess member bank reserves, of which approximately $175,000,000 is concentrated in New York. Three Billion Credit Basis Laid. These excess reserves could form the basis for $3,000,000,000 of member bank credit. But the banks have been slow in putting the potential credit to work. New York banks have been buying bonds in a halting fashion in recent weeks, but out-of-town banks have not yet joined in the movement. The Federal Reserve System is understood to believe that a genuine stimulation could be given business if borrowers and lenders could be brought together and this large amount of credit put to work. On Tuesday the governors of the twelve Federal Reserve banks met in Washington with the Federal Reserve Board to discuss means of increasing the volume of bank credit. Following the meeting Governor Meyer said that the Governors would return to their districts .1 termined to devise means of getting banks to use their credit resources. The appointment of the Young Committee Reserve by Governor Harrison was looked on as the method the Federal Bank in this District will use to achieve this result. New York Bankers Reported As Favoring Open Market Policy—Attitude of Congress Factor in Determining Program of Federal Reserve Heads. From the Now York "Journal of Commerce" of May 18 we take the following: The continuation of open market purchases of Government bonds by the Federal Reserve Banks at the rate of approximately $100,000,000 weekly is being strongly advocated by a number of local bankers. it became known here yesterday. Efforts of interior bankers, including officials of outside Reserve banks, to obtain a modification or cessation of these purchases is being strongly opposed here, it was said. Opposition to any change in policy, despite the failure of the operations here to show effects, is based upon three important factors. First radical relief programs in Washington would be encouraged, some bankers believe. In the second place, it is felt in some quarters that a continuation of open market operations at the present rate will tend to encourage banks finally to expand loans and investment in order to put these excess reserves to work. It is argued that the steady increase in reserves, rather than their mere amount, must be relied upon to induce member banks to expand their loans and investments. Support for Bonds. A third factor is the market for Government bonds, especially in view of the expected adoption of the bi-partisan relief program and the consequent likely issue of more than $1,000.000,000 in Reconstruction Finance Corporation bonds. Furthermore, support to the Government bond market from the Reserve banks is held desirable from this point of view. 3752 Financial Chronicle leis, of course, agreed that at some point the Feleral Reserve banks must discontinue their purchases of Government securities so that the difference of opinion hinges in part upon the determination of that point Some bankers hold that if the Reserve banks continue their purchases until the first or second week of June when Congress is expected to adjourn, the total increase in holdings will approximate $1,000,000,000. This is the amount the Federal Reserve banks were originally expected to buy. Discontinuation of these purchases while Congress remains in session, it is held, might lead to measures which would not be welcomed in Wall Street. These might include the Goldsborough bill, which would place upon the Reserve authorities responsibilities which they feel could not be fulfilled, and also proposals for unemployment relief which, according to commercial and private bankers, might injure investment markets. In banking quarters it is believed that any further purchases of Government securities will directly add to the excess reserves held by the banks. Up to the present time a part of the reserves created by the open market policy were used to retire member bank rediscounts. At the present time, itiwas pointed out, it is the country banks chiefly which remain in debt, and it is doubted that these institutions can possibly be reached by Government security purchases of the Reserve banks. For this reason, it is held, the crucial test of the efficacy of steady and rapid increases in excess reserves, in forcing the banks to increase their loans, is still to be made. Secretary Mills Says Credit Group Will Be Formed in all Federal Reserve Districts. According to Associated Press dispatches from Washington yesterday (May 20), Secretary of the Treasury Mills stated that the formation of committees of bankers and industrialists in all Federal Reserve districts similar to that announced in New York to secure more active co-operation between bankers and industry and business is considered an outcome of the New York movement. Tenders of $395,069,000 Received to Offering of $75,000,000 or Thereabouts of 91-Day Treasury Bills Dated May 18—Bids Accepted 375,000,000—Average Price 0.43%, Lowest on Record. Total tenders of $395,069,000 were received to the offering of $75,000,000 or thereabouts of 91-day Treasury bills, dated May 18 1932 and maturing Aug. 17 1932. The offering was referred to in these columns May 14, page 3576. The issue which was sold on a discount basis carries the lowest interest rate in the history of such issues, it was stated orally at the Treasury Department May 17 according to the "United States Daily" of May 18 from which we also quote as follows: The average rate of bills to be sold was 43% on a bank discount basis. It was explained, and the previous low record, established last Summer, was 46%. Since that time the rate advanced to a new high point of 3.25% last Winter only to return to its present low as banks foresee no attractive investments forthcoming within the next 90 days except Government issues, it was said. Treasury bills were first sold in 1920, it was said. The amount of bids accepted in the case of the bills dated May 18 is $75,000,000. The results of the offering were indicated as follows in the Treasury announcement of May 16: Secretary of the Treasury Mills announced to-day that the tenders for $75.000,000, or thereabouts, of 91-day Treasury bills, dated May 18 1932, and maturing Aug. 17 1932, which were offered on May 12, were opened at the Federal Reserve Banks on May 16 lei The total amount applied for was $395,069,000. The highest bid made was 99.900, equivalent to an interest rate of about 0.40% on an annual basis. The lowest bid accepted was 99.892, equivalent to an interest rate of about 0.43% on an annual basis. Only part of the amount bid for at the latter price was accepted. The total amount of bids accepted was $75,000,000. The average price of Treasury bills to be issued is 99.893. The average rate on a bank discount basis is about 0.43%. New Offering of $60,000,000 or Thereabouts of 91-Day Treasury Bills. Offering of a new issue of 91-day Treasury bills to the amount of 60,000,000 or thereabouts was announced on May 18 by Secretary of the Treasury Mills. The new issue will replace a maturing issue of $62,851,000. Tenders for the new bills will be received at the Federal Reserve banks and their branches up to 2 p.m. Eastern Standard Time, Monday, May 23. The bills will be dated May 25 1932 and will mature Aug. 24 1932. They will be issued in bearer form only and in amounts or denominations of $1,000, $10,000, $100,000, $500,000 and $1,000,000 (maturity value). The bills are sold on a discount basis to the highest bidders and the face amount is payable on the maturity date without interest. Tax Bill Before Senate—Income Tax Rates of Committee Adopted—War-Time Rates Rejected—Beer Tax Defeated. After rejecting on May 16 war-time income tax rates in the first effort (it is noted in the "United States Daily") to overturn the provisions in the Senate Committee draft of the revenue bill, the Senate on the following day (May 17) accepted the normal individual income tax rates ranging from 3% to 9%, and surtaxes with a maximum bracket of 45%, thus tentatively placing in the bill the Committee's May 21 1932 recommendations. No record vote was taken on these rates by the Senate on May 17. As to the Senate's action May 16 the "Daily" said: By a vote of 31 ayes to 49 nays, it defeated an amendment by Senator Couzens(Rep.) of Michigan, which would have installed in the bill the 1918 schedule of normal and surtax rates which ranged up to 65% on incomes in excess of $1,000,000. Reconsideration Planned. Whether the vote is to remain decisive, however, was uncertain. Senator Couzens, before the official vote was announced by the Vice-President but after private polls of Senators revealed a majority against his amendment withdrew his affirmative vote and voted in the negative, announcing that he did so in order to be able to ask for a reconsideration. Prior to the vote on the Couzens proposal, the Senate defeated an amendment by Senator Trammell(Dem.) of Florida, which would have altered the Couzens amendment in the lower brackets of incomes. The vote against the Trammell proposal was 4 to 76. Another Increase Proposed. After the vote on the Couzens amendment the Senate immediately was confronted with a new proposal to change the Committee rates in an amendment by Senator Connally (Dem.)of Texas, which would establish a normal tax ranging from 4 to 8% and a maximum surtax of 55% as was included in the 1922 schedule. The rates which the Texas Senator proposed were the same as those which he had offered while the bill was under consideration by the Committee and which were once accepted only to be voted out of the bill on a reconsideration. Senator Connally told the Senate he would ask for a record vote on his proposal for the reason that he believed there were Senators who would go along with him in a proposal a little lower than that sponsored by Senator Couzens. Consideration Is Expedited. Consideration of the Connally amendment and other phases of the income tax schedule continued into a night session, the first of several which are planned by Senator McNary (Rep.) of Oregon, Assistant Majority Leader, and Senator Smoot (Rep.) of Utah, who is in charge of the bill. Senator McNary explained that night sessions were necessary in order to expedite final disposition of' the revenue bill which is planned to produce more than $1,000,000,000 to aid in balancing the budget. Debate during the day centered chiefly around arguments by Senator Harrison (Dem.) of Mississippi, ranking Minority Member of the Committee which re-wrote the House bill. Senator Harrison urged the Senate to sustain its Committee and pass the bill substantially as it was reported by the Committee who had devoted more than a month to examination of the bill, the Government's revenue requirements and kindred problems. The Mississippi Senator, who is the ranking minority member of the Committee on Finance which had the task of redrafting the House bill, outlined to the Senate the difficulties that had been met and overcome. He told of the various factors that were influential in its final decisions and how the various members had forgotten partisan affiliations in their desire to write a revenue act that would be equitable and would stand to accomplish the purpose that all recognized as a necessity, namely, providing income for the Government. "And now," he said, "we find our work challenged in many respects. I have no quarrel with those who think differently, nor do I oppose them in the sense that I think they have no right to take the position they are now taking. But I do appeal to them to consider the problem from the view that we face a national crisis. "The Senator from Michigan, Mr. Couzens, would place a series of rates on incomes that are the same as we applied in the war time. But will not do. We are not at war. Our nation is not fired with enthusiasm as its people were when they were a great co-ordinated mass who were fighting for civilization. "These are peace times, and there is not the prosperity that enabled men with capital to make money as they did in war. They cannot be encouraged to go ahead now, as they did in wartime, when they are told that the Government is going to take 77 cents out of each one dollar they earn. It will get you nowhere." On May 17, in accepting the Committee's proposal respecting individual income tax rates and surtaxes, the Senate adopted the Committee proposal of a 14% tax on incomes of corporations. This rate is 0.5% above the rate passed by the House, and 2% higher than the rate now operative, said the "United States Daily," which further reported as follows concerning the Senate's action on May 17: Amendments Rejected. The entire income tax schedule was disposed of after the Senate had rejected amendments by Senators Connally (Dem.) of Texas, and Long (Dem.) of Louisiana, which respectively proposed to install the 1921 schedule of levies and the 1918 rates, except in the latter case the rates were to apply on incomes above $10,060. In the instance of the indivudal rates accepted by the Senate, there remains an opportunity for reconsideration as a result of notices filed by Senators Couzens (Rep.) of Michigan, and Conally. Each Senator gave notice of a motion to reconsider in order that their right to offer other amendments may not be proscribed by the rules. Minor Revisions. Numerous minor Committee amendments were accepted during several hours of rapid progress in which the amendments were adopted as quickly as they could be read by the secretary. In addition, upon a request by Senator Smoot (Rep.) of Utah. Chairman of the Committee on Finance. all amendments correcting the text were adopted en bloc. Several amendments proposed by the Committee were passed over temporarily at the request of Senators who were unable to attend the session. One provides for a tax of 80% maximum on bonuses and emolunients of that type paid t,)corporation officers in addition to their regular stated compensation. Another amendment about which some controversy has arisen prescribed a limitation on stock losses. These will be considered later. . • The Committee amendments passed over the Senate included the Gore amendments (Sec. 12, subsection (e) and section 23; subsection (a) and the limitation on stock losses (Sec. 23, subsection (r)). The Committee amendment relating to mutual ball, cyclone, casualty, or fire insurance companies or associations (Sec. 103,subsection 11) was Passed over along with related amendments in Sec. 208. There was passed over. too, in the section relating to adjusted basis for determining gain or loss (Sec. 113) the subsection (b.13) relating to depletion allowance. The Senate passed over the Committee amendments on insurance reserves, Section 203, subsection (2). Senator La Follette (Rep.) of Wisconsin, submitted an amendment to provide that the rate shall not be lower than 3,I%,which will be considered when the section again comes up. Financial Chronicle Volume 134 Motions to reconsider affected not only the income tax and related provisions but also the amendment in Section 25 relation to credits of individuals against net income. Affected, too, was the amendment relating to computation and payment of tax under the consolidated returns of corporations (Section 141, subsection (c)). Tar on Utilities' Earnings Advocated. Senator Connally, discussing his amendment briefly before a vote was taken, pointed out that by its adoption vaelous "obnoxious" taxes now in the bill could be removed, including the levy on bank checks, admissions below 45 cents and postal increases. Senator Howell (Rep.) of Nebraska, said that a tax could be imposed wnich would net the Government from $50,000,000 to $60,000,000. He explained that the "earnings of the power companies have been least affected during the present economic depression." Costs, he said, have fallen 44% but the rates on power have not fallen comparably. "Here's a source that can be taxed $50,000,000 or $60,000,000 if we had the will to do it," he added. An amendment which would take from the Conally amendment the provision striking out the earned income exemption was proposed by Senator Trammell (Dem.) of Florida. This was rejected by a viva voce vote. The Senate than rejected the Connally amendment by a vote of 46 to 31, Senator Conelly changing his vote from aye to no before the result was announced in order that he might later move for reconsideration of the vote. Senator Long(Dem.)of Louisiana, proposed an amendment to the income tax provisions of the revenue bill which would leave the rates to 810,000 as they came from the Finance Committee but would substitute the 1918 rates above that amount to a maximum of65% on incomes over $1,000,000. Income Tar Plan Offered by Mr. Long. He declared that hts amendment would return a revenue of $160,000,000 more than the Committee schedule of income tax rates. He explained that the Senate had refused to accept the 1918 rates, had rejected the 1922 rates proposed by Senator Connally, and that now he would provide an opportunity to increase the rates on the higher income brackets without changing the normal rates. He referred to his proposals as the "millionaire"b schedule." Senator Colleens (Rep.), of Michigan, sponsor of the amendment providing the 1918 rates, which the Senate rejected, moved to reconsider the vote by which that amendment failed of adoption. Senator Norris (Rep.), of Nebraaka, advising the adoption of the Long amendment, declared: "To those who object that we want to 'soak the rich,' let's hurl back at them the challenge that they want to 'soak the poor.' Yes, soak the poor, they're used to it." He drew a parallel between the rates of the Long amendment and the rates actually in effect in Great Britain showing that the British rates are higher than the proposed amendment would establish. A roll call vote showed 24 in favor of the Long amendment and 49 opposed, and the amendment was rejected. The Senate then adopted the Committee rates on income taxes and surtaxes. Reconsideration was moved by Senator Couzens, and Senator Connally moved reconsideration of his amendment. . . . Sales Tax Procedure. After the Senate had disposed of the individual and corporation income tax provisions and numerous other phases of the bill, advocates ot a manufacturers' sales tax were urged by Senator Harrison (Dem.), of Mississippi, to offer their amendment to include such a levy in the bill. He pointed out to them that if the sales tax question could be decided, many Senators would then know how to cast their ballots on the excise taxes recommended by the Committee. Senators Moses (Rep.), of New Hampshire, and Walsh (Dem.), of Massachusetts, declined, however,to yield to Senator Harrison's argument. Senator Walsh asserted he had no intention, as the prospective sponsor of a sales tax amendment, of offering it until the general outline of the tax measure has had Senate approval. Senator Moses added to this the expression that he would not be "trapped" and that the sales tax proposal would be offered at a time which its supporters deemed opportune. Neither Senator disclosed what rate they would propose. In its consideration of Committee amendments, the Senate completed approval of all such amendments until it reached the manufacturers' excise taxes (p. 239, title IX), with seven exceptions. These exceptions were passed over. Motions to reconsider were entered concerning various other amendments. Included in its approval besides the income and surtax schedules and the tax on incomes of corporations were several of general interest. Among these was the removal of the exemption from United States citizens residing abroad, which was accomplished by approval of the Committee action in striking out the exemption provided in the House bill (Sec. 116, subsection (a), on page 23 in the present bill). Also approved was the net loss provision for 1930 or 1931 as amended by the Committee. The Committee had stricken out the year 1931 and bad added at the end of Sec. 117, subsection (d), the following sentence: "If for the taxable year 1931 a taxpayer sustained a net loss within the provisions of the Revenue Act of 1928, the amount of such net loss shall be allowed as a deduction in computing net income for the taxable year 1932 to the same extent and in the same manner as a net loss sustained for one taxable year Is, under this Act, allowed as a deduction for the succeeding taxable year." The tax provisions voted on May 17 were summarized as follows in the New York "Times": During the afternoon the Senate adopted the following Committee amendments: Increase of the normal tax rates to 3% on the first $4,000 of net income, 6% on the second 4,000 and 9% on the rest, eliminating the House schedule of 2, 4 and 7%. Increase of the individual surtaxes from a maximum of 40% on incomes above $100,000 by a graduated scale to 45% on incomes in excess of $1,000,000. Increase of the corporation tax from 13%% in the House bill to 14%. Elimination of the 131% "penalty" on corporations filing consolidated returns. Restoration of the net loss provision to permit carryover of net losses for one year where the House had eliminated it entirely. Application of normal taxes and surtaxes to the salaries of future Presidents of the United States and judges of toe Federal Courts. Elimination of exemption to income tax of war veterans pensions and Insurance payments. Striking out of exemptions on earned income from sources without the United States. Ellrainating the $1,000 corporation exemption provided by the House. Sixty-three other amendments were adopted, effecting chiefly technical and administrative changes, either to "plug" loopholes in the present law or as adjustments in the new provisions inserted by the Senate. 3753 In the same account it was noted that the proposal of Senator Tydings for legalizing 2.75% beer as a basis for a special tax to finance a gigantic public works program was brought up on May 17 in its second night session of the week. The dispatch added: Despite the Senator's efforts to confine debate on his measure strictly to the question of relief, it appeared that this would be the pretext for another rough-and-tumble prohibition fight. The rejection on May 18 of the proposals to tax legalized beer are referred to in a separate item in our issue to-day; at the same time (May 18) the amendment by the Senate Finance Committee to the House rate on brewers' wort, malt syrup and grape concentrates—all used for the making of home brew or wine—was accepted by a viva voce vote. The "Times" indicating this, added: The only record test on the homebrew tax came on an amendment offered by Senator Copeland to place the entire levy upon malt and relieve wort of any part of it. This was overwhelmed, 68 to 7. The provision as adopted specified a tax of 15c. a gallon on wort, 3c. a pound on liquid malt, malt syrup and malt extract and 20c. a gallon on grape concentrate, evaporated grape Juice and grape syrup (other than finished or fountain syrup) if containing more than 35% of sugars by weight. The "Times" dispatch from Washington May 18 also said: After expressing itself on the beer and home-brew questions the Senate encountered the most controversial items in the whole revenue bill—the tariffs on oil, coal, copper and lumber. A night session was consumed by a futile debate on the oil duty, with Senator Long as a sort of master of ceremonies of the show. Recess until to-morrow was taken at 9:45 p. m. In our issue of May 14 (pages 3577-3578) we referred to the opening of the debate on the bill in the Senate on May 13. On that date, the "Times" noted, a drive to force the war-time income tax rates into the tax bill as substitutes for the manufacturers' excises recommended by the Finance Committee was started by Senator Couzens soon after the bill was formally presented to the Senate. On May 14, Senator Lewis (Dem.), of Illinois (we quote from the "United States Daily"), proposed the issuance of a five billion dollar bond issue instead of raising the income tax rates even above the present law with the revenue to be obtained from estates to be used in amortization of the bond issue. Both May 13 and May 14 were given over by the Senate to debates. On May 19 threats of tariff reprisals stirred the Senate as opposing sides in the oil duty controversy sought advantages in the general debate on the tax bill said the Washington correspondent (May 19) of the New York "Journal of Commerce" from whose account that day we further quote: Efforts to obtain an agreement for a vote to-night, at the close of the second day's consideration of this tariff, were of no avail. In the face of an apparent filibuster designed to focus general public attention on the matter,opponents were undertaking to delay a vote in the hope of weakening support of the oil group. With the oil duty proponents claiming a strength In excess of 50, a number sufficient to secure approval of the House rate of one cent per gallon upon crude and fue oils, with appropriate rates applicable to imports of gasoline and other petroleum products, opponents promised to advance so many other tariff amendments as to make the bill top-heavy In this respect. Tydings Leading Fight. The fight is being led by Senator TydIngs (Dem.) of Maryland. With him are joined many Atlantic seaboard members, but there in an indication that Old Guard Republicans will go along with the oil group of the Southwest as a means of protecting the Finance Committee and safeguarding the tax bill against all raids. Yesterday (May 20) attempts by leaders to obtain early action on the revenue bill were met by 500 amendments and many objections to quick disposition of the tariff sssue according to Associated Press dispatches from Washington which also stated: Torn by dissension over the import taxes in the bill, Senate opponents and proponents of the tariffs on oil, coal, copper and lumber disdained the efforts of leaders to force a vote and went stubbornly ahead with the debate. Before them was a request President Hoover has made to Senate leaders for action on the budget balancing legislation before the end ot the tiscal year, on June 30. If necessary to accomplish this, he has urged that Congress remain in session through the National Political conventions. Carrying out a threat he has made before, Senator Tyclings (Dem.) of Maryland, an opponent of the oil tariff now before the Senate, offered 500 similar amendments and demanded that the President force elimination of the tariff items from the bill. He threatened to force a vote on each of the 500 items if the oil levy is accepted. Senator Robinson, the Democratic leader, sought an immediate showdown on the four tariffs in the bill, but this was made impossible by objection of Senator Long (Dem.) of Louisiana. Beer Tax Rejected by Senate in Passing on Amendments to Tax Bill—Tax on Brewers' Wort Adopted. The U. S. Senate refused on May 18 to legalize beer to finance unemployment relief and during a five-hour debate that night became embroiled over the proposed impost on 3754 Financial Chronicle oil. The New York "Herald Tribune," reporting this from Washington May 18, further noted: By a vote of 61 to 24 earlier in the day it defeated the Tydings amendment, intended to legalize 2.75% boor and at the same time authorize a bond issue of $1,500,000,000 for public works to relieve unemployment. After defeating the beer proposals, the Senate adopted the Finance Committee amendment for taxation of brewers' wort, malt syrup and other home brow materials, which Senator Reed Smoot, Chairman of the Committee, said last night really meant a tax on "illegal beer," Senator Royal S. Copeland, Democrat, of New York, led a fight to put the tax on malt Instead of wort and malt syrup, but was snowed under on a vote and the Committee proposition was put through. The Committee proposals for taxes on home brew material and on grape concentrates, also approved, will bring in, it is estimated. $97,000.000. Switches on the Bingham Proposal. On the Bingham amendment the result was 23 to 60. Senator Pittman' who voted for the Tydings amendment, did not vote on the Bingham amendment. Senators Moses and Reed, who voted for the Bingham amendment, voted against the Tydings amendment. Senators Cutting and Shortridge, who voted for the Tydings amendment, voted against the Bingham amendment. Senator Bailey did not vote on the Bingham amendment, but voted against the Tydings amendment. Senators Moses and Rood voted for the Bingham amendment to show they were for modification In principle, but opposed the Tydings amendment because they did not want to comnilt themselves to the principle of a large bond issue for public works. Senator Tydings and other advocates of his amendment expressed themselves as pleased with the showing of strength made and predicted that sentiment would grow for modification. Intense Interest in Roll Call. The vote on the beer plan was the outstanding development in connection with the tax bill in the early part of the afternoon. It was taken at 2 o'clock, and was preceded by nearly three hours of debate. Galleries were crowded and there was intense interest as the roll was called. . . . Before defeating the Tydings amendment the Senate rejected, 60 to 23. a proposal by Senator Hiram Bingham, Republican, of Connecticut, to legalize 4% instead of 2.75% beer. Vote Discloses 29 Wets. Twelve Republicans united with 12 Democrats to support the Tydings amendment, while 32 Republicans united with 29 Democrats to oppose it. Taking into account Senators who did not vote because absent or paired, but were favorable to modification, the vote disclosed a strength of about 29 Senators ready to vote for the manufacture of beer. Tax on Wort Adopted. All pairs were general, but Senators Hebert and Shipstead announced that, had they been permitted to vote, they would have supported the amendment. This was the first test of sentiment in recent years in the Senate on the Issue of modification. However, the result was to some extent affected because the proposal for a bond issue for public work was attached to it. Senator David I. Walsh,Democrat, of Massachusetts, opened the discussion to-day with an argument for the Tydings amendment. Senator William E. Borah, dry insurgent Republican of Idaho, interrupted to ask if the Tydings plan was intended to take the place of the proposal made a few days ago by Senator Joseph T. Robinson, Democrat, of Arkansas, for unemployment relief. Senator Tydings replied that he had offered his amendment before Senator Robinson proposed his plan. He thought his proposal would largely meet the situation which Senator Robinson had in mind. Demand for Volstead Act Change. "If there has been any appreciable change of public sentiment on any public question in recent months," Senator Walsh said, "it seems to me It has been most notable in connection with the Volstead Act." He said citizens who never before were interested in the subject were showing an interest and that sentiment is "growing at a rapid rate" for a change. He added that in practically every letter he received relating to economic matters there was an expression in favor of modification of the Volstead Act. "When the State and local governments are unable to get money. the Federal Government must act," he argued. Senator Edwin S. Broussard, Democrat, of Louisiana, supporting the amendment, said he was opposed to the idea of issuing $2.000,000,000 of bonds for public works and relief of unemployment unless a way was provided to pay off those bonds. The Tydings amendment, Senator Broussard held, was not in violation of the Eighteenth Amendment to the Constitution. Senator Morris Sheppard, Democrat, and extreme dry, of Texas, who spoke last night against the Tydings amendment, to-day sought to show that in a number of the States before Federal prohibition, the laws probibited a beverage containing any alcohol whatever. Senator Huey Long, Democrat, of Louisiana, wanted to know why Senator Sheppard supported the provisions in the tax bill intended to raise 897.000,000 out of illegal beer and wine through taxes on wort, malt syrup, grape concentrate and the like. Senator Sheppard denied there would be a tax on beer and wine under these provisions and Senator Long called his attention to Senator Smoot's contrary opinion. "I'm not responsible for what the Senator from Utah says," Senator Sheppard retorted. He drew a picture of drinking in "the old days" and contended prohibition had worked many beneficial changes. Senator Jesse H. Metcalf. Republican, of Rhode Island, took a radically different view. "The awful conditions that the prohibition law has brought upon this country make every thinking man realize what a great mistake that law was," he said. "To-day we live in the most criminal country in the world." He contended light wines and beer would go far to remedy conditions. Senator Frederic C Wolcott. Republican, of Connecticut, supported the Tydings amendment. Senator Robert M.La Follette, insurgent Republican, of Wisconsin, held the public works program in the Tydings plan was inadequate to meet present demands, but said he would support it as a step in the right direction. I3ingham Urges 4% Beer. Senator Bingham made a brief address in support of his 4% by volume amendment. He said the evidence taken in the hearing on his proposal sustained the view that such a beverage was not intoxicating. Senator Carter Glass, Democrat, of Virginia, who said he would vote against both the Bingham and Tydings propositions. said he expected to oppose modification until some authority was able to say what was the Proper alcoholic content for Congress to permit. He criticized the Wickersham Commission for "sidestepping" this issue, saying he had supposed when it was created that it would pass on this question, He held the com- May 21 1932 mission was "morally derelict" in not determining the question of what constituted intoxicating liquor. He asserted that the question should be passed on authoritatively, since "repeal is beset with almost insuperable obstacles." Senator Otis F. Glenn, Republican, of Illinois, argued that the way to get a judgment on the question of content was to pass a law and put the question up to the Supreme Court of the United States, But Senator Glass insisted "Congress is not prepared to exercise any intelligent judgment on the matter." United States Senate Adopts Resolution Calling for Investigation by Tariff Commission and Senate Committee of Effect of Depreciation of Foreign Currency Values on Imports into United States— Membership of Senate Committee. Without a roll call, on April 12, the United States Senate adopted the Reed resolution providing for an investigation by the U. S. Tariff Commission, and also by a Committee of six Senators, into the effect of the depreciation of foreign currency values upon Importations of important commodities into the United States. The six Senators named by Vice-President Curtis to conduct the inquiry are Senators Reed (Pennsylvania), Dickinson (Iowa), Austin (Vermont), Pitttnian (Nevada), Costigan (Colorado) and Shipstead (Minnesota). In asking immediate consideration of the resolution on April 12 Senator Reed said: A few moments ago there was reported from the Committee to Audit and Control the Contingent Expenses of the Senate the resolution (S. Res. 156) calling for an expression from the Tariff Commission with regard to depreciated currencies and also creating a Special Senate Committee to investigate the same subject. The resolution is in form satisfactory to the Senator from Mississippi (Mr. Harrison) the Senator from Nebraska (Mr. Norris) and myself. As adopted by the Senate on April 12 the resolution reads: Resolved, That the United States Tariff Commission is directed to make a thorough investigation of the effect of the depreciation in value of foreign currencies since the enactment of the Tariff Act of 1930 upon the importation into, and exportation from, the United States of all of the more important commodities, and the effect of such depreciation on the general trend of international trade in tile same period, taking into consideration in both cases the increase in purchasing power of all gold-standard currencies, the decrease in exchange value, and the purchasing power of the currency of other countries in international trade, and particularly as affecting the export trade of the United States, and the general decrease In commodity prices in the United States and elsewhere, and to report to the Senate as soon as practicable the results of such investigation together with all statistics and facts used in determining such results; be it further Resolved, That said Commission be directed to compute and report to the Senate as soon as practicable the ad valorem equivalents of specifie duties imposed by said Tariff Act as of the date of passage of said Act and as of April 1 1932 ; and be it further Resolved, That a special select committee of six Senators, to be appointed by the President of the Senate, is authorized and directed (1) to make a thorough investigation of the effect of the depreciation in value of foreign currencies since the enactment of the Tariff Act of 1930 upon the importation into, and exportation from, the United States of all the more important commodities, and the effect of such depreciation on the general trend of international trade in the same period, taking into consideration in both cases the increase in purchasing power of all gold-standard currencies, the decrease in exchange value and the purchasing power of the currency of other countries in international trade, and particularly as affecting the export trade of the United States and the general decrease in commodity prices in the United States and elsewhere, and to report to the Senate as soon as practicable the results of such investigation, together with all statistics and facts used in determining such results; and (2) to compute and report to the Senate as soon as practicable the ad valorem equivalents of specific duties imposed by said Tariff Act as of the date of passage of said Act and as of February 1, 1932. For the purposes of this resolution the Committee, or any duly authorized subcommittee thereof, is authorized to hold such hearings and to sit and act at such times and places during the Seventy-second Congress as it deems necessary until the final report is submitted, and to employ such clerical and other assistants, to require by subpoena or otherwise the attendance of such witnesses and the production of such books, papers, and documents, and to administer such oaths and to take suah testimony, and to make such expenditures, as it deems advisable. The cost of stenographic services to report such hearings shall not be in excess of 25 cents per hundred words. The expenses of the Committee, which shall not exceed $5,000, shall be paid from the contingent fund of the Senate upon vouchers approved by the Chairman. In carrying out the provisions of this resolution the Committee, or any duly authorized subcommittee thereof, is authorized to consult with the several departments, independent establishments, and other agencies of the Government, and such departments, establishments, and agencies are requested to furnish to the committee or subcommittee such information and data in their possession as may be deemed of assistance. President Hoover Vetoes Bill Amending Tariff Bill Limiting President's Power Respecting Flexible Provisions—House Sustains Veto, On May 11 President Hoover vetoed the bill (H. H. 6662) amending the Tariff Act of 1930, restricting the powors of the President under the flexible provisions. The House on May 11 sustained the veto by a vote of 178 to 166. The objections to the bill cited by the President were (said the "United States Daily"): 1. The misinprosslon and uncertainty it may convey as to its purpose. 2. It practically destroys the flexible tariff through the removal of Executive authority to render conclusions of the Tariff Commission effective. Volume 134 Financial Chronicle Opposes Conference Conditions. 3. The conditions stipulated for action in an international conference which it is proposed should be called to deal with trade questions, because, he said, previous international economic conferences for these identic purposes have resulted in very little accomplishment. 4. The request made in the bill that the President should "negotiate with foreign governments reciprocal trade agreements under a policy of mutual tariff concessions," which, be said, Is to direct conflict with the other proposals in the measure. The bill originally passed the House on Jan. 9 by a vote of 214 to 182. As was stated in our issue of April 9(page 2640) the Senate on April 1, by a vote of 42 to 30, passed the bill in amended form. The bill went to the President after the House on April 28 had accepted all the Senate amendments. The veto message follows: To the House of Representatives: I am returning without my approval H. R. 6662. entitled "An Act to Amend the Tariff Act of 1930 and for Other Purposes." My first objection to the bill is the misimpression and uncertainty It may convey as to its purpose. If the purpose of the proponents of this Act is to secure lower tariffs on the 35% of our imports which are not on the free list, it would seem that the direct and simple method of SKI doing would be to recognize that tariffs are duties applied to particular commodities and to propose definite reduction of the duties on such particular commodities as are believed to be at fault and upon which the full facts can be developed. Alternatively the Congress is able to direct the Tariff Commission under the "flexible" provisions of the Act of 1930 to act upon such schedules as are believed to be too high. As a matter of fact, there never has been a time in the history of the United States when tariff protection was more essential to the welfare of the American people than at present. Price!' have declined throughout the world, but to a far greater extent in other countries than in the United States. Manufacturers in foreign countries which have abandoned the gold standard are producing goods and paying for raw materials in depreciated currency. They may ship their goods into the United States with great detriment to the American producer and laborer because of the difference in the value of the money they pay for their raw materials and the money they receive for their finished products. Under such conditions it is imperative that the American protective policy be maintained. If the intent or the effect of the proposed bill is to remove the possibility of Executive action or to reduce tariff protection, there never was a time more Inappropriate on account of widespread domestic unemployment and the possibilities which lie before us. Destroys Flexible Tariff. The second objection to the bill is that it practically destroys the "flexible" tariff through the removal of Executive authority to render conclusions of the Tariff Commission effective. This bill would again reduce the Tariff Commission to a purely advisory body to the Congress, and thus defeat a reform so earnestly sought ever since its first advocacy by President Roosevelt and finally fully realized in the Tariff Act of 1930. By the Act of 1930 the principle of a "flexible" tariff based upon determinations by a bipartisan commission, subject to approval of the Executive, was firmly and effectively established. Beyond the ability to change the duties by 50% there lies within the provisions the development of the definite a principle of preference of the home market for.American industry, workmen and agriculture, based upon the difference of cost of production at home and abroad, plus transportation to the principal markets. This open process, upon the application of any responsible party, is an assurance against either excessive duties or non-protective tariffs upon dutiable goods. The broad purpose of the present form of Executive action upon the "flexible" provision is promptly to remedy inequities and injustices in the tariff as they may be discovered; to prevent any tariff system being frozen upon the nation despite economic shifts; and by providing this flexibility to meet changing economic conditions, greatly to lessen the necessity for periodic general revision of the tariff with its disturbance to economic life and its orgy of politics and log-rolling. The "flexible" provision has, since the Act of 1930, proved its high usefulness in these particulars. The Commission has completed or has in progress investigations covering 291 different articles. Of those which come under the "flexible" provisions, the recommendations were for no change in about M% of the cases, increases in 16% and decreases in 30%. which were placed in effect within a few days. This effective "flexible" tariff as a protection to sound progress and for the future protection of our farmers, workmen, industries and consumers should be maintained in our American system. The proposal in the bill under consideration will effectively destroy it and Is a step backward. Under the present law the Congress has the benefit of the advisory functions of the Tariff Commission, upon which it can act at any time. If the bill is to have any practical result by reserving to the Congress incidental or occasional readjustment of the tariff, it simply opens the way for log-rolling every time Congress Is called upon to consider a report of the Tariff Commission recommending any specific change In rates or schedules. In an effort to avoid this obvious ob'oction, the Act attempts to limit Congress, In legislating upon there commendations of the Commission, to the specific Items included in the report. But no Congress can bind another Congress in any such manner, relating as it does to a question of legislative procedure. Third Objection. My third objection to the bill lies in the conditions stipulated for action international conference which it is proposed should be called to deal in an with trade questions. I wish to say at once that I am in fullest accord with the •proposal for an international action or conference to "eliminate discriminatory and unfair trade practices," "preventing economic wars," and "promoting fair, equal and friendly trade and commercial relations among nations." The American Government has participated in several international economic conferences for these identic purposes since the great war. They have resulted in very little accomplishment. But the objectives proposed in this bill for such a conference are not limited to the constructive purposes above mentioned. Some of the proposals in the bill for such a conference raise questions of futility or alternatively of abandonment of essential American policies. The first legislative act of Washington's Administration was a tariff bill. From policies has been that tariffs that day to this, one of our firm National in protection of our own people. It is now are solely a domestic question proposed that an International conference should be called with a view implication of calling other to "lowering excessive tariffs." The very nations into conference with view to changing our tariff duties is to subject agreement. international our tariffs to excessive duties in the American For myself I hold that any inequalities or flexible provisions of the present tariff tariff can be corrected through the 3755 law. If other nations should adopt this principle and such an instrumentality it would automatically remove excessive duties and unequal treatment throughout the world without interference with domestic control of tariff policies. If the meaning of the Congress is that such a conference should discover and negotiate the elimination of particular excessive duties throughout the world, then I do not need to elaborate upon the direction in which such action leads, for it means simply attempting the futility of negotiating a world tariff among 60 or 70 nations subject to confirmation of their legislative bodies. If on the other band what the Congress means is to undertake a general lowering of American tariffs in exchange for lowering of tariffs elsewhere in the world, and if the Congress proposes to make such a radical change in our historic policies by international negotiation affecting the whole of American tariffs, then it is the duty of the Congress to state so frankly and indicate the extent to which it is prepared to go. I am fully alive to the effect on our own and world commerce of the many arbitrary restrictions now in existence. The Departments of State and Commerce are actively engaged in protecting our export trade from unfair discriminations and infractions. If at any time circumstances are such as to permit the hope that such barriers to international trade and commerce may be removed through the medium of an international conference without sacrificing American interests or departing from the historic policies followed by our country. I shall not hesitate to take the lead in calling such a conference. If this measure is intended to do more than this, then the new policy should be clearly indicated for clarity to the American people and for the guidance and judgment of the Executive. An established National policy should not be changed by implication. Tariff Concessions. My fourth objection to the bill lies in the further request that I should "negotiate with foreign governments reciprocal trade agreements under a policy of mutual tariff concessions." This proposal is in direct conflict with the other proposals "to eliminate discriminstory tariffs: prevent economic wars, and promote fair, equal and friendly trade," all of which latter are desirable. A firmly established principle of the American tariff policy is the uniform and equal treatment of all nations without preferences, concessions or discriminations (with the sole exception of certain concessions to Cuba). No reform is required in the United States in this matter, but we should have at once abandoned this principle when we enter upon reciprocal concessions with any other nation. That is at once unequal treatment to all other governments not parties thereto. That is the very breeding ground for trade wars. This type of preferential tariff agreement which exists abroad to-day is one of the primary causes of trade wars between other countries at the present moment. It has been the policy of our Government for many years to advance "most favored nation" treaties with view to extinguishing these very processes, preferences and trade frictions and to secure equal treatment to us by the other nations in all their tariff and economic arrangements. We have such treaties or executive agreements with 31 nations. If we adopted this complete reversal of policies and now negotiated reciprocal tariff agreements we should either under our "most favored nation" obligations need extend these rights to all nations having such treaties with us, or to denounce such treaties. il,The struggle for special privileges by reciprocal agreements abroad has produced not only trade wars but has become the basis, of political concessions and alliances which lead to international entanglements of the first order. These very processes are adding instability to the world to-day. and I am unwilling to enter upon any course which would result In the United States being involved in such complexities and such entanglements. Effect on Agricultural Tariffs. Of high importance to us also in consideration of these matters is that the principal interest of a majority of the 60 or 70 other nations which might be approached for mutual tariff concessions would be to reduce the American agricultural tariffs. No concessions otherwise than those related to agricultural products would be of any importance to those particular nations. The effect of such a shift in the basis of our agricultural tariffs would be to make us large importers of food products, to demoralize our agricultural industry and render us more and more dependent upon foreign countries for food supply: to drive our farmers into the towns and factories, and thus demoralize our whole National economic and social stability. Moreover the futility of the Executive negotiating such treaties as reciprocal tariffs has been often demonstrated in our past. Before we definitely adopted the policy of equal treatment to all nations the Congress had from time to time authorized such treaties. Out of some 22 such treaties providing for reciprocal tariff concessions, the Congress either refused to confirm or failed to act in 16, and two of the remaining six failed of confirmation by other governments. On another occasion the Congress conferred upon the Executive a limited authority to conclude reciprocal or preferential tariffs without confirmation. Twenty two such agreements were entered upon, all of which were repealed in subsequent tariff acts. The experience would not seem to be encouraging for this type of action. There are other objections which might well be taken to this bill. It is enough, however, that this bill would destroy the effectiveness of the flexible tariff. which, for the first time, gives protection against excessive or inadequate tariffs, prevents a system of frozen tariffs upon the country irrespective of economic change and gives relief from log rolling and politics In tariff making. It would surrender our own control of an important part of our domestic affairs to the Influence of other nations or alternatively would lead us into futilities in international negotiations. It would start our country upon the road of a system of preferential tariffs between nations with all the trade war, international entanglements, .kc., which our country has sought to avoid by extending equal treatment to all of them. HERBERT HOOVER. The White House, May 111932. Power of President on Tariff Sustained by Court of Customs and Patent Appeals — Authority to Change Rate of Duty Upheld. The power of the President, under the so-called flexible provisions of the Tariff Act of 1922, to make a change in classification, as well as in a rate of duty, so long as the rates are not increased nor decreased more than 50% was upheld in a decision handed down May 2 by the Court of Customs and Patent Appeals. The "United States Daily" of May 3, from which we quote, also reported: 3756 Financial Chronicle The function of changing the classification was declared in the opinion, written by Judge Hatfield, to be a necessary corollary of the power to change the rates. "A large majority of the dutiable paragraphs of the 1922 Tariff Act contained one or more provisions, each of which covered many articles at the same rate or rates of duty," it is noted. "Accordingly, if the Presi dent lacked authority to describe the particular article or articles on which the rates or rates were to be increased or decreased, the increased or de creased rates, as to each of these paragraphs, would have applied to all, or to none, of the articles covered by a provision fixing a rate or rates of duty. "Obviously, it was not the purpose of the Congress to require the Presi dent to change the classification, or increase or decrease the rates of duty, on all articles, covered by a tariff provision, bearing the same rate or rates of duty, in order that the differences in cost of production of one or more of such articles might be equalized." The Court also sustained the power of the President to change the minimum ad valorem rate prescribed by a provision of the Tariff Act. "We are of the opinion that the Congress did not intend to except so called minimum ad valorem rates of duty from the operation of the provisions in question." In other cases it was held by the Court that it has the power to consider the legality of the President's order and proclamation changing a classification or rate of duty, and also to review the findings of the Tariff Commission upon which the President bases his action, but only for the purpose of determining whether a legal investigation has been made. National Credit Corporation Payment to Subscribing to Make Fifth Partial Banks on May 23. Announcement that a 10% payment will be made to subscribing banks on May 23 by the National Credit Corporation was made by the latter yesterday (May 13). This will be the fifth partial redemption, and will make a total of 55% returned to the subscribing banks. The last payment was noted in our issue of April 23, page 3034. The New York "Sun" of last night(May 13) said: The payment May 23 will make a total of $74.250.000 repaid to date and leaves outstanding less than half of the paid in capital. In reality the refunds have been larger, for the corporation at one time had $189,000,00 0 in loans outstanding, financing the difference between that figure and its paid to capital, $135,000.000 by bank loans which have also been repaid The continued refunds of capital by the National Credit Corporation to banks which participated in its formation is a measure of improvemen t in the nation's banking position, for many of the advances have been repaid by borrowers out of their own resources. The repayments also reflect the gradual taking over of the buiness of advancing money to banks by the Reconstruction Finance Corporation, which charges one-half of 1% less on its loans than does the National Credit Corporation. The National Credit Corporation, which has assisted more than 1,200 banks, at its organization had subscribed gold note capital of $450.000,000. Of this $135,000,000 was paid in through three calls of $45,000.000 each. Mortimer N. Buckner, bead of the Clearing House and chairman of the the New York Trust Co.. Is President. Boston Clearing House Association Reduces Interest Rate on Deposits. Members of the Boston Clearing House Association will reduce by 34 of 1% the interest rates on demand balances, effective May 16, and on time deposits or certificates of deposit not later than June 15, Thomas P. Beal, President of the Association, announced on May 14, according to the Boston "Evening Transcript" of May 14, which likewise said: The new rates will be 11 of 1% on demand deposit to banks and trust companies and to trust or agency accounts, and 1% to mutual savings banks, co-operative banks, building and loan associations and credit unions. On certificates of deposit or time deposits, the new rate will be 1%. The above rates are in line with the changes made by the New York Clearing House Association noted in our issue of May 14, page 3567. Gov. Signs Michigan's New Bank Depository Act. On May 12 Governor Wilber M. Brucker signed the Hull act which permits the posting of real estate mortgages and Federal Land Bank bonds in lieu of surety bonds as safeguards for public funds deposited with banks and trust companies. Advices from Lansing (Mich.), May 13, to the Chicago "Journal of Commerce" said: Brucker The measures, introduced at the recent special session by Representative Hull, Detroit, and passed in the closing hours before adjournment amended In 1931 Turner laws which permitted the deposit of certain classes of securities, such as municipal bonds, in place of depository bonds which the banks even a year ago were finding hard to obtain. The increased financial stringency since that time moved Governor Brucker to recommend further liberalization of the laws so as to release for more constructive uses by the banks the securities required under the old laws. State Sinking Fund to Guarantee Bank Deposits to Be Considered by Special Michigan Commission. The following from Lansing, Mich., May 9, is from the Chicago "Journal of Commerce": Swims consideration of proposals for establishment of a State sinking fund to guarantee bank deposits is to be given by a special commission just created at the extra session of the Michigan legislature. Commissioner Charles D. IAvingston, of the Insurance Department, is to serve on the Commission. Others delegated to the task of obtaining Information on this subject for report to the 1933 Legislature are the State Banking Commissioner, the State Treasurer, and the Attorney General. May 21 1932 Several measures, bills and Joint resolutions, providing for some form of State guarantee to restore confidence in banks were before the special session but none was approved. W. J. Barnett Appointed Bank Commissioner of Oklahoma, Succeeding C. G. Shull, Resigned. W. J. Barnett, special investigator in the income tax department of the Oklahoma State Tax Commission, has been appointed by Governor Murray as State Bank Commissioner to take the place made vacant by resignation of C. G. Shull, who has held the position for the last six years. Owen D. Young Makes Known His Determination Not to Accept Nomination as President. A statement by Owen D. Young in which he says "definitely and finally" that he cannot "accept a nomination for the Presidency if made," was contained on May 16 in a letter to John Crowley, publisher of "The Little Falls Times," friend of Mr. Young. Mr. Crowley's paper is the "home town" paper of Van Hornesville, (N. Y.), Mr. Young's boyhood home. On April 28 Mr. Crowley, in his newspaper, made a plea for the nomination of Mr. Young by the Democratic National Convention. The text of Mr. Young's letter in reply follows: My Dear John Crowley: Because you are my personal friend and because your paper circulates In my home community, your suggestion of my nomination for President by the Democratic party has raised again many queries regarding my attitude on that subject. I had hoped that my earliest statement had disposed of the matter. While, on the one hand, I do not wish to put myself in the position of declining a nomination for the greatest office in the land, which no one is in a position to tender, yet, on the other hand. I must not, by my silence, permit you and other good friends like you to put yourselves in the emharassing position of making a wasteful and fruitless effort. Indeed, to do so would put me under some obligations to the very people whose respect and good will I value most highly. So, may I say definitely and finally that I cannot, for reasons which are so controlliing as not to be open to argument, accept a nomination for the Presidency, if made. With assurance of my gratitude for the high compliment you have paid me, believe me to be. Sincerely yours. OWEN D. YOUNG. From the New York "Times" of May 17 we take the following: Friends of Owen D. Young, according to the Associated Press, voiced the belief yesterday that consideration for his wife, who Is Ill with a heart ailment, was responsible for his refusal to enter the contest for the Democratic Presidential nomination. Mrs. Young, it was said, had never been well since the death several years ago of their son, John, who was killed while rescuing a dog from an approaching railroad train. He saved the dog, but lost his own life. Recently her condition has become more precarious. It was said, too, that Mr. Young's mother, who died recently, was strongly opposed to his ever becoming a candidate for public office. Mr. Young, it was pointed out, has never been a candidate for the Democratic Presidential nomination. To his surprise, however, and to the surprise of some of his friends, a movement in his behalf started and continued to grow. Thaw Frozen Confidence, President Hoover Urges. President Hoover amplified the effects of the new compromise $1,500,000,000 relief program as formulated yesterday at White House conferences in a formal statement issued May 13, said the New York "Journal of Commerce" as follows: Our job in the Government is unity of action to do our part in an unceasing campaign to re-establish public confidence. That is fundamental to recovery. The imperative and immediate step is to balance the budget and I am sure the Government will stay at this job until it is When our people recover from frozen confidence, then accomplished. our credit machinery will begin to function once more on a normal basis and there will be no need to exercise the emergency powers already vested in any of our governmental agencies or the further extensions we are proposing for the Reconstruction Corporation. If by unity of action these extensions of powers are kept within the limits I have proposed they do not affect the budget. They stitute a drain on the taxpayer. They constitute temporary do not conmobilization of timid capital for positive and definite purpose of speeding the recovery of business, agriculture and employment. I have, however, no taste for any such emergency powers in the Government. But we are fighting the economic consequence s of overliquidation and unjustified fear as to the future of the United States. The battle to set our economic machine in motion in this emergency takes new forms and requires new tactics from time to time. We used such emergency powers to win the war: we can use them to fight depression, the misery and suffering from which are equally great. George Washington Officially Accepted by State Department As First President of United States— John Hanson and Thomas McKean Ruled Out. The question as to who was the first President of the United States of America, George Washington, John Hanson or Thomas McKean, has been answered by the State Department in favor of George Washington. A dispatch from Volume 134 Financial Chronicle Washington May 9 to the New York "Times", from which we quote, further said: Various writings to the effect that Hanson, and sometimes McKean, was the first President have resulted in many inquiries from interested citizens, with the result that the Department has declared that, while Hanson was President of the United States in Congress assembled, "in the most strict legal sense" and "actually and really" Washington was "the first President of the United States of America." To clear up doubts the Department made public to day a letter from Hunter Miller, its historical adviser, to an unnamed inquirer, declaring: "George Washington was the first President of the United States of America. The office of President of the United States of America was created by express words of the Constitution, which says (Article II, Section 1): 'The executive power shall be vested in a President of the United States of America'." Mr. Miller than explained that prior to the Articles of Confederation, which went into force on March 1 1781, upon the completion of their ratification by the 13 States, the Continental Congress chose from time to time presiding officers, or "Presidents." Of these,seven were chosen prior to March 1 1781. with Thomas McKean elected that year. Under the Articles of Confederation Congress met on Nov. 5 1781, and "proceeded to the election of a President." John Hanson was ap pointed to preside and held the "office of President" of "the United States in Congress assembled." He had six successors up to 1788. "His office," Mr. Miller explains, "was that of President of the United States in Congress assembled, and was not the office of President of the United States of America." Railroad Credit Corporation Able to Meet Interest Obligations to July 1, According to President Buckland—But Receipts are Falling—Estimates Surcharge for This Year at $60,000,000 and Needs at $100,000,000. Means have been taken to meet interest charges on aul railroad obligations due until July 1, E. G. Buckland, President of the Railroad Credit Corporation, said on May 19 after the monthly meeting of the organization. Mr. Buckland, who is Chairman of the New York, New Haven & Hartford RR., added, however, that the Corporation's receipts were falling below and its expenditures were running above the original expectations. From the New York "Times" of May 20 we also quote: Mr. Buckland said that when the Corporation was formed it was estimated that its receipts would be upward of $100,000,000 and its disbursements to meet interest due by railroads this year would be about $60,000,000. Now it appeared that about $100,000,000 would be required by the railroads to meet interest charges, while the Corporation's revenue would be between $55,000,000 and $60.000,000. Loan Application Certified. The Railroad Credit Corporation was formed to advance funds for Interest payments by solvent railroads from a pool accumulated through operation of the freight surcharges that became effective Jan. 4. It cannot extend aid for other purposes to railroads, but unlike the Reconstruction Finance Corporation, It does not require the same high standards of collateral set by the Government body. In order to make disbursements in advance of the receipt of proceeds from the rate pool, the Railroad Credit Corporation has been certifying loan applications for interest payments made by railroads to the Reconstruction Finance Corporation. "I see no difficulties to July 1, there being no serious interest obligations tcomeet in the intervening time." said Mr. Buckland. "We are taking care of everything coming along. "We do not expect to receive more than $55.000,000 to $60,000,000 in revenues this year, although, of course, it Is hard to predict exactly. On the other hand, requests for aid in meeting interest obligations vrill be about $100,000,000. This is practically the reverse of original expectations. We had expected to receive about $100,000.000 and expend about $60,000,000. Aid from Federal Body. "The Reconstruction Finance Corporation has been extending aid in meeting interest charges and we expect to continue working with that body. So far, we have been able to cover interest obligations of the railroads. the Railroad Credit Corporation assuming loans for which collateral suitable to the Reconstruction Finance Corporation was not available. "We as yet see no definite change in conditions." The next meeting of the Railroad Credit Corporation will be on June 6. Emergency Credits Advanced by Reconstruction Finance Corporation Since March 31—Aid to Industry and Finance by Other Government Agencies. According to the "United States Daily" of May 10 more than $706,000,000 in cash or credit has been made available as aid to industry, finance and agriculture by various branches of the Federal Government thus far in 1932, according to statistics furnished at the Treasury Department May 9. The "Daily" reports: Cash advances on loans by the Reconstruction Finance Corporation, increases in Federal Reserve member bank balances due to Reserve Bank open market operations, capital stock subscriptions to Federal Land banks and advances out of the Federal Farm Board funds are all aids which the Government has given the country, it was pointed out orally. Additional information furnished follows: Much more than $706,000,000 probably has been guaranteed to businesses and farmers seeking help because the cash advances of the Reconstruction Finance Corporation, which make up about 56% of the total sum, are far exceeded by the actual commitments of the Corporation. On March 31, the last date for which commitments were made public, they were 40% larger than the actual cash advanced. Most of the credit and cash advances arranged by the Government have taken place during the last five weeks. In that period open-market opera tions of the Federal Reserve banks have been accompanied by increases 3757 In member bank balances amounting to $203,000,000. This money, Reserve Bank officials point out, must be loaned to business or invested if it Is to earn interest for the banks. The last five weeks has seen also cash advances by the Reconstruction Finance Corporation aggregating $236,370,000. Approximately g11.000,000 has been allocated to Federal Land banks through capital stock subscriptions during these five weeks, making the total advances by the Government since April 1 $247,000,000. The $400,000.000 in cash advanced by the Reconstruction Finance Corporation includes money given to farmers through the Department of Agriculture. To this may be added $28.800,000 paid out by the Farm Board thus far in 1932 and a total of $74,240,000 in capital stock subscriptions taken out of the Treasury by the Federal Land banks. From the New York "Times" we quote the following from Washington May 7: Combined activities of the Federal Reserve banks and the Reconstruction Finance Corporation since early in February have placed at the disposal of banks,railroads and others approximately a billion dollars in the powerful drive to check deflation and depression. Operating on the open-market policy of rapid purchase of Government securities, the Federal Reserve banks in the past four weeks have put $402,000,000 on the market, and since early in February more than $500.000,000 in United States obligations have been acquired chiefly from the member banks. At the same time the Reconstruction Finance Corporation has authorized about $500,000,000 in loans, of which approximately $400,000,000 has been paid out of the Treasury. Purchase of Government securities by the Reserve banks has been centred mainly in the New York, Chicago, Cleveland, Philadelphia and Boston districts with a consequent increase in the member bank reserve balances. In the last 30 days the New York bank has bought $233,077,000 in Government securities, the Chicago bank, $48,448,000: Cleveland, $28,100,000: Philadelphia, $22,157,000, and Boston, $10,000,000. The largest increase In Reserve balances of the member banks was $53,000,000 in the Chicago district and $39,000,000 in the New York district. Results of Drive Apparent. The activities of the Reserve banks and the Reconstruction Finance Corporation have shown results in the marked decline in bank failures in the past two months,in the increase in the member bank reserve balances and their smaller indebtedness to the Reserve banks. There is, however, no apparent effect in general business recovery, a matter of considerable disappointment to Administration leaders who had hoped for quicker results in that direction, although officials said recovery necessarily must be slow in view of the low level to which business had sunk. They thought that, within a few months, real benefit might be found through the Reconstruction Finance Corporation's activities. The Reconstruction Finance Corporation has been expediting action on loans and increasing the rate at which loans are being made. In the first five days of May, its loans amounted to $52,461,000, at which rate it appeared that $250,000,000 would be loaned out in the entire month. In April loans paid out of the Treasury amounted to $177,867,000, and in March to $96,458,000. Has $350,000,000 in Cash Left. The Corporation has about $3350,000,000 in cash left in the Treasury, out of the $500,000,000 stock subscription by the Secretary of the Treasury and $250,000,000 in notes also bought by the Treasury. Officials thought that the peak of the Corporation's activity would be reached in July or August. The Corporation can issue and additional $1,250,000.000 in securities under its charter. Whether the maximum amount would be outstanding at any one time appeared doubtful, as additional cash for making loans will result from repayment of advances. The quarterly report to Congress (to March 31) of the Reconstruction Finance Corporation was referred to in our issue of April 9, page 2646. Ohio Legislature Passes Bill to Permit Receivers of Closed Banks to Borrow from Reconstruction Finance Corporation. Associated Press adviees May 17 from Columbus, Ohio, said: The Ohio Legislature, in its second special session, enacted emergency measures to-day permitting financially distressed banks to borrow from the Federal Reconstruction Finance Corporation, providing $750,000 to repair the explosion-damaged State Office Building, and making more workable the unemployment relief laws passed by the first special session. The measures were called for by Governor George White and were enacted in seven and one-half hours. They will become effective when the Governor signs them, probably to-morrow. The amendment to the State banking laws empowers the State Superintendent of Banks, or others in charge of liquidation of closed banks, to borrow from the $200,000.000 corporation fund or from any other 1301/XCe for the purpose of paying dividends to depositors or re-opening the banks. The bills were signed by the Governor on May 17. Special Session of Ohio Legislature to Be Held May 16 —Legislation Sought to Authorize Bank Superintendent to Secure Funds from Reconstruction Finance Corporation in Interest of Depositors of Closed Banks. Governor White of Ohio, according to the "Ohio State Journal" of May 5, issued a call on May 4 for a special session of the Legislature to meet May 16 to authorize the State Superintendent of Banks to borrow money from the Reconstruction Finance Corporation so as to expedite the liquidation of closed banks and permit the reopening of those in a condition warranting resumption of business. The "State Journal" added: The Governor's call limits the special session to enactment of amendments to the banking laws for that purpose, but he has the power to augment the prescribed business later by a supplementary proclomation or a message to the Legislature. 3758 Financial Chronicle White Tells Aim. The proposed legislation, Governor White said, will accomplish these purposes: "Enable the Superintendent of Banks to borrow cash with which to declare dividends for depositors and other creditors without sacrificing the value of assets of closed banks by liquidating them at present low appraisals. "Expedite the reopening of closed banks which are in condition to warrant reSumption of business. "Assure for Ohio Its proper share of the S2,000,000.000 of Reconstruction Finance Corporation funds available for relief of closed banks and thus enable depositors to pay their debts, make purchases and engage in other transactions which should be of great benefit to agriculture, Industry and commerce." Need Is Explained. Need of the second special session within six weeks of the last special session which enacted unemployment relief measures, the Governor said, "arises from action taken by the Reconstruction Finance Corporation on April 19 . . . that loan applications from receivers and liquidating agents of closed banks would be received only from States with laws authorizing receivers and liquidating agents to borrow money and pledge assets as security." Ohio has no such law. In his proclamation, the Governor said the "difficulty of opening such (closed) banks has deprived the citizens of the State of necessary credit facilities and has impeded the progress of agriculture, commerce and Industry and the recovery of normal business conditions." Meet 1:80 p. m., May 16. The proclamation fixes the session for 1:30 p. m., May 16, and the belief was expressed at the Governor's office that the matter can be disposed of in a single day. It is presumed the necessary bill will be drawn by the Governor's advisers to be committed to some member of the Legislature for introduction. The specific business of the special session is confined, by the Governor, to a single purpose as follows: "To amend the banking laws of Ohio to give power to the Superintendent of Banks to borrow money and pledge assets of such closed banks for the purposes of facilitating liquidation, expediting the making of distributions to depositors and other creditors, providing for the expenses of administration and liquidation and aiding in the reopening or reorganization of such closed banks or the marger or consolidation of such closed banks or the sale of all assets of such closed banks." Salaries Are Target. Renewed efforts are expected to be made by a strong faction in the Legislature to obtain reduction in salaries of elective State and county officials. This cannot be accomplished, however, except by an expansion, by the Governor, of his call of the special session. At the time of the special session six weeks ago, the Governor indicated he might call a special session before fall to reduce salaries. Receivers of Maine Trust Companies Authorized to Negotiate Loans from Reconstruction Finance Corporation. Receivers of Maine trust companies may be authorized by the justices of the Supreme Court who appoint them, to negotiate loans from the Reconstruction Finance Corporation, in the opinion of Deputy-Attorney-General Sanford L. Fogg. Mr. Fogg's opinion, addressed to the Bank Commissioner, Sanger N. Annis, was given as follows in the "United States Daily" of May 17: I do not find any provision of our statutes relative to the power of a receiver of a trust company to borrow money. and I do not know of any decision of our court of last resort concerning such power. Under our statutes the receiver of a trust company is appointed by one of the justices of the Supreme Judicial Court or of the Superior Court on application of the Bank Commissioner. Such receiver, when qualified, takes possession of the property and effects of the company, "subject to such rules and orders as are from time to time prescribed by the Supreme Judicial Court or Superior Court, or by any justice thereon in vacation." Our general law relative to the "authority of receivers of corporations" provides that: "Such receiver shall have power to institute or defend suits at law or in equity. in his own name as receiver, to demand, collect and receive all property and assets of said corporation, to sell, transfer or otherwise convert the same into cash, and to conduct and carry on the business of said corporation as ordered by the court, if it appears for the best interests of all concerned." In the instant case the Chief Justice of our Supreme Judicial Court appointed the receiver and is directing the receivership proceedings, and I,have no doubt as to his power to authorize the receiver to borrow money necessary to conserve the best interests of the company and its depositors, and to pledge the assets in his possession for that purpose. Advance Reconstruction by Finance Corporation Approved for Nebraska Bank Under Court Order. The following from Lincoln, Neb., May 16, is from the "United States Daily": The application of E. H. Luikart, Secretary of the Department of Trade and Commerce, acting in the capacity of receiver of the Nebraska State Bank, Bloomfield, for authority to pledge assets of the bank for a loan from the Reconstruction Finance Corporation, has been granted by District Judge Charles H. Stewart at a hearing at Center, Neb., the amount of the loan to be applied for being fixed at $50,000. F. C. Randke appeared as attorney for the receiver and W. A. Meserve of Creighton as attorney for stockholders and all creditors of the bank with objections to the granting of the order. The objectors alleged that there is no statute authorizing a receiver of a failed State bank to pledge assets for a loan, that the depositors of the failed bank have a first lien upon all the assets and that the receiver as a trustee has no right to interfere with this lien or to mortgage the assets to the Reconstruction Finance Corporation and if any loans were made by the Finance Corporation that Corporation would have power to liquidate the collateral pledged and would have power to fix and determine the manner of liquidation, and that thereby the receiver and the Court would surrender to that Corporation the power and duty of liquidation which it possesses under the law and which it does not have the powet to delegate. The Court found that a loan of $50,000 from the Finance Corporation would be to the best interests of the bank and its stockholders and depositors, that an emergency exists on account of drouth conditions which have impaired the general credit of the community. Attorney for the May 21 1932 receiver informed the Court that the bank's assets are listed at $231,000, of which it was estimated 40%, or $92,000, could be liquidated but that it would take from one year to 18 months to do so. The objectors gave notice of an appeal to the Supreme Court for a final judgment, which judgment is required by the Reconstruction Finance Corporation as a condition precedent to making the loan. Additional Loans of $58,966,376 to Railroads from Reconstruction Finance Corporation Approved by Inter-State Commerce Commission—Loans Aggregating $1,340,000 to Four Roads Denied—Further Applications Totaling $14,207,271 Filed. Loans aggregating $58,966,376 to ten additional railroads from the Reconstruction Finance Corporation have been approved by the Inter-State Commerce Commission bringing the total approved to date to approximately $166,000,000 to 36 roads. The largest loans now approved are $27,500,000 to the Pennsylvania RR. (see details elsewhere in this issue) and $25,500,000 to the Baltimore & Ohio RR. The Pennsylvania RR. on March 10 requested a loan of $55,000,000, but on May 12 it filed an amended application with the Commission asking approval of a loan of $27,500,000. This it did at the request of the Reconstruction Finance Corporation. It agreed that if the Finance Corporation definitely committed itself at this time to make the loan by Oct. 1, it would obtain the remaining $27,500,000 through banking and investment channels and furnish an additional 813,176,000 needed to provide for the expenditures contemplated in 1932 in connection with the electrification of its New York to Washington lines, estimated to cost $68,176,000. As in the case of the Pennsylvania the Commission's approval of the Baltimore & Ohio's request followed the filing of an amended application making a reduction in the original amount asked for $55,000,000 to $32,500.000. The Commission on March 30 approved a loan of $7,000,000 to the Baltimore & Ohio, thus making the total approved to date, $32,500,000. The Commission has disapproved loans from the Reconstruction Finance Corporation aggregating 81,340,000 to four additional roads; making the total loans disapproved to date $1,415,000. Applications have been filed by tell additional roads for authority to borrow approximately $14,207,271 from the Reconstruction Finance Corporation. This brings the total amount sought by the railroads to about $347,500,000, taking into consideration the amended application of the Pennsylvania RR. for a loan of $27,500,000 instead of the $55,000,000 loan originally requested and the amended application of the Baltimore & Ohio RR. reducing its original request for $55,000,000 to $32,500,000. The additional loans approved by the Commission are as follows: Name of Company— Baltimore & Ohio RR Birmingham Southeastern RR Chicago & Eastern Illinois Ry Fredericksburg & Northern Ry Georgia & Florida RR Maryland & Pennsylvania RR Meridian & Bigbee River Ry Minneapolis & St. Louis RR Pennsylvania RR Texas Southeastern RR Wabash Ry White River RR.,Inc Wrightsville & Tennille Amount Granted. 425,500.000 41,300 c595.500 15,000 271,222 100,000 600,000 2,698,630 27,500,000 30,000 d1,576,200 16,000 22,525 Amount Term. Applied for. 3 years W2,500,000 3 years 50,000 3 years d1,483,01 3 years 15.I I I 3 years 1,000,I I I 3 years 150,000 3 years 1,250.000 3 years 3,898,629 3 years .27,500,000 3 years 30,000 3 years 18,500,000 3 years 25,000 3 years 22,525 a Additional loan of $7,000,000 approved March 30. b The company originally sought $55,000,000 but as a result of amended application flied May 5 this amount has been reduced to $32,500.000. c Additional loans of$3,629,500 and $82,080 were approved Feb.27 and March 15 respectively. d Additional loan of 37,173,800 approved last February. e Original application filed March 10 sought loan of 155,000,000 but request amended May 12 for loan of $27,500,000. The Inter-State Commerce Commission has disapproved loans to the following five railroads from the Reconstruction Finance Corporation aggregating $1,415,000: Apalachicola Northern Elk Cairo Truman & Northern RR Jefferson & Northwestern 1:y Uvalde & Northern Ry Wichita Falls & Southern RE $200, *75,111 40, 300, 800,000 *Company has made a second application for approval of loan of $75,000. In all cases the Commission in disapproving the loans concludes (substantially) as follows: We conclude that the prospective earning power of the applicant and the security offered as pledge for the proposed loan are not such as to afford reasonable assurance of its ability to repay the loan within the time specified. The security offered and the purposes specified for the loans approved are as follows: Baltimore 8e Ohio BR. A further loan of $25,600,000 for a term of three years with interest at 6%, to be made available on the due dates of existing obligations and for the purposes stated below: To pay secured 4% short-term notes, due May 25 1932 $8,000,000 To pay one-half of the principal amount, $35,000,000, of unsecured 4% short-term notes, due Aug. 10 1932 17,500.000 Volume 134 Financial Chronicle The application sets forth that the applicant has been in negotiation with certain of the holders of the $35,000,000 of unsecured notes due Aug. 10 1932,and is encouraged to believe that upon payment of50% of the principal amount of each of said notes the balance, or $17,500,000, can be extended for a period of two years from Aug. 10 1932, at 6%. said extended notes to be secured by the pledge of $17,500,000 of the applicant's refunding and general mortgage 6% bonds and such other security now available, or which will become available upon the payment of the secured notes due May 25 1932, as may be necessary. The applicant further requests that the loan now sought be consolidated with the loan of $7,000,000, previously approved by us,so that the collateral security now pledged for the latter loan may be applied pani passu with additional security to be tendered to secure the loan hereunder consideration thus making the total collateral available to secure total advances of $32,500,000. The $8,000,000 of one-year secured notes maturing May 25 1932, were Issued in large denominations drawn to the applicant's own order and endorsed in blank. They are now held chiefly by bankers and financial institutions which largely participated in the financing of this issue in May 1931. These same interests are also important holders of the $35,000,000 of unsecured notes maturing in August. The active participation of this banking group and the co-operation of the note holders generally have made practicable the refinancing of these important maturities on the basis proposed. As security for the consolidated loans sought, totalling $32,500,000, the applicant offered, in addition to the $15,000,000 refunding and general mortgage6% bonds series B,due 1995,now pledged with the Reconstruction Finance Corporation for the existing loan of $7,000,000, the following described securities: Baltimore & Ohio RR. Co. refunding and general mortgage 6% bonds, series 0, due 1995, principal amount $7,500,000 Baltimore & Ohio RR. Co. refunding and general mortgage 6% bonds,series E5,due 2000 A.D., principal amount 15,000,000 Buffalo Rochester & Pittsburgh Ry. Co.6% pref. stk., par value 5,945,000 Buffalo Rochester & Pittsburgh By. Co. corn,stock, par value.. _ 10,493,200 Reading Company common stock, shares 200,000 * It is proposed to substitute new series E bonds for the bonds of series B now pledged with the Reconstruction Finance Corporation. Upon consideration of the application and after investigation thereof, we conclude: 1. That we should approve a further loan to the applicant of $25,500,000, for a term not exceeding three years, by the Reconstructiol Finance Corporation, to be used for the purposes set forth in this report and to be available to the applicant as follows: $8,000,000 May 25 1932 17,500,000 Aug. 10 1932 $25,500,000 Total 2. That the applicant should pledge as collateral security for the loan herein approved, and the loan of $7.000,000 previously approved by us, the following described securities which shall apply part passu and without preference to both loans: (a)$37,500,000 of Baltimore & Ohio RR.refunding and general mortgage 6% bonds of three series in respective principal amounts, viz.: 315.000,000 of series B, due 1995; $7,500,000 of series C, due 1995, and $15,000,000 of series E, due 2000, the series B and series C bonds to be subject to substitution for series E bonds as and when issued under the same mortgage and required to be so pledged by the Corporation or by us; (b) $5,945,000, par value, of6% preferred capital stock and $10,493,200, par value, of common capital stock of the Buffalo Rochester & Pittsburgh Railway; (c) $3,980,600, par value, of the preferred capital stock of the Buffalo & Susquehanna RR. Corp.; and (d) 400,000 shares of common capital stock of the Reading Company. 3. That the applicant should agree with the Reconstruction Finance Corporation that it will not, while the aforesaid capital stocks of the Buffalo Rochester & Pittsburgh Ry. and the Buffalo & Susquehanna RR. Corp. are pledged, as aforesaid, exercise its voting rights to increase the debt of the issuing companies without our consent and that of the Reconstruction Finance Corporation. 4. That before any advance upon the loan is made the applicant should present to the Reconstruction Finance Corporation evidence, in form satisfactory to that corporation, that $17,500,000, principal amount, of the applicant's unsecured notes now outstanding and maturing Aug. 10 1932, will be refinanced to a maturity date not earlier than the maturity date of the loan herein conditionally approved, without assistance from the Reconstruction Finance Corporation other than the said loan. Birmingham Southeastern RR. The loan to the Birmingham Southeastern RR. by the Reoenstruction Finance Corporationtion in the amount of $41,300 is for a term of not exceeding three years from the making thereof, the proceeds to be used for the following purposes: To pay taxes, $7,000; to meet unpaid payrolls and vouchers, $8,711; to meet loans and bills payable, $10,041; to pay traffic balances due, $7,548; to purchase motor equipment, $10,000. The Birmingham Southeastern RR. shall pledge with the Corporation, as collateral security for such loan, not less than $50,000 of first-mortgage bonds, to be issued by the applicant under a general mortgage upon all of its property, which mortgage should provide for the issue of a limited amount of bonds to be used only for the purpose of collateral security for this, or such other loans as the applicant may obtain from the Reconstruction Finance Corporation. Fredericksburg cfa Northern Railway. The loan of$15,000 for a period not exceeding three Yearsfrom the making thereof shall be secured by pledge with the Reconstruction Finance Corporation of$15,000 of bonds to be issued under a new first mortgage indenture, which shall constitute a first lien upon the entire railroad property of the company,superior to the lien of all the obligations now outstanding. The loan is for the purpose of providing funds to pay: • (a) Overdue bills for interline balances, car service balances, materials, supplies and wages, accrued prior to April 5 1932, as described in the application in an amount not exceeding $7,500; and (b) The applicant's promissory note to the National Bank of Commerce of San Antonio, Texas, due July 1 1932. in an amount not exceeding $7,500. Maryland & Pennsylvania RR. The loan of $100,000 for a term not exceeding three years from the date thereof, shall be secured by pledge with the Reconstruction Finance Corporation of $400,000 its first consolidated mortgage series B 6% bonds, due 1947. The loan shall be applied toward the payment at or after maturity of $202,450 York & Peach Bottom Railway first mortgage 5% bonds,series B, due May 11932, or for reimbursing the applicant's treasury and providing working capital after such payment. Meridian & Bigbee River Ry. The Commission approved a loan of not exceeding $600,000 for a period not exceeding three years from the dates of the respective advances thereon. subject, however, to the following conditions: 3759 1. That before any advance upon the loan is made, the company cause to be paid, retired, and cancelled the entire outstanding issue of $500,000 first mortgage 6% bonds of 1939, and to be issued in lieu thereof, an additional amount of its common stock of a par value equal to the principal amount of such bonds. 2. That before any advance upon the loan is made, the company create a new closed mortgage, in form satisfactory to the Reconstruction Finance Corporation, having a first lien upon all of its existing property, and prop• erty which may be'hereafter acquired by it, securing $600,000 6% bonds having a maturity date not later than the maturity date of the loan, and issue and pledge said bonds with the corporation as collateral security for the loan. 3. That the loan be further secured by the unrestricted indorsement and guaranty, jointly and severally, of the Illinois Central RR. and the Louisville & Nashville RR.,or,in the alternative,of the Western Ry. of Alabama, as to the payment of both principal and interest of the note or notes evidencing the loan. 4. That before any advance upon the loan is made, the company file with the Reconstruction Finance Corporation bond of the contractor. in form acceptable to that corporation, to the full face amount of the loan as a guaranty of his faithful performance and completion of the proposed construction. 5. That the company agree with the Reconstruction Finance Corporation to file with that Corporation and with this Commission monthly reports within ten days after the close of each month,showing the progress made, quantities of material placed, and costs incurred in connection with said construction, which reports shall be certified as to their correctness by the contractor and approved by the engineer in charge of construction. Necessities of the Applicant. The applicant has outstanding $500,000 of first mortgage 6% bonds on which no interest has been paid since their issue in 1929. While that portion of the uncompleted line now in operation has not shown substantial earning power, its prosperity, in any event, depends upon the construction of the remaining portion of the proposed road. The estimated cost of the proposed construction, including the bridge across the Tombigbee River is $921,299.19, or $44,314.53 per mile of road, without rail. The rail is to be leased from the LllLnois Central. It is apparent that the most pressing necessity of the applicant at this time is the construction of the remaining portion of the line in order to develop fully the applicant's earning capacity. To complete this construction the applicant requests a loan of $750,000, the remaining funds to be obtained by the contractor, who will receive applicant's common stock in payment. The time required to complete the work Is estimated to be not more than nine months after it is begun. The unit prices used in making the above estimate are based upon 1927 prices which are 30% or more in excess of present day costs, the present all-commodities index being 63% of 1926 price levels. In consequence of this change in level of prices, we estimate that the actual cost of the proposed construction will not exceed $750,000. .Should the contractor supply funds in the same proportion as proposed in the original contract, a loan of not exceeding $600,000 will be required. Chicago & Eastern Illinois Ry. Under dates of Feb. 27 and March 15 1932 we approved loans to the applicant of $3,629,500 and $82,080, respectively, and deferred action with respect to the remaining items of the application. The loans referred to were secured by the pledge of $5,262,500 of the applicant's prior-lien mortgage 6% bonds, series A, and $3,590,200 of its prior-lien mortgage 5%% bonds, series B, both issues maturing in 1961. An additional loan of $1,483,015 is requested by the applicant on or before May 1 1932, for the following purposes: Six months' interest on general mortgage bonds of Chicago & Eastern Illinois E3' $883,965 Six months' interest on first mortgage gold bonds of Evansville Belt Ry 3,550 Illinois taxes for year 1931,first installment (estimated) 390,500 Indiana taxes for year 1931, first installment (estimated) 205,000 Total $1,433.015 The loans approved by us under dates of Feb. 27 and March 15 1932 included three items of interest in the amount of $158,580. As stated in our original and first supplemental reports, items of interest represent purposes for which loans may be made by the Railroad Credit Corporation, under its "Marshalling and Distributing Plan. 1931." created to carry out the purposes of our decision in Fifteen Per Cent Case, 1931, 178 I.C.C. 539, 179 I.C.C. 215. Due to the apparent urgency and the further fact that the item of taxes due in Illinois and Indiana are taxes susceptible of separate consideration from other items in the application, we are of the opinion that we should act upon this request immediately. Upon consideration of the application and after investigation there°, we conclude: That we should approve a further loan of $595,500 to the applicant by the Reconstruction Finance Corporation for a period not exceeding three years, to be secured by the further pledge with said Corporation, as collateral security therefor, applicant's prior-lien mortgage bonds of 1961 in the aggregate principal amount of $88,852,700 now pledged as security for the loans of $3,711,580 as aforesaid; Minneapolis do St. Louis RR. Earnest efforts by the applicant to procure from various banks the funds necessary for the purposes hereinafter stated have met with no success. It is our view that the applicant's ability to secure the necessary funds through banking channels or from the general public is committed by Section 5 of the Reconstruction Finance Corporation Act primarily to the Corporation. The applicant requests a loan of $3,898,629.50 for the full term of three years, with the privilege of anticipating the maturity thereof in whole or in part. The requirements are represented to be as follows: Payment of preferred claims overdue, without accrued interest $1.748,629.50 Receiver a certificates. One due May 23 1932 ' $50,000 Five duo May 25 1932 515,000 One due June 3 1932 50.000 Two due Aug. 5 1932 180,000 One due May 25 1933 385,000 One involved with closing of bank and not replaced_ 15.000 Total 1,200,000.00 Maturity of Merriam Junction-Albert Lea first mortgage bonds, June 1 1932 950,000.00 Total _ $3,898,629.50 At the time of the receivership proceedings, the Special Master appointed by the Court permitted the filing of general claims in total amount of 54.034,570.60. This included claims of the United States in aggregate amount of $3,010,753.16 arising from Federal control settlements. under Section 210 of the Transportation Act, 1920, and under the guaranty under Section 209 of the same Act. Referring to the company's oblige,- Financial Chronicle 3760 tions under Sections 207 and 210 only, the total amount due the United States, with accrued interest in default, to April 1 1932, is in excess of $4,000.000. The courts have denied the priority of the Government's claims. Purposes of the Loan. Preferred Claims.—In support of the application, the applicant filed a list of the preferred claims outstanding as of 1923 for materials, supplies, coal. &c., and the amounts due to other railroad companies and to private car lines. As has been stated, the receiver paid $446,866.72 in May 1930 In discharging a part of the original indebtedness of this class. The items making up the remaining indebtedness, which are very numerous, may be summarized as follows: Balance Orioinal Amt. Due. of Claim. Materials, supplies & miscellaneous accounts__ $884,702.74 $707,762.17 , . Coal accounts Tie accounts_ 343,940.60 275,152.18 440,220.80 Railroad and private car lines 550,275.96 Totals $2,185,786.88 $1,748.629.50 A large part of this indebtedness is payable in the States traversed by the company's lines, but the creditors are generally scattered throughout the country. It follows that the payment of these claims would result In a wide distribution of funds through the channels of industry and commerce. All the claims were due prior to the appointment of the receiver, and the creditors have consequently been deprived of the major part of the money due them for about nine years. The amount of each claim has been determined by a Special Master and confirmed by the Court, Which accorded such claims a lien prior in equity to all the mortgages on the property. Accumulated interest to March 15 1932 exceeds $1,000,000, but the receiver proposes to effect a settlement of all the accounts by payment of the principal only. Litigation is in progress respecting the exact amount to be paid on these claims. Through the loan and a compromise settlement of the claims it is expected that such litigation would be stopped and a reorganization of the company would be expedited. Receiver's Certificates.—Up to the present the receiver has paid the Interest when due on his outstanding certificates and has succeeded in arranging for renewals. During the continued business depression, it has been increasingly difficult to effect renewals, and the receiver has been advised that the holders of certain certificates due in May 1932 will demand payment. A firm in New York City, which has been instrumental in placing certificates in the past, recently informed the receiver that owing to the acute financial conditions such certificates are now unsalable. However, it appears that if funds could be obtained to pay a part of this indebtedness some renewals could be effected. The holders of outstanding certificates are as follows: First National Bank of Minneapolis, Minn., interest 5% 8350,000 Midland Bank of Minneapolis, Minn., interest 5% 50,000 Bank of Appleton, Wis., interest 5% 25,000 Bank of Peoria, Ill., interest 5 % 50,000 Bank of Marshalltown, Iowa, Interest 514% 35,000 Banks at New York, N, Y., interest 6' 675,000 , S%--Total$1,185,000 Bond Maturity.—The maturity on June 1 1932 of $950,000 of the corn pany's first mortgage bonds represents a 5-year extension which was effected on June 1 1927. The mortgage securing the issue is dated Feb. 1 1877. and constitutes a first lien on approximately 110 miles of railroad extending from Minneapolis to Albert Lea, Minn., including the Minneapolis terminals. Since this property is vital to the System, the applicant desired to prevent a separate foreclosure and sale under the mortgage by the payment of the bonds at maturity. During the receivership it has been considered necessary to pay the interest on these bonds when due, both on the ground that this part of the line is indispensable to successfu operation of the remainder and on the ground of the Intrinsic value of the security. The bonds are widely scattered among investors, who expect to receive payment on June 11932. The bankers who handled the underwriting in 1927 state that there is no market for such issues at the present time and that It is impossible to effect a further extension of the bonds. Other Claims.—As has been stated, general claims aggregating $4,034,570.60 and preferred claims aggregating $2,185,786 88 were recognized as outstanding against the company when the property passed into ref ceivership. Excepting the payment of $446,866.72 to the preferred creditors in 1930, none of these claims have been paid, and there has been a large accrual of interest an the claims of the Government. The loan herein approved will dispose of the balance of miscellaneous preferred claims, but will not affect the claims of the United States. Upon consideration of the application and after investigation thereowe conclude: 1. That we should approve a loan of $2,698,630 to the receiver of the Minneapolis & St. Louis RR. by the Reconstruction Finance Corporation for the purpose of providing funds to pay: (a) Preferred claims outstanding, represented by the balance due on $2,185,786.88 of such claims of the railroad company, as set forth in the application, in an amount not exceeding $1,748,629.50; (b) First mortgage bonds of the railroad company, known as the Merriam Junction-Albert Lea bonds, issued under the mortgage dated Feb. 1 1877 due, by extension, June 1 1932, in an amount not exceeding $950,000. is 2. That the term of the loan should be for a period not exceeding three years: 3. That the Corporation will be adequately secured by the pledge of an equal face amount of receiver's certificates duly authorized by the courts of jurisdiction and having equal rank with the certificates now outstanding, or by the acceptance of such receiver's certificates as direct evidence of the receiver's indebtedness to the Corporation; and Georgia & Florida RR. On Feb. 13 1932 W. V. Griffin and H. W. Purvis, as receivers for the Georgia & Florida RR., submitted to us an application, and on March 7 1932 a supplemental application, to the Reconstruction Finance Corporation for a loan under the provisions of Section 5 of the Reconstruction Finance Corporation Act. The loan applied for is in the total amount of $1,000,000 and for the term of three years, comprising installments required on the dates and for the purposes specified below: Item 1— Required immediately to pay interest due March 151932,accrued taxes and audited vouchers, and for advance purchases of $316,500 materials and supplies Item 2— Required June 1 1932 to refund a maturing issue of $600,000 of receivers' certificates and pay the final six months' interest 621,000 re thereon of $21,000 "Item 3— Required Sept. 13 1932 to make payment of principal in the amount. of $50,000 and interest in the amount of $12,500 on 62.500 outstanding equipment trust certificates Total $1,000,000 May 21 1932 As to their present and prospective ability to repay the loan and discharge the obligations in regard thereto, the receivers state that they are expecting an increasing traffic from the Greenwood Extension; that they have strengthened their efforts in solicitation of traffic generally; that they are anticipating improvement in agricultural and business conditions, and expect direct and indirect increases in traffic from projected highway construction. Also, measures have been taken to accomplish savings in future operating expenses through wage reductions, discontinuance of unprofitable passenger and branch line trains, and purchase of fuel and supplies at lower prices. Taxes have been reduced to $80,000 for 1932. Tax accruals amounted to $94,139 for 1930 and $85,151 for 1931 in the receivers' accounts. Current Necessities of the Receivers. Item 1 of the loan applied for provides for the following specific requirements: Accrued taxes, 1928 to 1931 $172,052 Reivers' ec audited vouchers for materials and supplies, settlement of claims, car repairs, Stc Priority corporate audited vouchers, personal injury claims 7' 6 4" settlements Corporate audited vouchers, paving assessments 5 4,09 24 53 March 15 interest on equipment trust certificates 12,500 Advance purchases of materials and supplies for maintenance of property during 1932 In excess of what can he paid for from previous gross income (estimated) 45,279 Total $316,500 Financial Relations of Applicants With the United States. The receivers state that other than mall pay, transportation of troops, or income tax matters, there are no debits or credits now existing between the applicant and the United States, except as follows: 1. Unpaid loan made to applicant under Section 210, Transportation Act, 1920. principal $792,000, with interest at 6% from July 1 1929, secured by $1,100,000 of first mortgage bonds of the Georgia & Florida RR., now in default. 2. Claim of applicant on account of deficits under Section 204, Transportation Act, 1920, as successors in interest of Georgia & Florida RR. and Augusta Southern RR. aggregating $53,802, plus interest. To avoid delay in settlement, such provision should be made that the claims of the applicant under Section 204, Transportation Act, 1920, may not be invoked in any manner to obstruct payment of any loan to the applicant by the Reconstruction Finance Corporation. The receivers represent that they are unable to obtain funds upon reasonable terms through banking channels or from the general public for the purposes for which the loan is sought. It is our view that this question is committed by Section 5 of the Reconstruction Finance Corporation Act primarily to the Corporation. Conclusions. The Georgia & Florida operates, as has been indicated, between a point In South Carolina and a point in Florida. traversing a large section of eastern Georgia. While it has always been a weak line, Its abandonment would no doubt be a very serious matter for many shippers and communities that are dependent upon its service. The evidence before us. however, justifies doubt as to whether this road can survive, unless conditions speedily improve. The management is optimistic and offers reasons for believing that traffic and earnings will improve. It is quite possible, but by no means certain, that these reasons are sound. We believe it is to be essential that the shippers and communities that are dependent upon this railroad should be given to understand that there Is grave danger that they may lose its service, and that if they wish it to continue to operate they must do everything within their power to support it and increase the traffic which moves over it. The Government already has an investment of over $900,000 in this railroad, made up of a loan of $792,000 and unpaid interest thereon, and their seems little prospect at present that this money will be repaid. The evidence before us does not justify the loan of any large additional sum of money. We believe, however, that it does justify a comparatively small loan, secured by receivers' certificates of equal rank with those now outstanding, to cover needs which are immediately pressing. The total of receivers' certificates outstanding after such a loan is made will have a face value of less than $1,000.000, and under such circumstances the loan should be adequately secured, even if it becomes necessary hereafter to discontinue operation. Moreover, such a loan will enable the road to carry on for some time longer in any event, which will afford the management an opportunity to develop the possibilities of traffic increase and reduction in operating expenses which they have brought to our attention. It will also give the shippers and communities that are dependent upon this railroad an opportunity to rally to its support in every way within their power. We find and conclude, therefore: 1. That consideration of the application for a loan for the purpose of paying outstanding equipment obligations with interest thereon, due Sept. 15 1932, should be deferred pending a determination of the actual cash position of the applicants as of the end of August of this year: 2. That the application for a loan for advance purchase of materials and supplies at this time should be denied; 3. That a loan for the purpose of retiring outstanding receivers' certificates and paying interest thereon should be denied; 4. That a loan for the purpose of paying equipment trust Interest due March 15 1932, $12,500. accrued taxes for 1928 through 1931, $172,052, and audited vouchers for materials and supplies and for operating expense, $86,669, in the aggregate amount of $271,221, should be approved: 5. That the receivers, under authority of the court or courts having jurisdiction of the receivership of the Georgia & Florida, should deposit with the Reconstruction Finance Corporation receivers' certificates of indebtedness, in a principal amount equal to the amount of the loan. which will constitute a Ilan of equal rank to that of receivers' certificates presently outstanding; 6. That the receivers appropriately authorized should be required to stipulate not to present their claims under Section 204, Transportation Act, 1920, in any manner, in opposition to prompt payment of the Reconstruction Finance Corporation loan or the interest thereon, when due. Wabash Railway. The original application was for a total loan of 816,500.000 for the purpose of: (a) Retiring bank loans, $9,750,000; (b) paying interest on under lying bonds, interest and principal of equipment trust obligations, and the cost of necessary property improvements, in total amount of $3,000,000; (c) paying preferential claims for materials and supplies outstanding on Dec. 31 1931, $5,000,000; and (d) providing for contingencies, $750,000. After due investigation and consideration of the application, we approved a loan of $7,173,800 to the applicants on Feb. 10 1032. The conditions prescribed in our report and certificate were that the loan approved should be applied exclusively to the payment of $5,000,000 of preference claims, and to the payment of $2,173,800 of equipment trust maturities prior to June 11932. As to all other amounts and purposes of the loan applied for, Volume 134 Financial Chronicle consideration was deferred. In reporting the application of the proceeds of the loan to the payment of preference claims, the applicants advised that the claim of the Canadian National Railways, amounting to $1.164,821 in United States money, was settled through purchase of Canadian exchange at a saving of $125,642. This amount will be applied to the payment of a like amount of preferential claims consisting of freight overcharges and reparations. It wlll be observed that the original application was for a loan of $8,750,000 for purposes other than the discharge of bank loans, and that the loan approved by us was 1,576,200 less than that awn. The receivers request that the additional sum of $1,576,200 be advanced on the dates and for the purposes shown below: On or Before June 1 1932— To meet interest payable June 1 1932 on: Equipment trust of 1924, series D. 57 $29,050.00 Equipment trust of 1924, series E, 5% 34,200.00 Equipment trust of 1925. series F. 4)4% 56,497.50 To meet taxes payable June 30 1932—State of Ohio 83,432.00 On or Before Jule, 1 1932— To meet taxes payable July 1 1932—State of Michigan 226.525.00 Detroit and Chicago extension 5% bonds 50.375.00 Des Moines Division 4% bonds 32,000.00 First lien terminal 4% gold bonds 71.100.00 Debenture B 6% bonds 5.970.00 . Equipment trust of 1923, series u. 514% 25,795.00 To meet principal maturities due July 1932: Equipment trust of 1923, series C 134.000.00 To meet interest payable July 15 1932, on: Equip,trust of 1920 (Director-General's equip. trust)6% 67,986.00 On or Before Aug. 1 1932— To apply toward payment of taxes payable July 31 1932: State of Michigan (total taxes. $26,791) 23,244.50 To meet interest payable Aug. 1 1932, on: Second mortgage 5% bonds 349.825.00 Equipment trust of 1922. 5% 42,450.00 Equipment trust of 1929, series H. 435% 60,750.00 To meet principal maturities due Aug. 1 1932: Equipment trust of 1922 283,000.00 Total $1,576,200.00 F The further loan requested would be secured by the pledge of additional receivers' certificates which would be of equal rank to those pledged as security for the first advance. As in the first instance, the various stocks and bonds pledged to secure the applicants'loan from banks in the aggregate amount of $9,750,000 are not available for pledge. We showed in our previous report that the total of the outstanding liens on the Wabash ahead of the refunding and general mortgage in default was $77.777,600, and that the value found by us as of June 30 1919, plus net additions and bettermanta to Dec. 31 1930, was $198,730,734. The total amount of receivers' certificates issued and to be issued to secure loans already approved, including our approval herein, will be $8,750,000. Upon further consideration of the application and supporting data, and after investigation thereof, we conclude: 1. That we should approve a further loan to the receivers of the Wabash Railway Co. by the Reconstruction Finance Corporation for a term not exceeding three years for the purpose of providing funds to pay interest, maturities and taxes on June 1, July 1, and Aug. 1 1932, as set forth in the supplemental application filed May 12 1932, and in this report, in amount not exceeding $1,576,200: 2. That the Reconstruction Finance Corporation will be adequately secured by the pledge of an equal face amount of receivers' certificates duly authorized by the courts of jurisdiction and having equal rank with the certificates now pledged, for the loan heretofore approved by us or by the acceptance of such receivers' certificates as direct evidence of the receivers' indebtedness to the corporation; and 3. That the receivers should be required to report to the corporation and to us, in writing, within 30 days from the mkaing of the further loan, the expenditure of the proceeds thereof for the purposes,for which it is authorized. White River RR. Inc. The applicant requests a loan of $25,000, to bear interest at a rate to be fixed by the corporation, and to be repaid three years from date, with the privilege of partial repayment on any interest date in amounts of $1,000 or multiples thereof. The loan is requested for the following purposes: (a) To pay existing obligations for wages, traffic and car-service balances, and materials and supplies $8,000 (b) To provide funds to complete betterment projects already started and necessary to continued operation 8,000 (c) To provide for the operating deficit for the year; including an adequate maintenance program and an amount for working capital 9,000 Upon consideration of the application and after investigation thereof, we conclude: 1. That the application for a loan for the purpose of meeting an anticipated operating deficit for the year 1932, in the amount of 39,000, should be deferred until the necessity is more clearly demonstrated by the results of.actual operations. 2. That we should approve a loan to the White River RR., Inc., by the corporation in the amount of $16,000, for a period not exceeding three years from the date thereof, for the purpose of paying existing obligations for wages, traffic and car service balances, and material and supplies, in the amount of $8,000, and the remainder to provide for the completion of betterment projects already started, as hereinbefore stated. 3. That the White River RR., Inc., should pledge with the corporation $16,000, Principal amount, of bonds to be issued under a first mortgage upon the property of said railroad. Wrightsville & rennin's RR. The Commission approved a three-year loan of $22,525 from the Reconstruction Finance Corporation to the Wrightsville & TenniIle RR., out of $39,530 applied for. Of the amount approved $18,609 will be used to pay delinquent taxes, and $3,916 for materials and supplies. The Commission directed the pledging as security for the loan, of $140,000 of refunding and general mortgage 5% bonds, series 0 of the Central of Georgia Ry., of which the applicant is a subsidiary. Texas Southeastern RR. The Commission approved a loan of $30,000 for three years. The loan will be secured by a first mortgage upon the road's physical properties now existing or hereafter acquired. The use of the proceeds is limited to specific items. As stated above total applications to date filed by the roads with the I.-S. C. Commission to borrow from the Reconstruction Finance Corporation aggregate $347,500,000, allowing for the amended applications of the Pennsylvania RR. and the Baltimore & Ohio RR. The following additional roads have filed applications with the Commission to borrow from the Reconstruction Finance Corporation in the amounts shown: Cairo Truman & Southern Ry Chicago Rock Island & Pacific Ry Fort Dodge Des Moines & Southern RR Norfolk & Southern RR Oklahoma & Rich Mountain RR Pere Marquette Ry Sand Springs Ry Stockton Terminal & Eastern RR Texas Oklahoma & Eastern RR Tuckerton (N. J.) RR Williamsport & North Branch Ry 3761 *375,000 10,000,000 200,000 325,000 33,296 3.000,000 269,498 65,000 214,477 50,000 50.000 * The Cairo Truman & Southern's application is the second requesting approval of the loan. The Commission denied the first request (V. 134 P. 3211) principally because company's prospective earnings power and the security offered was "not such as to afford reasonable assurance of its ability to repay the loan within the time specified." Oklahoma & Rich Mountain RR. The road asks for a loan of $33,296 for three years with which to pay a loan owed Dirks Lumber & Coal Co. Advance would be secured by a first mortgage on all its property. Stockton Terminal & Eastern RR. The road asks for a loan of $65,000 for three years. The purpose of the loan is to liquidate its indebtedness. A first mortgage on its property Is offered as security. Texas. Oklahoma & Eastern RR. The road has asked for a loan of $214,477 for three years. Funds will be used to pay money owed the Choctaw Lumber Co. Loan would be secured by a first mortgage on all its property. Chicago. Rock Island de Pacific hi,. The money is requested to enable the road to pay bank loans and to meet interest and equipment trust obligations maturing at various times from May to September 1932. The funds requested cannot be obtained from any other source, according to the application, although the company succeeded in borrowing from various banks on collateral held in its treasury, $8,750,000, notes for which mature on Aug. 1. For payment of one-half of these notes, $4,375,000 is requested. It is not stated whether an agreement actually has been reached with the banks for an extension of the other half of the amount of the notes, although the assumption is that an understanding to that effect has been obtained. The bank loans coming due for payment on Aug. 1, with the value of collateral offered as security, are listed in the application as follows: Pfrdord. Amovnt. Creditor— 34,000.000 $11,218,000 Chase National Bank, New York 2,752,000 1.000,000 New York Trust Co 1,500,000 3,898,000 Continental Illinois Bank & Trust Co.. 2,598.000 1,000,000 Continental Illinois Bank & Trust Co 1,340,000 500,000 First National Bank, Chicago 250.000 720.000 Harris Trust & Savings Bank, Chicago 210,000 720,000 Harris Trust & Savings Bank, Chicago 250,000 755,000 Mississippi Valley Trust Co., St. Louis All loans except that by the First National Bank of Chicago and the Mississippi Valley Trust Co. bear interest at 534%, the former having been offered at 5. The other amounts sought in the application are $4,621,519 to meet fixed interest obligations and $1,003,480 to be applied to maturing principal instalments of equipment trust obligations. Funds to enable the road to meet its fixed interest requirements are requested for use as of the following dates: May 1, 3500,405: June 1, $416.935: July 1, $1,594,504; Aug. 1, $522,175, and Sept. 1, $1,187,500. The company declared that on the basis of present indications it expects to be able to finance its operations during 1932 without the necessity of a further loan, but that, if conditions become less favorable than It has forecasted, an additional application would be filed for meeting fixed charges and other obligations after Sept. 1. The road has applied for but has not received a loan of $4,621,519 from the Railroad Credit Corporation with which to meet its interest obligations between May and September. It says in its application that if the amount requested is forthcoming. the application for a loan from the Finance Corporation would be reduced by that amount. The road further states its intention of applying for an additional loan from the Credit Corporation for meeting fixed charges after September If conditions require. The Rock Island states it already has paid In $154,597 to the Credit Corporation in revenues received during January and February from the increased freight rates that became effective Jan. 4. Amounts expected to be received during the remaining 10 months this year will bring the total for the year to between $1,209,831 and 51.329.831. As security for the loan the company offers to pledge with the Finance Corporation $10,747,473 of first mortgage bonds of its subsidiary lines. The security, the road holds, is worth par, and it is stated in support of the line's contention that the bonds represent a paramount and sme lien on subsidiary property essential to the operation of the Rock Island System. It is further stated that in all instances except one the bonds comprise the entire issue outstanding, and in many cases represent substantially less than the value of the property on which based. A separate compilation included in the application places the value of total owned and leased carrier property of the Rock Island lines at $451,637,755 as of Dec. 31 1927. The value given includes $8,135,690 for working capital represented by cash, materials and supplies. The road estimates that for 1932 it will have a net income deficit of $11,090.294, compared with a corresponding deficit for 1931 of $386,545. Net incomes ranging from $5,780.350 in 1921 to $14.007,320 in 1929 were shown for preceding years. Pere Marquette Rib The company requests a three-year loan of $3,000,000 to meet an equal amount of its collateral trust 4)4% bonds that mature Aug. 1. It offers security 59.386,000 first mortgage 434% gold bonds, series C. Norfolk ck. Southern RR. The proceeds of the $325,000 ioan would be used to pay 1931 taxes and penalties on its properties in North Carolina. Speedy action on the request was urged in order to prevent further penalties. As security for the loan the road offered $511,000 of its first and refunding mortgage 5% bonds due Feb. 1 1961. In support of its ability to repay the loan within three years, the Norfolk & Southern said it had a net income for the past 10 years, after payment of fired charges, of $3,283,048. It further stated that although the loan could not be repaid in event of failure of business to improve, it was confident of eventual revival. "If it is to be assumed," said the application, 'that conditions existing in 1930, 1931 and so far in 1932 are to continue, then it Is apparent that the loan, if made, cannot be paid, but applicant feels that this would be a wholly unwarranted assumption. On the contrary, applicant has every confidence in the future revival of business and of its ability to 3762 Financial Chronicle share in that revival, and based on that premise and experience in the past, hat It is entirely justified In assuming that it will be able to repay this tioan.•! The Tuckerton Railroad Co. The company seeks authority to borrow $50,000 on a three year note The money Is to be used to pay various small short term notes due May 25 and for taxes and materials needed for repair work. Fort Dodge, De4Moines & Southern. Application for a three-year loan of $200,000 was made by C. H. Crooks, receiver. It Is proposed to use the funds for the following purposes: Payment of taxes to State and counties $56,549 Purchase of track ties 36,000 Purchase of poles and cost of placing them 10,000 Payment of vouchers for materials and supplies, claims and interline . balances during receivership 44,532 Estimated operating deficit during 1932 53,719 Receiver 'certificates for the full amount of the loan are offered as collateral security. Cairo Truman & Southern. The application by the Cairo is the second filed requesting approval of the loan. In its original application the Cairo offered as security a first mortgage lien on all its real and personal property, free from all other liens. This Is supplemented in the second application by the proposed guaranteeing of the loan by the proprietor company, the Tschudy Lumber Co. It is further proposed that a special fund be created for repayment of the loan by withholding $5 from the amount received by the road on each carload of lumber shipped over its rails. Williamsport & North Branch Ry. The company seeks approval of a loan of $50,000 for three years. Company needs funds to refund existing Indebtedness and offers $100,000 of first mortgage bonds as security. Sand Springs Ry. The company seeks loan of $269,498 for three years. Funds are needed to pay taxes, interest, equipment trust obligations and claims. It offers $300.000 in bonds as security. Loan of $27,500,000 to the Pennsylvania RR. from the Reconstruction Finance Corporation Approved by the Inter-State Commerce Commission, The Inter-State Commerce Commission on May 18 approved a loan of $27,500,000 to the Pennsylvania RR. from the Reconstruction Finance Corporation. The road had originally requested $55,000,000 but on May 12 at the suggestion of the Finance Corporation it filed an amended application asking for $27,500,000. At the same time it agreed that if the Finance Corporation definitely committed itself at this time to make the loan of $27,500,000, by Oct. 1 it would obtain the remaining $27,500,000 through banking and investment channels and furnish the additional $13,176,000 needed to provide for the expenditures contemplated in 1932 in connection with the electrification of its New Yorkto-Washington lines and the construction of improvements on its property at Newark, Philadelphia, Baltimore and various minor improvements on other portions of its lines. The report of the Commission in approving the loan, in part, follows: On March 10 1932. the Pennsylvania RR.filed with us an application to the Reconstruction Finance Corporation, for a loan under the provisions of section 5 of the Reconstruction Finance Corporation Act. On May 12 1932, it filed an amendment to the application. The Application. The applicant originally requested a loan of $55.000,000 for a term of not more than three years, to be used to finance in part the electrification of its line from New York, N. Y., to Washington, D. C., and the construction of improvements on its property at Newark, N. J., Philadelphia, Pa., and Baltimore, Md., and various minor improvements on other portions of its lines. Its estimated needs for 1932 are distributed over the various projects as follows' $47,000,000 New York to Washington electrification 2,000,000 Newark improvements 9,822,000 Philadelphia improvements 1,500,000 Baltimore improvements 7,854,000 Miscellaneous items $68,176,000 Total The applicant requested that the loan be made available to it as follows: $.3,000,000 $7,000,000 Oct. 1 1932 May 1 1932 16,000,000 1,000,000 Nov. 1 1932 June 1 1932 5,000,000 Dec. 1 1932 16,500,000 July 1 1932 6,500.000 Aug. 1 1932 Total $55,000,000 The applicant stated that it would provide the balance of funds, $13.176.000 needed for capital expenditures in 1932, as well as for maturing iet31DZEI of securities and other corporate requirements of its system companies. The applicant now asks, in the amended application, for a loan of $27,500,000, asserting that at the request of the corporation, and in view of changed conditions, it is willing to provide by the sale of securities through banking and investment channels the additional $27,500,000 originally requested, and to furnish the additional sum of $13,176,000 necessary to continue the construction of the above-designated improvements, not originally applied for, upon the understanding that the corporation definitely commit itself at this time to make the loan of $27,500,000 to the applicant on Oct. 11932. The applicant represents that it cannot secure the $27,500,000, now sought from the corporation, from any other source, either in whole or in part. It is our view that the question of the ability of the applicant to through banking channels or from the obtain funds upon reasonable terms section 5 of the Reconstruction Finance general public is committed by corporation. Corporation Act primarily to the that with the increase of traffic The applicant states its expectation conditions and with the restoration business incidental to recovery of conditions, it will be able to sell securities of the security markets to normal proceeds, augmented by net income at reasonable prices and with the remaining after payment of moderate dividends, to repay the loan applied May 21 1932 for and provide for current requirements. While the applicant asks for the entire amount of the loan for a period of three years, it will desire to anticipate payment thereof as soon as conditions permit. The present status of the projects for the prosecution of which the applicant applies for the loans may be summarized as follows' Expenditures Additional Jan. 11932. to Complete1932. Electrification New York to Washington $26,247,327 $47,000,000 $37,185,924 Newark improvements 1.497,876 16,502,124 2,000,000 Philadelphia improvements _ 74,302,046 9.822,000 24,168,603 Baltimore improvements 5,403,838 1,500,000 19,096,162 Miscellaneous 7,854,000 (x) 400,00(1, Total $68,176,000 $97,352,813 it Not ascertained. The total estimated cost of the electrification from New York to Washington, and the Newark, Philadelphia and Baltimore improvements, is $264,735,900, of which approximately 40% had been expended up to Jan. 1 1932. Charges to operating expenses and credits for property to be abandoned and retired in connection with these projects will approximate 830.000.000. :and are reflected in the estimates. Expenses in connection with the miscellaneous projects are estimated at $461,475 in addition to the costs of $7,854,000 anticipated in 1932. Work on the e.ectrification between New York and Washington and on the Newark and Philadelphia improvements has progressed to such a point. and expenditures and commitments have been such, that the desirabuity from an economic standpoint of at least substantial completion of these projects as originally planned is readily apparent. The estimated cost o roadway structures for electrification south of Wilmington is $38,485,464. Possibly 20% of this work is completed. It is estimated by the applicant's engineer that roughly $400,000 would have to be spent at Wilmington to enlarge the facilities for interchange of',team and electric equipment at that point in the event that electrified operation terminated there. At Newark expenditures have been made by the city to the amount of 88.000,000 for a trolley subway which can not be used economically until the applicant's improvements are completed, and for land for use for the applicant's tracks. The improvements at Philadelphia are 70% completed. Construction of a new 2-track tunnel supplemental to the Union Tunnel at Baltimore is necessary before electrification can be completed through that city. By use of temporary electrification through the city, most of the work which it is planned to carry out subsequent to 1932 could be deferred. This would reduce by approximately $18.000,000 the requirements of the applicant subsequent to 1932. Nearly all the contracts covering uncompleted work on all these improvement projects contain cancellation clauses under which the applicant may avoid continuation of construction work by payment of damages to contractors who have moved in to carry on the work. Inasmuch as the applicant, through contracts with material supply companies, furnishes much of the material used in the construction work, damages due to cessation of the work would be limited largely to the costs to contractors of moving equipment and losses due to commitments by the applicant for rolling equipment and other fabricated articles. On the whole it appears that the applicant is justified in its position that the work should be continued on the improvements which are in the course of construction, In view of the amount of work which has already been done and, in order that it may take advantage of the present low prices of both labor and material, and furnish employment to various building trades In construction work and in the manufacture of material and products entering Into the projects. It should be understood that our investigation has not been such as to justify us in expressing an opinion as to the basic merits of the original projects or of the contracts which have been entered into. Security. As security for the loan applied for the applidant offers 175,000 shares of the common capital stock of the Pittsburgh, Fort Wayne & Chicago By. having a total par value of $17,500,000 and 237.000 shares of the capital stock of the Pittsburgh Cincinnati Chicago & St. Louis RR. of a tote) par value of $23,700,000. The applicant holds unpledged in its treasury the following bonds recently Issued by companies whose properties it operates under 999-year leases at an annual rental sufficient to pay fixed charges and dividends on capital stock. There is shown also the current valuation which it places on these securities. Upon all of these bonds the applicant has pledged its endorsed guaranty of principal and interest. $5,280,000 Pittsburgh Cincinnati Chicago & St. Louis RR. general mtge. gold 5% bonds of 1981. Applicant's valuation 89% (5.64% yield) $4.719,000 11,744,000 Philadelphia Baltimore & Washington RR. general mtge. 5% bonds of 1981. Applicant's valuation 94% (5.30% yield) 11,127,440 3,242,000 Pennsylvania Ohio & Detroit RR.first and refunding mtge. 5% bonds of 1981. Applicant's valuation 82% (6.13% yield) 2,674,650 3,126,000 Cleveland & Pittsburgh RR,general and refunding mtge. 5% bonds of 1981. Applicant's valuation 94M (5.32% yield) 2,954,070 934,000 Connecting By. Co. lit mtge. 50/ bonds of 1951. Applicant's valuation 95% (5.35% yield) 895,472 324,326,000 total principal amount. Applicant's total valuation $22,370,632 During the period from 1922 to 1930 the average annual earnings of' the applicant were 1.89 times its fixed charges. After payment of interest and other fixed charges, the earnings averaged 12.48% of the outstanding common stock. Dividends declared averaged $35.472,144. In the year 1931 the applicant's net income after payment of fixed charges was $19,941,499, or approximately 3% on outstanding capital stock. Approximately 60% of the dividend declared In 1931, amounting to 5M % on the outstanding common stock of the company, was paid from surplus. This company has declared no dividend since January 1932. Based on estimated gross revenue 11% less than in 1931, and Including estimates of increased revenues under our decision in Fifteen Percent Case, 1931, 178 I. C. 0. 539, 179 I. 0. C. 215, amounting to $12,211,000, the applicant forecasts a net income in 1932 of $21,745,000. It submitted an estimated cash forecast for 1932 on the same basis in which it is shown that including the loans applied for and taking into account expenditures for improvements. it would have on hand throughout the year cash in the amount of approximately $30,000,000. The applicant estimates that its railway operating revenues will amount to $399,400.000 in 1932, as compared with $448,090,279 in 1931. Deducting estimated revenues expected under our decision in Fifteen Per Cent Case. 1931. supra, the 1932 estimate represents a reduction of 13.6% below revenues received in 1931: Railway operating expenses estimated for 1932 are 16.2% below those for 1931. The total estimated operating Income for 1932 exclusive of the revenues from increased rates is $4,037,731 less than that received in 1931, or a reduction of approximately 6%. During the period 1922-1931 the applicant's average annual non-operating Income was $50,800,187, of which $27,729,311 was dividend income derived from securities of other companies held by the applicant. In 1931 the non- Volume 134 Financial Chronicle operating income was 853.718,958, ot which $28.238,165 represents income from securities of lines leased by the applicant, paid out of rentals received from the latter. The total dividend income in 1931 was $33,008,868. The applicant estimates that its non-operating income will be approximately $48,500,000 in each of the years 1932, 1933 and 1934. Deductions from gross income, which averaged $97,605,920 over the period 1922 to 1931. it estimates will be approximately $100.000,000 in each of the years 1932. 1933 and 1934. Fixed charges, including rents, miscellaneous tax accruals, loss on separately operated property, interest on funded and unfunded debt, and miscellaneous income charges, averaged $79,363,408 annually in 1929, 1930 and 1931. The applicant estimates these will amount to approximately the same sum in 1932, 1933 and 1934, excluding Interest on the loan herein sought. The applicant's balance sheet as of Dec. 311931,shows accrued depreciation of road and equipment of $224,750,014 and other unadjusted credits amounting to $71,325,367, of which $64,379,608 represents depreciation accrued on property of roads operated by the applicant. Under our classification of accounts, the latter item must be balanced by charges representing the cost of restoring depreciation of the property, or by payments made to the lessor to compensate for the loss through depreciation, at the time the property is surrendered. We think it desirable that the collateral security should not consist of capital stock alone, but should be diversified so as to include both bonds and stock. We shall accordingly require that the loan be secured by the pledge of guaranteed bonds of leased lines, together with the common capital stock of the Fort Wayne company. Conclusions. Upon consideration of the application and after investigation thereof, we conclude: 1. That we should approve a loan to the applicant by the Reconstruction Finance Corporation of 827.500.000, for a period not to exceed three years, to be made available to the applcant on Oct. 1 1932; 2. That the applicant should pledge with the Reconstruction Finance Corporation as security for the loan the following described securities: (a) $18,500,000, par value, of the common capital stock of the Pittsburgh Fort Wayne & Chicago Ry. Co. (b) $5.280,000, principal amount, of the Pittsburgh Cincinnati Chicago & St. Louis RR. Co. general mortgage series D,5%. bonds of 1981. (c) $11,744,000, principal amount, of the Philadelphia Baltimore & Washington RR. Co. general mortgage. 5%,series D bonds of 1981. 3. That before any advance upon the loan is made the applicant should agree with the Reconstruction Finance Corporation that the applicant will not exercise its voting rights to create any mortgage den upon the properties of the Pittsburgh Fort Wayne & Chicago Ry. Co. during the life of the loan; 4. That the Corporation will be adequately secured under these conditions; and 5. That the applicant should be required to report, in writing, to the Corporation and to us within 10 days from the close of each month following the making of the loan, the expenditure of the proceeds thereof for the purposes for which the loan is authorized. Inter-State Commerce Commission Calls for Report from Railroads As to Salaries of $10,000 or More a Year. Class I railroads have been called upon by the Inter-State Commerce Commission to supply data respecting positions paying $10,000 or more a year. The letter addressed to the Presidents of the roads by George B. McGinty, Secretary of the Commission says: Enclosed herewith is a form for a special report showing a list of the positions held by persons in the employ of Class I railway companies for which the annual rate of pay is $10,000 or more as of the month of Dec. 1929, and also the annual rate of pay for the same positions as of the month of March 1932. If any new positions paying $10,000 or more have been created since 1929, they should be listed as of March 1932. Although the names of the persons holding the positions need not be shown it is desired that in all cases where one individual held positions in two or more operating companies as of March 1932, the combined salary of the person holding such positions should be shown in a footnote on the form for one of the companies concerned. System reports may be made, in which case, the companies represented should be indicated. The report should be filed on or before May 23 1932. Legislation to Place Railroad Holding Companies Under Jurisdiction of Inter-State Commerce Commission Recommended in Report of House Committee— Also Approved by Senate Committee—Repeal Recommended of Recapture Clause. _Legislation to place railroad holding companies under the Inter-State Commerce Commission was approved on May 6 by the Senate Inter-State Commerce Committee. The Committee authorized introduction in the Senate and approved the bill which was approved by the House Inter-State Commerce Committee on April 15. Enactment of the bill, sponsored by Chairman Rayburn, Chairman of the House Committee on Inter-State and Foreign Commerce, was recommended in a report filed by the latter on May 7. In addition to its provisions governing holding companies, the bill would also repeal the rate-making provisions of the Inter-State Commerce Act. According to Associated Press dispatches from Washington May 13 the belief that the PellflrOad Corp. and the Van Sweringens had tried to consolidate railroad holdings "in absolute violation of the spirit of the law" was expressed on May 13 before the House Rules Committee by Representative Rayburn. Associated Press advices May 13 from Washington also said: said Mr. Rayburn, "Is that these people— "The truth of the business," Pennroad Corp. and the Van Sweringens—have gone and I speak of the these properties in absolute violation of the spirit out and consolidated law to prevent that." ,of the law. But there's no 3763 Asking preferred status for his railroad bill so that it could be voted upon soon, Mr. Rayburn said it would tend to prevent consolidations hindering plans of the Inter-State Commerce Commission. The bill would place railroad holding companies under the jurisdiction of the Commission. If the Commission found that any stock was being voted in an effort to block its consolidation plans, it could specify that stock should not be voted. "The Van Sweringon interests have 36 holding companies," Mr. Rayburn testified. "Through these devices the Van Sweringens and the Pennroad Corp. have struggled for 10 years over strategic properties. "When the time came for consolidation along lines suggested by the Commission it looked like it would be impossible. These consolidations effected through the holding companies appeared to prevent sane, solid and honest consolidations." Indicating that that portion of the Rayburn bill which would repeal the law requiring carriers to put into a Federal fund half of their earnings over 6% is likely to fail at this time, Associated Press dispatches May 18 said: Early in the session Chairman Rayburn of the House Inter-State and Foreign Commerce Committee suggested two major changes in transportation laws. One was repeal of the recapture clause; the other, based on a special study ordered by the House, would let the Inter-State Commerce Commission supervise the activities of railroad holding companies. Both propositions were indorsed by Rayburn's Committee and finally put into one bill. But when the Texas Democrat asked the Rules Committee to speed the measure to passage, it objected to the recapture repeal. In the hope that the holding company phase of the bill—already approved by a Senate Committee—may be enacted, Chairman Rayburn Intends to ask the House Rules Committee to approve that, leaving the other proposal for future consideration. Under the original bill, carriers would be relieved of the possible necessity of paying $361,000,000 to the Government in excess earnings. Members of the Rules Committee who opposed the proposal contended this was not the psychological time to give more aid to railroads. They pointed out that although railroads would receive only $13,000,000 In actual cash, many constituents back home would think the 8361.000.000 figure represented an actual refund. The Inter-State Commerce Commission has estimated it eventually would collect the $361,000,000, after lengthy and innumerable law suits, but so far there Is only $13,000,000 in the recapture fund. With reference to the report filed on May 7 by the House Committee on Inter-State and Foreign Commerce, we quote the following from the "United States Daily" of May 9: While the majority report also recommended (in addition to control over holding companies) retroactive repeal of the recapture provision (Section 15a) of the Inter-State Commerce Act, as provided by the bill, Representative Hoch (Rep.), of Marion, Hans., was jointed by four other Committee members in a dissenting report opposing this feature of the bill. Those dissenting declared they were in favor of repeal of the recapture provision for the future, but not for the past, and joined the majority in connection with holding company regulation. Only $10,000,000 Obtained. While the Inter-State Commerce Commission has estimated recapture Claims of $360,000,000, it has only obtained about $10,000,000 of this sum since March 1 1920, when the Transportation Act was enacted, its records show. The Committee members who joined Representative Hoch in his separate report are Representatives Burtness (Rep.), of Grand Forks, N. D.; Nelson (Rep.), of Augusta, Me.; Robinson (Rep.), of Hampton, Iowa, and Garber (Rep.), of Enid, Okla. Objection to the proposed regulation by the Inter-State Commerce Commission of the rail holding companies was made in another minority report written by Representative Beck (Rep.), Philadelphia, Pa., who was joined by Representatives Cooper (Rep.), of Youngstown, Ohio. Wyant (Rep.), of Greensburg, Pa., and Igoe (Dem.), of Chicago, Ill, Additional Powers Opposed. "We are indisposed," said this report, "to grant further powers to this greatest of all governmental bureau unless the advantage to the public is reasonably clear. Far from that being the case in respect to the present law, it seems to us a fact that to pass this law at this time, when many of the railroads are in a moribund condition, is to increase the investors' present lack of confidence, and possibly lead to a grave financial crisis." Hearings were begun before the Committee on Feb. 17 1932, relative to the holding company feature of the present bill. At that time the matter of holding companies was considered in a separate bill (H. R. 9059). The hearings concluded March 24, and the bill was reintroduced as H.II. 11643. Recapture Repeal Measures. The proposed repeal of the recapture clause was first considered during hearings on bills (H. R.7116 and 7117) commencing Jan. 19 1932, and concluding Fob. 11 1932. This bill was also reintroduced as a part of IT. R. 11643. The bill is a combination of two different features which the Committee had under consideration, the first to regulate the activities of holding companies in the railroad field, and the second to bring about the retroactive repeal of section 15a of the Interstate Commerce Act. This section, as it now stands, requires the recapture by the Government of one-half of all earnings of the carriers in excess of6% allowed on property investment. The latter feature of the bill also would relieve the Commission from the requirement of making periodical valuations of the rail carriers, but would in lieu thereof enable the Commission to keep its present records and bring them up to date as the occasion demanded by being constantly advised as to any changes in rail construction, improvements, retirements, etc. The holding company section of the bill requires that such corporations must obtain approval of the Commission before they may purchase stock in a railroad, and to all the provisions of the Interstate Commerce Act which relate to reports, accounts, etc., and to the issuance of securities and assumption of liability. Voting Authority Restricted. The bill, according to the majority report, also provides that the Commission shall have the power of restricting the voting power of any individual corporate or otherwise, Hatter investigation, It is found that such individual has defiled the "congressional will" as expressed in section 5 by bringing about a combination of railroads without authority from the Commission. The New York "Times" account from Washington May 7 regarding the report said: 3764 Financial Chronicle If the bill is passed, it would wipe out government claims against 446 railroads amounting to $360.000,000, representing their earnings since 1920 In excess of the present "fair return" of 6% on the value of their property Investment. The present rate-making rule, a corollary of the recapture provisions, also would be changed to eliminate the requirement that rates should be such as to enable the road to earn a "fair return" on the value of property used in transportation service. The proposed rule authorizes the Commission to take into consideration the need for efficient railway transportation service and the need of the carriers of revenues sufficient to enable them to perform such service. The effect of the new rule is to give the Commission wider discretion in making rates and to release it from the necessity of basing them. Would Drop "Excess Profits" Rule. Accompanying th( new rule is the permission to the railroads to retain so-called "excess earnings" during prosperous times, thereby obviating the necessity for raising rates in times of lean-traffic conditions. On the question of holding companies, the bill provides: "It shall be unlawful for any person, except as provided in paragraph four (on approval of the Commission), to accomplish or effectuate, or to participate in accomplishing or effectuating the control or management in a common interest of any two or more carriers, however such result is attained, whether directly or indirectly, by use of common directors, officers or stockholders, a holding or investment company or companies, a voting trust or trusts, or in any other manner whatsoever. It shall be unlawful to continue to maintain control or management accomplished or effectuated in violation of this paragraph." The Commission is authorized to initiate investigations of railroad control and to require divestment of holdings by one person in two or more roads when it is of the opinion that such holdings are not in the public interest. The provision would apply particularly to control by one carrier of another in opposition to separate allocations provided in the Commission's own plan of rail consolidation. Changes Advocated by Inter-State Commerce Commission. The Commission's authority e-mr consolidations does not at present apply to holding companies, since they do not operate in interstate commerce. Such companies can now be reached by the Commission only through the Clayton anti-trust act, in which case it must be shown that the control "may be substantially to lessen competition" between the two roads. In this way the Commission ordered the Pennsylvania company, which it described as "a mere department" of the Pennsylvania Railroad, to release its stock holdings in the Wabash and Lehigh Valley Railroads. The order Is still being contested in the courts. The three proposed changes in the Inter-State Commerce Act give effect to recommendations made by the Commission in its annual reports for the past several years. The Commission stated as early as 1929 that through the activities of holding companies "the subjection of the unification of carriers by railroad to the orderly processes of a carefully planned scheme of public regulation, which Section 5 was designed to accomplish, Is very likely to be partially or even wholly defeated, subject to the possibility that the Clayton anti-trust act may in some measure, after protracted litigation, enable control over the situation to be maintained" Recapture Clause Condemned. Enforcement of the recapture provisions of the act also has been vigorously condemned by the Commission on the ground that, even if the money could be collected it could not be made available for loans to roads in need, due to the stringent regulations imposed by the so-called contingency fund regarding purposes to which it could be applied and security demanded. The majority report on the bill was accompanied by two minority reports. One by Representative Hoch of Kansas, and joined in by Representatives Burtneas of North Dakota. Nelson of Maine, Robinson of Iowa and Garber of Oklahoma opposed the provisions for absolute retroactive repeal of recapture and complete wiping out of the government's claims Representative Beck of Pennsylvania condemned the proposed Federal regulation of holding companies as an unwarranted extension of Federal authority, and was joined in his opinion by Representatives Cooper of Ohio. Wyant of Pennsylvania and Igoe of Illinois. As a substitute for absolute retroactive repeal, Representative Hoch proposed that Congress strike an average of excess earnings by the various roads since 1920, taking into consideration the years in which they may have failed to earn even a "fair return", and return to them half of whatever excess remained. The recapture liability of the roads, as calculated by the Commission, gives no consideration to years when no excess occurred, but represents the aggregate of whatever excess they earned in separate years. Mr. Hoch pointed out that if the average earnings were considered, the government's claim would be reduced from S360.000,000 to $237-000,000. Under the substitute proposal, the recapture liability would be wiped out in the case of 45 of the 90 Class 1 roads, while among Class 2 roads the number would be reduced from 137 to 83. Half Owed by Three Roads. He stated in support of his proposal that out of $222,000,000 due the government in excess earnings by Class 1 roads, $113.000.000, or more than 50%. was owed by only three carriers. The recapture liability of these was estimated at $93,000,000 for the Chesapeake & Ohio, $82,500,000 for the Norfolk & Western, and $51,000,000 for the Duluth, Missabe & Northern. The latter had earnings in excess of the 6% return In each of the past 11 years, according to the Hoch report, while the Chesapeake & Ohio fell below in only two years and the Norfolk & Western in only four. Mr. Beck characterized the holding company proposal as an attempt "to vest new and unprecedented powers In the Inter-State Commerce Commission and which, if passed, would, in our judgment, create serious alarm in the minds of the investing public. "If the law is now to be broadened." Mr. Beck declared, "and the Commission is to be given the power, acting simultaneously as prosecutor, judge and executioner, to control the question of railroad ownership irrespective of its effects upon the freedom of inter-state commerce and only because in its discretion it interferes with its preparation of a plan of consolidation, then the States have lost control over corporations of their own creation and individuals can only own railroad stocks by and with the advice and consent of the Commission." "Railway Age" on Train Speeds and Employees' Hours and Wages. Commenting upon the increase of 29% made since 1926 in the average speed of freight trains, the "Railway Age" devotes an editorial in its May 14 issue to a situation which seriously threatens the continuance of such improvement. The "Railway Age" observes: This situation arises from the fact that railway train and engine service employees are paid upon a so-called "dual basis," which includes both hours worked and mileage covered. In freight service, eight hours of less, May 21 1932 100 miles or less, represents a basic day's work. In other words, if a freight train crew cover 90 miles in eight hours, they have done a day's work, on a time basis: likewise, if this crew cover 100 miles in four hours, they have done a day's work on a mileage basis. In either case, additional hours worked or additional miles run by this crew represent overtime, and are paid for as such. Thus, "as trains are speeded up," says the "Railway Age," "the result is not more train-miles por employee per day, but simply shorter working hours per day, with higher earnings per hour for train and engine service employees. If a freight train averages 30 miles per hour, as many of them do nowadays, the train crew earns its day's wages in a little over three hours. The increased speed is largely the result of improved signaling, better locomotives and track and improved operating methods. Yet a full return on the investment in these facilities is impossible because the train-mile output per employee is not increased by them." The editorial continues: Nor is the disadvantage of this situation all on the side of the railroads. Unable to effect savings in train-mile wage costs, management turns to heavier trains as its only alternative. This, of course, reduces employment and curtails the frequency of service, which is in many cases undesirable in the face of highway competition. To meet this competition, train speeds should undoubtedly be further increased and frequency of service should be maintained, but can the industry afford further great improvement along these lines while wage payments are measured on the present basis? The six-hour day with pay for eight hours is, apparently, the principal policy advocated by the employees' organizations for meeting the unemployment problem. For some classes of employees, this goal, or something very close to it, has without formal recognition already been achieved and its effect is proving a serious hindrance both to tho railways and their employees in their struggle with competitors who pay much lower wages and work their employees much longer hours. One big point where railroads must reduce their costs in order to meet truck competition and save their employees' jobs is in the handling of high grade merchandise and manufactured goods. Yet it Is precisely the trains handling this class of traffic which operate at the highest speeds, enabling their crews to earn eight hours' pay in hale that time or less. If crews of these trains worked as many hours as their less fortunate follows in slower service and in other railroad occupations. is It not at least possible that a reduction in rates might be made which would recapture much of this traffic which has been lost to trucks, thereby enabling the railways to employ more men? If eight hours of work were performed for eight hours of pay in passenger service is it not probable that reductions could be made in rates which would attract business from the highways, resulting in increasing train mileage and more employment, instead of constant reductions which have been necessary in the past and many more of which are threatened now? We raise this question with a full appreciation of the situation of the employees involved. Their loyalty and efficiency are beyond question and any discussion of this question should give full consideration to their welfare. We have no final opinion as to what change should be made to meet the situation. But in any event a situation which militates against faster and more frequent schedules, and keeps up railroad costs in the face of dangerous competition, disadvantages both the railroads and their employees, and both ought tostrive courageously, and in a spirit of mutual fairness, to correct it. Former Governor Alfred E. Smith of New York in Radio Address Offers "Financial Program for Present Crisis"—Favors Beer and Manufacturers Sales Tax —Urges Congress to Avoid Blocs Which Unsettle Business—Would Give President Free Hand to Provide Federal Aid for Productive Public Works— Urges Action on War Debts. "A Financial Program for the Present Crisis" was offered on May 16 by former Governor of New York Alfred E. Smith in a radio address over a Nation-wide hook-up. Mr. Smith declared it to be the first duty of Congress "to use every means at its command to reduce the cost of Government." He added: "I believe it to be the duty of every member of Congress, without fear or favor, to go to the extreme limit in slashing from the appropriation bills all unnecessary appropriations of the public money." A manufacturers' sales tax and a beer taxation were advocated by Mr. Smith, some of whose proposals wore summarized as follows in the New York "Journal of Commerce" of May 17: "No group of patriots can properly ask that their care shall become a National burden greater than the people of tho country can carry in times of trouble." "I earnestly believe that it will be a mistake for Congress to adjourn and leave this matter (war debts) hanging In the air." "Soak capital and you soak labor. Confiscatory taxation of capital prevents the flow of money into industry. The greater and freer the flow of capital the quicker industry will revive and the quicker widespread unemployment will cease. The demagogue won't agree to that, but it's trust just the same." 'The only way I know of to discourage the operation of the special groups which infest the lobbies of Congress seeking either special favor or immunity Is to impose temporarily a manufacturers' sales tax. It may not be good politics, in the view of some people, to say this, but It is good patriotism, and that in the end is the only kind of politics which the people of this country will stand for in a time of emergency." "The people have awakened to the fact that prohibition Is not workable, that it does not prohibit and that liquor and malted beverages are flowing throughout the country in as great a volume as they did prior to the enactment of the Eighteenth Amendment." "The proceeds of the sales and beer taxes will not only provide for the existing deficiencies, but will undoubtedly produce revenue sufficient to pay the interest and amortize any public works bonds which may be issued by the President during the next fiscal year." "I believe that it is the patriotic duty of every member of Congress from now until adjournment to discourage and avoid in every possible way all Volume 134 Financial Chronicle blocs, cabals, insurgencies and mugwump tactics, by whatever name they bo called, which bedevil legislation, increase the depression, unsettle business and endanger our credit at home and abroad." "Let every member of Congress think of what is best for the country at large, even though it may not seem at the moment to be popular with the boys back home." "Rather than limit unemployment relief in the way suggested by the President, I would strongly recommend that the President be given a free hand to provide Federal aid for productive public works of States and municipalities as well as for additional Federal projects which will bring about the early employment of the largest possible number of men." In full, Mr. Smith's address follows: In the crisis now confronting our country, the Government itself, like every other human line of endeavor, is in trouble. At the beginning ofthe present session of Congress,on advice of the Secretary of the Treasury, the President certified to Congress a shortage of $1,200,000,000 between the estimated receipts and the estimated expenditures for the year 1933. It became therefore the duty of Congress. acting upon the advice of the President, to devise ways and means, either by increase of existing forms of taxation or the establishment of new forms, to insure sufficient revenue to meet the estimated cost. Duty of Congress. The first duty of the Congress, exercising ordinary, good business Judgment, is to use every means at its command to reduce the cost of the Government. I believe it to be the duty of every member of Congress, without fear or favor, to go to the extreme limit in slashing from the appropriation bills all unnecessary appropriations of the public money. Every item not absolutely essential to the proper conduct of governmental business should be eliminated. So far the action taken by Congress with respect to reorganization of the Federal Government is not, to my mind,satisfactory. Congress cannot give this matter the study and thought to which it is entitled. Under present con. ditions reorganization must be an Executive and not a legislative function, and I am therefore in favor of giving to the President the full responsibility and power which he has asked in the immediate consolidation of Government activities and bureaus and in other ways to reduce the cost of Government. The compromises so far offered by Congress are inadequate. They will not produce either economy or reorganization, and will lead to endless wrangles as to the responsibility for failure. Would Stay Soldier Bonus Payments. One of the most important fields of economy in which the general public Is Just beginning to take a lively Interest is the revision of the laws relating to veterans. While I bow to no one In my reverence for and devotion the to the men who, in the hour of National peril, offered themselves to country, I nevertheless hold, and I believe that a majority of the veterans legislation themselves hold with me, that we should call a halt to veteran and check up before we go any further. No group or patriots can properly ask that their care shall become a National burden greater than the people of the country can carry in times of trouble. Lot us go back to the principles of the wise and far-sighted plans set forth by President Wilson in his program for payments to soldiers. He was a student of history. He sought, above all things, to avoid the evils of soldiers' pensions which followed the Civil War. He began by obtaining a scale of pay for men in the service higher than any scale ever paid before in this or any other country. He established as a further part of this program the principles of full and complete care of those wounded or disabled during the war, or whose disabilities are traceable to the war; full care and protection for widows and orphans of soldiers who lost their lives in the war; and a system of insurance and deferred compensation for all veterans on a sound actuarial basis with contributions by the Government and the veterans. This program was entirely acceptable to veterans and to the people generally, and was regarded everywhere as the most generous plan ever offered of governmental co-operation in the compepaation and care of soldiers and their dependents in this, or in any other country. What has happened since Wilson's'retirement as President? Not only have Federal and State bonuses been provided, but the Wilson principles have practically been destroyed by numerous amendments to veterans' laws, all of which have for their purpose the payment of hundreds of millions of dollars to hundreds of thousands of vetarans and their dependents. whose disabilities and other problems are not remotely connected with the war. Much of this huge sum is being paid, in fact, to men who never saw active service and to dependents who have no legitimate claim on the Government. The country simply cannot afford to appropriate these huge sums in a time of crisis for a favored class. As a matter of fact, by gradual changes in these laws, we are now paying large sums every year to over 300.000 veterans whose disabilities resulted from other than military or navalservice. I take those figures from a document recently issued by a group of veterans themselves. I. therefore, suggest that Congress appoint a special committee to report back at the next session a list of all special acts, amendments and appropriations which in ally way compromise the original Wilson principles with a view to the repeal of such legislation. In the meantime no more burdens for veteran relief should be added by Congress at this session. Holding this view, it seems unnecessary for me to say that I believe nothing should be done with regard to revision of the bonus bill at this session of Congress. The plan to pay immediately compensation not due for a number of years is made more obnoxious when accompanied by the suggestion that it be paid by the issuance of flat money. I am sure that, upon consideration, the great majority of veterans will approve this, and will manifest their willingness to bear their share of the National burden. After Congress has boned the appropriation bills to the irreducible minimum there remains the question of seeking sufficient revenue by taxation to meet the estimated cost of operating the Government during 1033. At the time of the convening of the present Congress, estimates of Since the Treasury Department indicated a shortage of $1.200,000.000 then Congress has added to the appropriations, and falling receipts indicate that the actual difference will be in excess of 31,500,000,000, and there is no assurance that it will not exceed that amount. Let us face the facts. The burden rests upon Congress to find new means of revenue which will positively produce at least 31.500,000,000. Manufacturers' Sales Tar. It is important in the imposition of new and additional taxes required to balance the budget that no greater strain be put upon industry or business than is absolutely necessary, and in any event that no strain be imposed which will operate to retard the return of prosperity. Moreover, any strain which is imposed should be fairly and evenly distributed over all business, all industry, and all occupations and callings. That is good sound American principle. In other words, the desirable thing to do at whole the present moment is to broaden the base of taxation so that the country will bear its full and Just share of the burden. 3765 This leads me to the frank and honest statement that I believe in the general manufacturers' sales tax to meet the emergency. I think it was a mistake for Congress to turn it down. I think it should be reconsidered, and I hazard the guess that a clear majority in Congress in their hearts believe in a temporary general manufacturers' sales tax at this time. Much has been said about the manufacturers' sales tax, but I am a little afraid that it is not thoroughly understood by the man on the street. For that reason I believe it will be helpful to cite some figures. Take. for example, the man who spends $1,000 a year; that is, $83 a month. I would take that to be the expenditure of probably the average family head among the working classes of this country. Studies indicate that $700 of that $1,000 is for shelter, food, clothing and other things, which, under the provision of the manufacturers' sales tax bill, were not taxable, leaving only $300 of his $1.000 expenditure to be subject to sales taxation. A sales tax such as had been proposed would have required him to pay less than $8 a year, and I deny emphatically that there is such a lack of patriotism and devotion to this country at a time like this that any consideration number of men in position to expend 31,000 a year are unwilling to contribute $8 of it to the support of the Federal Government. Aside from every other consideration, it would be a healthy thing at a time like this, because it would encourages great many thousands, if not millions, of people to study the financial operation of their Government, which they would surely do if they were direct contributors to its support. All during my life and public career, I have stood by the ordinary citizen of limited means and limited earning power. I shall never change that attitude. I came from this class, and I shall never forget it, and for this reason I cannot give my approval to the false friend who leads the working man to believe that his condition in life can be bettered by the slogan attributed by the press to those who opposed the manufacturers' sales tax: "In order to make up the deficit—soak the rich." Cannot Soak Capital Without Soaking Labor. That means soak capital, and you cannot soak capital without soaking labor at the same time. They are bound together. One is essential to the other. The success of one means the success of the other. The destruction of one means the destruction of the other. It is a false friend who leads the poor man to believe that capital can be unreasonably taxed or soaked without injury to him. In prosperous times labor does not receive the largest share of the profits of industry; therefore in a depression like the present it is right enough that capital should bear a larger share of the burden. Of course, capital must bear the main burden of taxation, but it should never be an unfair burden. Let me give you a homely example. Mr. Railroad needs $50,000,000 to electrify his main line. Ile must go to Mr. Capital for the money, and Mr. Capital will say to Mr. Railroad: "What will you give me for the loan of this money?" and Mr. Railroad will say: "Five per cent, gilt-edge first mortgage bonds of our system." If the false friend of the poor man who suggests that we soak capital has his way about it, Mr Capital will be compelled to say to Mr. Railroad: "No. I cannot lend you the money. While you promise me 5%, there Is a third party to the transaction known as Mr. Government. and he is going to take from me a large part of what I earn. IL on the other hand, instead of lending to you, Mr. Railroad, I lend to Mr. Government, Mr. Government will not tax me. I can put my money into State, Municipal or Federal Government securities and can be left undisturbed in the enjoyment of the full income growing therefrom. Instead of going into partnership with you. I propose to go in with Mr. Government." Thereupon, Mr. Capital desserts Mr. Railroad and Mr. Railroad, in turn, is compelled to turn his back on the thousands of men who would be required in mine, shop. mill and factory to produce, fabricate and transport the equipment necessary for the electrification, plus the thousands of men now out of employment who would be engaged in its installation. This same story can be recited all along the line. Soak capital and you soak labor. Confiscatory taxation of capital prevents the flow of money into Industry. The greater and freer the flow of capital, the quicker industry will revive, and the quicker widespread unemployment will cease. The demagogue won't agree to that, but it's true just the same As a result of the attempt of Congress to impose taxes upon a few industries and forms of business, the representatives of these industries and business groups are fighting to be relieved of tax burdens. The only way I know of to discourage the operation of the special groups which infest the lobbies of Congress seeking either special favor or immunity is to impose temporarily a manufacturers' sales tax, It may not be good politics, in the view of some people to say this, but it is good patriotism, and that in the end is the only kind of politics which the people of this country will stand for in a time of emergency. Prohibition Not Workable—iVould Tax Beer. Throughout the length and breadth of the land to-day there emanates from all classes of our people an insistent demand that something be done about the present laws, both constitutional and statutory, with respect to prohibition. The people have awakened to the fact that prohibition Is not workable, that it does not prohibit and that liquor and malted beverages are flowing throughout the country in as great a volume as they did prior to the enactment of the Eighteenth Amendment. Pending action by the party conventions determining party policy with respect to modification or repeal of the Eighteenth Amendment. it Is within the power of Congress to put a more liberal interpretation by statute on what constitutes an intoxicant. The immediate passage of an amendment to the so-called "Volstead Act," legalizing light wines and beer and providing for its taxation, will produce a revenue of hundreds of millions of dollars and at the same time tax something that the Government always taxed and which is to-day escaping all forms of taxation. and pursuing its business with as much vigor as it did at any time during the history of the country. Aside from the revenue-producing features, It would help materially to relieve the unemployment situation. Bond Issue to Promote Public Works in Behalf of Unemployment. For several months I have spoken and written repeatedly of the necessity for a bond issue to progrcss productive National and local public works in order to cure unemployment, stimulate business generally, increase purchasing power and restore our National morale. More and more people are coming to this point of view. Men who can hardly be called visionaries—sound business men—have recently taken the same position. Talk will not solve unemployment. Immediate help is what is needed. We have already waited so long that if we do not take action quickly I doubt whether relief can come in time to be of use in the months that lie Just ahead. Millions of dollars of public money have already been expended om unemployment relief of little value. Certainly the so-called "made work," which consists of employing men on the basis of their family needs on all kinds of odd Jobs without proper plans, material or supervision, is a disguised dole and a waste of public funds. I have seen hundreds of men pulling up weeds and fixing shoulders of roads which three months from now will look Just as they did before the men began working. This kind of labor produces nothing of permanent value. We have had enough of it. 3766 Financial Chronicle Everything which has come to my attention on the subject of unemployment since I suggested a relief bond issue confirms my opinion that unemployment and relief of the distress it has caused cannot be solved by merely throwing them back on the States and municipalities. My original recommendations contemplated that the Federal Government would issue public works bonds for four purposes: 1. For an expanded program of Federal improvements; 2. For additional Federal highway aid to the States; 3. To advance money to limited dividend housing corporations for construction of low cost housing; 4. For the purchase by the Federal Government of bonds of States and municipalities, issued by these local governments for local public works projects of long life and permanent value. Only public improvements, for which plans were completed or under way or for which plans could be quickly prepared, were to be financed in this way. I further suggested that the President be empowered to appoint a public works administrator, clothed with the power to progress public improvements of all kinds without reference to the many regulatory statutes which now contribute to the red tape and delay incident to Government work. There are numerous Federal public buildings and works throughout the country which have been authorized by Congress but for which no appropriations have actually been made. These could be put under way promptly. In addition there is at least $500.000,000 in the 1933 budget for Federal public improvements which could be built from the proceeds of the sale of bonds and thus relieve the overburdened taxpayer. Why should we not have a Federal aid highway program at least as great as last year's, instead of one only one-fourth as great? New York, for example, has the smallest highway program this year since the war. Last year it had the largest. Some time ago the President recommended that Congress provide by legislation for substantial Federal aid for low-cost housing. The President has not referred to the subject again, although all other legislation recommended at that time has long since been disposed of. Within the last week the leaders at Washington have suddenly concluded that something must be done to speed the relief program. President Hoover's Three-Point Relief Program. After an informal conference with the leaders of both parties in Congress, the President has issued a statement proposing a three-point Federal relief program for unemployment, in which he proposed: 1. That authority be granted the Reconstruction Finance Corporation to assist States by underwriting State bonds or by loaning directly to them for relief purposes to an amount not exceeding a total of $300,000,000. 2. That the Reconstruction Finance Corporation underwrite or make loans upon proper security for income-producing and self-sustaining enterprises which will increase employment, whether undertaken by public or private enterprise, provided also that these enterprises furnish part of the capital and promise early and substantial employment. 3. That the borrowing power of the Reconstruction Finance Corporation be increased to 83,000,000,000. The President pointed out that he distinguished sharply between the use of capital for these enterprises on the one hand and unproductive public works on the other, and that the projects be proposed to aid were of a self liquidating character not constitming a charge against the taxpayers or public funds He stated further that he was opposed to increasing Federal construction work beyond the amounts already appropriated. I presume that the President's statement is merely a starting point for discussion. The President says he does not propose to issue Federal bonds. Of course, that does not mean anything, because by increasing the capital of the Reconstruction Finance Corporation he would authorize that Corporation either to sell its securities, which are backed by the full credit of the United States Government, to the public, or to sell them to the United States Treasury and the Federal Reserve banks or to borrow from these, which is precisely the same thing under another name. I am also unable to follow the President's reasoning as to additional Federal improvements because the President himself has signed bills in which he authorized numerous improvements not included in the 1933 budget. Are we to assume that all authorized improvements, many of which are being designed, including post offices, Federal buildings and other projects, are wasteful? If they are needed, why not have them now ?" I know of no field of public improvements in which results can be obtained so quickly and on which so many men can be employed promptly as on road construction. The entire huge budget for Federal highway aid to the States last year was actually expended in the time contemplated by the various States to which the money was advanced. If this could be done in the past year, why can It not be done again? Of course, if the aid to be extended by the Reconstruction Finance Corporation is limited to revenue-producing improvements, then all such projects as highways and practically all State and municipal improve ments will be excluded. Many of these improvements are truly productive even if they do not produce revenue. It is absurd to measure the productiveness of an improvement by the amount of revenue it brings in directly. As for the financing of private revenue-producing enterprises under the guise of remedying unemployment, I am radically opposed to this, and I think most of the people of the country will be. It will lead to all kinds of log-rolling and favoritism, and there are plenty of worth-while public improvements ready to go ahead which should receive Federal aid before private business is subsidized. Personally I doubt very much whether the Reconstruction Finance Corporation is the right agency to which to entrust the public works and unemployment problems. The confusion in the President's mind is due to his attempt to use an agency created to bolster up private credit as an administrative body to progress public works. If the President wants to stimulate employment by public works, he must make his plan conform to the facts and not attempt to crest overnight an entirely new body of State and municipal law based upon theories applicable to private and not to public business. The notion that municipalities throughout the country may, under existing law, furnish part of the capital for a self-supporting improvement and then borrow the rest from the Reconstruction Finance Corporation is directly contrary to the Constitutions, statutes and practices of almost every State and municipality throughout the country. Only specially crested instrumentalities like the Port of New York Authority can follow that procedure. States and Municipalities Cannot Borrow from Federal Government. 5Even the offer to lend money to States will be entirely ineffective. New York State. for example, under its Constitution may contract a debt only In anticipation of taxes, to repel invasion, suppress insurrection or defend the State in time of war, and to fight forest fires. Otherwise all debts can onlylbe created by legislative action plus popular referendum. Most of the States of the Union have such constitutional restrictions, and the same limitations apply to most cities, counties, towns and villages. The fact remains that the States and municipalities simply cannot borrow from the Federal.Government no matter how much it might wish to lend. May 21 1932 The most the Federal Government can do is to buy their securities after investigation as to their soundness and thus create a market almost wholly lacking under present conditions. This policy I have long advocated. Rather than limit unemployment relief in the way suggested by the President, I would strongly recommend that the President be given a free hand to provide Federal aid for productive public works of States and municipalities as well as for additional Federal projects which will bring about the early employment of the largest possible number of men. The broader and more flexible the power given the President to accomplish these thing at this time, the better it will be. It is not a mistake during times of stress and crisis to clothe the President with this plenary power to equip him to fight the war against unemployment and all the other evils which follow in its wake. The proceeds of the sales and beer taxes will not only provide for the existing deficiencies, but will undoubtedly produce revenue sufficient to pay the interest and amortize any public works bonds which may be issued by the President during the next fiscal year. Action on War Debts Urged. On April 13 in Washington, I suggested a plan to liquidate the war debts owed to this country by foreign governments. I earnestly believe that it will be a mistake for Congress to adjourn and leave this matter hanging in the air. The one-year general debt and reparation moratorium negotiated by President Hoover last year, expires in a few weeks, and while It is true that payments are not due until December, the world at large will be in a state of doubt, uncertainty and apprehension during that period, unless some one is authorized to speak for us. Here again, temporarily, and to meet the emergency, I believe Congress should empower the President to most the situation as he once did without Congressional authorization, and if necessary, to prolong that moratorium until a real solution can be reached. Certainly the rider attached by Congress to the act approving the moratorium should be repealed, because it constitutes a threat to the President not to take any similar action in the matter without the consent of Congress until 1933. It leaves the country without a spokesman at a critical time. And incidentally, let me say here that this spokesman may be called upon to overlook payment of our foreign debts for the simple reason that they are not going to be paid, the foreign governments having made no provision for them in their own budgets. It is senseless to count chickens which will never be hatched. Congress Should Discourage Blocs. In conclusion I believe that it is the patriotic duty of every member of Congress from now until adjournment to discourage and avoid in every possible way all blocs, cabals, Insurgencies and mugwump tactics, by whatever name they may be called, which bedevil legislation, increase the depression, unsettle business and endanger our credit at home and abroad. Let every member of Congress think of what is best for the country at large, even though it may not seem at the moment to be popular with the boys back home. The time has come for us to pull together like one great united people, to put our financial house in order. The prompt enactment of a complete and honest financial program, and the balancing of our budget are subjects above politics and sectionalism. There are plenty of subjects to be discussed during the summer by conventions and candidates. Let us co-operate now and argue afterward. Exempt Interest Upheld in Basis of California Tax— Inclusion of Income from Treasury Certificates Is Constitutional, State Commission Rules. The following from Sacramento, Calif., May 16, is from the "United States Daily" of May 17: Interest on United States Treasury Certificates may be included in the basis of the California corporate franchise tax, the State Board of Equlaization has ruled. The decision is entitled in re Burnham Exporation Co. The decision of the Supreme Court of the United States in the Pacific case is controlling, the Board declared. Its opinion follows in full text: This is an appeal pursuant to section 26 of the Bank Corporation Franchise Tax Act (State 1929, Chap. 13, as amended) from the action of the Franchise Tax Commissioner in overruling the protest of Burnham Exploration Co., a corporation, against a proposed assessment of additional tax in the amount of $9,135.76. The assessment of additional tax was proposed by the Commissioner partly due to the fact that the Commissioner included in appellant's income for the taxable year ended Dec. 31 1930, on the basis of which appellant's tax liability was compared interest on United States Treasury certificates received by appellant during said Year in the amount of $6,590.53. Previous Ruling Cited. Whether the Commissioner acted properly In thus including interest from United States Treasury Certificates in the income of appellant for the taxable year ended Dec. 31 1930, Is the sole problem involved. In the appeal of Homestake Mining Co. decided by us on this date, we held that the Act contemplated the inclusion of interest from Federal. State and municipal bonds in the computation of the income by which the tax imposed by the Act is to be measured, although said bonds, and the Interest therefrom, are exempt from taxation. Further, we held that such Inclusion was constitutional for the reason that the tax imposed by the Act is not an income tax but an excise tax, and, consequently, tax exempt Income could be included in the measure of the tax. Decision in Pacific Case. In thus holding, we relied upon the cases of Flint v. Stone Tracy Co.. 220 U. S. 601. Educational Films Corp. v. Ward, 282 U. S. 379, and Pacific Company, Ltd., v. Johnson, 212 Cal. 148, (affirmed by the United States Supreme Court U. S. Daily, April 12 1932, page 6). In the last cited case, the inclusion of interest from tax exempt improvement district bonds In the computation of the income by which the tax provided in the Act Is to be measured, was held valid. We are of the opinion that our decision in the above appeal should be regarded as controlling our decision in the instant appeal. Glass Banking Bill Viewed by Texas Bank Commissioner as Check on State Rights—Branch Banking Proposal Regarded As Seriously Impairing Local Systems. James Shaw, Texas State Banking Commissioner, was quoted as follows in the "United States Daily" of May 10: There is a bill in Congress, an amendment to the Federal Reserve Act, that strikes at the very soul of State rights. This Is the Glass bill that provides that branch banks may be established by Federal Reserve membe Volume 134 Financial Chronicle banks, even in States which do not permit branch banks. The Federal law at present provides that branch banks can only be established where permitted by State laws. This bill even provides that banks can go across State lines and establish branches—in what is termed trade territories. If this law passes, it will be a serious, if not a death, blow to the great State banking system of this country, and we will witness a further concentration of power in the Federal Government. Effect on State Rights. It is my opinion that Congress will not pass the Glass bill in its present form. Apparently there is no great demand from the public for this law that, whether intended or not, will eventually put the great State banking systems of this country out of commission. The Glass bill, as I see it, is another body blow to State rights. While it is true that most of the bank failures for the past few years have been State banks, it must be taken into consideration that the State banks in the United States greatly outnumber National banks, and that the great majority of banks that failed were small institutions which never had a chance to succeed, owing to rapidly changing economic conditions. The last comparative figures available show that on March 25 1931, the 15,865 State banks had combined capital accounts of $5,950,000,000 and that the 6.935 National banks had capital accounts of $3,778,000,000; that the combined deposits of the State banks were $34,266,000,000 against $22,344,000,000 for the National banks. Assets of State Banks. The records show that from June 30 1919, to March 25 1931. the total assets of State banks in the United States increased in the amount of $16,721,000,000 and that during the same period the assets of National banks increased only $7,327,000.000. It is therefore apparent that the public of the United States has complete confidence in the State banks of this country. - What the public should have is safety for its funds and that can be accomplished by the State banking systems just as well, or probably better, than under the National system, because the territory of the various State departments is restricted to such an extent that the supervising authorities can keep in closer touch with conditions, than a system that covers the entire country. Conditions in Canada Different. It is not a fair comparison to show that the branch banking system of Canada has had few failures, while we have had many. Conditions are entirely different in that Canada has a very largo territory, with a population of less than one-tenth the amount of the United States, and that the business of the Dominion has been built up along the English system and not on the American system, which was a pioneer in its line. We must never take drastic steps that will affect our economic structure while things are upset. Certainly they are upset at this time and drastic legislation should be held off until calmer times arrive. New Mexico Bank Examiner Opposing Glass Banking Bill Says Adoption of Branch System Is Not Suited to Conditions in State. Santa Fe (New Mexico) advices May 13 to the" United States Daily" stated that branch banking and Federal control of State banking systems are opposed by State Bank Examiner John Bingham, who believes that each community can be served best by the unit banking system in which the local banker is master of his bank's affairs. Mr. Bingham made his statement in commenting on the Glass bill pending in Congress, which he opposes. As given in the "United States Daily" it follows: There are at present 47 banks in New Mexico. They adequately serve the needs of the State. I do not believe that a single community in the State could at present support another bank without endangering the bank at present serving that community. Policy in New Mexico. It has been the policy in New Mexico for the State bank examiner to approve applications for only those banks he deemed absolutely necessary, believing that fewer banks and better bankers is the solution to the bank failure problem, as nearly as it can be solved. Success of this policy is attested by the fact that not a single bank in the State has been placed in receivership during the last six years. During the last 16 months only New Mexico and Vermont of all the States failed to report a bank failure. It has been the experience of this Department that the Federal Comptroller is more lenient in granting charters for new banks than the State Banking Department. We've had one experience hero where the State Bank Examiner approved an application for a new bank at Hobbs only after several weeks delay to see if the oil boom town could support a bank. After the State bank was chartered, it was only a few weeks until the Comptroller approved application for a national bank. The result was the two banks soon merged and later a third bank took over the combined assets. If the Federal Government should enter the banking field in New Mexico and take over the State banking system, it would be the death warrant for the unit banks. Loss of Personal Contact. Fr All personal contact between a banker with authority and the community would be gone. I believe the local bankers are better qualified to know the financial needs of any given community than the head of a chain banking system, which the Government banking system in effect would be. A branch banking system is no stronger than its weakest bank. There are cases on record where failure of one member of a branch banking system caused failure of other members. This could not happen under the unit system. The bank failures In this State in the panic suffered in the early 1920's demonstrated the weakness of too many banks. Where the State had over now. During the crash over 60 banks in the State 100 then, there are 47 all railed, whereas during the present period of depression not only have open, but they report a healthy condition, the banks remained am political control should be established. I under banking If branch to convinced that more banks would be forced on communities unable support them. Depositors. Protection of between community and bank would I am positive the personal contact compensating good resulting, so far as Now Mexico is be lost without a concerned. always safety. We have devised no means to le first consideration is United States, like they have in China, where, prevent bank failures in the 3767 when a bank fails, all officials and employees from president down to janitor are beheaded. China has few bank failures. Under our present laws depositors of money can best be protected under a system calling for fewer banks and better bankers. I do not believe National branch banking can accomplish this as well as continuance of the unit system under State control. Single Bank System Under Federal Control Opposed by Head of Virginia Banking Department. From Richmond (Va.) May 9 the "United States Daily" reported the following: Myon E. Bristow. head of the Virginia State Banking Department, does not favor the proposal for the inclusion of all banks in a single system under Federal control and superivion which would result in the abolition of State banking systems, he has stated orally. “I am naturally opposed to the abolition of State bank systems and consider the proposition as being an extremely wild one," Mr. Bristow said. — Considering the State bank resources which are approximately 50% greater than those of the Federal banks, the question is absurd on its face and I trust that it will not be considered seriously by Congress even if it has the power to do so, which is doubtful. "It may be natural for the troubles which we have had to cause some to think along radical lines, but on the other hand it would be exceedingly unwise to enact any radical legislation. This is just the time that one should keep his feet on the ground and wait until times are normal and then correct the defects which have been disclosed in a safer and saner atmosphere. The failure of a large number of small banks has greatly swelled the number involved but their resources have been relatively small. The failure of a few large institutions easily equals a very large number of small ones. It must be conceded that we have been too free in chartering banks in the past. That situation is gradually adjusting itself through sales, mergers and some failures. "III my opinion, the attempt to abolish State banks,instead of improving our financial conditions, would greatly add to our financial difficulties and complicate them immeasurably." Bill for Federal Guarantee of Deposits Opposed in South Dakota—Branch Privilege Provision of Glass Measure Also Criticized by State Official and Bank Group. From Pierre,S. Dak.,May 17, the "United Statespaily" reports the following: Objection to Federal legislation permitting national banks to operate branches regardless of State laws on the subject and to statutory guarantee of bank deposits has been expressed by the Depositors Guarantee Fund Commission and the Superintendent of Banks of South Dakota. A statement issued by the Superintendent of Banks,E. A. Ruden,follows in full text: As Superintendent of Banks of South Dakota. I believe I voice the sentiment of at least 90% of the banks in this State in saying that Section 19 of the Glass bill now before Congress would be detrimental to the interests of our banks. Opposes Guarantee Plan. The-experience in South Dakota as well as other States, with reference to the guarantee of deposits proved so unsatisfactory that it does not now appear to be consistent with sound banking principles that the provision to guarantee deposits would meet with serious consideration. In our own State it placed conservatively managed institutions on a par with the ones that were conducted by incompetent and inexperienced bankers. Inasmuch as deposits in all banks were presumed to be guaranteed the conservative banker was at a disadvantage in competing with other institutions that were too liberal in granting credit. At a:recent meeting of the Depositors Guaranty Fund Commission of this _State the following resolution was unanimously adopted: Resolution Adopted. "Resolved, That this Commission is opposed to the provision of the Glass bill now before Congress, seeking to permit national banks to establish branches in States where State banks are not given the same privilege. "In view of the experience in South Dakota, as well as other States, in their attempt to guarantee bank deposits, it has been clearly demonstrated that such a system is unsound in principle as well as in practice. "Therefore, be it further resolved That we are opposed to any legislation attempting to guarantee deposits in banks whether such banks are members of the Federal Reserve System or otherwise. "Lie it further resolved, That a copy of these resolutions be sent to our Members in Congress and to all State banks in South Dakota. Sound Business Revival Must Begin in Increased Consumption Says President Haas of American Bankers' Association--Restoration of Buying Power Dependent on Restoration of Public Confidence and Return of Sense of Security as to Employment and Wages. Breaking the "vicious circle" of depressive business influences is the paramount need of the hour and can be accomplished only by all business men working together to restore public confidence and buying power through a returning feeling of security, Harry J. Haas, President of the American Bankers' Association, declared in an address before the New Jersey Bankers' Association, in Atlantic City, on May 13. "There is a great volume of unsatisfied requirements overhanging the market," Mr. Haas said. "People have economized too much and too long. This suspended buying will be replaced by effective purchasing demand as soon as people feel that their jobs are secure, that the period of wage-cutting has come to an end, that the destruction of values and purchasing power will go no further. The restoration of purchasing power is the paramount need. It can be accomplished only by restoring public confidence, and public confidence can be restored only by the return of a 3768 Financial Chronicle sense of security. Each in the scope of our business influence can do our part to re-establish security." Mr. Haas said in part: "Just now the great problem that confronts us is to find some way to break the vicious circle of depressive influences that have the nation's business in their grip. No one of us by his own business policies can break it—but all of us working together can bring it to an end. There is a great deal of the psychological element in the vicious circle—whose cure can be brought about by changing our own mental attitudes and using our influence to change public fear into growing confidence. "It is difficult to say just when the vicious circle begins to operate in a depression. In fact, it is more like a vicious spiral than a circle. It starts in relatively small swings, but as it sinks lower and lower with the deepening of depression it swings in ever-widening reaches that finally become a public menace. I believe we can describe the beginning of this vicious spiral in the present business reaction as the contraction of current buying power that set in in 1929. At the height of our prosperity a large part of our activity was financed by borrowed buying power. "In every direction, except th the actual volumes of the United States currency and commercial banking credit, there was tremendous inflation. It was this inflation that financed the speculative rise of prices in securities and kept the excessive activity of business going. In other words, the great, perilous structure of over-priced security values, overproduction in many lines of industry, and overtrading in commerce was made possible by a tremendous credit inflation outside of the currency and commercial credit structures. It was this situation that was all set for the devastating effects of the vicious circle that began to move in rapidly increasing spirals Iii 1929. "Without attempting to state a rigid sequence of events we find the following developments: "(1) There was a cessation of foreign loans by this country—and this meant decreased foreign purchasing power in our markets with adverse effects on our foreign trade. "(2) The reaction to this was slackened business for industry and an Impairment of speculative confidence in the stock market, starting the liquidation of the inflated price structure. "(3) A panicky contraction of the call loan credit structure began, causing a contraction of effective purchasing power and a further drop In values. "(4) Slackening trade increased the fall in commodity prices progressively and further injured the prospects of corporate enterprise on which the speculative security price structure depended. "(5) Falling prices and volumes of trade impaired the confidence of business men who began to curtail operations, reduce payrolls and cut dividends. "(6) Reduced payrolls and dividends meant reduced public purchasing power, and a further contraction of credit and money as people reduced their installment purchasing commitments and current expenditures, resulting in a slowing down in the velocity of money. "(7) Fear became general, and the vicious spiral was by now swinging in its full scope through our whole economic and social life, bringing ruin wherever it struck. "Under the spell of fear the reaction went too far in every direction. In wave after wave of liquidation securities pricee--even the prices of United States Government bonds—dropped beyond all reason. The panic seized the public. Public buying ceased—in place of prudence and sensible economy an excess of retrenchment in expenditures and purchases set in as Increasing numbers of people lost their jobs or received wage cuts and other people grew more and more fearful that they would be the next to suffer a like fate. "In business and industry also a panicky fear drove the wave of reducing payrolls too far, perhaps, in some directions—although of course each individual concern had to judge for itself as to whether or not it would have to adopt extreme measures of caution to conserve its position. There is no doubt, however, that the reaction from optimism to pessimism swung too far in every direction and that values have been reduced and activities cut down beyond all reason. The result is that we are now greatly overdeflated. . . . "I do not mean to say that business endeavors should be undertaken that are not justified—but I do mean that an important element in business policy just now is to create moral courage—to avoid, each in the scope of his own influence, any further destruction of confidence. "Sound business revival must begin in an increase in consumption. It cannot be created merely by an increase in credit, nor an expansion in uncalled for production. But moral influence can be brought to bear on the public mind aimed to release, by a restoration of confidence, the potential buying that now exists. "Just as the vicious circle I have described progressively spread its influence and bred fear, so can a beneficent circle be started whose as power to breed confidence on an ever-widening scale should be just effective. Bad news travels fast from person to person. A man loses his security, of employment and all his friends, who had begun to have a sense know of it and fears are aroused all over again. Wages are cut here and there—and the indirect economic effect in the form of broken morale among others is greater than the direct effects on those immediately concerned. A concern cuts down its production or sales schedule or cancels its plans, possibly in an excess of caution, and as from a stone thrown in a pond, a wide circle of mental depression spreads out among those who hear of it. A large volume of potential buying power is frozen up by the fears that are created. "Good news also spreads rapidly. A contract let, a construction begun, a payroll increased—things like these bring relieved smiles and courage wherever they are mentioned—they give confidence to others—they increase moral purchasing power. That Is the beginning of the beneficent circle whose gradually widening swings will gather headway and power, touching a broadening scope of our economic life, bringing business regeneration in all directions until finally prosperity Is once more established." Merchants' Association of New York Condemns As Unsound and Dangerous Goldsborough Bill Directing Federal Reserve System to Maintain Purchasing Power of Dollar. The Goldsborough bill, purporting to be a measure to restore and maintain the purchasing power of the dollar, which passed the House of Representatives on May 2, was condemned as a measure "so unsound as to be absurd, if it were not potentially so dangerous," in a report authorized on May 15 by the Executive Committee of The Merchants' May 21 1932 Association, of which Thomas J. Watson, President of the Association, is Chairman. The report was drafted by the Association's Committee on Banking and Currency at a meeting of the Committee which was attended by Chairman Percy H. Johnston, President of the Chemical Bank & Trust Co.; Willis H. Booth, Vice-President of the Guaranty Trust Co. of New York; Fred I. Kent; Henry Fletcher of Fletcher & Brown; George W. Naumburg; Thomas S. Lamont of J. P. Morgan & Co., and Richard Whitney, President of the New York Stock Exchange. All of these members of the Committee united in the conclusions. The report of the Committee roads as follows: This brief measure declares it to be the policy of the United Statist that the average purchasing power of the dollar as ascertained by the Department of Labor in the wholesale commodity markets for the period covering the years 1921 to 1929, inclusive, shall be restored and maintained by the control of the volume of credit and currency. The Federal Reserve Board, the Federal Reserve banks and the Secretary of the Treasury are charged with the duty of making effective this policy. Theoretical schemes for stabilization of the price level have been discussed more or less for several years, but have hitherto made no progress In a practical way. While something may be said in favor of retarding changes in the general price level, there are so many factors entering into the determination of that level as effectively to obscure the exact causes operating to change It at any time, and to Involve a considerable element of risk in any attempt to retard price changes even by the use of complete freedom of judgment and administrative discretion as to how far and how long such attempts should be pursued. To transmute such a theoretical concept into a rigid statutory requirement and to bind our banking system, come weal or woe, to an arbitrary and quite inflexible price level Is so unsound as to be absurd. if it were not potentially so dangerous. It is the difference between giving the captain of a ship authority to run before a storm or to ride it out at the end of a long cable and ordering him to anchor in a given spot with a short, fixed length of anchor chain which would leave the ship alternately aground and submerged. What is sought at the moment Is a short cut back to prosperity by a feat of legislative legerdemain. The level of commodity values can be raised now but only by abandoning the gold standard. This would result In raising prices in depreciated paper and the net gain would be nothing because of depreciated purchasing power. Our last state would be worse than our first because we should have destroyed what little confidence business and industry still retain and have nothing to put in its place. The Goldsborough bill is essentially in a class with measures to stabilize prices by governmental purchase of uncontrollable surpluses and to help debtors by the destruction of creditors through the issuance of fiat money. Your Committee, therefore, recommends that the Association oppose any and all attempts to impose the statutory duty of maintaining price stability upon our banking system. A telegram was sent to the Banking and Currency Committee of the Senate advising that Committee of the conclusions and a copy of the report was mailed to the Committee. Copies of the report have also been placed in the hands of the Senate leaders, the Now York Senators and President Hoover. Recent references to the bill appeared in our issues o May 7, page 3379, and May 14, page 3571. ITEMS ABOUT BANKS, TRUST COMPANIES, &C. Arrangements have been made for the sale of two Now York Stock Exchange seats, one at $81,000 and the other at $80,000. The previous sale of a seat was on May 10, at $85,000. The sale at $80,000 equaled the low price set for the year on April 9. J. Stewart Baker, Chairman of the Board of The Manhattan Company, of New York, when approached on May 16 with reference to rumors that the Bank of Manhattan Trust Company would merge with some other institution stated without reservation that the Bank of Manhattan Trust Company has had no such negotiations with any institution, that no negotiations of any kind are now being considered, aid that none are in contemplation. The statement by Mr. Baker further said: He pointed out that the Bank of Manhattan Trust Company continues to maintain its unusually strong liquid position in relation to its deposits. He further stated that the New York Title and Mortgage Company is not indebted in any amount directly or indirectly to the Bank of Manhattan Trust Company. He added that the consolidated net earnings of The Manhattan Campany and its subsidiaries continue satisfactory and for the first quarter of this year amounted to more than double the dividend requirements for that period and that there is every reason to believe that the payment of the dividend at the present rate will be continued. James E. Hollingsworth was elected a Vice-President of the Central Hanover Bank & Trust Company of New York et the meeting of the Board of Trustees held on May 17. William Caryl Cornwell, Economist of the New York Stock Exchange firm of J. S. Bache & Company, 42 Broadway, died on May 11. Mr. Cornwell, who was 80 years old, was editor of the Bache Review,issued by the firm. He was one of the founders and the first President of the New York State Bankers' Association. Mr. Cornwell began his banking career in Buffalo, serving as Cashier of the Bank of Volume 134 Financial Chronicle Buffalo from 1878 to 1893 and as President of the City Bank of Buffalo from 1893 to 1901. While Chairman of the Committee on Education of the American Bankers' Association (1897-1900), Mr. Cornwell devoted his time to promoting the establishment of the American Instit ute of Bank Clerks and urging upon the American Bankers' Association to undertake the project. The Council is said to have been reluctant to take such a responsibility, but after Mr. Cornwell's report and appeal in a speech on the floor of the convention at Richmond in 1900, the Association unanimously requested the Council to appropriate $10,00 0 toward undertaking the formation of the Institute. The Institute was organized with Mr. Cornwell as its first President. In 1893 he served as Vice-President for New York State of the American Bankers' Association. He was also a member of the Executive Council of the Association from 1893 to 1896. Mr. Cornwell was active in the work of the New York Board of Trade of which he was a Vice-President. On May 3 the Hellenic Bank Trust Compa ny, 51 Maiden Dane, New York, withdrew its applic ation filed with the New York State Banking Department asking for permission to change the location of its place of business to 534 Eighth Avenue. The filing of the applic ation, which was dated February 29, was noted In our issue of March 12, page 1895. Permission was granted on April 28 by the New York State Banking Department to the Morri s Plan Company of New York, 33 West 42nd Street, to open a branch office at 110 East 125th Street about August 1. The authorization Is conditioned upon the discontinuance of the branch office heretofore authorized to be maintained at 1413 Fifth Avenue. The Banking Department announced that this is in lieu of change of the branch location to 113 East 125th Street authorized on March 17, which the institution advise d they do not wish to exercise. A previous reference to the Morris Plan Company was given in our issue of March 26, page 2276. The Morris Plan Company of New York also received permission April 28 from the New York State Banking Department to open a branch office about August 1 at 36 Graham Avenue in Brooklyn conditioned upon the discontinuance of the branch office previously authorized to be maintained at 804 Manhattan Avenue, also in Brooklyn. A reference to the filing of the application appeared In these columns April 9, page 2657. The application dated February 29 which was filed with the New York State Banking Depar tment by the National Bank of Greece, Agency, 51 Maiden Lane in New York, for permission to move its office to 534 Eight h Avenue was withdrawn by the institution on May 3. The filing of the application was indicated in our issue of March 12, page 1895. Francis H. Moffet, Vice-President and Secretary of the Metropolitan Savings Bank, 1 Third Avenue, this city, was elected President of the bank at a meeting of the Trustees. Mr. Moffet succeeds Robert D. Andrews, who died on April 23. At the same meeting Hugh B. Gardner, formerly with the Union Square Savings Bank of New York was appointed Secretary and Harry B. Kern Assistant Secretary. An item on the death of Mr. Andrews was given in our issue of April 30, page 3212. Indictments against eleven office rs and directors of the closed World Exchange Bank, at 174 Second Avenue, New York City, charging violations of the penal and banking laws In making loans in excess of legal limits, were dismissed on May 16 by Judge Max S. Levin e in General Sessions, on motion of Isidor Gainsburg, lawyer, of 35 Wall Street, in behalf of the defendants. From the New York "Herald Tribune" of May 17 we quote: It had been charged that a loan of $60,000 by the bank to Louie Marcus and the Marcus Contracting Company had carried the outstanding loans above the legal limits. The bank was taken over by the State Banking Department in March 1981. Judge Levine found yesterday that the loan had been repaid, depositors had been paid in full and a surplus accumulated for stockholders. Those freed of the indictments were Meyer Greenberg, lawyer, Chairman of the Board; Joseph Sheldon, President; Morris Gurin, Jacob Pomeranz, Louis Goldman and Charles Illions, all Vice Directors, and the following Directors: Jacob H. Cohen,-Presidents and Louis Marcus, Paul Herring, Henry Yohalen and David Mandel. "I am convinced," Judge Levine said in his decision, "that there is no warrant in law for this indictment and that the testimo ny adduced before the Grand Jury in no way indicates the ceenorbsion of any crime on the part of the defendants." 3769 Items regarding the World Exchange Bank appeared in our issues of March 21 1931, page 2125 and March 19 1932, page 2088. John M. Haffen, Chairman and former President of the Bronx County Trust Company, Bronx, N. Y., died on May 15. Mr. Haffen, who was 60 years old, was President of the Haffen Realty Company and Treasurer of the North Side Savings Bank. He also was a director of the follow ing companies: The Bronx Fire Insurance Company, the Bronx Title and Mortgage Guarantee Company, the Eureka Cooperative Savings and Loan Association and the Sound View Land and Improvement Company. Mr. Haffen serve four d terms as President of the Bronx Board of Trade. Harry V. Kelly, Assistant Secretary and regional office r of the Brooklyn Trust Company in charge of branches in the Coney Island area, died on May 15 at his home in Brook lyn. Mr. Kelly was 46 years of age and had been ill only a short time, having suffered a paralytic stroke about three weeks ago. Mr. Kelly was born in Ottawa, Illinois, and entered the employ of the 26th Ward Bank, 2590 Atlant ic Avenue, on July 15 1901. He continued with the Mechanics Bank of Brooklyn after the merger of the 26th Ward Bank in 1903 and was appointed an Assistant Cashier of the Mechanics Bank in 1920. After the merger of the Mecha nica Bank with the Brooklyn Trust Company in 1929, he was elected an Assistant Secretary of the latter institution and transferred from the 26th Ward Office to the Coney Island region. Mr. Kelly was a trustee of the East New York Savings Bank, a director of the Empire Title and Guarantee Company, and had other business affiliations . Elton H. Spink, Chairman of the Board of the Citizens' Bank of Attica, N. Y., and a Civil War vetera n, died in Attica on May 12 at the age of 90 years. Mr. Spink, who was born in Orangeville, N. Y., was President of the Attica bank for 15 years before becoming Chairman of the Board. He served in Company 0, 160th New York Volunt eers. Incident to the taking over last week of the Atlantic National Bank of Boston, Mass., by the First Nation al Bank of Boston, a special meeting of the stockh olders of the former has been called for June 6 next to approve the agreement between the institutions for the transf er of substantially all the assets of the Atlantic Natio nal Bank and assumption of all its deposits and acceptance liabilities by the First National Bank of Boston, accord ing to Boston advices on May 9 printed in the "Wall Street Journal." The stockholders will also be asked to vote on winding up the affairs of the Atlantic National, it was stated . The Boston "Transcript" of May 18 states that the Rockland Trust Co. of Rockland, Mass., has absor bed the Cobasset National Bank at Cohasset, Mass., and will operate a branch office in the latter's present quarte rs. The closing of the Leominster NationallBank of Leominster, Mass., on May 16 was reported in Associated Press advices from that place on the date named. A notice posted on the door stated that the institution had been taken over by the Comptroller of the Currency. The dispat ch continuing, said: Directors and the clerical staff had been on duty since Saturday until 3 a. m , to day and the directors returned to the bank again after a few hours respite. F. C. Williams of the Federal Reserve Bank of Boston arrived Saturday to assist the directors. Although the institutions Ka independent, a conside rable run on the Leominster Savings Bank. ..across the corridor from the Leominster Nationa l Bank developed to day Officials of the Savings Bank assured depositors that it was sound. The 90-day clause had not been invoked. The last available statement of the bank's condition,issued Dec. 31.last. showed total resources of $2,390,297, includi ng cash of $243,397, bonds and securities other than 'United States bonds 5754.367, and notes discounted $1.235,042. The Boston 'Transcript" of May 16 stated that the closed bank as of Dec. 31 had deposits of $1,92 0,000, capital of $150,000 and surplus and undivided profit s of $172,000. The following, with reference to the affairs of the Windsor Locks Trust & Safe Deposit Co., Windsor Locks, Conn., which closed Dec. 18 of last year, appeared in the Hartford "Courant" of May 14: William H. Leete receiver of the Windsor Locks Trust 8: Co., was authorized 'Friday (May 18) by Judge John A. Safe Deposit Cornell of the Superior Court to pay full commercial department deposits of $10 or less. There are 730 accounts in this class, represe nting a total of $1,798.02. The receiver also was authorized to pay current bills of the receivership and the State tax on savings deposits if the Supreme Court of Errors, which now has the latter question under consideration, approves. 3770 Financial Chronicle May 21 1932 Further referring to the affairs of the defunct Unionville Bank & Trust Co. of Unionville (Hartford County), Conn., which closed its doors Jan. 2 1932, the Hartford "Courant" of May 19 contained the following: A dividend of 25% will be paid by the Citizens' National Bank, which was closed some time ago due to frozen assets. The dividend will be sent to depositors Saturday (May 14) and was made possible through a loan from the Reconstruction Finance Corporation. The Travelers Bank & Trust Co. will send out checks to-day (May 19) to depositors in the commercial department of the Unionville Bank & Trust Co. and is prepared to make payments during the early part of next week to savings depositors. Payments to be made by the Travelers Bank 8: Trust Co. to-day will be In conformity with the order of the Superior Court and will be for 35% of the deposit balance of the customers. On Monday, Tuesday and Wednesday of next week representatives of the Travelers Bank & Trust Co. will be at the Unionville Bank & Trust Co. in Unionville to make payments to depositors in the savings department. Depositors with balances of $10 or less will be paid in full. Those with balances in excess will be paid 20% of the amount called for. Customers are required to present their passbooks. Francis A. Callery of New York City, a son of the late James D. Gallery, President and a director of the Diamond National Bank of Pittsburgh, was elected a member of the Board of Directors of the institution on May 17 to succeed his father in that capacity, according to the Pittsburgh "Post Gazette" of May 18, which furthermore said: Announcement was made on May 17 that Claude H. Meredith, Secretary of the Elizabeth Trust Co. of Elizabeth, N. J., had been promoted to the Presidency of the institution to succeed John J. Stamler, who resigned because of ill health, according to Elizabeth advices to the New York "Times," which also said: He started his banking career twenty-eight years ago as a runner with the Chase National Bank of New York. Mr. Stamler last week relinquished the Presidency of the New Jersey National Bank & Trust Co. of Newark. He was taken ill several weeks ago, but is reported to be recovering at his home here. George H. Neubeck, Sr., President of the Mutual Savings Fund Harrnonia, Elizabeth, N. J., and a resident of Union County for 51 years, died on May 12 at his home in Roselle Park, N. J., after a long illness. Born in Bavaria, in 1856, he came to Elizabeth in 1881. His first job was in the Elizabeth plant of the Singer Manufacturing Co. Alin Neubeck joined the staff of the bank in 1891, and in 1919 was elected President. During his years with the institution he saw it grow from 800 accounts to more than 25,000. Advices from Belvidere, N. J., printed in the Newark "News" of May 11, contained the following with reference to the affairs of the Belvidere National Bank, which closed the early part of October 1931: Depositors of the Belvidere National Bank, Monday night (May 9), accepted the offer of Charles H. Knight and son, John Knight, of Easton, Pa., to proceed with plans formulated by the Committee of 21, named by the depositors, to establish a new bank. The Knights have named as their associates F. 0. Coogan, William H. Walters and Clarence Walters, all of Phillipsburg (N. J.). They will take over a portion of the liabilities of the old bank, as outlined in the plans of the Committee and also the property of the bank. It was agreed at least five of the 11 directors will be residents of the community. The Merchantville National Bank & Trust Co. of Merchantville, N. J. (a Camden suburb), a new organization which replaces the First National Bank & Trust Co. and the Merchantville Trust Co., which closed their doors on Oct. 10 last, opened for business on May 14, according to the Philadelphia "Ledger" of May 15, which furthermore said, in part: During the first hour of banking business there were many deposits received, and comparatively few withdrawals made. The reopening of the new bank, at Park Avenue and Center Street, was made possible by a six weeks' campaign to raise $300,000 new capital. The quota was oversubscribed by $25,000. Edward E. Shumaker, former President of the R. C. A.-Victor Co., is temporary President of the bank. The new stockholders' and reorganization meeting will be held in 30 days. On May 12 the Pennsylvania State Banking Department added 30 days to the period for the cashing of checks representing a 10% first advance payment to depositors of the defunct Olney Bank & Trust Co. of Philadelphia, according to a dispatch from Harrisburg to the Philadelphia "Ledger" on that date, which went on to say: Originally the department fixed 60 days as the period for cashing these checks, that period expiring May 17, but to-day, because a great number of the checks had not been cashed, the period was extended 30 days from May 17. The checks were drawn upon the Union Trust Co. of Pittsburgh. With reference to the affairs of the defunct Mountain City Trust Co. of Altoona, Pa., a dispatch from that place on May 9 to the Pittsburgh "Post Gazette" said: Judge Marion D. Patterson to-day (May 9) directed George Taylor, Deputy Secretary of Banking in charge of Mountain City Trust Co., which closed in February 1931, to sell at face value of all bank's securities. They include bonds of City of Pittsburgh and Allegheny County and other municipalities, Liberty and Philippine Island bonds, all regarded as gilt- Callery is a member of the firm of Emanuel & Co. of New York, members of the New York Stock Exchange. He has resided in New York for seven years and will continue to make his home there, but will divide his time between New York and Pittsburgh. He was educated at Princeton, leaving there to join the aviation service during the war. At a meeting of the directors of the Central National Bank of Wilmington, Del., held May 2 last, Howard F. McCall, Cashier of the institution, was elected a Vice-President, to fill the vacancy caused by the resignation of Philip J. Carpenter, who remains a member of the Board. Mr. McCall still continues as Cashier. Robert P. Robinson is President of the institution. On April 6 1932, the Citizens' National Bank of New Lexington, Ohio, capitalized at $75,000, was placed in voluntary liquidation. It was succeeded by the Peoples' National Bank of New Lexington. The Citizens' Trust Co. of Fort Wayne, Fort Wayne, Ind., was closed on May 17 and its affairs taken over by the Indiana State Banking Department, following the suicide the previous day of Will B. Gutelius, Executive Vice-President and Secretary of the institution. Associated Press advices from Fort Wayne, in reporting the closing, furthermore said: An autopsy on Mr. Guteliu
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