Bull, Bear, Lion, Lamb

Bulls, of whom there were many, and bears, of whom there were few, looked last week toward Philadelphia. Traders felt, and with reason, that the deliberations of 5,400 U. S. bankers, gathered for the meeting of the American Bankers' Association, held a more or less potent threat to the stockmarket. Many a banker, speaking for himself or his bank, had warned against frenzied speculation. The market had kept its strength, had soared through a record month. But traders feared the effect of a solemn and public pronouncement from the Philadelphia convention. Resolute bulls faced the 5,400 bankers with hostility.

The effect of the warnings from Philadelphia could be guessed and fought. What could not have been guessed was a 300-word statement from John Jacob Raskob, which came like a knife-thrust in the market's back. With Arthur Cutten, and the Brothers Fisher, Mr. Raskob has stood in the front rank of the bulls. His slightest intimations have lifted stocks nearly 40 points. His name, linked with the Du Pont interests, has been synonymous with a mysterious but potent pool operating in market leaders. Amazing, almost traitorous, appeared this statement, released on the very day the 5,400 bankers were preparing their formal edict:

"Since I have taken this position as Democratic National Chairman (TIME, July 23), I have not purchased any stock whatever.

"It is my opinion that security prices have so far outrun demonstrated values, earning power and dividend returns that a material readjustment is necessary before they will again be attractive to the prudent investor. . . ."

"My name has frequently been mentioned as being prominently identified with Chrysler Corp. and Radio. As a matter of fact I have never owned and do not own a single share of Chrysler Corporation stock, and the stock in the Radio Corp. which I hold was purchased outright by me a long while ago and held as an investment.

"I am not interested, directly or indirectly, in any pool or stock market operations."

Stockmarketeers gasped and gaped. It was not so much that Mr. Raskob had exploded the current myth of the Raskob-Du Pont pool. It was not impossible to believe that he had been out of the market all summer. But that the great bull should have turned into a bear was a blow which could only be described as catastrophic. Seeking a parallel, traders suggested that Nominee Hoover might issue such a statement as this: "My name has been frequently mentioned as being prominently identified with the Republican party. As a matter of fact I have never been a Republican. I am a firm believer in Jeffersonian Democracy."

In deference to the death of a bull, birth of a bear, the market sagged a few respectful points. But the same inexplic- able strength which fortified it against the 5,400 bankers remained to repel Mr. Raskob's attack. The market recaptured its stride.

Thrifty v. Shifty. Most blistering in his attack on the stockmarket was Col. Leonard Porter Ayres of the Cleveland Trust Co. To the convening bankers he said:

"The transition to a new and sober era is not going to be easy. The American people are in a mood of invincible optimism. Three years ago they were speculating in Florida real estate and finally that bubble burst. They then speculated in urban real estate. . . . Now they have turned to the stockmarket, where prices of the stocks of mail order houses, chain stores, motor companies and soft-drink firms are selling on a basis to yield half as much as the obligations of the U. S. government. . . .

"All the experience of the past points clearly to the conclusion that prices are too high and must come down. . . . However, our concern is not about what may happen in the stockmarket. . . .

"We may look forward to the longer future with confidence, but the great rewards of business and banking during the next decade will probably go to the plodders rather than to the plotters, to the calculators instead of to the speculators, to the thrifty and not to the shifty."

Lion-like in its beginnings, the convention of U. S. bankers went out like a lamb. Scarcely had the delegates assembled when Representative Louis T. McFadden, chairman of the House Committee on Banking and Currency, introduced the mooted question of credit and the war of the banks and the bulls. He warned that the Federal Reserve policy of tight money might "produce a business slump without intending to do so." On the other hand, he warned that relaxing the policy might result in more credit going "directly into the speculative loans." Between the two horns of the dilemma, he sought a legislative solution. Perhaps the law might be amended to give the Federal Reserve "a commanding position . . . controlling all the elements . . . in the credit situation."

Not entirely clear to the layman, this threat was not misunderstood by fearful traders. It meant, in two words: "BROKERS' LOANS." And to emphasize the point, brokers' loans mounted last week to $4,569,978,000, highest for all time, surpassing even the figure for June 6. Apparently undisturbed, the stock-market went about its business, saw a seat sold for a record $425,000, dickered for the adjoining 20-story Postal Telegraph building as an annex, appointed Mrs. Catherine M. Healy of Montclair, N. J., as its first woman purchasing agent.

Chains. Unjust are the sneers which currently link Louisiana's bankers with Louisiana's onetime lotteries. Unkind are pictures of bewhiskered, bejuleped col- onels. As every Louisianan knows, New Orleans can boast many an active, enterprising apostle of sound finance. One such journeyed to Philadelphia last week to address fellow-bankers on bedrock principles of their profession. No dodderer, no lotterer, Rudolf S. Hecht is the able president of the Hibernia Bank & Trust Co. of New Orleans. German-born Banker Hecht has become so substantial a support of Louisiana industry that the Times-Picayune gratefully hailed him as New Orleans' most constructive citizen. As a reward he won the Times-Picayune trophy. For these reasons, and for one other--his passionate fondness for pastry--Banker Hecht is famed.

To attentive bankers, last week, he said:

"In the financial world, there are daily developments indicative of . . . creation of larger units. Gigantic mergers, capital increases, large new banks, additional branch offices testify that banking is following the lead of Big Business."

Banker Hecht views banking concentration, formation of chain banks, with the utmost alarm. Articulate, he found phrases: "Financial feudalism . . . economis vassalage . . . financial octopus . . . Branch banking is a monster of such frightful mien." He quoted figures: "During the past 25 years, the number of branch banks has practically doubled each five years."* He classified, adroitly: "We still have the nation's financial business carried on by literally 57 varieties of banking institutions (48 different kinds of state banks, national banks, federal joint stock land banks, federal land banks, federal reserve banks, federal intermediate credit banks, postal savings system, mutual savings banks, trust companies, private banks)."

To point his remarks, bankers heard that the investment firm of S. W. Straus & Co. was planning to establish a new chain of banks, using the Straus National Bank & Trust Co. (Chicago) as a nucleus.

Glad Hand. Obviously, the sessions of the bankers were heading to a climax. Last of the important speakers was to be no less a personage than Roy Archibald Young, governor of the entire Federal Reserve system./- As the Federal Reserve had taken the lead in the war on speculation, as the credit situation was the only real issue at Philadelphia, bankers waited with intense interest for what Governor Young might say. In Manhattan, the market was uneasy.

Not all who prophesied a terrific philippic knew Roy A. Young. Famed masters of finance have won reputations for taciturnity, austerity. But Governor Young is friendly, cheerful, talkative. He was twitted", last week, about his nickname, coined by the able financial writer for the New York World John F. Sinclair is a northwesterner, familiar with breezy phrases, breezy people. He called Governor Young, "the glad-hand artist of the Federal Reserve." The nickname stuck.

Glad-hand tactics have carried Roy Young far. At 18 he was a messenger boy in the Marquette (Mich.) bank. At 37 he was head of the Federal Reserve Bank of Minneapolis, the youngest governor in the system. Every U. S. banking tycoon knows and likes his pleasant, florid face, his easy, vigorous anecdotes. He is now 46, a satisfied, successful Scotchman.

Roy Young delivered no philippic, no bomb. If there had been any crisis at Philadelphia, no listener would have guessed it. Gov. Young told the bankers the A. B. C. of banking. He laid down some incontrovertible rules of ethics. Among them: "Responsibility of banks does not end with their depositors and stockholders. Banks also have a responsibility to the community in which they are located. . . . It is my conviction that a healthy banking situation is the best guaranty of a healthy economic development."

About credit, he said only this: "The Federal Reserve can't earmark its credit. But it can help steer the credit ship. People must not expect the impossible."

Thus, with a glad hand, did Governor Young wave aside any little unpleasantness about speculation. The Wall Street bulls beamed with relief. The press was amazed. Said Writer B. C. Forbes, bluntly, in the New York (Hearst) American: "He said nothing. Either he was muzzled by the Washington powers that be, or more likely, he muzzled himself. A high-powered shell proved to be a dud. Politics, presidential elections, are responsible for more than making strange bed-fellows."

Gloom. James E. Baum, no glad-hand artist, told bankers that as deputy manager of the protective department, he must report a distressing fact. In the year ending Aug. 31, member banks of the A. B. A. suffered 177 daylight robberies and 28 night burglaries, an increase of 55% over the previous year.

Resolution. From the convention there emerged, at length, a resolution. It caused no alarm in Manhattan. It said:

"We respectfully suggest that bank depositors who have funds for investment cooperate with their bankers to the end that nothing unsound shall develop that might result in the disturbance of the healthy business on which we must all depend for our comfort and happiness."

*There were 60 branch banks in 1900; 166 in 1905; 329 in 1910; 565 in 1915; 1052 in 1920: 2233 in 1924; 2989 in 1928.

/- There are 12 banks in the system. Most important, for psychological reasons, is the New York unit. But its governor, Benjamin Strong, was neither speaker nor delegate in Philadelphia. He lay seriously ill in a Manhattan hospital after an operation for an intestinal ulcer.