Reserved Reserve

Economists have about the same fun drawing conclusions from the weekly reports of the Federal Reserve System as scientists do drawing new diagrams of the atom. On one series of the complex Federal Reserve statistics all commentators are agreed--that the rise and fall of commercial loans by U. S. banks is usually a good measure of business activity. Thus, all through Depression II the volume of credit issued to business has fallen (with occasional minor reversals) some $20,000,000 a week in New York City, another $20,000,000 in the rest of the U. S. Last week, however, Federal Reserve summaries for reporting banks in 101 cities showed the trend had been reversed for three consecutive weeks of August: loans rose $30,000,000 in New York City, $11,000,000 outside. Though there is always a seasonal expansion in August and though there was a slump in the week before Labor Day, Reserve officials asserted that the figures indicated the beginning of recovery had come to commercial credit as it has to the Stock Exchange and to most businesses.

More interesting to a few close followers of Federal Reserve figures last week was the fact that since June 15 the Board had not broken down commercial loans by collateral. It used to state each week how many loans were secured by securities, how many by other property, or unsecured. To analysts of the figures this seemed most important, for if volume of commercial loans against securities was heavy (it sometimes ran more than 50% of the total) the indication was that the borrowing was not so much for commercial purposes as a mere hocking of securities to carry inventories, etc. Commercial loans rose at the end of 1936, for example, indicating apparently that business was expanding; actually much of the borrowing was to carry ponderous inventories; was therefore a sign of danger rather than optimism.

Suspicious bankers last week still could get no satisfactory explanation for the change from the reserved Reserve, wondered what New Deal financial shenanigans it might foretell. But Reserve officials pooh-poohed such fears, insisted they had discontinued the tabulation because it proved an unsatisfactory way to show the purpose of loans.

Last week the U. S. Government also did the following for and to U. S. Business:

P:Began hearings preparatory to enforcing the utility "death sentence" upon sprawling Utilities Power & Light Corp. As SEC announced it would do last July, it set about breaking up this "scatteration" of utility holdings in the first exercise of its most bitterly attacked utility duty. Attorneys for Associated Gas & Electric Co. and Atlas Corp., the two concerns with the biggest stakes in U. P. & L. since it went into 77B reorganization promptly indicated that the case might proceed to a Supreme Court test of the "death sentence," as most of the industry expected.

P:Extended its wheat export subsidy plan to flour. Fortnight ago W. Lee O'Daniel, flour salesman and Democratic nominee for Governor of Texas, suggested the idea. Last week AAA announced it expected to dispose of 5,000,000 bbl. abroad.

P:Cracked down upon Minneapolis Commodity Broker S. W. Gongoll and eight affiliated companies. Charging him with falsely reporting his position in commodities as required by the Commodity Exchange Act, Secretary of Agriculture Henry A. Wallace ordered him to show cause why he and his firms should not be refused trading privileges.

P:Redefined its Monopoly Investigation. To the Independent Bankers Association in St. Paul, Thurman Arnold, Assistant Attorney General in charge of trustbusting, likened business competition without effective anti-trust enforcement to a prizefight without a referee. Said he: "In such a contest the man who puts on brass knuckles will win. This situation will not be solved by hanging mottoes of fair play on the four posts of the ring. . . . We should not blame great industrial organizers. In a hard-played game, an aggressive team will go as far as the imposition of penalties permits, or else it will lose to the team which does. . . . Today there are laws going in all sorts of directions which need to be reconciled. 'There are new problems which need more immediate attention. That is the function of the monopoly committee. . . ."

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