Still Easier Money

To grease the ways for this week's record-breaking $4,000,000,000 Federal bond issue,* the Federal Reserve Board cut reserve requirements for the New York City and Chicago banks to 20%. It was the third reduction since August.

Just before the cut the 37 reserve banks in New York City had only $90,000,000 of excess reserves on Sept. 30--a five-year low. The Chicago banks were actually reported to have a small deficit. Obviously this left the banks in no position to underwrite any large part of the biggest bond issue ever, so close to half a billion dollars was added to their free cash by a cut in their requirements. As it becomes necessary to have them buy more Government bonds their reserve requirements can still be cut much lower, possibly to the statutory limit of 13%.

Main reason last week's cut was limited to New York and Chicago is that the war effort is siphoning money out of those two cities and pouring it into other districts which received a bigger share of defense contracts.

*The fourth Liberty loan in 1918 was $6,000,000,000; the Victory loan in 1919 was $4,500,000,000, but the Government took almost a whole month to float each of these issues.

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