Finance
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Abstract
Finance N the decreased gold inflow into the United States in June and the con tinned movement of imported gold into earmarked accounts, payments for gold from abroad continued to be an important factor in the further expansion of member bank reserves to a record total of over 10 billion dollars. Other influences were the absence of a cash offering in the June 15 Treasury financing and the net disbursements of funds by the Treasury as a result of the continued substantial excess of Government expenditures over receipts. Loans of the weekly reporting member banks to agriculture, commerce, and industry have been practically unchanged so far this year, and on June 21 aggregated 83,323,000,000. The problem of credit needs was under review during the month by the Senate Committee on Banking and Currency which held hearings on the Mead bill (S. 1482), one of several before Congress which have as their purpose the stimulation of the flow of credit to business enterprise. Security trading was in relatively low volume during June, with prices of industrial and rail stocks showing a net decline for the month. Price averages at the end of June were approximately the same as a year ago; June 1938 witnessed an exceptionally sharp rise in stock quotations which anticipated the subsequent improvement in business and earnings. Prices of high-grade bonds continued to fluctuate narrowly, reflecting the pressure of funds seeking investment in this type of security. Government bonds eased slightly after rising sharply in the 3 preceding months to record figures. Prices of speculative issues reacted with the stock market. The volume of corporate security issues for new capital purposes has continued relatively small through June. The figure on page 4 indicates the comparative volume of new flotations for recent years. June flotations were larger than in May, but the bulk of the offerings continues to be refunding issues to take advantage of prevailing low interest rates. One industrial corporation's 25-year issue of $50,000,000 of debentures, with a 3-percent coupon, was offered at 104. On June 22, the President proposed to Congress a new program of Government financing of self-liquidating projects designed to stimulate employment. Included was the suggestion of a 3-year program for the purchase by a Government agency of railroad equipment for leasing to the carriers, as well as a number of other major projects. The total program involves $3,060,000,000, with loan disbursements of $870,000,000 called for in the 1940 fiscal year. In addition, the proposal was made to expand the public housing program of the United States Housing Authority by increasing its borrowing power by $800,000,000. Referring to the suggested expenditures outlined for 1940, the President's letter states: "This program would stimulate a greater amount of productive expenditure than is indicated by the total estimated loan disbursements of $870,000,000 for the fiscal year 1940, Some parts of it will involve additional local expenditures not financed by Federal funds, and other indirect expenditures will be generated."