326 



FINANCIAL REVIEW OF 1888. 



money in London and an advance in the Bank 

 of England minimum to 3 per cent. On the 

 9th the corner in August deliveries of cotton 

 not only stopped the export of that staple but 

 it caused the import of cotton from Liverpool, 

 to the value of about $500,000, thus affecting 

 commercial bills. In September the market 

 was in an anomalous condition. Rates were 

 near the gold exporting point, because com- 

 mercial bills were small in volume, the supply 

 being limited in consequence of the scarcity 

 of freight-room which prevented free ship- 

 ments of staples. Discounts were so high in 

 London that bankers did not care to anticipate 

 a decline in the exchange market by making 

 speculative sales. Sterling was directly af- 

 fected on the 13th by an advance in the Bank 

 of England minimum to 4 per cent., and a rise 

 in the Bank of France to 3|. Toward the end 

 of the month rates were very firm, and on 

 October 4 the Bank of England minimum 

 was further advanced to 5 per cent., the Bank 

 of France to 4, and that of Germany to 4, 

 forcing a rise in sight sterling very near to the 

 gold exporting point, and on the 9th $500,000 

 was sent to London on special order. The 

 speculation in wheat stopped exports, and the 

 cotton movement was late, so that the supply 

 of commercial bills was insignificant. About 

 the middle of the month sterling fell off on a 

 better offering of bankers' bills and a lighter 

 demand, and by the close the tone was de- 

 cidedly easier, there then being a greater sup- 

 ply of cotton drafts and cheaper money in 

 London, due to the temporary suspension of 

 gold exports to South America. In November 

 commercial and bankers' bills were scarce, 

 there was a demand to cover speculative sales, 

 and rates were firm throughout the month. 

 Toward the close about $5,000,000 gold went 

 to London and Germany, wholly on special 

 order. In December the tone of the market 

 was firm for short bills and easy for long, in 

 consequence of dearer discounts in London, 

 and during the second week some bankers ad- 

 vanced short drafts to a price very near the 

 gold exporting point, but no gold was sent as an 

 exchange operation, although about $3,000,000 

 went to Germany and $2,000,000 to London on 

 special order. In the third week the exchange 

 market was quiet and firm, and $1,000,000 gold 

 went to Berlin. For the remainder of the 

 month the tone was barely steady, but without 

 any alteration in nominal rates. None of the 

 gold sent abroad this year $11,252,962 to 

 London and $14,514,467 to Berlin went for- 

 ward as an exchange operation. The metal 

 was first attracted to Great Britain by a desire 

 on the part of the bankers who were under 

 engagement to supply the Argentine Republic 

 to avoid disturbing the London money mar- 

 ket by drawing from the Bank of England. 

 On October 9 the news of the shipment hence 

 of $500,000 tended immediately to ease the 

 open market discount rate in London. The 

 exports to that center in November and De- 



cember were made because the bankers above 

 referred to, being parties to the negotiation of 

 the Russian conversion loan of 20,000,000, 

 were willing to pay a premium for bar-gold 

 amounting to about one half to one quarter of 

 a penny, per ounce below the price demanded 

 by the Bank of England. The movement to 

 Germany in the summer was, as stated above, 

 due to efforts of the Imperial Bank to augment 

 its stock of this metal, and, having obtained a 

 supply, the bank sought to retain it by advanc- 

 ing its rate of discount, and December 6 this 

 rate moved up to 4| per cent., thus aiding in 

 attracting further amounts from London and 

 New York. 



Railroads. The majority of managers of rail- 

 roads of the country claimed, in those of the 

 annual reports which at the end of the year 

 were made public, that their properties had felt 

 the effect of the fourth and fifth sections of the 

 Interstate Commerce Act, and particularly of 

 the latter, which prohibits pooling, more se- 

 verely than they did during that portion of the 

 previous year in which the act was in opera- 

 tion, for the reason that the competition from 

 new lines was great, and also because agree- 

 ments for the maintenance of rates were not 

 generally regarded. The Eastern trunk lines 

 suffered to some extent from the aggressive 

 course pursued by the Canadian roads, but the 

 old established routes felt the influence of com- 

 petition by more recently established trunk 

 lines and their connections, to which differen- 

 tials had to be given, and these rates were by 

 no means uniformly maintained. In the North- 

 west the old roads were called upon to meet 

 the competition of newly organized lines which 

 waged a guerilla warfare to get business, and 

 succeeded in keeping rates in an unsettled state 

 throughout nearly the whole of the year. In 

 the Southwest rates were forced to low points 

 by excessive competition and the aggressive 

 course of the Missouri Pacific, and the result 

 was reductions of dividends to points never 

 before reached in the history of the roads. 

 Southern lines enjoyed a greater degree of 

 prosperity by reason of an increase of traffic 

 and comparative immunity from competition, 

 but some of the Eastern roads suffered severely 

 during the year, although mainly from local 

 influences. One feature was the action of the 

 Iowa railroad -commissioners in formulating a 

 new distance tariff of rates for roads in that 

 State far below those previously ruling. This 

 action was resisted by the companies, and 

 on application to Judge Brewer, of the Unit- 

 ed States Supreme Court, an injunction was 

 granted, July 26, restraining the commission- 

 ers from enforcing the new tariff, the judge 

 taking the ground that rates must be reason- 

 able and just, and sufficiently high to ena- 

 ble the roads to meet expenses and fixed 

 charges and leave something for the stockhold- 

 ers. The manner in which the railroad com- 

 missioners prepared their tariff was made the 

 subject of a judicial investigation by State 



