STATE OF BUSINESS: Looser Money

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There were plenty of signs last week that tight money is beginning to loosen. The Treasury Department's costs for floating its 91-day bills edged down for the second week, stood at an average 3.528%. Furthermore, interest rates on bankers' acceptances, i.e., a form of short-term commercial loans, have dropped in the past month from 4% to 3.75%.

The demand for long-term money—which a few months ago had raced far ahead of supply—was being pinched off by high interest rates. Businessmen still wanted to expand, but they were so hard-pressed to find the funds—and so reluctant to pay the steep interest—that they were shelving many marginal projects.

The Federal Reserve Board reported that, in September's last week business loans fell by $203 million. In the key New York area, loans last week also bucked the usual seasonal uptrend, declining by $15 million; in the same week last year, they rose by $89 million. For the entire third quarter, commercial and industrial loans decreased by $37 million v. an $857 million gain during the same period of 1956.

The tight-money policy was also reducing the pressure on prices. The Commerce Department's daily wholesale-price index of sensitive commodities slid to 85-3% of the 1947-49 average, the lowest since 1953, and wholesale food prices dropped sharply for the third straight week.