Federal Reserve Bulletin April 1937 - St. Louis FedFEDERAL RESERVE BULLETIN VOL. 23 APRIL 1937 No. 4...

FEDERAL RESERVEBULLETIN

APRIL 1937

Recent Money Market Developments

Interest Rates Charged by Banks

French Financial Measures

BOARD OF GOVERNORS

OF THE FEDERAL RESERVE SYSTEM

WASHINGTON

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLE OF CONTENTS

PAGE

Review of the month—Recent money market developments 283-289National summary of business conditions 290-291Summary of financial and business statistics 293Law Department:

Deduction of withdrawable dividends from amount of demand for margin under Regulation T 294Determination of market value of stock for loan under Regulation U 294

Interest rates charged by member banks 295-298United States Government corporations and credit agencies in 1936 299-303Earnings and expenses of State member banks 304Earnings and expenses of nonmember insured banks 305French financial measures 306-308Annual report of the Bank of France 309-313Annual report of the Bank of Canada 314-318Annual report of the Swiss National Bank 318-323Financial, industrial, and commercial statistics, United States:

Member bank reserves, Reserve bank credit, and related items 326Federal Reserve bank statistics 327-331Reserve position of member banks; deposits in larger and smaller centers 332Money in circulation 333Gold stock and gold movements 334All banks in the United States i 335All member banks 336-337Reporting member banks in leading cities 338-341Bank suspensions; bank debits; Postal Savings System 342Acceptances, commercial paper, and brokers' balances 343Federal Reserve bank discount rates 344Money rates and bond yields 345Security markets 346Treasury finance 347Governmental corporations and credit agencies 348-349Production, employment, and trade 350-358Wholesale prices 359

International financial statistics:Gold reserves of central banks and governments 362Gold production 363Gold movements 363-364Central banks 365-368Bank for International Settlements 368Commercial banks 369Discount rates of central banks 370Money rates 370Foreign exchange rates . 371Price movements:

Wholesale prices 372Retail food prices and cost of living 373Security prices 373

Federal Reserve directory:Board of Governors and staff; Open market Committee and staff; Federal Advisory Council 374Senior officers of Federal Reserve banks; managing directors of branches 375


FEDERAL RESERVE BULLETINVOL. 23 APRIL 1937 No. 4

REVIEW OF THE MONTH

On March 1 an increase of 16 2/3 percentin reserve requirements of member banks

went into effect, in accord-Increase in reserve ance with the action of therequirements Board of Governors of Jan-

uary 30, which also pro-vided for a final increase of the same amountto become effective May 1. As a result of thechange on March 1 required reserves of mem-ber banks increased from about $4,600,000,-000 to $5,400,000,000 and excess reserves de-clined from about $2,100,000,000 to $1,300,-000,000. Changes in total reserves held, inrequired reserves, and in excess reserves byclasses of banks over the period of the changeand the amounts of excess reserves held afterthe change are shown in the following table:

RESERVE POSITION OF MEMBER BANKS, BY CLASSES

[Dollar amounts in millions. Figures partly estimated]

Class of bank

Central reserve city banks._Reserve city banksCountry banks _._ _

All member banks

Change between last halfof February and week

ending March 12

Totalreserves

-165+103+61

- 1

Re-quired

reserves

+385+246+130

+761

Excessreserves

-550-143-69

-762

Excess reservesweek ending

March 12

Amount

435499443

1,377

Percentof re-

quiredreserves

162950

26

Country banks and reserve city banksgained reserves in the period, while centralreserve city banks lost reserves owing in partto shifts in bankers' balances. Each class

of banks, taken as a whole, early in Marchhad excess reserves more than sufficient tocover the increase in requirements to takeplace on May 1, which will amount to one-seventh, or 14% percent, of present require-ments. Country banks had the largestamount of excess reserves relative to theirrequirements and central reserve city banksthe smallest.

In view of the large amount of excessreserves remaining after the increase inrequirements on March 1 and their broaddistribution, member banks were able tomake the change with very little borrowing.The great majority of banks had sufficientreserves in excess of requirements to meetthe increase; some banks, in addition, drewupon their balances with other banks; and acertain number of banks found it necessaryto liquidate some earning assets.

In February and March there was a sub-stantial volume of sales of Government obliga-tions, both by banks and by other holders.These sales reflected in part adjustment ofreserve positions by banks in connection withthe increase in reserve requirements, and inpart other influences, particularly profit-tak-ing at the high levels of prices reached inrecent months.

As a result of the selling of securities yieldson Government obligations, both long-termand short-term, showed sharp advances inFebruary and March. There were also in-creases in open-market money rates on bank-ers' acceptances and commercial paper andin yields on corporate bonds. Variations in

283


284 FEDERAL RESERVE BULLETIN APRIL 1937

short-term money rates and in high-gradebond yields during the past 40 years areshown in the chart on page 285.

Excess reserves of member banks afterMarch 1, when the new reserve requirements

went into effect, showedExcess reserves smaller changes than areand Treasury u s u a l j p e r iod of Treasuryoperations m ^ /March fiscal operations. Usually in

quarterly tax-payment pe-riods Treasury receipts exceed expenditures,Treasury balances at the Reserve banks con-sequently increase, and the resulting with-drawal of funds from the market results indecreases in member bank reserves. In thepast two years the loss of reserves at theseperiods has been more than usually pro-nounced because, in addition to the customaryexcess of receipts over disbursements, theTreasury's balance was further augmentedby proceeds from the sale of new securities tothe public. This year the Treasury arrangedfor $300,000,000 of bills to mature during theMarch tax-payment period, in addition to theregular weekly amount, and the paying off ofthese bills out of tax receipts restored to themarket reserves that would otherwise havebeen temporarily withdrawn.

Transfers of reserves among memberbanks for the purpose of meeting the increase

in reserve requirementsWithdrawals of that became effective Marchbankers' balances l were not on a large scale

owing to the wide distribu-tion of excess reserves. There was littleborrowing by banks and withdrawals ofbankers' balances, which represent in largepart idle funds that banks place with citycorrespondents, were not unusually large.Between February 17 and March 10 depositsof other banks with weekly reporting mem-ber banks in 101 leading cities declined byabout $300,000,000. This figure includes asubstantial amount of duplication, however,since reporting banks outside New York,losing funds through withdrawal of balances

that had been placed with them, in manycases replenished their reserves by drawingupon their own balances with other banks.In addition some of these banks withdrewa part of their balances to meet the increasein their own reserve requirements. Alto-gether $130,000,000 was withdrawn fromNew York City banks and $170,000,000 fromreporting banks in other leading cities. Itwould appear that during this three-week pe-riod there were only small withdrawals ofbankers' balances by member banks outsidethe leading cities, that is, by country banks,partly because these banks were gaining re-serves through other operations. In the weekending March 24 bankers' balances wereagain reduced, reflecting in large part with-drawals to meet a Treasury call for fundsfrom depositary banks and the payment ofFederal taxes by other depositors.

There has been continued reduction inrecent weeks in the amount of United States

Government securities heldDecline in bank by reporting banks. Unlikeholdings of the decline in these holdingsGovernmentobligations during the last half of 1936,

which occurred only at mem-ber banks in New York City, the decline sincethe beginning of this year has been at report-ing banks outside as well as in New York.Reductions were substantial in the threeweeks ending February 10 and were particu-larly large in the three weeks ending March24. From the end of December to March 24,United States Government securities held byreporting member banks declined by $545,-000,000, of which $370,000,000 was in thelast three weeks of the period. A portionof the reduction in the two weeks endingMarch 24 reflected the net retirement of $200,-000,000 of maturing Treasury bills, a part ofwhich was held by weekly reporting memberbanks. Holdings of New York City banks de-clined by $110,000,000 in January and Feb-ruary and by $240,000,000 in the three weeksending March 24, and those of reporting banks


APRIL 1937 FEDERAL RESERVE BULLETIN 285

Renewed increasein commercialloans

outside New York City declined by $120,000,-000 in the five weeks ending March 3 andby an additional $130,000,000 in the twoweeks ending March 24.

Commercial loans of weekly reportingmember banks, following a sharp seasonal

decline in January, in-creased in the followingtwo months. In the eightweeks ending March 24 so-

called "other" loans, which include loansmade for commercial, industrial, and agri-cultural purposes, increased at reportingbanks by an aggregate of $225,000,000, ofwhich $100,000,000 was at banks in NewYork City and $40,000,000 in Chicago. OnMarch 24 these loans, both at New York Citybanks and at other reporting banks, exceededthe amount outstanding on December 30, themaximum since 1932.

The accompanying chart shows fluctua-tions in short-term money rates and high-

grade bond yields for theMoney rates and P a s t 4 0 years. The principalbond yields fact brought out by the chart

is that, while we are at pres-ent in a period of low rates both for short-and long-term money, short-term rates aremuch lower than in the past in relation bothto their own previous levels and to long-termrates. Principal factors in the low level ofshort-term rates in recent years have beenthe large amount of excess reserves held bymember banks together with the relativelysmall demand for loans by trade and industry.The decline in long-term rates in recent years,which has not been as great as the decline inshort-term rates, has been due principally tothe great abundance of funds in the hands ofall classes of investors, as well as to the small

MONEY RATES AND BOND YIELDS

1900 1905 1910 1915 1920 1925 1930 1935

Commercial paper rates are averages of open-market rates on 4-6 months prime commercial paper. Theindex of yields of railroad bonds is computed by the National Bureau of Economic Research to represent changesin yields of bonds of a high and unchanging- grade; the general level of this index is somewhat below averages of actualyields on high-grade bonds in all industries. Corporate bond yields are averages of yields on Moody's Aaa bonds.United States Government bond yields are averages for bonds callable or maturing after 8 years. Latest figure ineach case is for the last week in March 1937.



volume of capital issues offered in the market.With regard to the relationship between long-term and short-term rates, the chart showsthat long-term rates have shown muchsmaller fluctuations and less responsivenessto changes in business conditions.

Money rates on short-term paper in theopen market have advanced somewhat fur-ther in recent weeks. Rates on bankers' ac-ceptances have had several advances thisyear. On March 24 the offered rate on 90-daybankers' acceptances was %6 of 1 percent,compared with %6 at the beginning of theyear. The buying rate for acceptances at theFederal Reserve Bank of New York has re-mained unchanged at V2 of 1 percent. Theaverage yield on 3-5 year Treasury notes in-creased from .94 percent in December to 1.26percent at the end of February and to 1.50percent on March 24. The rate on prime com-mercial paper was advanced in the week end-ing March 27 from % of 1 percent to 1 per-cent. Rates on call and time money on theNew York Stock Exchange have remainedunchanged and rates charged on customers'loans by banks in leading cities have shownlittle change.

In the long-term bond market yields haveadvanced since last December, as prices ofUnited States Government, municipal, andcorporate bonds have declined. The declinewas shown first for municipal bonds, whichhad risen sharply in November and Decem-ber. Prices of corporate bonds began to de-cline in the latter part of January, and by thelast week of March average yields on high-grade corporate issues, as computed byMoody's Investors Service, had risen to aboutthe level of January 1936. The decline inUnited States Government obligations oc-curred first in short- and medium-term issues,but in March longer-term bonds also declined.

Offerings of new securities have beensmaller in recent weeks. Security issues

during January, aggregating $600,-Capital 000,000, were larger than for mostissues months of 1936 and included an un-

usually large amount of State andmunicipal issues. The volume of issues wasalso large during February, totaling $500,-000,000, but offerings declined sharply in thelast week of the month and continued smallduring March, with the exception of one largeissue. Corporate issues in 1937 have includeda substantial amount of common stock offer-ings both for refunding and for new capitalpurposes. During January and Februarythere were about $150,000,000 of foreignissues for refunding purposes.

Prices of common stocks, which rose tonew high levels in the early part of March,

declined somewhat after the middleStock o f t h e month. The increase duringmarket the first two months of the year oc-

curred principally in prices of in-dustrial and railroad shares, while stocks ofutility companies declined steadily after theearly part of January.

Following a temporary decline in stockprices in April 1936, a practically uninter-rupted advance for ten months, accompany-ing improvement in earnings reports, carriedaverage prices from 100 to 130 percent oftheir 1926 level, according to the weeklyindex of prices of 419 common stocks, com-puted by the Standard Statistics Company.During the twelve months ending March 31,1936, stock prices had advanced from 65 to110 percent of the 1926 average. Averageprices of industrial and of railroad stocksshowed sharp advances in both periods.Prices of utility stocks rose moderately afterApril 1936 as compared with a rapid advanceduring the preceding year.



Outstanding advances of stock exchangemembers to customers for margin trading

increased by about $150,000,-Stock market ^^0 in the five months endingcredit January 31, 1937, and in Feb-

ruary there was a further in-crease of $50,000,000 to a total of $1,480,000,-000, approximately the highest level reachedat any time in recent years. These advanceshad shown little change from May to Augustlast year, following increases in marginrequirements effective February 1 and April1, 1936.

Loans by banks to brokers and dealers insecurities, which showed little more than cus-tomary seasonal fluctuations from last Mayuntil February of this year, increased by$150,000,000 in the three weeks ending March10. In the following two weeks they declinedslightly. Most of the wide short-period fluc-tuations in those loans in recent months havereflected borrowings by dealers in Govern-ment securities, but loans to brokers alonehave increased substantially. Other loans onsecurities by banks, including loans for pur-chasing listed stocks which also were madesubject to margin requirements last May,have shown little change since the autumn of1935, following a decline lasting for severalyears.

Industrial production increased more thanseasonally in February and March and the

level for the first quarter as aRecent business whole is estimated at 116 per-developments cent of the 1923-1925 average,

as compared with 115 for thefourth quarter of 1936. In many industries,furthermore, there is a substantial volumeof unfilled orders on hand. Construction con-tracts have shown a further increase, witha greater proportion of privately-financedwork. Employment has continued to expandalthough a number of industries have beenaffected by strikes, and payrolls have in-creased, partly as a result of advances inwage rates.

Over the past year output and distributionof both durable and nondurable products haveshown continued expansion. Currently out-put of electric power and of many manufac-tures, including textiles, shoes, leather, andpetroleum products, is at a higher rate thanin 1929. Reflecting strong demand from themachinery and automobile industries andfrom many other sources, output of steel is atapproximately the high level reached in thesummer of 1929. Construction, however, isstill in considerably smaller volume than inpredepression years, and this is reflected inindustries producing materials such as lum-ber and cement, where output, though in-creasing, is at a lower rate than in most otherindustries. As compared with a year ago,construction is substantially larger, reflectingan increased volume of private work, includ-ing factory and commercial construction aswell as residential building. The number ofnon-farm dwelling units built in 1936, accord-ing to recent comprehensive estimates, wasnearly 300,000 as compared with a low of55,000 in 1933 and in 1934, a post-war highof 935,000 in 1925, and 520,000 in 1929. Fur-ther discussion of recent business develop-ments is given in the national summary ofbusiness conditions on pages 290-291.

Wholesale commodity prices have con-tinued to advance during the first quarter

and since the end of October theCommodity i n d e x o f t h e Bureau of Laborprices Statistics has risen from 81.2

percent of the 1926 average to87.6 percent, as shown in the chart on page290. Until the middle of January this up-ward movement reflected a rapid generaladvance and since that time many commod-ities have shown further substantial in-creases. Since October prices of industrialmaterials, such as iron and steel, nonferrousmetals, lumber, wool, cotton, rubber, andhides, have advanced considerably more thanprices of finished products. The followingtable shows the index of the Bureau of Labor



Statistics for three principal groups of com-modities at the end of October, the middle ofJanuary, and the week ending March 20.

WHOLESALE PRICES

(1926 = 100)

All commodities

Farm productsFoodsOther commodities

Week ending

1936

Oct. 31

81.2

82.380.2

1937

Jan. 16

85.7

92. 387.383.1

Mar. 20

94.487.985.6

The French Cabinet stated on March 5that steps were being taken to establish a free

gold market in France, toFrench financial create a new administrationmeasures of the Stabilization Fund, to

control Government expendi-tures, and to issue a large loan for nationaldefense. Translations of the official state-ment and of several legislative measures im-plementing the program are given on pages306-308 of the BULLETIN.

One of these measures, the law of March10, abolishes the system created by the Mone-tary Law of October 1, 1936, under which alltransactions in gold (including exports andimports) were made subject to authorizationby the Bank of France and owners of goldwere required to sell their holdings to theBank of France at the old legal parity or topay to the Government as a tax the full profitfrom the altered gold value of the franc.Provision is made for reimbursing those whocomplied with the October law. The new lawdoes not restore the obligation of the Bankof France to redeem its notes in gold, whichwas suspended by the law of October 1; noris the Bank required to buy gold at currentmarket prices. Such purchases are, how-ever, freely being made as a matter of policy.

A committee of four was established onMarch 6 to administer the Exchange Stabili-

zation Fund and advise the Government re-garding the maintenance of orderly condi-tions in the money market. The committeeis composed of Messrs. Labeyrie, Governorof the Bank of France; Rist, honorary vice-governor of the Bank of France; Baudouin,general manager of the Bank of Indo-China;and Rueff, manager of the General Move-ment of Funds in the French Treasury. Es-tablishment of the new committee came at atime of considerable unsettlement in the ex-change market. The franc, which had beenpegged to sterling since the middle of October,was allowed to decline sharply and the sub-sequent rise was checked at a level about1 percent lower than that which had prevailedduring the previous five months. The newcommittee, according to the official statement,is to administer the Fund with the object ofassuring the security of commerce and thestability of prices.

In conjunction with these monetary meas-ures assurance was given that, save for cer-tain necessary increases in small salaries, theGovernment would request no further ex-penditures from Parliament. On the con-trary it was anticipated that expendituresalready budgeted could be reduced by 6,000,-000,000 francs in view of the improving eco-nomic situation in France. To cover extraor-dinary credits for armaments a large loanwas announced payable in francs, pounds,and dollars.

This loan was authorized by the law ofMarch 10. It was limited to 10,500,000,000francs. A first instalment of 5,000,000,000francs was offered on March 12 and a secondinstalment of 3,000,000,000 on March 16.Both were immediately oversubscribed.They were issued at 98 with interest at 4Vkpercent and maturities of 60 years, and aresubject to call beginning March 1, 1942.Holders may elect to receive payment of in-terest and principal either in French francsin France or in Swiss francs in Switzerland,with an exchange guarantee of not less than


FEDERAL RESERVE BULLETIN 289

the equivalent of £9.7s. or $45.66 per 1,000French francs. The holder will benefit bypayment on the basis of dollars or pounds ifthe French franc at the time of payment hasa market value less than 4.566 cents per francor 106.95 francs per pound. At the time thefirst instalment was issued, the franc had avalue in the exchange market somewhat

higher than either of these rates, and sub-sequently it rose further.

Appointment of Class C Director at FederalReserve Bank

On March 4, 1937, Mr. Jay Taylor wasappointed as Class C Director of the FederalReserve Bank of Dallas for the unexpiredportion of the three-year term ending Decem-ber 31, 1939.



NATIONAL SUMMARY OF BUSINESS CONDITIONS

[Compiled March 25 and released for publication March 27]

Volume of production, employment, andtrade increased more than seasonally in Feb-ruary and wholesale prices of industrial com-modities continued to advance.

Production and employment.—The Board'sindex of industrial production, which makesallowance for changes in the number ofworking days and for usual seasonal varia-tions, was 116 percent of the 1923-1925 aver-age in February as compared with 114 inJanuary and an average of 115 in the lastquarter of 1936. At steel mills activity con-tinued to increase in February and the first

INDUSTRIAL PRODUCTIONPERCENT

140

130

120

110

100

90

80

70

6050 1

V

ITTV

JA li 1

£T

//

130

120

110

100

90

80

70

60

501929 1930 1931 1932 1933 1934 1935 1936 1937

Monthly index of physical volume of production, adjusted forseasonal variation, 1923-1925 average = 100.

three weeks of March and, although thegrowth was somewhat less than seasonal,output currently is at about the peak levelreached in the summer of 1929. Automobileproduction, while fluctuating considerablywith strikes at important plants, has beenlarger for the year to date than in the cor-responding period last year. Output of plateglass in February showed a sharp rise fromthe low level of the two preceding monthswhen strikes curtailed production. At textilemills and shoe factories activity continued ata high level, while output at meatpackingestablishments declined somewhat further.Mineral production increased, reflectingchiefly greater output of coal and a furtherrise in crude petroleum production.

Value of construction contracts awardedthis year, according to the F. W. Dodge Cor-poration, has been considerably larger thana year ago, reflecting an increased volume ofprivate residential building and other typesof private construction, while the volume ofpublicly-financed work has been smaller.

Factory employment and pay rolls in-creased from the middle of January to themiddle of February by more than the usualseasonal amount. The number employed inthe machinery industries increased consider-ably and there were smaller increases at au-tomobile and plate-glass factories. In thenondurable goods industries as a group therewas a seasonal rise in employment.

Distribution.—Department store sales in-creased from January to February and theBoard's seasonally adjusted index advancedfrom 93 to 95 percent of the 1923-1925 aver-age. Sales at variety stores also increasedmore than seasonally, while mail-order sales,largely in rural areas, showed less expansionthan is usual at this time of year. Totalfreight-car loadings increased in Februaryand the first half of March, owing in part toseasonal influences.

Commodity prices.—The general level ofwholesale commodity prices advanced fromthe middle of February to the third week ofMarch, reflecting principally further sub-stantial increases in the prices of industrialmaterials. Prices of iron and steel, non-

WHOLESALE PRICES

110

100

90

80

70

60

50

\

IJ

i

- no

- 100

90

80

- 70

60

501929 1930 1931 1932 1933 1934 1935 1936 1937

I:

Ma

[ndex compiled by U. S. Bureau of Labor Statistics, 1926 =). By months, 1929 to 1931 ; by weeks, January 2, 1932, to•™^ 20, 1937.

ferrous metals, lumber, cotton, rubber, andhides advanced considerably and there werealso increases in the prices of cotton goods,paper, and furniture. Wheat prices have ad-vanced in recent weeks following a decline inthe latter part of February.

Bank credit.—On March 1, when the firsthalf of the recent increase in reserve require-ments went into effect, excess reserves ofmember banks declined from $2,100,000,000



to about $1,300,000,000. In the next threeweeks, which included the March tax collec-tion period, excess reserves showed moder-ate fluctuations around the new level. Inconnection with the increase in reserve re-quirements there were some withdrawals of

MEMBER BANK LOANS AND INVESTMENTSBILLIONS OF DOLLARS BILLIONS OF DOLLARS

°a


MEMBER BANK RESERVES AND RELATED ITEMSBILLIONS OF DOLLARS

12

11

10

8

WEDNESDAY FIGURES BILLIONS OF DOLLARS

4

3

2

1

Ji

!!X

n

......'•••••••. "

GOLD

rMO

TREASL

*

STOCK /

MEY IN CIRCU

RY CASH

i RESERVE BANKj (DREDiT

| IREASURY DEPOSITS

LATION y

1 \ IIi V i^

1932 1933 1934 1935 1936 1937

1932 1933 1934 1935 1936 1937

12

11

10

8

7

4

3

2

1

0

MEMBER BANKRESERVE BALANCES

Latest figures for March 24, 1937. See table on page 326.



SUMMARY OF FINANCIAL AND BUSINESS STATISTICS

1937

Feb. Jan . Dec. Feb . Jan. Dec.

Annual averages

1936 1935 1934 1933 1932 1929

RESERVE BANK CREDIT, MEMBER BANK RESERVES,AND RELATED ITEMS

Reserve bank credit—totalBills discountedBills boughtU. S. Government securities

Monetary gold stockTreasury currencyMoney in circulationTreasury cashTreasury deposits with F. R. banksNonmember deposits and other accountsMember bank reserve balances:

TotalExcess

REPORTING MEMBER BANKS

Total loans and investmentsLoans to brokers and dealers in New York CityOther loans on securitiesAll other loansIT. S. Government obligations:

DirectFully guaranteed

Other securitiesReserve with Federal Reserve banksCash in vaultBalances with domestic banksDemand deposits—adjustedTime deposits (excluding interbank)2Deposits of domestic banks3Borrowings

MONEY RATES AND BOND YIELDS

C ommercial paperStock exchange call loansU. S. Treasury billsU. S. Treasury bonds, long termCorporate high grade bonds (Moody's Aaa).

CAPITAL ISSUES

All issues—totalNewRefunding

Domestic corporate issues-—total-NewRefunding

Common stocks (1926=100)Wholesale commodi ty prices (1926=100):

All commoditiesF a r m productsFoodsOther commodities

Retail food prices (1923-25=100)

BUSINESS INDEXES

Industrial productionManufacturesMinerals

Construction—totalResidentialAll other..

Factory employmentFactory payrolls (unadjusted).Freight-car loadingsDepartment store sales

MERCHANDISE EXPORTS AND IMPORTS

Exports , including re-exports.General imports._.

Averages of daily figures; in millions of dollars

2. 47533

2. 43111,3992, 5316, 3692, 569

167554

6, 7472,152

2, 48533

2,43011,3102,5316,4002,450200560

6, 7162,093

2,49873

2,43411,2202,5286, 5632,357155506

6, 6652, 046

2, 49385

2, 43010,1632,4955, 7792, 515466584

5,8083,038

2.48465

2, 43010,1582, 4865, 7572, 564494533

5, 7803, 033

2, 49465

2, 43010.0722,4545, 8972, 545324539

5, 7162, 983

2,48164

2, 43010, 5782, 5036.1012,474446551

5, 9892, 512

2, 47575

2,4319, 0592,4785, 5852,791128507

5,0012,469

2, 5023625

2, 4327,5122, 3815, 4032, 798

81438

3,6761, 564

2, 42928383

2,0524, 0592,2715, 57628855497

2, 343528

2,077 152171

1,4613, 9522, 0965, 32823639407

2, 114256

Averages of Wednesday figures; in millions of dollars

22, 600982

2. 2565, 744

9,1181,2123.2885, 326

3872, 252

15, 5725. 0945, 988

1

22, 734993

2,2425,763

9,2631,2303, 2435,292

4012,307

15, 5165,0526, 085

3

22, 7601,0212, 2615,748

9,2411,2423,2475,264

4272,439

15, 5445,0456,155

11

21,053901

2,2304,850

8,7081,1943,1704,782

3562, 335

14, 0644,8935,647

2

20, 928923

2,2474,910

8, 5991,1553,0944,773

3542, 336

13, 8244,8925,620

2

20, 769921

2,2814,982

8,4331,1313,0214, 694

3762,312

13, 9044,8725,388

2

22, 064969

2, 2675,226

9,0801, 2503,2724,799

3832, 358

14, 6194,9995,810

5

19, 997820

2, 3014,907

7,989928

3,0534,024

3262,112

12, 7294,8834, 938

6

18, 672815

2, 7114,965

6, 856e325

«3,0002,875

2711,6880)

4,9373,814

17, 505591

3, 3435,222

5, 228

3,1211,822

2401, 322

0)4,9462,822

115

Averages of weekly figures; percent per annum

.751.00

.382.313.22

Index numbers

130

8691878585

Amounts per month; in millions of dollars

222240

230245

182193

199187

223187

205202

190171

178138

140121

13-1110

p Prel iminary.1 Figures not available.

c Par t ly estimated. r Revised.2 Include t ime deposits of banks, domestic and foreign, 1929-1934.

1, 459952241208

3. 9962,0154, 47620722406

2, 35843

19,080337

4, 5086,578

4,413

3. 2451, 673214

1, 2500)

5, 6662,772228

22, 5991, 4056, 2519, 231

2, 865

2,8471,725248

1,1420)6,7882,787674

.751.00.362.293.09

.751.00.212.273.10

.75

.75

.082.62-3.32

.75

.75

.102.683.37

.75

.75

.092.733.44

.75

.91

.142.473.24

.76

.56

.142.703.60

1.021.00.263.104.00

1.721.16.523.314.49

2.732.05.883.655.01

5.857.61

3.604.73

497168329354130225

610249362306102204

'726266

r459626218408

Amounts per

'303107

r19619513181

40012227826665201

month;

42222120116767101

in millions of dollars

518'164r35438299282

39212127018934155

18011664411526

896029321318

14610046542727

959841118781667115

126

8691878385

123

8489868283

106

8180837981

100

8178847982

95

8178867982

111

8181828082

78

8079847880

72

7565717874

63

6651617166

48

6548617068

9510510092105

"116"116/> 114"64"47"78

P I O O"968095

11411510963457799918093

Index

12112111766458399958692

number

949211152257587747083

s, adjusted for seasonal variation,

979610462259289747081

101101102682610389787183

10510510455377092827288

90909137215086716379

1923-25=100

79788632124883636275

76758225113772495867

64637128134066465669

11911911511787142105109106111

437367

3 Do not include t ime deposits 1929-1934.



LAW DEPARTMENT

Deduction of withdrawable dividends from amountof demand for margin under Regulation T.

The Board recently had occasion to con-sider the question whether cash dividendswhich had been received in an account underRegulation T within the preceding 35 daysmight be deducted from the amount of thedemand for margin for a transaction in theaccount if the dividends had not been with-drawn and there had been no transactions inthe account subsequent to the crediting of thedividends until the subject transaction.

Section 8(b) of the regulation permits thewithdrawal of cash dividends in such a situa-tion and the question presented was in effectwhether the broker should demand the fullamount of margin that would ordinarily berequired on the transaction, possibly for-warding with the demand for margin a checkfor the amount of dividends, or whether it ispermissible for the broker in such a case todeduct the amount of the withdrawable divi-dends from the amount of the demand formargin. The Board expressed the opinionthat it is permissible in such circumstancesfor the broker to deduct the amount of thewithdrawable dividends from the amount ofthe demand for margin instead of demandingthe full amount of margin without deductionof the dividends. The Board stated further,however, that in order to make it clear thatthe dividends are not thereafter available forother purposes, and also to comply fully withthe requirement of the regulation that marginbe demanded upon the basis of the aggregatetransactions in the account on a given day,the notation that the dividends are no longerwithdrawable (which in effect amounts to awithdrawal and redeposit of the dividends)should be made on the date of the transactionin question rather than on the later date onwhich margin is deposited in response to thedemand.

Determination of market value of stock for loanunder Regulation U.

The Board recently considered a ques-tion regarding the determination of the mar-ket value of a stock in connection with a loanon the stock under Regulation U. In the casepresented, a bank made an agreement withan out-of-town customer to lend a certainsum of money on a registered stock, theamount being 45 percent of its then marketvalue and the purpose being to purchase reg-istered stocks. The borrower delivered thestock and the note as promptly as possible onthe next day, but the market value of thestock had become lower in the interval so thatthe amount the bank had agreed to lend wasin excess of 45 percent. The question aroseas to whether Regulation U permits the bankto carry out its commitment.

It appeared that the bank had entered intoan enforceable commitment, the details of theloan had been perfected in so far as prac-ticable on the first day, and the negotiationsfor and completion of the loan were to takeplace as nearly contemporaneously as the cir-cumstances of the case would permit. In thecircumstances, the Board expressed the viewthat the market value of the stock for the pur-pose of completing the loan might properlybe determined as of the time when the bankand the customer agreed upon the amountand terms of the loan. The Board pointedout, however, that any clearly foreseeablechange in the stock during the interval, suchas a split-up of shares or the stock selling"ex" a dividend of any kind, should be takeninto account in such a determination.



INTEREST RATES CHARGED BY MEMBER BANKS

Results of a recent survey made by theBoard of Governors and the Federal Reservebanks with regard to interest rates chargedby member banks indicate that as of last Oc-tober the rate most frequently charged bybanks on loans to their customers was 6 per-cent. In the larger cities a rate of 5 percentand frequently considerably less was com-mon, while at many country banks the mostcommon rate was 8 percent. It would appearthat the rates reported for last October werelower than those in effect in pre-depressiondays, when a 5 percent rate was much lessfrequent and 10 percent was charged moreoften than at present.

The survey, which was made as of October1, 1936, covered information as to interestrates charged by each member bank (1) onthe largest number of loans of specified types,(2) on the largest amount of such loans, and(3) the lowest and highest rates charged.The inquiry was made as simple as possiblein order to enable banks readily to complywith it from their records without the neces-sity of special compilations of figures. Theresults were compiled to show the rates re-ported most frequently under the variousheadings, treating each bank as a unit with-out regard to size of bank or volume of loansmade at the respective rates. As a conse-quence, the results of the survey show ratesmost frequently charged, rather than theaverage rate of interest actually received bymember banks on the total volume of theircustomer loans. Small banks, which consti-tute a large proportion of the banks but ac-count for a small portion of all loans, domi-nate the results. The fact is that the bulk ofbank loans is made by relatively few largebanks and to large borrowers at relativelylow rates. Rates charged, as indicated by thesurvey, are, therefore, higher than the aver-age returns earned by banks on their loans,as indicated by the banks' earning state-ments.

Rates charged greatest number of bor-rowers.—The single rate most frequently re-ported by banks as charged the greatest num-ber of borrowers was 6 percent for all typesof loans. In general the rates charged thegreatest number of borrowers were some-what higher than rates charged on the largestvolume of loans, because loans made at lowrates to borrowers of the best credit stand-ing, though not great in number, constitute

a considerable proportion of the total volumeof bank loans.

For central reserve city banks in New Yorkand Chicago, as shown in the following table,no rates higher than 6 percent were reported.In New York City 13 banks reported 6 per-cent as the rate most frequently charged oncommercial and industrial loans, but 7 banksreported rates of 1*4 or 1% percent, 9 banksreported rates between 2 and 3% percent, and9 others rates between 4 and 5% percent asmost commonly charged. Of the rates re-ported on urban property loans in New YorkCity and in Chicago and on commercial andindustrial loans in Chicago 5 percent is prob-ably a representative rate.

RATES CHARGED GREATEST NUMBER OF BORROWERS,OCTOBER 1936, CENTRAL RESERVE CITY BANKS

[Number of banks charging rates indicated]

Cities and rates

New York City:

2-3%4-4% .

6

Total number of banks report-ing

Chicago:

4_43/5-5K6

Total number of banks re-porting

Com-mercial

andindustrial

loans

7945

13

38

2253

12

Loans onurbancom-

mercialproperty

115

5

19

0140

5

Loans onurban

residen-tial

property

01477

19

0063

9

At reserve city and country banks, asshown in the following table, 6 percent wasby far most frequently reported as chargedthe greatest number of borrowers on all typesof loans. The next most frequent rate atbanks in the reserve and larger nonreservecities was 5 percent, which was especiallycommon as to loans on urban real estate. Inthe smaller cities, however, country banksfrequently reported rates of 8 percent andmany borrowers were being charged 10 per-cent. The higher rates were especially com-mon on agricultural loans.

Rates charged on largest volume of loans.—In view of the fact that large loans are usu-ally made at lower rates of interest thansmall loans, rates charged the largest number



RATES CHARGED GREATEST NUMBER OF BORROWERS,OCTOBER 1936, RESERVE CITY AND COUNTRY BANKS

[Number of banks charging rates indicated]

Classes of citiesand rates

Reserve city banks and coun-try banks in nonreservecities of over 100,000 popu-lation:

5 percent6 "

8 " _"""10 "Allotheri

Total number of banksreporting

Other country banks:5 percent6 ';

8 ••' I IZI IZI IZI I IZI I10 "Allotheri

Total number of banksreporting

Com-mercial

andindus-trialloans

74330

1022

085

521

3,054706

1,132347223

5,551

Loanson

urbancom-

mercialprop-erty

782221250

47

364

1902, 450

29345878

115

3,584

Loanson

urbanresi-

dentialprop-erty

110282

1870

62

479

4253,011

448698137207

4,926

Loanson

farmreal

estate

2315520

013

218

3862,845

418816198202

4,865

Agri-cultural

loans

3311016221

18

200

372, 362

7231,094634

4,949

1 All other rates reported, including all fractional rates and ranges ofrates.

of borrowers do not indicate what rates arepaid on the bulk of the loans. Figures wereobtained in the survey as to rates charged onthe largest volume of loans of each class byeach reporting bank. The results of thisphase of the inquiry are also dominated byfigures for small banks, since in compilingthem each bank, whether large or small, wasgiven equal consideration. Although, asbrought out by the following table, significantdifferences are found when the banks aredivided into classes, it is still clear that themost common rates reported as charged bymember banks are generally somewhat higherthan average rates actually earned by thesebanks on their loans.

Differences between these two sets of ratesare due in part to the fact that rates actuallyearned relate to the total volume of loans, in-cluding open-market paper, brokers' loans,and personal loans, as well as commercial, in-dustrial, agricultural, and real estate loans.The ratio of earnings to loans outstanding isalso affected by loans on which interest maynot be received by banks in the periodcovered. Rates actually earned apply to thefirst half of 1936, since complete earnings re-ports for the last half of the year are not yetavailable, but partial data for the last half of1936 indicate that this difference does not

affect the comparability of the two sets ofrates. The differences shown in case of re-serve city banks and of country banks aredue principally to methods used in compilingthe figures.

In New York City IV2 percent was com-monly reported as charged on the largestvolume of commercial loans, whereas theaverage rate earned by New York City banks

VOLUME OF LOANS AND RATES CHARGED BY MEMBERBANKS IN 1936

[Amounts in thousands of dollars ; rates in percent per annum]

Classes of banks

Central reserve city banks:New York CityChicago

Reserve city banksCountry banks

First half of 1936

Averagevolume

ofloans1

3, 469, 549494,921

4, 356, 5363, 950, 815

All member banks__ 12, 271, 821 253,059 4.12 6

Interestearned

onloans

40, 7897,983

93,153111,134

Aver-agerate

earned

2. 363.224.285.62

Oct. 1, 1936;most commonrate on largestvolume of loans

Com-mercial,indus-trial,agri-

culturalloans

VV4,5 "6-8

Realestateloans

5-6

66-8

1 Averages of amounts from reports of condition for three call datesDecember 31, 1935; March 4, 1936; and June 30, 1936.

(2.36 percent) was somewhat larger, reflect-ing the influence of other loans, includingsome commercial loans, made at higher rates.In Chicago it was not possible to select fromthe October survey a single most common ratebecause both IV2 and 5 percent were reportedmost frequently; the average rate earned, 3.22percent, was midway between these. Themost common rates reported as charged onthe largest volume of loans by banks in re-serve cities were generally above the averagerate earned in those cities, and the same istrue for country banks. It is clear from therelationship shown and from other availableinformation that member banks have made anappreciable volume of loans at rates lowerthan those reported as the most common ratescharged on the largest volume of loans.

Rates in large cities.—Detailed analysis ofthe figures obtained by the survey show thatmany banks in large cities were making loansat lower rates, in some cases appreciablylower, than those reported by most memberbanks. In Boston, Cleveland, Richmond, At-lanta, New Orleans, Detroit, St. Louis,Minneapolis, and San Francisco, as well as



in New York City and Chicago, the majorityof banks reported rates on commercial andindustrial loans of 4 percent or less chargedon the largest volume of their loans, with l1/^percent frequently reported. In 35 othercities rates between 4 and 5 percent werereported more frequently than higher rates.Real estate loans at most banks in these citieswere most commonly made at 6 percent, with5 percent in a number of cases, especially inthe central western cities, and lower ratesoccasionally. Loans on commercial propertieswere in some cases reported at rates of 3 or4 percent.

These 46 cities, in which customers' ratesseem to be more sensitive to changing money-market conditions than in other cities, in-clude all cities with Reserve banks, 17 withReserve bank branches, 8 other reserve cities,and 9 country bank cities with populationof over 100,000. The country bank citiesare mostly in the Boston and New York Fed-eral Reserve districts. There were 8 Reservebank branch cities, 16 other reserve cities and35 country bank cities with population ofover 100,000 not included in this list. In mostof these excluded cities a rate of 6 percentwas most common, but rates of less than 6percent w7ere found more frequently than atbanks in smaller places.

Rates in reserve cities by Federal Reservedistricts.—The following table compares ratescharged by banks in principal cities, otherthan New York and Chicago, by Federal Re-serve districts. The first column shows themost common rates charged on the largestvolume of their industrial and commercialloans by reserve city banks as indicated bythe survey of last October, the second columnshows prevailing rates charged in October onthe bulk of commercial loans by selectedbanks in Federal Reserve bank and branchcities as reported monthly to the Board, andthe third column shows the annual rate ofinterest earned on loans by reserve city banksin the first half of 1936.

These three sets of figures generally show areasonable similarity in each district, whenallowance is made for differences in citiescovered, in loans included, and in methods ofcollection and compilation. Prevailing ratesin the monthly series and interest earned aremore similar to each other than they are tothe most common rates derived from therecent survey. Although rates in some dis-tricts are lower than in others there appearto be few marked geographical differences.

RATES CHARGED AND INTEREST EARNED ON LOANS ATRESERVE CITY BANKS

FederalReservedistrict

BostonNew York4Philadelphia-ClevelandRichmondAtlantaChicago4St. LouisMinneapolis..Kansas C i ty -DallasSan Francisco.

Mostcommon

rate chargedon indus-trial and

commercialloans,

Oct. 1, 19361

1 14554 Yi54 ?254i Vi5 } 955

Prevailingrate on

commercialloans,

Oct. 19362

3.224.404.174.043.994.143.223. 663.614.095.074.38

Interestearned

on loansfirst halfof 19363

2.883.983.584.384.624.344.023.783.724.465.004.90

1 Most common rate reported as charged on largest volume of loansby reserve city banks.

2 Weighted average of rates charged by leading banks in cities with aFederal Reserve bank or branch, except New York City and Chicago.

3 Ratio of interest earned (doubled to put on annual basis) to averageamount of loans outstanding.

4 Central reserve city banks not included.

The lowest rates seem to be charged by citybanks in the Boston, Minneapolis, and St.Louis districts, while higher rates are chargedin the Dallas, Kansas City, and San Franciscodistricts. Customers' rates reported by re-serve city banks in the New York and Phila-delphia districts are higher than rates earnedon loans, a difference that may reflect hold-ings of open-market paper, an appreciablevolume of loans at low rates in a few banks, ordifferences in reporting rates charged. Sincethe two sets of figures shown for ratescharged—most common rates and prevailingrates 1—are based on data reported by indi-vidual banks with little or no allowance forvolume of loans made at different rates, theyare likely to be higher than rates actuallyearned, which are more influenced by thelarge loans and large banks. This does notseem to have been the case, however, in Bos-ton and Minneapolis, where the rates re-ported as charged on the largest volume ofloans are considerably lower than thoseearned and also lower than the prevailingrates reported monthly.

Rates at country banks.—At country banksthere is less variation in rates charged than

1 Figures for prevailing rates are based on rates charged onprime customer loans of three types—commercial loans and de-mand and time loans on securities—as reported by large banksin cities containing Federal Reserve banks or branches. Themethod of computing the averages takes into account the relativeimportance of each of these types of loans and the relative im-portance of each reporting bank, as measured by total loans. Inthe district averages, the average rate for each city included isweighted according to the importance of that city in the group,as measured by loans of all banks in the city.



at city banks. At a large majority of countrybanks 6 percent is the most common ratecharged on loans; in a great many banks 7and 8 percent is more common, and 10 per-cent is not infrequent, especially on agricul-tural loans. A rate of 5 percent is seldom re-ported by country banks in cities of less than100,000, except on real estate loans.

The following table shows by Federal Re-serve districts the annual rate of earnings onloans at all country banks and the most com-mon rates charged on various types of loansat country banks other than those in countrybank cities with a population of more than100,000. The reason that rates earned bycountry banks in the Boston, New York, andPhiladelphia districts are considerably lowerthan the most common rates charged is prob-ably that in these districts there are a numberof larger cities with a country bank statuswhere rates charged are lower than in thesmaller communities. In most of the otherdistricts, except perhaps Minneapolis, thecomparisons of rates reported as charged andrates earned seem reasonable, consideringthe various factors, previously mentioned,that may account for differences. At countrybanks variations in size of loans and in ratescharged are smaller than at city banks, andthe average rates earned on the total amountof loans are therefore more nearly compar-able with rates charged on the largest volumeof loans. The figures shown in the table areprobably fairly typical, not only of ratescharged on the largest volume of loans by allbanks, but also of those charged largest num-ber of borrowers.

RATES CHARGED AND INTEREST EARNED ON LOANS AT

COUNTRY BANKS

FederalReservedistrict

BostonNew YorkPhiladelphia-ClevelandRichmondAtlantaChicagoSt. LouisMinneapolis-_Kansas City_.DallasSan Francisco.

Most common rate charged,October 1, 1930, on

Com-mercial

andindus-trialloans

666666-8667-8

Agri-cultural

loans

108

4.884.945.166.005.686.325.665. 905.487.588.806. 32

1 Most common rate charged on largest volume of loans at countrybanks excluding banks in country bank cities with population of morethan 100,000.

2 All country banks; rate per annum.

There is a marked geographical variationin rates among country banks. In the easternand central western districts the prevailingrate is 6 percent. In the southern and west-ern districts of Atlanta, Minneapolis, KansasCity, Dallas, and San Francisco higher ratesprevailed on commercial and agriculturalloans—generally 8 percent, with 10 percentas most common on agricultural loans in theDallas district. On real estate loans a 6 per-cent rate was more nearly universal, with 8percent ruling in the Dallas district and arange of 6-8 percent reported by the othersouthern and western districts.


A P R I L 1937 FEDERAL RESERVE BULLETIN 299

UNITED STATES GOVERNMENT CORPORATIONS AND CREDIT AGENCIES IN 1936Outstanding loans of Government corpora-

tions and credit agencies, together withinvestments in the stock of financial insti-tutions, decreased by $400,000,000 in 1936and at the end of the year totaled $8,900,-000,000. The proprietary share of the UnitedStates in these corporations and agencies de-creased by $500,000,000 to $3,900,000,000.There was almost no change during the yearin the combined equity of private stockhold-ers in Government credit agencies, but out-standing bonds and notes of the agencieswere over $200,000,000 larger at the end of1936, when they totaled $6,100,000,000.

The decrease in loans and investments ofthese agencies reflected principally declinesin loans to financial institutions, and in hold-ings of preferred stock and capital notes anddebentures of banks. Loans by the Com-modity Credit Corporation declined, andother agricultural production and commodityloans showed little change, but there was anincrease in outstanding rehabilitation loansto farmers. Farm mortgage loans showed amuch smaller increase than in other recentyears and home mortgage loans declined, butother assets of the home mortgage agenciesincreased.

Table 1 shows for December 31, 1936, thecombined assets and liabilities of agenciesclassified by the Treasury as wholly financedfrom Government funds and of those classi-fied as financed partly from Governmentfunds and partly from private funds.Changes in the various items from the end ofthe preceding year are also indicated. Simi-lar data for January 31, 1937, for importantgroups of agencies, as derived from themonthly statement published by the TreasuryDepartment, appear in the regular BULLETINtable on page 348. Data given in these tablesdiffer from those in statements released bythe various agencies themselves in thatinteragency assets and liabilities are hereexcluded.

Out of the total of outstanding loans andinvestments of $8,920,000,000 at the end of1936, $8,230,000,000 was held by three groupsof agencies, as is shown in Table 2, whichgroups the agencies in such a way as to showseparately those agencies which are not pri-marily lending agencies and so as to arrangethe lending agencies in four important classesand a miscellaneous group. This table isbased in part on additional data furnished by

the Treasury Department. The three prin-cipal groups of agencies are (1) the Recon-struction Finance Corporation, together withcertain affiliated corporations, and the PublicWorks Administration; (2) the farm mort-gage institutions under the Farm CreditAdministration; and (3) the institutionsunder the Federal Home Loan Bank Board.Other agricultural loans amounted to $550,-000,000, and miscellaneous loans of variousagencies accounted for the remaining $140,-000,000. The major part of these miscel-laneous loans are ship construction and war-time railroad loans.TABLE 1.—ASSETS AND LIABILITIES OF GOVERNMENT

CORPORATIONS AND CREDIT AGENCIES, DECEMBER31, 1936.

[In millions of dollars]

ASSETS

Loans and preferred stock:Loans to financial institutions_..Preferred stock, etc.Home mortgage loansFarm mortgage loansOther agricultural loansAll other loans .__

Total loans and preferred stock-

CashUnited States direct obligationsObligations of Government credit

agencies:Fully guaranteed by U. SOther

Production credit association class Astock_ _

Shares of Fed. sav. and loan associa-tions held by U. S. Treasury

Accounts and other receivablesOther assets

Total assets other than inter-agency

LIABILITIES

Bonds, notes, and debentures:Guaranteed by United S t a t e s -Other

Other liabilities (including reserves).

Total liabilities other than in-teragency—

Excess of assets over liabilities, ex-cluding interagency transactions.__

Privately owned interests.—

U. S. Government interests...

Dec. 3

Fi-nancedwhollyfromGovt.funds

369651

3811,200

2,600

8132

1428

75

74228

3,133

2527292

416

2,716

2,716

L, 1936

Fi-nancedpartlyfromGovt.funds

152i 126

2,7652,937

218

6,197

178474

181

22

49211388

7,680

4,417

370

6,143

1,537338

1,199

Change fromDec. 31, 1935

Fi-nancedwhollyfromGovt.funds

- 2 0 4- 2 2 4

- 1 0 1+79

- 4 5 0

—24+6

- 6

+5- 2

+13+27

- 4 3 1

- 1+72+33

+105

-536

-536

Fi-nancedpartlyfromGovt.funds

+46+106- 1 3 2+13+22

+55

—35+50

- 1 3—3

+29+246

+329

+124+21

+144

+289

+40- 2

+41

* Shares of Federal and other savings and loan associations held byHome Owners' Loan Corporation.

2 Excludes $761,000,000 of Federal Land bank bonds held by FederalFarm Mortgage Corporation.

3 Less than $500,000.


300 FEDERAL RESERVE BULLETIN

TABLE 2.—LOANS AND INVESTMENTS OF GOVERNMENTCORPORATIONS AND CREDIT AGENCIES AND PRO-PRIETARY INTEREST OF UNITED STATES, DECEMBER31, 1936.


Agency or group of agencies

Agencies engaged primarily in lending:Reconstruction Finance Corpor-

ation and affiliated agencies 2Farm mortgage agenciesHome mortgage agencies.. ._ _ .Other agricultural credit agencies:

Federal intermediate credit banksand banks for cooperatives

Regional agricultural credit cor-porations and production creditcorporations __ __

Congressional app ropr i a t i onsadministered by Farm CreditAdministration _ . . .

Resettlement AdministrationOther lending agencies:

U. S. Maritime CommissionLoans to railroadsOther lending agencies financed

wholly by United States

Total, lending agencies

Other agencies:Federal Deposit Insurance Cor-

poration and Federal Savingsand Loan Insurance Corporation

Tennessee Valley AuthorityOther non-lending agencies fi-

nanced wholly by United States. _

Total, all agencies

Outstandingloans; nvest-

ments in pre-ferred stock,capital notes

and debentures!

Dec.31,

1936

2,2073 2, 937

3,085

218

100

* 14587

8230

18

8,910

7

6

8,922

ChangefromDec.

31,1935

-512+13+16

+22

- 2 0

(5)+79

- 1 1- 1

+17

-397

+4

- 4

-397

Proprietaryinterestof U . S.

Government

Dec.31,

1936

1,900459230

253

147

18287

11530

17

3,422

256127

110

3,915

ChangefromDec.

31,1935

- 6 2 1+8

+20

+9

- 2 0

+15+79

- 4 5_ 1

+16

- 5 3 9

+4+45

~ 5

- 4 9 4

NOTE.—Farm mortgage and home mortgage agencies, the Federal inter-mediate credit banks and banks for cooperatives and the Federal De-posit Insurance Corporation and Federal Savings and Loan InsuranceCorporation are classified in Treasury statements as agencies "partlyfinanced by the United States" as is also the War Finance Corporation,which is not included in groups shown in this table and for which theamounts were less than $500,000.

1 Including also investment in Class A stock of production creditassociations and in shares of Federal savings and loan associations whichare Federally chartered institutions.

2 Including Commodity Credit Corporation, Export-Import Bankand RFC Mortgage Company. Including also, though not an affili-ated agency, the Public Works Administration.

3 The difference between this figure, derived from the Treasury De-partment statement, and the sum of corresponding figures in the regularBULLETIN table on Farm Credit Administration loans is due to the in-clusion of Federal Land bank "loans called for foreclosure" and matured"extensions" in the Treasury figure. On earlier dates other differ-ences existed between the data from the two sources. As a result of thesedifferences and changes, the Treasury figure for Federal Land bankloans shows a decline of $29,000,000 in 1936 but the Farm Credit Adminis-tration figure shows a decline of $8,000,000; on an accounting basis com-parable for the two dates it appears that there would have been shownan increase of somewhat more than $10,000,000. Federal Farm Mort-gage Corporation loans, also included in the figure in the table increased$42,000,000.

4 The difference between this figure and the sum of correspondingfigures shown in the regular BULLETIN table on Farm Credit Adminis-tration loans is due chiefly to deduction in the Treasury figure of re-serves for uncollectible items.

s Less than $500,000.

The Government's proprietary share inagencies which are or have been engaged pri-marily in lending, also shown in Table 2,amounted to $3,420,000,000 at the end of1936. The equity of the United States in theassets of the Federal Deposit Insurance Cor-poration and the Federal Savings and LoanInsurance Corporation, which are not pri-marily lending agencies, totaled $260,000,000.Certain other Government corporations andagencies have no loans outstanding. TheGovernment's equity in three of these agen-cies, the Tennessee Valley Authority, thePanama Railroad Company and the FederalHousing Administration, amounted to $200,-000,000.

Reconstruction Finance Corporation andaffiliated agencies.—The decrease in out-standing loans and investments of Govern-ment corporations and credit agencies during1936 was principally in assets held by theReconstruction Finance Corporation, theCommodity Credit Corporation and the Pub-lic Works Administration. Table 3 showsdetails concerning the loans of the Recon-struction Finance Corporation, three corpo-rations to which it supplies funds, andthe Public Works Administration, for whoseloans the Reconstruction Finance Corpora-tion acts as distributing agent in sales toprivate investors.

As shown in this table, ReconstructionFinance Corporation investments in pre-ferred stock, capital notes and debenturesof banks were reduced during 1936 by $225,-000,000; at the end of the year the Recon-struction Finance Corporation's holdingswere about three-quarters of the peak level.About two-thirds of the year's retirementsoccurred in June and July, when along withretirements by other banks a few very largebanks completely retired their outstandingpreferred stock. Reconstruction FinanceCorporation loans to banks, including allloans to aid in the reorganization or liquida-tion of closed banks, were also reduced fur-ther in 1936 by $180,000,000, and are nowabout $500,000,000 below the peak in 1933.The major part of the repayments of bankloans were on loans originally made to re-ceivers of closed banks and for reorganiza-tion of closed banks. Outstanding loans oncommodities by the Reconstruction FinanceCorporation, Commodity Credit Corporationand Export-Import Bank also declined con-



siderably. These loans are principally Com-modity Credit Corporation loans on cottonmade in 1934 to farmers who signed agricul-tural adjustment contracts. The combinedholdings of the Reconstruction Finance Cor-poration and the Public Works Administra-tion of securities acquired by the PublicWorks Administration in making loans forpublic works to various state and local gov-ernment units and to railroads were smaller

TABLE 3.—LOANS AND INVESTMENTS OF THE RECON-STRUCTION FINANCE CORPORATION AND AFFILIATEDAGENCIES1 DURING 1936.

[In millions

Investment in preferred stock, etc.,of banks 2

Loans for distribution to depositorsof closed banks

Other loans to banksMiscellaneous loans _____Loans on commodities 3P.W.A. loans held by P.W.A. and

R F CLoans to railroads _Self-liquidating loansLoans to industrial and commercial

businesses _Loans to drainage, levee and irriga-

tion districtsR F C Mortgage Company loans

Total

of dollars

Dis-bursed

in1936

22

541

25

3060

32

15

Re-paid

in1936

248

1914643

8012

9

4

Out-stand-

ingDec.31,

1936

664

109122343231

248346195

64

6422

2,207

ChangefromDec.31,

1935

-225

-13745

- 1 8- 6 7

- 5 0+47

+24

+14+17

- 5 1 2

1 Including Commodity Credit Corporation, Export-Import Bank,and RFC Mortgage Company. Including also, though not an affili-ated corporation, the Public Works Administration. Except as other-wise indicated by title or footnote all items are R.F.C. loans or invest-ments.

2 Including loans secured by preferred stock, etc., of banks.3 Including all loans of Commodity Credit Corporation and Export-

Import Bank in addition to Reconstruction Finance Corporation loans.4 Less than $500,000.

at the end of 1936 than a year earlier,although a substantial amount of new ad-vances continued to be disbursed by the Pub-lic Works Administration. ReconstructionFinance Corporation loans to railroads de-clined and there was a further small reduc-tion in the outstanding amount of miscel-laneous Reconstruction Finance Corporationloans to mortgage loan companies, buildingand loan associations, insurance companies,other financial institutions and certain otherborrowers.

Four classes of loans made from Recon-struction Finance Corporation funds con-tinued to increase during 1936. Outstandingloans for self-liquidating projects increasedby $47,000,000, in large part as the result of

commitments made in earlier years, loans toindustrial and commercial businesses by$24,000,000, and loans to refinance indebted-ness of drainage, levee and irrigation districtsby $14,000,000. Outstanding loans of theRFC Mortgage Company increased by $17,-000,000, and there was also an increase of$14,000,000, not shown in table 3, in invest-ments held. The loans of the RFC MortgageCompany are largely made to refinance mort-gages on such properties as apartment houses,hotels and office buildings. The company hasalso purchased a considerable number ofFederal Housing Administration insuredloans on newly constructed homes.

In summary, the net decline during 1936in outstanding loans and investments of theReconstruction Finance Corporation andaffiliated agencies amounted to more than$500,000,000. Funds returned to the Treas-ury during 1936 as the result of realization ofthe loans and investments of these agenciesand of other changes in their assets andliabilities exceeded this amount by more than$100,000,000. The difference is accountedfor largely by the sale in July of an issue ofsix-month notes of the Commodity CreditCorporation. The combined earned surplusof these agencies showed a small increase;the earned surplus of the ReconstructionFinance Corporation increased by $33,000,-000, but the Commodity Credit Corporationshowed a deficit for the year.

Farm mortgage loans.—Outstanding loansof the permanent Federal Land banks and ofthe emergency Federal Farm Mortgage Cor-poration increased by a relatively smallamount during 1936. Outstanding loans ofthe Federal Farm Mortgage Corporation,which are known as "Land Bank Commis-sioner loans" and may be made until Feb-ruary 1, 1940, were $837,000,000 on Decem-ber 31, 1936. The rate at which these loanshave been made has declined sharply since1934; new loans were made in 1936 in theamount of $77,000,000 and there was a netincrease of $42,000,000 in the amount out-standing. These loans are made to farmers,either on first or second mortgage security,frequently in connection with a loan froma Federal Land bank. They are to be amor-tized in periods up to forty years, beginningthree years after the loan is made.

Loans to farmers by the Federal Landbanks have also been made in decliningamounts in the past two years. These mort-



gage loans are amortized generally over aperiod of 30 or more years, and the amountnow outstanding is about twice as large as inthe years 1926-1932, before the program ofemergency refinancing commenced. Newloans made in 1936 totaled $109,000,000, butforeclosures and voluntary repayments re-sulted in there being only a small increase inunpaid balances outstanding. Principal pay-ments on loans in good standing which wereoutstanding in June 1935 are not required atpresent until July 1938; this applies to alarge majority of the banks' loans.

The following table, derived from a con-solidation of Treasury statements for theFederal Land banks and the Federal FarmMortgage Corporation, gives a general indi-cation of the sources from which funds wereobtained to finance increased assets in 1936:

Assets and liabilities1 other than funded debt:Cash and United States Government direct obligations

increased $34,000,000Loans and other assets less miscellaneous liabilities in-

creased 58,000,000

A total increase of $93,000,000

Funded debt and net worth:F.F.M.C. bonds fully guaranteed by United States in-

creased $35,000,000Federal Land bank bonds and private capital stock in-

creased 28,000,000Earned surplus increased 22,000,000United States Government proprietary interests:

Paid-in capital and surplus increased ___ $35,000,000Net liability to other agencies decreased. 26,000,000

—a net increase of 8,000,000

1 Exclusive of interagency liabilities.$93,000,000

The increase in earned surplus during theyear and new funds obtained from the UnitedStates totaled $30,000,000, or a little lessthan the increase in cash and Governmentsecurities held. New issues of securities toprivate investors were a little larger than thenet increase in loans and other assets lessmiscellaneous liabilities. Outstanding loansare not shown separately from other assetsbecause of changes during the year in theaccounting classification in the Treasurystatement. (These changes were referred toin a footnote to Table 2.)

Home mortgage loans.—Government lend-ing agencies under the supervision of theFederal Home Loan Bank Board include thepermanent Federal Home Loan banks, whichlend to private home-financing institutions,and the emergency Home Owners' Loan Cor-poration, whose loans were made directly tohome owners in a refinancing program whichterminated on June 12, 1936.

Outstanding loans of the Federal HomeLoan banks on December 31, 1936, were$145,000,000; these loans are almost en-tirely to member building and loan associa-tions and the outstanding volume has beenincreasing steadily since March 1935. Anincrease of $43,000,000 in 1936 was financedto the extent of $24,000,000 by increase incapital paid in by the United States, $4,000,-000 by payments on private capital subscrip-tions, and $7,000,000 by increase in mem-bers' deposits.

Home Owners' Loan Corporation loans tohome owners were reduced by a net amountof $132,000,000 in 1936. These loans are tobe amortized in 15 years. Principal instal-ments on a considerable proportion of theCorporation's loans were not required untilJune 13, 1936. Foreclosures and voluntarytransfers of title completed in 1936 appear tohave accounted for about half the gross reduc-tion of $285,000,000 in outstanding loans.Loans outstanding at the end of the year ag-gregated $2,765,000,000.

The Home Owners' Loan Corporation isauthorized to invest up to $300,000,000 inshares of Federal and other savings and loanassociations. Investments of this kind in-creased to $126,000,000 by the end of 1936.In addition, the Treasury holds $49,000,000of shares of Federal savings and loan asso-ciations which were acquired in 1934 and1935.

There follows a summary of changes in thecondition statement of the Home Owners'Loan Corporation during 1936:

Assets and liabilities other than funded debt:Loans decreased 1 $132,000,000Cash and United States Government direct obligations

decreased 53,000,000

Shares of Federal and other savings and loan associa-tions increased 106,000,000

Other assets (largely property held for sale) less mis-cellaneous liabilities increased 147,000,000

An aggregate net increase of $68,000,000

Funded debt and net worth:Bonds fully guaranteed by United States increased *__ $71,000,000Deficit increased 3,000,000

$68,000,000

1 New loans made from January 1 to June 12 were $163,000,000.2 Data include a small amount of bonds guaranteed as to interest only

which were called for redemption on July 1, 1935.

There was an increase in outstandingbonds of the Home Owners' Loan Corpora-tion and a decline in cash and Governmentsecurities held, and a nearly correspondingincrease of $106,000,000 in holdings of shares



of Federal and other savings and loan asso-ciations.

Other agricultural loans. — Agriculturalloans and investments, other than those ofthe Reconstruction Finance Corporation andits affiliated agencies and other than farmmortgage loans discussed above, totaled$550,000,000 at the end of 1936, an increaseof $80,000,000 in the year, as shown inTable 2. The most important change during1936 was the growth of outstanding rehabili-tation loans made by the Resettlement Ad-ministration from $8,000,000 to $87,000,000.

Loans and investments of corporations andbanks under the supervision of the FarmCredit Administration aggregated $318,000,-000 on December 31, 1936. This includescredit extended by the regional agriculturalcredit corporations, the production creditcorporations, the Federal intermediate creditbanks and the banks for cooperatives. Loansof the regional agricultural credit corpora-tions, which were originally financed by theReconstruction Finance Corporation and arenow in liquidation, declined in 1936 to $25,-000,000. Investments of the productioncredit corporations in class A stock of thethe Federally chartered but privately man-aged production credit associations were$75,000,000 at the end of the year, onlyslightly smaller than a year earlier. Thefunction of the production credit corpora-tions is to organize, to assist in capitalizingand to supervise the operations of the localassociations. Their investments in stock ofthe associations were made almost entirelyin 1933 and 1934, when associations werebeing organized, and provide capital fundswhich are largely invested by the associationsin marketable securities to be offered as ad-ditional collateral for rediscounts obtainedfrom the Federal intermediate credit banks.

Discounts and loans of the Federal inter-mediate credit banks and the banks for co-operatives to production credit associations,other financing institutions (chiefly State-

chartered agricultural credit corporations),and cooperatives increased by $22,000,000during 1936, to $218,000,000, as shown in thefollowing table. Outstanding debentures ofthe Federal intermediate credit banks were$13,000,000 larger on December 31, 1936,than a year earlier and payments by theUnited States for capital stock of the banksfor cooperatives made in 1936 were $3,-500,000.DISCOUNTS AND LOANS OF FEDERAL INTERMEDIATE

CREDIT BANKS AND OF BANKS FOR COOPERATIVES.


Discounts for production credit associationsDiscounts for other financing institutions.._Loans to cooperatives

Total

Dec.31,1936

1 1083971

2 218

ChangefromDec.31,

1935

+11

+19

+22

1 This figure, which is that of rediscounts for and loans to the produc-tion credit associations by the Federal intermediate credit banks, is$2,000,000 larger than total outstanding loans of the production creditassociations to farmers on the same date.

2 This figure differs from the total of similar items in the regular BUL-LETIN table on Farm Credit Administration loans by $22,000,000, theamount of loans and discounts by the Federal intermediate credit banksto the banks for cooperatives.

Other agricultural loans outstanding at theend of 1936 were loans financed by specialappropriations from Congress. Rural re-habilitation loans of the Resettlement Ad-ministration, made principally in 1936,amounted to $87,000,000. Emergency croploans and drought relief loans administeredby the Farm Credit Administration wereoutstanding in the amount of $105,000,000after reserves of $60,000,000 for uncollect-ibles; $17,000,000 of these loans were madein 1936. Loans of the old Federal FarmBoard and of the Agricultural MarketingAct Revolving Fund, to which the assets ofthe Federal Farm Board were transferred in1933, totaled $40,000,000 after reserves foruncollectibles; these are principally loans tocooperative marketing associations.



EARNINGS AND EXPENSES OF STATE MEMBER BANKS

Earnings and expense reports of Statemember banks show a further substantialincrease in their net profits during the lasthalf of 1936. Similar reports for Nationalmember banks are not yet available. Growthin profits at State member banks reflectedincreased net earnings from current opera-tion and a larger amount of recoveries onloans and investments. Banks also had sub-stantial profits on securities sold. Incomefrom interest and dividends and the amountof collection and service charges and earningsof trust departments increased somewhat,while expenses showed little change. As aresult, net earnings from current operations

of State member banks increased from $64,-000,000 in the first half to $76,000,000 in thesecond half of 1936. With losses on loans andinvestments about the same in both halves ofthe year and with recoveries on loans andinvestments somewhat larger in the secondhalf, there was considerable improvement innet profits before payment of dividends. Inthe last 6 months net profits amounted to $87,-000,000 as compared with $65,000,000 in thefirst 6 months.

The following table gives the detailed re-port of earnings and expenses of State mem-ber banks during each half of 1936 and forthe years 1935 and 1936.

[In thousands of dollars]

Earnings:Interest and discount on

loansInterest and dividends on

investmentsInterest on balances with

other banksCollection charges, commis-

sions, fees, etcForeign departmentTrust departmentService charges on deposit

accountsRent receivedOther current earnings

Total earnings from cur-rent operations

Expenses:Interest on deposits:

TimeDemandBank

TotalSalaries—officersSalaries and wages — em-

ployees (other than offi-cers)

Fees paid to directors andmembers of executive dis-count and advisory com-mittees

Interest and discount. 01;borrowed money

First : Second Y e a rhalf i half u m

of 1936 of 1936

Year1936

81, 330 !!

77, 135 '

153 I

4,446 •1,942 i

26,751 |

5,839 i14, 9053,126

85,118 159,147 ;

84,194 I 151, 491 :!

149 i

4, 784 ;

2, 566 j

29,834 ;

6,109 :

15,398 13,302 1

558 j

8, 533 !

5, 395 |49,163 j

10, 747 ij

166, 448

161.329

302

9,2304,508

56, 585

11,94830, 3036,428

215,627 : 231,454 . 414,412 ', 447,081

24,436 !1,049 •

379 ;

25,864 I22, 184 !

41, 646 ;

930

178

24,553 i 53,970944 ! 2, 572 ;371 i 992

25, 868 57, 534

22, 769 :) f:!l23,226J

43,674 j ['

48, 9891, 993

750

911

170 801

51, 73244, 953

1,871

348

Expenses (continued):Real estate taxesOther taxesO ther expenses

Total current expenses

Net earnings

Recoveries, profits on securities.etc.:

Recoveries on loansRecoveries on investments..Profits on securities soldAll other

Total. .

Losses and depreciation:On loansOn investments-.-On banking house, furniture

and fixturesAllother

Total losses and deprecia-tion

Net profitsCash dividends declared2..

Capital funds3 4

Number of officers *Number of employees (full and

part t ime)4

Number of banks 4 .

First Secondhalf half

of 1936 ' of 1936

Year1935

Year1936

6,3019,279

45, 642

G'lOS 1} 21,052 ( 12, 4099; 955 j/ ̂ »«^\i 19,23446,274 I 82,126 ! 91,916

152, 024 ; 155, 759 j 284, 739 j 307, 783

63, 603 • 75, 695 ! 129, 673 | 139, 298

13, 406 . 24, 574 | 24, 73222,665 \ q f i KQfi/j 39,66435,997 / J b ' 5 8 b \ i 72,8076,503 ! 14,769 i 10,621

11, 326 I16,999 |36,810 i4,118 ;

69, 253 78, 571 ! 135, 929 J 147, 824

24,143 i20,336 !

4,958 :18, 525

28, 09319, 135

7,34712, 848

92,396 !82,583 ;

10,257 :

26,587 ;

52, 23639,471

12, 30531,363

67, 962 ! 67, 423 : 211, 823 j 135, 375

64,894 i37.451 !

86,843 | 53,779 151,74739,857 j 73,892 77,308

, 076, 115 2, 110, 555 2, 046, 123|2, 110, 5557, 523 ; 7, 653 j 7, 337; 7, 653

55,392 ! 55,739 I 52,670; 55,7391,032 i 1,051 j 1,001J 1,051

1 Not reported separate ly ; included par t ly in "sa lar ies"- Includes interest on capital notes and debentures.3 The aggrega te book value of capital stock, capital notes1 At end of period.

and in "other expenses".

and debentures, surplus, undivided profits, reserves for contingencies, etc.



EARNINGS AND EXPENSES OF NON-MEMBER INSURED BANKS

The Federal Deposit Insurance Corpora-tion has just released the following report:

Tabulation of statements of 1936 earnings,expenses and disposition of profits submittedto the Federal Deposit Insurance Corpora-tion by 7,584 insured State banks not mem-bers of the Federal Reserve System disclosedthe following picture of their operations dur-ing the year:

1. Net profits before dividends amountedto $76 million, compared with a net loss of$5 million in 1935. Net profits amounted toabout 7V2 percent on total capital account.

2. Cash dividends declared and interestpaid on common and preferred capitalamounted to $25 million, compared with $20million in 1935. For the banks as a wholedividends and interest averaged approxi-mately 2% percent on total capital accountand approximately 4 percent on common andpreferred capital.

3. Gross current earnings were 7 percentgreater than in 1935, amounting to $295 mil-lion.

4. Notwithstanding the inclusion of regu-lar annual depreciation on banking house,furniture and fixtures with expenses in 1936,which was not done in 1935, net current oper-ating earnings were 24 percent greater inthe year just closed. Net current operatingearnings were $84 million in 1936, $68 mil-lion in 1935.

5. Comparative items of expense werelower than in 1935 except salaries and wages,which increased by 5 percent. Total cur-rent operating expenses were $211 million in1936, $208 million in 1935.

6. Profits on assets sold and recoveries onassets previously charged off were 36 percenthigher than in 1935 and amounted to $76million. Approximately half of this amountrepresented profits on securities sold or ex-changed.

7. Losses charged off on assets were morethan 30 percent lower than in 1935.

PRELIMINARY STATEMENT OF EARNINGS, EXPENSES

AND DISPOSITION OF PROFITS OF OPERATING INSURED

COMMERCIAL BANKS NOT MEMBERS OF THE FEDERAL

RESERVE SYSTEM

Calendar Year 1936 Compared With Calendar Year1935

[Amounts in millions of dollars]

Current operating earnings:Interest and discount on loansInterest and dividends on securitiesCommissions, exchange, service

charges, etcOther current operating earnings..

Gross current operating earnings.

Current operating expenses:Interest on time and savings de-

posits _-

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Federal Reserve Bulletin April 1937 - St. Louis FedFEDERAL RESERVE BULLETIN VOL. 23 APRIL 1937 No. 4...

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