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•EDERAL RESERVE BANK
of KANSAS CITY
BANKING AMD MONETARY DEVELOPmAAG I» m
1956
Summary, Total loans and investments^ a W A ^ & E % r c l a l
banks declined in July r e f l e c t i n g p r i n c i p a l l y further reductions
in holdings of U. S. Government s e c u r i t i e s but a l s o some decline
in loans and holdings of other s e c u r i t i e s . Demand deposit and
currency holdings of businesses and individuals increased s l i g h t l y
more than seasonally, U» S, Government deposits declined sharply.
Net borrowed reserves of member banks averaged s l i g h t l y lower in
July than in June, but they increased somewhat toward the end of
the month.
Bank c r e d i t . Preliminary estimates indicate that t o t a l
loans and investments at a l l commercial banks may have declined
around $1.2 b i l l i o n in July, as shown in Table 1. Continued s a l e s
of bank holdings of U. S, Government s e c u r i t i e s accounted f o r over
half the reduction, but loans declined about $300 m i l l i o n and holdings of municipal and corporate s e c u r i t i e s about $200 million* •
Last year in July, t o t a l bank credit increased about $1 b i l l i o n .
Expansion in loans accounted for over half the r i s e but holdings
of U. S. Government s e c u r i t i e s a l s o increased due in part t o bank
a c q u i s i t i o n s of new Treasury tax a n t i c i p a t i o n c e r t i f i c a t e s .
• Business and security loans each declined about $200
m i l l i o n . Agricultural loans a l s o declined s l i g h t l y during July
and sharply on August 1 (not included in data in Table l ) when
about $550 m i l l i o n of CCC cotton and c o m loans matured. Real
e s t a t e loans continued t o r i s e but the expansion a t weekly reporting banks was considerably below that of other recent months.
Consumer loans are estimated t o have increased further in July.
The $200 m i l l i o n decline in business loans a t a l l commercial banks in July followed an increase of $1,100 m i l l i o n In June
About two-thirds of both the increase and ensuing decrease occurred
at banks in New York City. Last year in July, these loans had increased an additional $200 m i l l i o n following a r i s e of $900 m i l l i o n
in June. In July of most other recent years, business loans declined
or showed l i t t l e change.
Reductions in borrowing largely by s a l e s finance companies,
metals manufacturers, and food processors during July were o f f s e t only
in part by further increases in other l i n e s , as shown in Table 2,
Loans t o s a l e s finance companies declined $200 m i l l i o n further and
those t o metals manufacturers, which had been increasing sharply
e a r l i e r in the year, declined $100 m i l l i o n . Loans t o food processors
continued t o decline while those t o commodity dealers began t o increase as i s usual in July. Most other industries with the except i o n of public u t i l i t i e s and construction firms continued t o add t o
t h e i r outstanding bank borrowing in J u l y .
Not f o r publication
Table 1
Estimated Changes In Loans and Investments at A l l Commercial Banks
(In b i l l i o n s of dollars)
Item
July 25
Total loans (excluding
"1555SST
Buslness
Eeal estate
Security
Agricultural
Consumer
A l l other loans
+ 0;1
1/
U, S. Government s e c u r i t i e s
Other s e c u r i t i e s
Total loans and Investments
(excluding Interbank)
- 0;3
- 0;2
- 0;2
- Oil
HE
Jan, 1,
Jan. 1,
m>.
Tear ending:
July 27 July 25
July 27
July 25, July 27
1%# ,
199?
i
+ 5;0
±10il
+ 8.8
+ 1.6
1/
+ 2.0
2;6
1/
0;9
"1953"
June 28, July 1,
+ 0 ;6
+ 0.2
+ 0.2
1/
- 0.2
±-i
2
1;2
0.8
+ 2,2
- 1.0
+%5
- 0,3
3.3
1.2
+ oa
+ 0.1
0;3
1.1
0.3
+ 1;2
+ 0.9
+ 1.9
+ 0.6
1.4
- 0.7
+ 0.4
5.9
- 5.3
- 8.0
-0.6
- 0.2
- 0.1
0.5
+ 0.4
- 0.5
+ 1,0
- 1.2
+ 1.0
- 2.5
+ 0.1
+ 2.0
+ 9.2
+ 0.1
1,1
1/ Less than $50 m i l l i o n .
2 / Level of business loans increased by, and real e s t a t e loans decreased by,
$300 million at end of October 1955 t o correct c l a s s i f i c a t i o n errors, No back
figures revised; most of the m i s c l a s s i f l c a t i o n probably occurred during 1955.
Note: Figures f o r July 1956 are estimates and subject t o change. Preliminary
data f o r July w i l l be shown in the Board's statement, "Assets and L i a b i l i t i e s
of A l l Banks in the United States", available at the end of August,
So f a r t h i s year, business loans at a l l commercial
banks have increased about $2.4 b i l l i o n compared with $2.2 b i l l i o n in the same period a year ago. About half t h i s year's
expansion has been accounted f o r by Increases In loans t o metals
manufacturers whereas l a s t year, such borrowing was r e l a t i v e l y
small. Borrowing by t e x t i l e manufacturers, petroleum concerns, •
and other manufacturers has a l s o been larger t h i s year than l a s t .
In addition, repayments of borrowing by food processors and commodity dealers have been considerably l e s s t h i s year than l a s t .
On the other hand, loans t o sales finance companies have declined
over $500 m i l l i o n t h i s year whereas l a s t year, they rose by a
comparable amount. Also, borrowing by public u t i l i t i e s and construction firms has been l e s s t h i s year than l a s t .
Not f o r publication
- 3 Table 2
Changes in Commercial, Industrial, and Agricultural Loans l /
(In millions of dollars)
Business of Borrower
1956
1955
1953
June 28, June 30, July 2,
July 25 July 27
1956
Jan. 5>
July 29 July 25
.1955
Jan. 6,
1953
Jan, 8,
July 27 July 29
Food processors
Commodity dealers
Trade concerns
Total
-102
+142
- 4
+ 36
+
+
+
65
66
30
31
- 83
+ 37
- 23
T^9
-356
-234
+205
-385
-536
-371
+232
^75
-714
-574
+214
-17075
Sales finance
-203
- 37
+ 38
-577
+508
- 21
A l l other - t o t a l
Metal and metal
products
T e x t i l e s , apparel,
and leather
Petroleum, coal, e t c .
Other manufacturing
and mining
Public u t i l i t i e s
Construction
A l l other types of
business
+ 35
+132
iSL
+2,948
+1,693
-116
- 46
- 25
+1,247
+127
+395
+ 29
+ 64
+ 28
+ 18
+ 29
+ 14
+271
+451
+250
+321
+184
- 22
+ 75
- 26
- 17
+ 29
+ 2
+ 36
+ 15
+ 56
- 4
+446
+281
+ 44
+189
+389
+170
+118
- 24
+ 11
+ 26
+ 65
+ 12
+208
+246
+ 31
-132
- 91
+125
2/-100
+ 64
- 6
+1,990
+ 58
+1,526
3/-254
-402
- 88
-229
2/+ 25
+ 58
+2,048
3/+l,272
-490
Total - C l a s s i f i e d
Unclassified
Total change
l / Data for 1956 exclude agricultural loans,
2 / CCC c e r t i f i c a t e s of interest may have declined about $100 m i l l i o n .
2 / CCC c e r t i f i c a t e s of interest may have declined about $600 m i l l i o n .
Wot f o r publication
Holdings of U, S. Government s e c u r i t i e s a t a l l commercial
banks declined about $700 m i l l i o n in July. On July 25, new 12-1/2
month 2 - 3 / 4 P e r cent Treasury noted were exchanged f o r the 2 per
cent Treasury notes maturing August 15 > 1956, and the I - 1 / 2 per
cent Treasury notes maturing October 1; A l l commercial banks may
have held around $1 b i l l i o n of the $12.9 b i l l i o n maturing notes,
or about o n e - f i f t h of the holdings outside the Federal Reserve.
Of the $900 m i l l i o n ' t o be redeemed f o r cash, commercial banks hold
around $100 m i l l i o n .
So f a r t h i s year, t o t a l bank credit at a l l commercial
banks has declined about $2.5 b i l l i o n , whereas l a s t year, in the
same period, i t increased nominally. U. S. Government s e c u r i t y
holdings declined more t h i s year than l a s t , $ 5 . 9 b i l l i o n compared
with $ 5 . 3 b i l l i o n , a n d holdings of other s e c u r i t i e s declined $500
m i l l i o n whereas l a s t year, they increased by about that same amount.
In addition, net loan expansion was smaller t h i s year than l a s t ,
$4 b i l l i o n compared with $5 b i l l i o n . Eeal e s t a t e , consumer, and
"other loans" rose l e s s t h i s year than l a s t , and s e c u r i t y loans
declined s u b s t a n t i a l l y whereas l a s t year, they were unchanged.
On the other hand, as noted above, business loans increased s l i g h t l y
more t h i s year than l a s t and a g r i c u l t u r a l loans did not decline
as much.
The appended t a b l e , "Loans and Investments a t A l l Commercial Banks", shows types of outstanding loans and investments
monthly f o r recent years and quarterly or annually f o r previous
years.
Deposits and currency. Preliminary estimates indicate
that demand deposits and currency held by businesses and individuals
may have increased about $300 m i l l i o n in July, about $200 m i l l i o n
more than the usual seasonal amount. At the month-end, the p r i v a t e l y held money supply was almost 1 - 1 / 2 per cent above i t s year-ago
l e v e l . So f a r t h i s year, however, i t has been growing a t an annual
rate of about 1 - 3 / 4 P e r cent.
U . S . Government deposits declined sharply i n July t o
the lowest month-end l e v e l since early in the year. Time deposits
probably showed l i t t l e further change. On balance, t o t a l deposits
and currency declined $1.5 b i l l i o n r e f l e c t i n g p r i n c i p a l l y reduct i o n s In commercial bank credit noted above but a l s o some declines
in System holdings of U. S. Government s e c u r i t i e s and changes in
miscellaneous f a c t o r s tending t o reduce d e p o s i t s .
The seasonally adjusted annual rate of deposit turnover
a t banks outside New York City rose t o almost 24 i n the second
quarter of 1956 from 22;5 in the l a s t quarter of 1955 > an increase
of more than 6 per cent. At banks in New York City, turnover,
which had declined early in 1956, increased again in the AprilJune period t o about the same l e v e l that had prevailed i n l a t e 19551
Not f o r -publication
- £> -
Table 3
Estimated Changes in Deposits and Currency
(in b i l l i o n s of dollars)
Item
Seasonally adjusted data l /
""fiemahd deposits adjusted
Currency outside banks
Total
Unadjusted data 1 (
Demand deposits adjusted
Currency outside banks
Total
Time deposits
U3 S. Government deposits
Total
Factors a f f e c t i n g deposits
and~curren*cy
oarik loans and investments
other than U. S, Govts sec*3/
Commercial
""
Mutual savings
Bank holdings of U. S*
Government s e c u r i t i e s
Federal Reserve
Commercial
Mutual savings and other
Gold stock and foreign
deposits at F. R. Banks
Foreign bank d e p o s i t s , n e t ,
at commercial banks
Other factors
Tear ending
1955
1956" ~~WT~ T 3 5 T
«?une 28E July 1« Jan* 1« Jan a 1- 3uly 237 July 27
1955
1956
July 25 July 27 July 2$ July 27
+ 001
+ 0,6
+ 1.1
+ 0a2
TT75
+ 2.7
+ 0.3
+ 0,2
+ 0.7
- 0.3
TTO
» lt.6
- 0.7
-T73
+ 2.0
- 0.3
- 3.7
- 2.7
+ 0,1 + 0,2
+1572 + 0*0
+ 0,1
-
X,i
+ 1.1
• 0.8
- 3IC
+ 1.8
+ I.U
r r o
+ u.o
+ 0.2
+T^'
+1.1
+ o»5
+ 3»9
+ 0*3
+ 3.3
- 2©li
+ 2.7
+ 2.1
+T.5
+ 3»U
(signs indicate e f f e c t on deposits and currency)
- 0.3
+ 0.6
+ 0o2
+ 0.2
- 0o9
- 0.2
- 0.7
2/
+12 0 5
+ 1.5
+ 6.7
+ 5.U
+ i.U
+ 2.5
+ 2.3
+ 1.0
+ 0,5
+ OoU
— 6.2
— o.ti
- 5*3
- 0.2
- 9.5
— I.u
2/
- 7.6
- loh
* 5*9
- 0o3
" 8<s0
— 0.6
— 0.6
- o.U
+ 0.1
+ 0.1
+ 0.3
2/
+ 0.3
— 0.1
Xh
2/
«• U06
+ 0.1
- 0.7
-f{o
Ail
X7
-1)7!
- 0»k
or l a s t Wednesday except in case of June and December c a l l dates, when available.
Unadjusted data on the monthly change for July are not s t r i c t l y comparable i n view
of the f a c t that June 27> 1956 i s being compared with June 30, 1955* Usually,
however, demand deposits adjusted decline and currency outside banks increase in
roughly comparable amounts between the l a s t Wednesday and the 30th of June; therefor*
the t o t a l privately-held money supply may have been about unchanged between June 27
and June 30.
2 / Less than $50 m i l l i o n .
3 / Total includes foreign loans on gold and holdings of bankers 1 acceptances at the
Federal Reserve} changes in these items are generally r e l a t i v e l y small. In additionr
even i f there were no changes in these items, changes at commercial and mutual
savings banks would not necessarily add exactly t o t o t a l change, which i s "net",
because of bookkeeping discrepancies between various banking records»
Note* Data f o r July 1956 are estimates and subject to change. Preliminary data
f o r July w i l l be shown in the Board's statement, "Assets and L i a b i l i t i e s of
All Banks i n the United States" available at the end of Auguste
for publication
Digitized forNot
FRASER
#
- 6 Table 1*
Free Reserves
(Excess reserves minus member bank borrowings;
based on average of d a i l y f i g u r e s ; i n m i l l i o n s of dollars)
Period
All
member
3.95b* December
159
1955*
1956$
1956:
Notet
June
July
August
September
October
November
December
-
168
92
189
285
360
1*91
215
January
February
March
April
May
June
July
—
-
255
266
1*08
533
50U
195
11*1
June 27
July 3
11
18
25
Aug, 1
•
-
161
171
123
220
12
205
New York
26
550
2
69
139
127
150
265
161
1*3
25
— 61
- Ill*
- 137
67
** 83
-
167
219
31*2
1*09
1*16
501
338
377
1*07
353
365
31*1*
31*1
338
198
138
171*
167
88
33
106
—
*
-
83
103
256
262
153
111
1*9
-
353
336
298
1*29
1*68
356
31*7
379
310
319
321*
205
305
362
33
98
138
200
50
32
-
83
1*7
75
53
27
18
—
-
332
311
356
357
326
31*9
286
285
1*1*6
390
391
221*
-
-
-
Country
.
50
w
Reserve
City
16
*»
-
Chicago
Data f o r second half of July and August are preliminary.
Bank reserves* Net borrowed reserves of member banks
averaged about $140 million in July compared with about $200 in
June, ae shown in Table 4, Borrowings dropped t o about $740
m i l l i o n and excess reserves rose t o $600 m i l l i o n . Beserve p o s i tions at country and Chicago central reserve c i t y banks eased
somewhat, whereas New York central reserve c i t y banks vere under
increased reserve pressure. During the month, net borrowed
reserves fluctuated considerably, Increasing t o a l e v e l of $220
m i l l i o n around the mid-month and subsequently declining t o a
nominal amount. They increased again, however, toward the end
of July when they averaged over $200 m i l l i o n .
Not f o r publication
#
- 7 Table 5
Changes In Member Bank Reserves, with Relevant F a c t o r s
(Monthly average of dally f i g u r e s ; in millions of d o l l a r s )
Item
Jan. - July
1956
1955
1956
+102
-4o4
+ 50
+ 59
+ 3
-407
1955
Year ended July
1956
1955
Member bank reserve balances
Total
Excess reserves
Required reserves
+ 23
-120
Principal factors
Currency in circulation
Gold stock and foreign
accounts
Treasury operations
Federal Reserve f l o a t
Other factors
Federal Reserve loans and
investments:•
U, S. Govt, s e c u r i t i e s :
Outright
Repurchase agreements
Acceptances
Discounts and advances:
To member banks
To others
+ 12
- 84
-371
- 22
+ 34
(signs indicate e f f e c t on reserves)
-215
-235
+514
+465
-467
-316
+
+
+
46
29
57
16
- 7
-108
+ 62
- 81
+296
- 57
-126
+ 98
-
15
13
52
91
+269
- 3
+323
+106
+245
- 3
+^2
•1,022
- 29
+ 1
+329
+ 4o
- 3
-7%5
-277
- 1
-950
+ 13
+ 13
-352
- 35
+ 5
^3S
-101
+281
-112
+211
+463
+ 9
- 31
-
1
+126
- 15
-
1
-8o4
- 49
0
0
System holdings of U. S, Government s e c u r i t i e s increased about $60 million on an average basis over July, Beginning
in l a t e June and extending into early July, when month-end and
holiday currency needs and reductions in f l o a t were absorbing
reserves, the System purchased about $400 m i l l i o n of s e c u r i t i e s .
Subsequent s a l e s , however, more than o f f s e t t h i s increase. In
the week ending August 1, when reserve pressures again increased,
largely as a r e s u l t of reductions in Reserve Bank f l o a t , the System
purchased about $50 million of s e c u r i t i e s outright.
#
Not f o r publication
#
-216
-124
+ 32
+ 13
As shown in Table 5> the principal f a c t o r s supplying
reserves t o banks over July, in addition t o the Increase i n holdings o f U. S. Government s e c u r i t i e s , were a reduction In required
reserves, some expansion i n Reserve Bank f l o a t , and small changes
in gold stock and f o r e i g n deposits a t the Reserve Banks. Required
reserves declined $120 m i l l i o n as substantial reductions i n U. S,
Government deposits a t commercial backs were o f f s e t only i n small
part by increases in privately-held d e p o s i t s . Reserve Bank f l o a t ,
a f t e r r i s i n g sharply in mid-June, continued a t a higher-than-norma 1
l e v e l in July, The p r i n c i p a l f a c t o r absorbing reserves in July
was a $215 m i l l i o n Increase in currency in c i r c u l a t i o n . Currency
outflows early In July, r e f l e c t i n g turn-ofi-month and holiday needs,
were o f f s e t only In part by subsequent return f l o w s . Inflow was
e s p e c i a l l y heavy in the week of July 25, however, and contributed
t o the sharp reduction i n net borrowed reserves i n that week.
Interest rates* The e f f e c t i v e trading rate f o r Federal
funds was almost c o n s i s t e n t l y 2 - 3 / 4 per cent during J u l y . The rate
on 4 - 6 months prime commercial paper was reduced f i r s t on July 5
and again on July 20 t o a range of 3-1/8—3-1/4 per cent from
3 - 3 / 8 per cent. The rate on d i r e c t l y - placed 3-6 months finance
company paper was reduced early in July t o a range of 2-7/8— 3
per cent from 3 per cent. The rate on 90-day bankers 1 acceptances
rose in l a t e July t o 2 - 1 / 2 per cent from 2 - 3 / 8 per c e n t .
- 9 Loans and Investments at A l l Commercial Banks
(In b i l l i o n s of d o l l a r s )
Loans
U. S. Other
and
Gov't, secur- Total
i n v e s t - secur- i t i e s loans
ments . i t i e s
Date
•
•
$
#
•
•
Business
Eeal Secu- Farm ConAll
estate rity
sumer other
31
31
31
31
31
31
116.2
114.2
120.1
126.6
132.5
141.5
69; 2
62.6
67.O
62.0
61.5
63.3
9.0
9.2
10.2
12;4
13.3
14.1
37.9
42,4
42.9
52.2
57.6
64.0
18.3
18.9
17.1
21;9
25.9
27.9
9;4
10; 8
11;5
13.5
14,6
15.7
2,1
2.3
2,6
2;9
2.6
3,2
1.7
2.9
3.1
2.9
3.4
3.9
3.8
4.8
5,8
7*4
7,5
9.4
2.9
3.1
3.4
4.2
4,5
4,9
1953: Mar. 25
June 30
Sept.30
Dec. 31
139.2
137.8
142.6
145,5
60,5
58;6
62.2
63.4
14.3
14.3
14;5
14,7
64.4
64.9
65.9
67.4
27.9
27.4
27.9
27,2
15.9
16; 2
16,5
16,7
2.7
2.8
2.9
3.6
3.9
3.7
3,9
5.0
10; 0
10,6
10,9
10,9
4.9
5.1
4.9
5.1
1954: Mar. 31
June 30
Sept.29
Dec. 31
142.5
146.2
150.1
155,7
60.7
63.5
67.3
69.0
15.1
15.5
16,0
16.3
66.8
67.2
66.8
70.4
26,7
26.1
26,1
26.9
l6;8
17.2
17;8
18,4
3.0
3.7
3,8
4.5
5.8
5.1
3.9
5.2
10.6
10.8
10.7
10.7
5.0
5.2
5.5
5.8
1955: Jan. 26
Feb. 23
Mar. 30
Apr. 27
May 25
June 30
July 27
Aug. 31
Sept.28
155.5
153.8
152.4
154.4
154,5
154.8
155.8.
155.6
156.4
66.8
64,2
65;6
65.0
63 ;3
63,7
62.5
62.0
69IO
4.4
5,2
5.2
4.9
4.4
4.4
4.4
4.2
3.9
3,9
4.0
12,5
7,0
Nov. 30
Dec. 31
158.2
160.3
61.4
6l.6
16,6
16.7
80.2
82.0
18; 6
18,8
19; 0
19;2
19.5
19; 8
20.0
20; 3
20; 6
20;8
1/20.5
20.7
20.8
5.8
5.9
6,0
6,2
6.4
6.6
6.7
6.8
7.0
62,9
26.6
26,8
27.4
27.6
28.0
28.9
29.1
29.9
30.5
30.8
1/31.1
32.3
33.2
10,7
10;8
11,0
11.2
11.4
11.8
11,9
12;1
12,3
158.1
69^8
70.2
71;2
71;8
72,8
74,8
75.4
76;2
77.5
78.4
4.0
3,9
4.1
4.3
4.3
4.5
4.5
4.2
4.2
Oct. 26
16.7
16; 8
17.0
17.0
16,7
16,8
16; 7
16.9
16,9
16,8
4.5
5.0
4.3
4,5
12,6
12.7
7,0
7.0
I9V7:
1948:
1949:
i950;
1951:
1952:
Dec;
Dec.
Dec.
Dec.
Dec.
Dec.
4,6
1956: Jan. 25p
60.9
80,9
158.3
16.5
4 , 4 12,8
20;9
32; 7
6.9
16.6
81.2
Feb; 29p
21;0
157.1
59.2
4.5
6.9
4,5 12,8
32.9
Mar. 28p
16.6
21;2
4
,
4
13,0
7.0
158.5
83.3
4,5
58.5
34;5
16.6
21;
4
4
,
4
Apr. 25p
158,6
58.1
13,2
7.1
83.9
34,7
4.3
9
May 3QP 158,3
16.4
4,4
84.7
21;7
13.4
7.2
4.5
57.2
34.7
86.2
4
.
4
16.4
June 27p
56.4
21.9
4 . 3 13;7
35.8
159.0
7.3
22.0
4.2
4 , 2 13.8
16.2
July 25e
157.8
35.6
55.7
85,9
7-3
e - Es1bimated
p - Preliminary
1 / Level of business loans increased by, and r e a l e s t a t e loans decreased by
$300 m i l l i o n a t the end of October 1955 t o correct c l a s s i f i c a t i o n errors. No
back f i g u r e s revised; most of the m i s c l a s s i f i c a t l o n probably occurred during 1955,
Note; Data exclude Interbank loans. Total loans are a f t e r and types of loans
before deductions f o r valuation reserves. Consumer and "other loans" are
partly estimated f o r a l l dates. Other data are partly estimated on a l l
but June and December dates.
Banking Section, Board of Governors
Not f o r publication
August 9$ 195>6
BANKING AMD MONETARY DEVELOPMENTS IN AUGUST 1956
Summary. Total loans and investments a t a l l commercial
banks increased s u b s t a n t i a l l y in August r e f l e c t i n g p r i n c i p a l l y bank
a c q u i s i t i o n s of new Treasury c e r t i f i c a t e s and sharp expansion in
business loans, Demand deposit and currency holdings of businesses
and individuals declined on a seasonally adjusted b a s i s . Net borrowed reserves of a l l member banks increased t o a l e v e l considerably
above that p r e v a i l i n g in J u l y . Short-term money market rates rose
further and the prime commercial loanjrate was increased. The d i s count rate was raised t o 3 per cent a t
BANK
; imite
( t i e * ttoot a l]
Bank c r e d i t . Preliminary estimOTei^4»a5w$e
loans and investments a t a l l commercial banka^jtecreased over $1.5
b i l l i o n during August, as shown in Table 1. ifenk*trolMfigs of U. S,
Government s e c u r i t i e s increased about/Xr^A/iMU-ipn, l a r g e l y reAiriroet 15,
f l e c t i n g bank a c q u i s i t i o n s of new tax'
A l l commercial banks i n i t i a l l y took $2.2 b i l l i o n of t h i s $ 3 , 2 ' b i l l i o n
i s s u e , but prior and subsequent t o the financing, they sold s e c u r i t i e s , Total bank loans increased about $ l / 4 b i l l i o n ; business loans
expanded sharply and r e a l e s t a t e and consumer loans rose further
but security and a g r i c u l t u r a l loans declined. Holdings of other
s e c u r i t i e s a l s o increased, the f i r s t monthly r i s e since early in
the year. Last year in August, t o t a l bank credit declined s l i g h t l y
as s a l e s of U, S, Government s e c u r i t i e s were about o f f s e t by subs t a n t i a l increases in loans and holdings of other s e c u r i t i e s .
Business loans increased $600 m i l l i o n In August, somewhat
l e s s than in August a year ago but more than in any other recent
year since 1950 following the Korean outbreak. T h r e e - f i f t h s of the
r i s e a t c i t y banks was in New York City compared with l e s s than
half in the f i r s t s i x months of 195 6 and l e s s than t w o - f i f t h s in
the year 1955•
Outstanding loans In most business loan categories rose
in August, as shown In Table 2, with increases f o r food processors,
commodity dealers, public u t i l i t i e s , petroleum and chemicals concerns, and miscellaneous manufacturing and mining s u b s t a n t i a l l y
exceeding those of a year ago. Loans t o metals concerns, In cont r a s t with an Increase l a s t year, continued the decline begun in
early July while those t o s a l e s finance companies rose only half
as much as a year ago.
Not f o r publication
2 -
Table 1
Estimated Changes In Loans and Investments at A l l Commercial Banks
(In b i l l i o n s of dollars)
Item
1956
1956
1555.
1955
July 26, July 28, June 28, July 1,
Aug, 29 Aug. 31 Aug. 29 Aug. 31
Year ending:
Aug. 29, Aug, 31;
1956
1955
Total loans (excluding
interbank)
Business
Eeal estate
Security
Agricultural
Consumer
A l l other loans
+
+
+
+
U. S. Government s e c u r i t i e s
+ 1.2
- 1.2
+ 0.7
- 0,8
- 5,4
- 4.8
Other s e c u r i t i e s
+ 0.1
+ 0*2
- 0.1
+ 0.1
- 0,6
+ 1,2
+ 1.6
- 0,2
+ 0.7
+ 0,8
+ 4,1
+ 6,7
Total loans and Investments
(excluding interbank)
0;3
Oio
0.2
0.3
0;3
0.1
1/
+
+
+
+
+
0;8
0;5
0.3
0.3
0;3
0,2
0.1
+
+
+
+
0.1
oA
0.3
0.5
0.3
0.2
1/
+
2/+
2/+
+
+
+10.1
+10;3
li4
liO 2/+ 6.6 2/+ 4c1
0i5 2/+ 1.8 1 A 2,7
+ 0i6
0i3 ~ - 0 , 3
+ 0,1
+ Oil
0;5
+ 1.8
+ li4
0;3
+ 1,4
0.2
+ 0.5
i.
1 / Less than $50 m i l l i o n .
2/ Level of business loans increased by, and real e s t a t e loans decreased by,
$300 million at end of October 1955 t o correct c l a s s i f i c a t i o n errors. No back
figures revisedj most of the m i s c l a s s i f i c a t i o n probably occurred during 1955.
Note: Figures f o r August 1956 are estimates and subject t o change. Preliminary
data, f o r August w i l l be shown in the Board's statement, "Assets and
L i a b i l i t i e s of A l l Banks in the United States", available at the end of
September.
Eeal e s t a t e loans increased further in August, somewhat
f a s t e r at weekly reporting banks than in July. Consumer loans also
continued t o expand. Agricultural loans at a l l commercial banks declined sharply on August 1 when $550 million of CCC cotton and corn
loans matured, but these loans subsequently rose, largely due t o
new CCC borrowing. Security loans declined further in August and a t
the month-end were at the lowest l e v e l since the f a l l of 1954.
Not f o r publication
<
r
- 3 Table 2
Changes In Commercial and Industrial Loans
1/
(In millions of dollars)
e
Business of Borrower
e
e
#
Food processors
Commodity dealers
Trade concerns
Total
+115
+108
+ 2
+225
+ 6o
+ 29
+ 31
+120
+
+
89
11
5
73
+ 15
+249
- 2
&S8
- 5
+ 95
+ 60
+150
- 30
+ 13
- 21
OB
Sales finance
+137
+2?4
- 60
- 67
+238
- 24
A l l other - t o t a l
Metal and metal products
T e x t i l e s , apparel, and
leather
Petroleum, coal, e t c .
Other manufacturing
and mining
Public u t i l i t i e s
Construction
A l l other types of
business
+180
-139
+311
+ 33
+190
- 13
+208
-259
+442
- 13
+149
+ 48
+ 54
+ 78
+ 20
+ 33
+ 18
+ 76
+118
+106
+ 38
+ 67
- 4
+ 6o
+ 52
+ 19
+ 17
+ 41
+ 2
+ 7
+ 76
+ 19
+135
+ 24
+ 4
+ 46
+ 43
+ 37
+ 17
+ 59
+ 14
+ 86
+120
+ 50
+110
+185
+ 59
+541
+ 10
+705
2 / - 60
+201
+ 47
+403
- 81
+830
3/-160
+ 6
+551
2/+645
+248
+322
3/+670
+ 94
e
Total - C l a s s i f i e d
Unclassified
Total change
*
r~l$5^
1955
1956
1953
1955
1953
July 26, July 28, July 30, June 28, June 30, June 25,
A
w.
Aug. 29 Aug, 31 Aug. 26 Aug, 29 Aug. 31 Aug. 26
i/
Data for 1955 and 1953 include agricultural leans.
2/
CCC c e r t i f i c a t e s of interest may have declined about $200 million*
2J
CCC c e r t i f i c a t e s of i n t e r e s t may have declined about $300 m i l l i o n .
Not f o r publication
+ 88
Preliminary member bank c a l l report data f o r June 30, 1956,
indicate that t o t a l loans at a l l member banks increased $3,7 b i l l i o n ,
or almost 5 - 1 / 2 per cent during the f i r s t half of 1956. Bates of
expansion were generally comparable at a l l c l a s s e s of banks. Business
loans increased $2.7 b i l l i o n , or almost 9 per cent, and accounted f o r
over two-thirds of t o t a l loan growth. About half the growth occurred
at central reserve c i t y banks in New York and Chicago where the rate
of expansion was 11-12 per cent, whereas at reserve c i t y and country
banks, the rates of increase were 6 and 10 per cent, r e s p e c t i v e l y .
"Other loans t o individuals", which include consumer loans rose about
7 per cent and real e s t a t e loans about 5 per cent, but loans f o r
purchasing or carrying s e c u r i t i e s declined substantially at banks in
New York and Chicago and agricultural loans dropped at country and
reserve c i t y banks.
Total loans and investments at a l l commercial banks have
increased about $ 3 A b i l l i o n since mid-year, about the same as in
the comparable period l a s t year; The 1956 increase, however, ref l e c t e d increased holdings of U. S. Government s e c u r i t i e s with l i t t l e
net change in other earning a s s e t s . Last year, loans increased subs t a n t i a l l y while holdings of U. S. Government s e c u r i t i e s declined
somewhat.
The appended t a b l e , "Loans and Investments at A l l Commercial
Banks", shows types of outstanding loans and investments monthly for
recent years and quarterly or annually f o r previous years.
Deposits and currency. Preliminary estimates indicate that
demand deposits and currency held by businesses and individuals may
have declined about $600 million on a seasonally adjusted basis in
August, as shown in Table 3* So f a r t h i s year, the seasonally adjusted annual rate of growth has been somewhat l e s s than 1 per cent,
and at the end of August, deposits and currency were about 1 per
cent above t h e i r l e v e l a year ago.
The $500 million reduction in demand deposits adjusted
in August r e f l e c t e d in part a transfer of funds t o Treasury accounts
for a c q u i s i t i o n of new c e r t i f i c a t e s in mid-August. Over the month,
U. S. Government deposits increased over $2 b i l l i o n . Time deposits
continued t o r i s e moderately. Total deposits and currency, on balance,
increased almost $2 b i l l i o n , largely r e f l e c t i n g expansion in commerc i a l bank c r e d i t , but also increased Reserve Bank holdings of U. S.
Government s e c u r i t i e s and loan expansion at mutual savings banks.
The seasonally adjusted rate of deposit turnover a t banks
outside New York City, which was over 6 per cent higher in the second
quarter of 1956 than in the l a s t quarter of 1955, continued t o r i s e
in July, At banks in New York City, where turnover in the second
quarter averaged about the same as in l a t e 1955, the rate a l s o increased in July.
Not f o r publication
- 5 Table 3
Estimated Changes in Deposits and Currency
(In b i l l i o n s of dollars)
Item
Seasonally adjusted data l /
Demand deposits adjusted
Currency outside banks
Total
Unadjusted data 1 /
Demand deposits adjusted
Currency outside banks
Total
Time deposits
U, S. Government deposits
Total
Factors a f f e c t i n g deposits
and currency
Bank loans and investments
other than U. S. Govt. sec. 3 /
Commercial
Mutual savings
Bank holdings of U. S,
Government s e c u r i t i e s :
Federal Reserve
Commercial
Mutual savings and other
Gold stock and foreign
deposits at F. R. Banks
Other factors
1953"
1955
1956
1955
July 26- July 28- June 28- July 1AUK. 29 AUS..J1,
- 0;5
- 0;1
2/
~.Z
- 0.
2
- 0;5
+ 0.2
+ 2;1
T l 3
2/
+ 0;2
+ 0;2
+ 0;3
^_0.9
- o75
+~o,~5
Qi9
0.3
+ 1.2
+ 4;6
+ 0.3
+ 4.9
+ 0;7
-_0.1
+ o."5
+ 0;3
0.9
0*2
1.1
3.3
0.7
5.2
+
+
+
+
~
- 0;4
- 0.1
- 0,5
+ 0;6
- 0,3
_2/_
- 0;3
+ 0.3
j_0;4
+ 63
Year ending:
Aug. 29, Aug, 31.
1956
1951.
+ 0;2
- 0;2
+ 0.7
4.5
0;4
4i9
3i4
0.5
6
(signs indicate e f f e c t on deposits and currency)
+ 0;6
+ 0.4
+ 0.2
+ 1;2
+ UO
+ 0.2
+ 0.3
" i r
+ 1;8
+ l;5
+ 0.4
+11.?
+ 9.5
+ 2.3
+14 i0
+11;5
+ 2.3
+ 1;5
+ 0;3
+ 1.2
2/
- 1.7
- 0;3
- 1.2
2/
+ 0;9
- 0;7
+ 0.2
- 0.8
2/
-
-
- 0;1
- 0.2
+ 0.1
2/
2/
- 0.4
+ 0.2
- 0.9
+ 0.2
+ 0;2
+ 0.7
2/
2/
- o. 6
6i0
0.1
5,4
0.6
5.4
0.1
4.8
0.4
2/
- 0.8
for l a s t Wednesday except in case of June and December c a l l dates, when available.
Unadjusted data from the end of June are nob s t r i c t l y comparable in view of the
f a c t that June 27, 1956 i s being compared with June 30, 1955» Usually, however,
demand deposits adjusted decline and currency outside banks increase in roughly
comparable amounts between the l a s t Wednesday and the 30th of June; therefore the
t o t a l privately-heId money supply may have been about unchanged between June 27
and June 30,
2 / Less than $50 m i l l i o n ,
j}/ Total includes foreign loans on gold and holdings of bankers' acceptances at the
Federal Reserve; changes in these items are generally r e l a t i v e l y small. In addition,
even i f there were no changes in these items, changes at commercial and mutual
savings banks would not necessarily add exactly to t o t a l change, which i s "net",
because of bookkeeping discrepancies between various banking records.
Note: Data for August 1956 are estimates and subject t o change. Preliminary data
for August w i l l be shown in the Board's statement, "Assets and L i a b i l i t i e s
of A l l Banks in the United States" available at the end of September.
Not for publication
« 6 *
Table 4
Free Reserves
(Excess reserves minus member bank borrowings;
based on average of d a l l y f i g u r e s ; In m i l l i o n s of d o l l a r s )
Chicago
Reserve
City
Country
459
-
50
ON
New York
ro
All
member
1
Period
550
-
92
189
285
360
491
245
-
69
139
127
150
265
161
- 25
- 6l
- 114
- 137
- 67
- 83
-
219
342
409
4l6
501
338
407
353
365
344
341
338
January
February
March
April
May
June
July
August
-
255
266
408
533
504
195
139
341
-
198
138
174
167
88
33
108
162
-
83
103
256
262
153
Ill
48
72
-
353
336
298
429
468
356
344
381
379
310
319
324
205
305
360
273
1956:
July 25
Aug. 1
8
15
22
29
Sept. 5
-
16
213
34?
381
230
432
348
-
50
32
160
150
145
205
132
- 27
- 48
- 34
- 53
- 99
- 106
- 57
-
326
353
469
429
371
299
345
387
220
316
251
385
178
186
Note:
Data f o r second half of August and September are preliminary.
195^:
December
1955s
July
August
September
October
November
December
1956:
-
16
Bank reserves. Net borrowed reserves of a l l member banks
averaged $340 m i l l i o n in August, s u b s t a n t i a l l y above the $140 m i l l i o n
average in July, as shown in Table 4 . Borrowings from the Reserve
Banks averaged $900 m i l l i o n in August and excess reserves about
$560 m i l l i o n . A l l c l a s s e s of banks shared in the recent tightening
but country banks accounted f o r almost h a l f .
Not f o r publication
- 7 Table 5
Changes In Member Bank Beserves, with Relevant Factors
(Monthly average of daily f i g u r e s ; in m i l l i o n s of d o l l a r s )
Item
July - August
August
1956
1955
Year ended August
1956
1955
1956
1955
^150
+ 13
+ 55
+250
- 17
- 133
+
+
+ 74
- 19
-264
+514
Member bank Reserve balances
Total
- 53
Excess reserves
1/
Required reserves l /
- 42
- 11
Federal Reserve loans and
investments:•
U. S. Govt, s e c u r i t i e s ;
Outright
Repurchase agreements
Acceptances
Discounts and advances:
To member banks
To others
l/
7
6
(signs ii idicate el f e e t on 1reserves)
Principal f a c t o r s
Currency in c i r c u l a t i o n
Gold stock and f o r e i g n
accounts
Treasury operations
Federal Reserve f l o a t
Other f a c t o r s
- 43
- 53
+101
-
5
- 114
-239
-361
-393
+ 11
+ 20
-353
+ 58
- 6
-107
-194
+ 69
+ 57
- 10
- 296
+ 74
- 13
-213
-132
- 12
+286
+126
+164
+ 95
+
+
+
- 50
- 85
+ 36
---
- 81
- 55
- 26
+ 1
+
+
+
+
8
2
7
1
+288
+274
+ 14
- 2
-356
-382
+ 27
+ 4
-103
- 60
- 43
+ 14
+160
+238
- 11
+ 129
1
+364
- 26
+133
- 38
+650
- 57
84
71
92
64
Data f o r August 1956 are preliminary.
System holdings of U. S. Government s e c u r i t i e s increased
$415 m i l l i o n during August. Purchases were concentrated at the end
of the month, however, and on a monthly average b a s i s , as shown in
Table 5# holdings declined somewhat. Holdings by the System r e mained about unchanged in early August following purchases l a t e in
July when reserve pressures•increased l a r g e l y as a r e s u l t of reduct i o n s in Reserve Bank f l o a t . In mid-August, the System purchased
almost $200 m i l l i o n of s e c u r i t i e s under repurchase contracts when
market t i g h t n e s s developed in'connection with the issuance of the
new Treasury tax c e r t i f i c a t e s . These holdings were r e t i r e d in about
a week, but additional purchases were made a t various times over the
remainder of the month. Beginning on August 21, and continuing through
Hot f o r publication
the end of the month, the System purchased b i l l s outright t o t a l i n g
$410 m i l l i o n , as declines in Reserve Bank f l o a t and increases in
currency in circulation associated with month-end and holiday needs
drained reserves#
As shown in Table 5# the principal factor absorbing reserves over August was a substantial decline in Reserve Bank f l o a t ,
which returned t o a normal l e v e l In August following unusually high
l e v e l s in June and July. An inflow of currency from c i r c u l a t i o n
was the major factor supplying reserves t o banks over August, Late
in the month, however, and continuing into early September, there
were heavy outflows t o meet end- of -month and holiday needs, Required
reserves showed l i t t l e change on a monthly average b a s i s in August;
a sharp increase a t the mid-month, associated with expansion in bank
credit resulting from Treasury financing, was about o f f s e t by previous and subsequent declines. Between late July and l a t e August,
however, required reserves increased $265 m i l l i o n .
Interest r a t e s . Beginning in mid-August and continuing
through early September, rates on short-term money market paper rose
further about l / 4 t o l / 2 per cent. The rate on prime commercial
paper, 4-6 months, rose t o 3-1/2 per cent, on d i r e c t l y placed firance
paper, t o 3-1/8 per cent, on 90 day bankers' acceptances, t o 2 - 7 / 8
per cent, and on brokers' c a l l loans, t o 4-1/2 per cent. On August 20
and 21, banks in Boston, New York, and other c i t i e s announced an increase in the prime commercial rate--the minimum charged on shortterm loans t o business borrowers with the best credit r a t i n g - - t o 4
per cent from 3-3/4 per cent. The l a t t e r rate had been in e f f e c t
since April 1956, when an increase in the prime rate had followed
an increase in the discount rate.
On August 24, with the approval of the Board of Governors,
the discount rate was increased from 2-3/4 t o 3 per cent a t the
New York, Philadelphia, Richmond, and Chicago Reserve Banks, f o l lowed by similar increases at s i x other Reserve Banks by the end of
the month. At the Minneapolis and San Francisco Banks, the rate
had been raised to 3 per cent l a s t April.
The e f f e c t i v e rate on Federal funds increased t o 3 per cent
at the time the discount rate rose on August 24, and thereafter
generally remained close t o t h i s l e v e l .
Not f o r publication
. y
- 9 Loans and Investments a t A l l Commercial Banks
(In b i l l i o n s of d o l l a r s )
Loans
and
investments
Date
1947:
1948:
1949:
1950i
1951:
1952:
Dec;
Dec;
Dec;
Dec;
Dec;
Dec.
U. S. • Other
Gov't, secur- Total
secur- i t i e s loans
ities
Business
Eeal
estate
Secu- Farm ConAll
rity
sumer other
31
31
31
31
31
31
116,2
114; 2
120.1
126; 6
132.5
141.5
69;2
62 ;6
67;0
62;0
61.5
63.3
9;0
9;2
10;2
12;4
13;3
14.1
37;9
42;4
42;9
52.2
57.6
64,0
18.3
18; 9
17; 1
21; 9
25.9
27,9
9;4
10; 8
11; 5
13 ;5
l4;6
15.7
2,1
2;3
2;6
2;9
2.6
3.2
1;7
2,9
3;1
2.9
3.4
3.9
3.8
4.8
5.8
7.4
7.5
9.4
2;9
3.1
3.4
4.2
4,5
4.9
1953: Mar. 25
June •30
Sept,30
Dec. 31
139 *2
137:8
142; 6
145.5
60.5
58; 6
62.2
63.4
l4;3
l4;3
14 ;5
14.7
64;4
64,9
65.9
67.4
27;9
27.4
27;9
27.2
15;9
16;2
16;5
16,7
2;7
2;8
2;9
3.6
3.9
3;7
3.9
5.0
10.0
10.6
10; 9
10,9
4,9
5:1
4,9
5.1
1954s Mar. 31
June 30
Sept.29
Dec. 31
142;5
146;2
150;1
155.7
60; 7
63;5
67; 3
69.0
15;1
15:5
16; 0
16,3
66;8
67 ;2
66;8
70,4
26;7
26;1
26; 1
26.9
16; 8
3;0
17; 2
3;7
17.8 , 3;8
18,4
4.5
5;8
5;1
3;9
5.2
10.6
10; 8
10,7
10,7
5;0
5.2
5.5
5.8
1955: Jan; 26
Feb; 23
Mar; 30
Apr, 27
May 25
June 30
July 27
Aug.•31
Sept.28
155; 5
153; 8
152; 4
154; 4
154,5
154.8
155; 8
155.6
156.4
69;0
66;8
64;2
65;6
65 ;0
63; 3
63.7
62 ;5
62,0
16; 7
l6;8
17; 0
17; 0
16; 7
16,8
16; 7
16; 9
16,9
69;8
70;2
71;2
7l;8
72 ;8
74 ;8
75.4
76;2
77.5
26;6
26;8
27;4
27;6
28.0
28;9
29;1
29;9
30.5
10,7
10.8
11; 0
11.2
11.4
11.8
11,9
12.1
12,3
5;8
5.9
6;0
6;2
6,4
6;6
6.7
6;8
7.0
Oct, 26
158,1
16,8
158 ;2
160,3
16; 6
16.7
78,4
80.2
82.0
7,0
Nov; 30
Dec. 31
62,9
6l;4
61.6
7.0
7.0
158; 3
157.1
158 ;5
158.6
158.3
159.0
158.1
159.7
60,9
59;2
58.5
58.1
57.2
56.4
55.9
57.1
l6;5
16,6
l6;6
16; 6
16.4
16,4
16.2
16.3
80;9
8l;2
83;3
83.9
84,7
86.2
86.0
86.3
6.9
6.9
7.0
7.1
7.2
7.3
7.3
7*3
1956$ Jan;
Feb;
Mar.
Apr.
May
June
July
Aug.
25p
29p
28p
25p
3Op
27p
25p
29e
4,4
5;2
5.2
4;9
4;4
4.4
4.4
4,2
3.9
3.9
4,0
32;3
33.2
18;6
18,8
19; 0
19; 2
19;5
19; 8
20; 0
20; 3
20; 6
, /20;8
-/20,5
20; 7
20.8
4;5
5.0
4,3
4.5
12.5
12 ;6
12,7
32;7
32.9
34,5
34;8
34.8
36.1
35.9
36.5
20; 9
21; 0
21.2
21;4
21.6
21.8
21.9
22.1
4,6
4.5
4;5
4,4
4,5
4,4
4.2
3.9
4.4
4,5
4,4
4,3
4,4
4.3
4.3
4.0
12 ;8
12.8
13.0
13.2
13.4
13.7
13.8
13.9
i/iifx
4;0
3.9
4;1
4;3
4,3
4,5
4;5
4,2
4.2
l / Level of business loans increased by, and r e a l e s t a t e loans decreased by
$300 m i l l i o n a t the end of October 1955 t o correct c l a s s i f i c a t i o n errors. No
back f i g u r e s revised; most of the m i s c l a s s i f i c a t i o n probably occurred during 1955,
Note; Data exclude interbank loans. Total loans are a f t e r and types of loans
before deductions for valuation reserves. Consumer and "other loans" are
p a r t l y estimated f o r a l l dates. Other data are p a r t l y estimated on a l l
but June and December dates.
Banking Section, Board of Governors
Sot f o r publication
September IX, 1956
@FedFRASER