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BANKING AND MONETARY DEVELOPMENTS IN NOVEMBER 195 6 "EDERAL RESERVE BANK ' of Nummary. Total loans and Investments a t a l l commercial D E C M ^ 9 $ B c r e a 8 e d considerably in November r e f l e c t i n g f u r t h e r loan expansion and additional bank purchases of U. S, Government securO p C [7 A D •' D®rtftOJ^deposit and currency holdings of businesses and 1v raai-Huiiaie increased substantially more than the usual seasonal amount. Net borrowed reserves of a l l member banks declined f u r t h e r . Bank c r e d i t . Preliminary estimates indicate that t o t a l loans and investments a t a l l commercial banks increased $1.4 b i l l i o n in November, as shown in Table 1, Loan .expansion accounted f o r over half t h i s growth and acquisitions of U. S. Government securit i e s f o r the remainder. Holdings of other s e c u r i t i e s declined. Last year in November, loans rose over twice as much but t h i s growth was almost entirely o f f s e t by reductions in holdings of U. S, Government and other s e c u r i t i e s . Since mid-year, t o t a l credit a t commercial banks has increased $3.4 b i l l i o n , the same as in the comparable period l a s t year; Loans increased less than half as much as l a s t year, but U, S, Government security holdings also rose whereas l a s t year, they declined. During the f i r s t half of both 1956 and 1955, t o t a l credit declined about $1 b i l l i o n , with loans r i s i n g somewhat over # b i l l i o n and t o t a l security holdings declining about $5 b i l l i o n each year. Total credit growth during each of the past two years has been smaller than in any other year since 1948. Bank holdings of U. S, Government s e c u r i t i e s may have increased about $700 million in November, as commercial banks i n i t i a l l y probably took most of the $1,750 million of new b i l l s on November 16. At weekly reporting banks, t o t a l holdings increased about $200 million over the month, notwithstanding heavy sales p r i o r and subsequent t o the financing. At non-weekly reporting banks, U. S. Government security holdings are estimated to have increased around $500 million, about the same as in October, Since mid-year, commercial bank holdings of U, S. Government securit i e s have increased about $1,5 b i l l i o n , with most of the r i s e occurring in connection with Treasury financings in October and November. Last year in the July-November period, when Treasury financings totaled somewhat more than t h i s year, Government security holdings declined almost $2 b i l l i o n . Business loans a t a l l commercial banks increased $500 million In November, less than half as much as in November l a s t year, but about the same as the average r i s e in other recent years. The r i s e in New York City declined t o 40 per cent of the t o t a l weekly reporting bank increase in November compared with an average Not f o r publication Table 1 Estimated Changes in Loans and Investments at All Commercial Banks (In b i l l i o n s of dollars) Item 1956 " 1956 Nov, 1, Oct, 2b, July 1 , Year ending Nov#28* J o w 30, Nov. 28 Nov. 30 Nov. 28 Nov, 30 1956 x 1955 y ^0.1 + 0.9 + 0,3 + + + + + + — 1,5 +1*5 - 1.9 - 3*3 — 8.7 «0,1 - 0.2 *> 0,3 - 0.2 - o*U + o.U + i,ii + 0,1 + 3,1* + 3,1* + k,5 + 3,1 + 0.8 + 0,S + 0,1 <m 0,1 + 0,2 + 0.1 + + + + + + Total loans (excluding interbank) Business Real estate Security Agricultural Consumer All other y y U, S, Government s e c u r i t i e s + 0.7 Other s e c u r i t i e s Total loans and investments (excluding interbank) 1955 July 1, 1.8 1,2 0,2 0.1 0,3 0.1 + 2,2 + 1.5 + 0.7 * O.U + 0.1 + 0.3 * 5.U && 8*2 5,3 1*8 0.5 0,1 1,6 0,2 1/ 2/ "* +11,3 f.ii + 0,7 * 0,8 + 2,2 + 1,0 Less than $$0 million. Level of business loans increased by, and real estate loans decreased by, $300 million a t end of October 1955 to correct c l a s s i f i c a t i o n errors* No back figures revised* Note: Figures f o r November 1956 are estimates and subject to change* Preliminary """""""" data f o r November 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 in the United S t a t e s , available at the end of December* of 70 per cent in the three preceding months, During the f i r s t half of 1956, New York City banks had accounted f o r about 45 per cent of the $2.2 b i l l i o n growth a t weekly reporting banks. Since mid-year, business loans a t a l l commercial banks have increased $1.5 b i l l i o n , less than half as much as in the comparable period of 1955. During the f i r s t half of the year, however, these loans had increased almost $1 b i l l i o n more than in 1955 • So f a r t h i s year, the growth has been $4,4 b i l l i o n , $1 b i l l i o n less than l a s t year, but more than in any other year since the early postwar period. Borrowing by food processors and commodity dealers continued t o account f o r a considerable part of business borrowing a t city banks in November, and the volume was about the same as in November l a s t year. In other recent months, seasonal borrowing by these industry groups exceeded that of l a s t year. Loans t o metals manufacturers increased over $100 million in November following a general decline since the end of June. Loans t o sales finance companies increased somewhat In November, a f t e r declining $400 million in September and October, but these loans generally tend t o r i s e l a t e „ ^ http://fraser.stlouisfed.org/in the year. Not f o r publication Federal Reserve Bank of St. Louis - 3 Table 2 Changes In Commercial and Industrial Loans 1 / (In millions of dollars) Business of Borrower 1956 Nov* 1, 1951* 1956 1955 1955 w Oct. 2?, Oct. 30, June 20, June 30, July 1, Nov* 28, Nov* 30 Nov* 21* Nov* 28 Nov* 30 Nov. 21* +388 •TO +1*75 +1*61 +371 +188 +17S5U +1:537 Food processors Commodity dealers Trade concerns Total +155 + 98 +135 +108 * 87 +130 +131 + 30 +655 +636 +256 +175E7 Sales finance + 63 +315 + 63 -1*16 +223 -196 All other - t o t a l Metals and metal products Textiles, apparel, and leather Petroleum, coal, etc* Other manufacturing and mining Public u t i l i t i e s Construction All other types of business +191 *1X5 +253 T'3B - 38 =-0 +643 "=m +829 *19 -565 - 2h + 88 - 57 + 76 - 1*1* - lit - 8 +1*85 + 70 +153 + 5 - 29 + 32 - 21 + 2 + 73 + 22 - 18 + 13 + 2 it + 81 +211* - 57 + 55 + 58 +101 - 1*5 -271 + 68 + 29 + 1*9 + 50 +152 +313 +161* +537 - 58 +8 99 - 9 +316 +773 +1,775 *236 +1*79 +890 +1,089 Total - Classified Unclassified Total change + 38 +275 2/3/+197 i*A 27 +1,539 § 'l/t 2*513 l*/+2l*8 1/ Data f o r 1955 and 195U include agricultural loans# 2/ 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 million. 3/ ~ Includes increase of §318 million in October 1955 to correct c l a s s i f i c a t i o n errors* No back figures revised,, Most of the misclassification probably occurred in 1955# it/ CCC c e r t i f i c a t e s of i n t e r e s t may have increased about $350 million* Note: Classified data are for a sample of about 210 banks reporting changes in t h e i r larger loans; these banks hold over 90 per cent of t o t a l commercial and industrial loans of a l l weekly reporting member banks and nearly ?0 per cent of those of a l l commercial banks* Not for publication Since mid-year, loans t o food processors and commodity dealers have increased $1,300 million, about $400 million more than in the same period a year ago, and amounting to about 85 per cent of the t o t a l r i s e in business loans a t weekly reporting banks in t h a t period. Growth in loans t o petroleum concerns and public u t i l i t i e s has also been larger than l a s t year. On the other hand, loans t o sales finance companies and metals manufacturers have declined t h i s year whereas they rose l a s t year, Eeal e s t a t e loans increased f u r t h e r in November, but expansion continued t o be more moderate than l a s t year. Since the beginning of the year, these loans have increased about one-fourth less than l a s t year, but t h i s y e a r ' s growth generally has been comparable with the average rate of expansion in other recent years, Consumer loans continued t o r i s e in November but since mid-year, growth has moderated considerably. So f a r t h i s year, these loans have increased about one-third less than in the comparable period l a s t year, but as in the case of r e a l eetate loans, a t about the same r a t e as the average in the postwar period. Agricultural loans increased s l i g h t l y in November, but they have shown l i t t l e over-all change during the year. Security loans continued to decline bringing the reduction t o $1 b i l l i o n so f a r t h i s year, The appended table, "Loans and Investments a t All 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 on a seasonally adjusted basis, may have increased about $1 b i l l i o n in November, about the same as l a s t year, as shown in Table 3. Since mid-year, the money supply has fluctuated but has increased only s l i g h t l y on a seasonally adjusted b a s i s . So f a r t h i s year, the active money supply has increased a t an annual rate of around 1 - 1 A per cent, less than half the rate in the comparable periods of 1955 and 1954. Most of the growth in 1956 has been in demand deposits; currency outside banks has shown l i t t l e change. Time deposits at commercial and mutual savings banks declined $600 million in November as is usual when Christmas savings deposits are withdrawn. Over the past year, these deposits have increased $3*5 b i l l i o n , or 4-1/2 per cent, and s l i g h t l y f a s t e r than in the year ending November 1955« The increased rate of expansion occurred only a t commercial banks, whereas a t mutual savings banks, the rate of increase declined s l i g h t l y . • U. S. Government deposits a t commercial banks increased about $1.4 b i l l i o n in November. These deposits declined'somewhat' early in the month, but then rose when payments were made f o r new tax b i l l s on the 16th, On balance, t o t a l deposits and currency 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 T355" Z2EZ Year end!ngt 1936 1955 July 1 - %ov. 28^ Nov. 30 Nov. 1 - Oct. 20- OTylT Nov. 28 Nov. 30 Nov. 28 Nov. 30 1956 1955 Seasonally adjusted data 1 / Demand deposits adjusted Currency outside banks Total + Unadjusted data 1 / Demand deposits adjusted Currency outside banks Total Time deposits U. S« Government deposits Total + i#a + 0.3 + 1.5 0.6 + 1.U + 2.3 1.0 i.i + 0.6 + 0.3 + 0.9 + 0.8 + 0.6 - 0.5 - 0.3 +"53 • o.U iZL * 3.9 - 0.3 + 3.6 + 0.3 — o.U +33 o.5 o.5 + 1.0 • 1*7 + 2.8 + 0.1 + 0.6 + 1.8 + 3*9 + 0.5 + 0.1 + 0,1* + U.2 + 0.3 — 0.8 +T7 + 1.7 + 2.9 +13 + 3.5 + 3.1 + 0.7 - 2.1 + 6,6 + U.O (Signs indicate e f f e c t on deposits and currency) Factors a f f e c t i n g deposits and currency Bank loans and investments + 1.8 + 0.9 + 2*7 + 6.1 +10.L +llu2 other than U. S. Govt. sec. 3/ + 1.6 + 1.9 + 7.8 +11.7 + 5.2 Commercial "* VTT? + 0.2 + 0.2 + 2.6 + 2.3 + 1.1 + 0.9 Mutual savings Bank holdings of U, S. + 1.2 + 1.7 Government s e c u r i t i e s : — 1.6 • 3*8 - 9.6 - 1.3 + 7-5:7 + b'.5 T53 -6.3 Federal Reserve + 0.7 + 1.5 Commercial - 1.9 - 1.5 -H.3 - 8.7 0.1 Mutual savings and other — 0.3 0.3 0.5 - 0.6 1/ Gold stock and foreign + 0.2 deposits at F. R« Banks - 0.1 -4).8 + 0.3 Other f a c t o r s — 0*8 X . 6 % X , Seasonally adjusted data are f o r l a s t Wednesday throughoutj unadjusted data are" or l a s t Wednesday except in case of June and December c a l l dates, when available. 2/ Less than $50 million. 3/ 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 i n 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 f o r November 1956 are estimates and subject to change. Preliminary data f o r November 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 in the United States" available at the end of December. z. Not f o r publication — 6 — Table 4 Free Reserves (Excess reserves minus member bank borrowings; based on average of daily f i g u r e s ; in millions of dollars) Period All member 1954* December 169 1955* October November December New York Chicago Reserve City Country 50 "• 16 - 26 550 - 360 - 191 - 245 - 150 - 265 - 161 - 137 - 67 - 83 - 416 - 501 - 338 344 341 338 1956: March June July August September October November ~ - 408 195 139 339 213 195 110 - 174 33 108 158 204 192 213 - 256 Ill ltd 72 93 Ill 139 ~ • - 298 356 344 382 296 246 195 319 305 360 274 380 358 437 1956i October 31 November 7 14 21 28 December 5 - 315 - 266 - 323 25 81 - 19 - 152 220 308 259 127 35 ~ . - 113 168 153 1U5 123 52 - 185 259 237 139 165 221 135 381 375 568 496 289 Note: Data f o r second half of November and December are preliminary* - increased $2-l/4 b i l l i o n , r e f l e c t i n g the $1.4 b i l l i o n growth in commercial bank credit noted above, as v e i l as increases in Federal Reserve holdings of U, S, Government s e c u r i t i e s , loans a t mutual savings banks and in Reserve Bank f l o a t . Since mid-year, t o t a l deposits and currency have increased $3.5 b i l l i o n , about the same as in the comparable period l a s t year and in line with the rates of growth in t o t a l credit a t commercial banks, mutual savings banks, and Federal Reserve Banks. Over the past year, however, t o t a l deposits and currency have increased $6 b i l l i o n , considerably more than the $4 b i l l i o n in the year ending November 1955* While growth in the p r i v a t e l y held money supply has been l e s s , U« 9, Government deposits have increased $700 million over the past year compared with a decline of $2.4 b i l l i o n in the year-ago period. Not f o r publication Table 5 Changes in Member Bank Reserves a with Relevant Factors (Monthly average of daily figures} £n millions of dollars) November July - November Year ended November 1956 1955 1956 1955 1956 1955 + 230 + 32 + 236 + 187 + 267 I1 Iw la Item + 115 + 115 1 + 33 + 61 + 175 - k6 + 111 + 156 - 289 - ik Member bank reserve balances Total Excess reserves 1 / Required reserves J / Principal f a c t o r s Federal Reserve loans and investmentss 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 1/ (signs iiidicate e: ' f e e t on :reserves) - 33k - 259 — 662 + + + + - + 122 + 55 33 Lo 118 91 m 2 26 + 129 + 22 + 2h3 + U6 + 9k + 137 + 502 + + 31* + 8 + •"'82 • 36 2 + 37 + 10 + 29 + 1 + 132 9 - 25 CVJ £ 1 Currency in circulation Gold stock and foreign accounts Treasury operations Federal Reserve f l o a t Other f a c t o r s + 232 - U07 - 501+ + + - 31 157 177 77 + + + + 309 133 215 223 - 15 + 5 + 286 - 105 + 399 + 36V + 32 1 + + + 27 12 39 10 rrn + 27 + 17 + 615 - 62 - 272 1 + 852 -179 Data f o r November 1956 are preliminary• Bank reserves. Net borrowed reserves of a l l member banks averaged $110 million in November, somewhat below the $195 million level in October, as shown in Table 4. Excess reserves increased t o $635 million, the highest monthly average since early 1955* Borrowings also increased s l i g h t l y , however, and averaged $745 million. Last year in November, borrowings averaged $1,015 million and net borrowed reserves $490 million* The e f f e c t i v e trading rate f o r Federal funds in November was generally 3 per cent, although occasionally, as in October, i t dropped below. http://fraser.stlouisfed.org/Not f o r Federal Reserve Bank of St. Louis publication • 66k Total net borrowed reserves declined generally during the second half of the year, although they were temporarily high In August, In November, they were $85 million below the June l e v e l . There were s u b s t a n t i a l differences among classes of banks however. At reserve c i t y banks, net borrowed reserves declined $160 million and a t country banks, f r e e reserves rose $130 mill i o n . On the other hand, a t c e n t r a l reserve c i t y banks in New York and Chicago, positions tightened considerably and net borrowed reserves rose $210 million. Over November, as shown in Table 5, reserves were sup* plied t o member banks p r i n c i p a l l y through System purchases of U. S. Government s e c u r i t i e s , expansion in Reserve Bank f l o a t , and foreign t r a n s a c t i o n s . These funds were absorbed in p a r t through currency outflows and increases in required reserves. Reserve positions tended t o remain t i g h t during the f i r s t half of November, as shown in Table U, when heavy currency outflows were j u s t about o f f s e t by System purchases of U. S. Government s e c u r i t i e s and reductions in required reserves. During the second half of the month, however, reserve positions eased s u b s t a n t i a l l y and excess reserves exceeded borrowings. System purchases of Government s e c u r i t i e s , expansion in Reserve Bank f l o a t , and foreign transactions supplied considerably more reserves than were absorbed through currency outflows and increases in required reserves associated p r i n c i p a l l y with bank c r e d i t expansion r e s u l t i n g from Treasury financing. System holdings of U. S. Government s e c u r i t i e s increased $618 million between October 31 and November 30, of which $51 mill i o n were under repurchase contracts. At the month-end, t o t a l holdings were $129 million above t h e i r year-ago l e v e l . Last year in November, t o t a l Government s e c u r i t i e s increased $232 m i l l i o n ; repurchase contracts increased $265 million while s e c u r i t i e s held outright declined s l i g h t l y . Purchases were made s t e a d i l y during November 1956 but tended t o be heavier l a t e in the month. Between the end of 1955 and November 30, 1956, holdings of U. S, Government s e c u r i t i e s declined $400 million, r e f l e c t i n g a decline of $136 million in s e c u r i t i e s held outright and of $264 million in those held under repurchase contracts. During the comparable period of 1955, t o t a l holdings of U, S. Government s e c u r i t i e s had declined $676 million with outright holdings declining $897 million and repurchase contracts increasing $221 m i l l i o n . Not f o r publication - 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 U. S. Other Gov't. secur- Total Business Real estate secur- i t i e s loans ities Secu- Farm Con- All sumer othei rity 1/ V 31 31 31 31 31 31 31 116.2 114.2 120.1 126.6 132.5 141.5 145.5 69.2 62.6 67.0 62.0 61.5 63.3 63.4 9.0 9;2 10.2 12.4 13.3 14.1 14.7 37.9 42.4 42.9 52.2 57.6 64.0 67.4 18.3 18.9 17.1 21.9 25.9 27.9 27.2 9.4 10.8 11.5 13.5 14.6 15.7 16.7 2.1 2.3 2.6 2.9 2,6 3.2 3.6 1.7 2.9 3.1 2.9 3.4 3.9 5.0 3.8 4.8 5.8 7.4 7.5 9.4 10.9 2.9 3.1 3.4 4.2 4.5 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 16.8 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 10.8 10.9 5.0 5.2 5.4 5.6 1955: Jan. 26 Feb. 23 Mar. 30 Apr. 27 May 25 June 30 July 27 Aug. 31 Sept.28 Oct. 26 155.5 153.8 152,4 154.4 154.5 154.8 155.8 155.6 156.4 158.1 16.7 16.8 17.0 17.0 16.7 16.8 16.7 16;9 16.9 16.8 5.2 5.2 4.9 4.4 4.4 4.4 4.2 3,9 3.9 4.0 10.9 11.0 11.2 11.5 11.7 12.1 12.3 12.5 12.7 12.9 5.6 5,7 5.8 5.9 6.1 6.2 6.3 6.4 6.6 6.5 158.2 160.3 18.6 26;6 69.8 18.8 26.8 70;2 19.0 27.4 71.2 19.2 71.8 27.6 28.0 72.8 19.5 19.8 74.8 28.9 20.0 29.1 75.4 20.3 76.2 29.9 20.6 30.5 77.5 p/20.8 78.4 2/30.8 - / 3 1 . 1 ~ 20.5 80.2 32.3 > 20.7 20,8 82.0 33.2 4.0 3.9 4.1 4.3 4.3 4.5 4.5 4.2 4.2 4.4 Nov. 30 Dec, 31 69.0 66.8 64.2 65.6 65.O 63.3 63,7 62.5 62.0 62.9 61.4 61.6 4.5 5.0 4.3 4.5 13.0 13.2 6.5 6.5 1947: 1948: 1949: 1950: 1951: 1952: 1953: Dec. Dec. Dec. Dec; Dec, Dec. Dec. 16.6 16.7 4.4 13.3 6,4 4.6 20.9 80.9 16.5 32.7 60.9 158.3 1956: Jan. 25 21,0 4.5 4.5 13.3 6,4 16,6 81.2 32.9 Feb. 29 59.2 157.1 4.4 13.5 6.5 21;2 4.5 16,6 34.5 58.6 83.3 Mar; 28 158.5 21;4 4.4 4.3 13.7 6,6 16.6 58.2 83.9 \ 3 4 . 8 Apr. 25 158.7 4.4 13.9 6,7 21,6 4.5 16.4 84.7 34.8 May 30 158.4 57.3 4.4 21,8 4.3 14.3 6.7 86.2 36.1 16.5 5 6.6 June 30 159.3 4.2 14.4 6.6 4.3 21,9 85.8 35.8 16.3 56.2 July 25P 158.3 4.0 14.4 6,7 4.0 22.1 16.4 86.3 36.4 Aug. 29P 159.8 57.2 4.2 14.5 6.6 4,1 22,3 87.2 36.9 16.5 Sept.26p 160.7 57.0 4 , 1 4.2 14.5 6.7 22,4 87.6 37.1 16.3 Oct. 31P 161.3 57.4 4.4 14.6 6.7 4.0 88.4 22.5 37.6 16.2 58.1 162.7 Nov. 28e e - Estimated p - Preliminary l / Revised s e r i e s . 2 / Level of business loans increased by, and r e a l e s t a t e loans decreased by $300 million a t the end of October 1955 t o correct c l a s s i f i c a t i o n e r r o r s . 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 f o r 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 December 11, 1956 Not f o r publication
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