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L.4.3 FEB -i1 r\ RtStAv. JH IVil-StA BANKING AMD MONETARY DEVELOPMENTS IN JANUARY 1958 Suimnary. Commercial bank credit declined substantially in January reflecting principally reductions in business and security loans. Holdings of U. S. Government securities also declined somewhat but holdings of other securities increased. Demand deposit and currency holdings of businesses and individuals declined slightly less than seasonally* Member bank reserve positions eased further and banks moved from a position of net borrowed reserves to one of free reserves. The discount rate was lowered at ten Reserve Banks during January and early February. The prime rate was reduced and other interest rates dropped sharply. Bank credit. Total loans and investments at all commercial banks declined $2 billion during the January reporting period (December 26, 1957-January 29, 1958), as shown in Table 1. This reflected credit growth of $800 million during the last week of December followed by a reduction of $2,8 billion between January 1 and January 29. The January decline, which followed a record growth in December has been exceeded in the postwar period only by last year's $2.9 billion drop. At the end of January 1958, total credit was still about $700 million higher than at the end of November 1957 whereas in the comparable two months last year, it had shown a net decline of $1*1 billion. Total loans declined $2.3 billion between December 31 and January 29 reflecting largely reductions in business and security loans, The reduction occurred almost entirely at city banks, and was nearly twice as large as the loan growth at these banks during 1957. Holdings of U, S. Government securities declined $600 million during January following a substantial growth of $1,5 billion during December. Holdings of other securities rose further in January reflecting in part bank acquisitions of new FNMA notes. Total loans declined somewhat more than in the comparable period last year but holdings of U. S. Government securities were reduced less. Not for publication L.U.3 -2 " Table 1 Estimated Changes In Loans and. Investments at All Commercial Banks (In billions of dollars) Item Total loans (excluding interbank Business Real estate Security Agricultural Consumer All other DeOe26j> 1957Jan.29, 1958 J an# 1y 1958Jan.29, 1958 - 2.1 - 2.3 7 1/ -0.lt + 0,1 ? "l/' - 0.6 + 0.1 Jan. 1, June27, July 1, Year ending: 195619571957Jan.30, Dec,31j Dec,31# Dec. 31, Dec.31# 1956 1956 1957 1957 1957 - 2.0 + 1.3 + 3.U 2.6 0.7 0.2 0.1 + 3.7 X + 0.3 + 0.1 + + - + o.U + o.U + 0.2 + + — + + - 1.1 H.$ + 7.6 1.8 0,6 0.1 0.1 1.3 0.2 5.5 + 1.7 •» 0.8 - 0.3 + 1.3 + 0.5 + -~0.1 -~0.1 -~0.1 — 0,2 U, S, Govt, securities - 0.2 — 0,6 - 0.9 + 2,7 + 1.9 - 0.3 - 3.0 Other securities + 0.2 + 0.1 - 0.1 + 0.9 - 0.2 + 1.5 - o.U - 2.0 — 2,8 - 2,9 + U.9 + 5.1 + U.9 + U.2 Totalloans and investments (less interbank) + 0,1 January 1 to last Wednesday of January Item Total loans (excluding interbank Business Real estate Security Agricultural Consumer All other 1953 1952 - l.U - 0,6 - 0.9 + 0.1 — 0,6 - 0.3 + o.U + 0.1 - 0.3 # + 0.1 - 0.1 - 0.1 — o.U + 0.1 - 0,5 1/ +~0,1 + 0,1 1/ + 0.8 - o.5 1956 1955 195U - 1.1 — 0.6 + - - 0,3 + 0.2 - 0.5 o,5 0,1 o.U 0,1 it U. S, Govt, securities - 0,7 Other securities — 0.2 + o.U Total loans and investments (less interbank) 1/ Less than <550 million* - 2.0 - 0,2 Note; >0.7 1/ - 0.7 + 0,1 - 1,2 >0.5 1951 . 1 + o.5 y - 0.5 - 2.0 y - 1.9 Data for January 29> 1958 are preliminary estimates based on data for weekly reporting member banks and estimates for other banks. Later estimates for January will be shown in the Board's statementt "Assets and Liabilities of All Banks in the United States" available at the end of February* Data for December 31, 1957 are estimates. Wot for publication "d " Table 2 L.U.3 Changes in Commercial and Industrial Loans 1/ (In millions of dollars) Business of Borrower r 1 9 5 T " 1957 1956 " T B T " 1954 Jan* 1, Jan# 3, Jan. 5* Jan# 6, Jan. 7t Jan# 29 Jan# 30 Feb, 1 Feb. 2 1952 1953 Jan. 1, Jan# 3, Jan# 28 Jan# 30 Feb, 3 32 89 51 - h7 Food processors Commodity dealers Trade concerns Total - 221 . 6 - 193 - 1120 - 1U7 - 73 - 117 - 337 - 2h m Uij - 15b - 75 — 6h - 70 - 209 Sales finance «• 561 - 272 - 276 - 8 - 135 — 106 - 376 All other - total Metals and products Textiles, apparel and leather Petroleum, coal, etc# Other manufacturing and mining Public utilities Construction All other types of business - 305 - 41 - Ill + 65 + 110 + 101 + 19 + ti - 15U + 12 + + + 3h + Classified Unclassified Total change 1/ - 86 - - 16 26 87 - 129 - 78 86 2il - 172 59 + Ul8 90 + 466 + - 22 22 + ~ 6 25 + + 27 8 + h9 u - 101 - ~ - 29 83 22 + - 6 19 37 + + - 13 25 L - + + 3 1 ~ 13 - 10 - 23 7 - h - 15 - 130 - 133 - 60 - 33 - 56 - U6 - 56 —1,286 - 315 - 720 - lh$ - - 321 71 - 199 2/- 129 - 1*20 + 116 - 219 - 170 — 160 - 98 -1,600 - 865 - 392 2/- 328 - 30U - 379 - 268 5 6 • 2 + 10 9 + 25 + 2lt Prior to week ending January 11, 1956, included changes in agricultural loans# 2/ Includes CCC certificates of indebtedness which are estimated to have declined *™ $60 million# Note: ; Classified data are for a sample of about 210 banks reporting changes in their larger loans; these banks hold over 90 per cent of total commercial and industrial loans of all weekly reporting banks and nearly 70 per cent of those of all commercial banks# Data are preliminary for week of January 29, 1958# # Not for publication L*4e3 - k - Changes jin Commercial and Industrial Loans 1/ fin millions of dollars) "* Last Wednesday in June to last Wednesday in December Business of Borrower 1953 + ii98 + 539 + 120 +1,157 + 537 + 392 7 + 922 + 75U + 662 + 1 la 32 - 137 + +1,069 + 224 - 559 - 540 - 175 - 326 + 393 6 + It28 + 71 + 208 •* 26 + 88 - 107 + 138 . 4o + 250 - 161 + 183 - U9 + 72 + 350 — 66 + 63 + 27 + 106 - 62 - 225 + 82 - h9 + - + + + 58 + 176 + 370 + 132 + 101 + 191 + 161 - 157 +2,719 - 260 +3,050 2/ + 156 + 630 3/- 91 + 610 150 +2,49k - 59 1956 + k20 + 331 - + 822 + 739 + 178 Sales finance - 108 + 98 + 704 All other - total Metal's anci products Textiles, apparel and leather Petroleum, coal# etc* Other manufacturing and mining Public utilities Construction All other types of business - h7h - 496) + 883 - 71 - 159 + 150 Food processors Commodity dealers Trade concerns Total Classified Unclassified 1952 195U 1957 8 ~ r w 1955 + 480 + 469 + 327 "'+1,276 + h/+ 91 23 Shh «*«""" 36 57 13 2/+3,206 3/+ 539 U/+ 795 +2,435 Total change +2*459 - 296 included changes in agricultural loanso 1/ Prior to week ending January 1]L, 1956, i Includes CCC certificates of interest which are estimated to have declined $200 ~ million. In October 1955, the level of business loans was increased by $318 million to correct classification errors. No back figures were revised and changes for the July-December period include the revisions* 3/ Includes CCC certificates of interest which are estimated to have increased "* $350 million* 4/ Includes CCC certificates of interest which are estimated to have increased "" $U10 million# Note* Classified data are for a sample of about 210 banks reporting changes in their larger loans) these banks hold over 90 per cent of total commercial and industrial loans of all weekly reporting banks and nearly 70 per cent of those of all commercial banks. Data are preliminary for week of January 29, 1958* Not for publication Business loans declined $1,6 billion at city banks between December 31 and January 29, almost twice as much as last year's record drop, as shown in Table 2. Moreover, the January decline was twice as large as the December rise, which had been at a near-record level for the postwar period. Over the year 1957, business loans at all commercial banks had increased $1.8 billion compared with $5.5 billion in 1956, Business loans showed no growth on balance during the last half of 1957 as a small reduction at city banks offset further expansion at other banks. Repayments by sales finance companies totaled $560 million in January, accounting for about one-third of the total business loan decline and about offsetting net new borrowing by these companies in December. The reduction was much larger than in the comparable period of other years. Seasonal repayments by food processors and trade concerns were also considerably larger than in other years. Loans to commodity dealers were about unchanged in January. With the exception of loans to textile manufacturers, which are now rising seasonally, all other major categories of business loans declined. Security loans declined $600 million in January, about offsetting the December growth. In early February, however, they rose again, reflecting operations associated with Treasury refunding. Real estate loans declined further at city banks during January and probably showed little change at other banks. Preliminary member bank call report data for December 31# 1957, indicate only a nominal growth in real estate loans at country banks during the fourth quarter of 1957. Consumer loans were probably about unchanged at all commercial banks in January. Deposits and currency. Preliminary estimates indicate that demand deposit and currency holdings of businesses and individuals declined $1,8 billion during the January reporting period, or about $200 million less than the usual seasonal amount, as shown in Table 3« This followed a substantially less than seasonal rise in December. At the monthend, the seasonally adjusted money supply was about one per cent below the level at the end of January last year. Demand deposits adjusted declined about $500 million less than seasonally in January but currency inflow was about $300 million greater. Not for publication - 6 - L.U.3 Table 3 Estimated Changes in Deposits and Currency billions of dollars} Item Seasonally adjusted data 1/ Demand deposits adjusted Currency outside banks Total Unadjusted data 1/ Demand deposits"adjusted Currency outside banks Total Time deposits - total Commercial Mutual savings U, S, Government deposits Total V $ Jan# 1, 1958Jan.29, 1958 + 0.5 - 0.3 +~C)7S + 0.5 - 0.3 +15^ 0.2 - o,5 - 1.3 ~T78 + 0,8 — 2,0 - 3.0 + o,L - 1.9 - 0.9 T27H + 0.7 £1.5 — u.o + 0*1 - 2.0 — U«0 + 0,8 -"1.8 — 1,0 + 0*6 - 1,8 +0.9 H.i T-iCT + 0.3 '+0.3 =73 ^ + U.8 + 0,7 +33 + 2.5 +T75 + 6,6 - 1.0 - 0.7 - 1,6 0.1 + 0,8 +~77U + 0,1 + + + + 6,7 1,6 0,9 0,8 +1.5 + 0.2 +0.1 -™o75 +I7F" + 6.7 +3.8 TJJ + 1,7 +1.9 2/ +"577 4vr (signs indicate effect on deposits and currency) 1 1 + + + U»5 — 2.2 - 1*7 - 1,9 3,3 7.1 !+9,9 + 2*2 + 5.1 |+7.2 + 3.2 - 2;i + 1,1 + 2*3 j+2.5 + 0.2 + 0.2 + 0,2 + 1.2 CO o: s Factors affecting deposits and currency Sank loans'and investments other than U* S, Govt* sec,3/ Commercial Mutual savings Bank holdings of U, S* Government securities: Federal Reserve Commercial Mutual saving and other Gold stock and foreign deposits at F, R* Banks Other factors Jan. 1, June27* July 1, Year ending: 195619571957Jan.30, Dec.31, Dec.31, Dec,31, Dec,3L 1956 1957 1956 1957 1957 Dec.26, 1957Jan*29, 195# - 0.7 — 0.2 + 0.1 — — — + 1*3 0.9 0,6 0,1 - 2.U + 0.1 - o#U + 0,1 - 0,9 + 0.3 + 0,3 - 0,9 2/ + 3*5 + 1.3 + 2,7 - 0,6 + + + - + 0,2 + 0,1 + 0.1 - 0.6 2,7 1.2 1.9 0,ii 1—3,6 !+0*1 ;-3.0 1-0,7 j + 0,8 +0,3 0,1 -1.2 - 1.9 0,7 0.3 0.9 Seasonally adjusted data are for last Wednesday throughout; unadjusted data are for last Wednesday except in case of June and December call dates# when available* Less than $50 million. Total includes foreign loans on gold, holdings of bankers' acceptances at the Federal Reserve, and loans to foreign banks; changes in these items are generally relatively small. In addition even if there were no changes in these itemsf changes at commercial and mutual savings banks would not add to total change which is "net" because commercial banks exclude all interbank loans, domestic and foreign# Note; Data for January 29, 1958 are preliminary estimates based on data for weekly reporting member banks and estimates for other banks. Later estimates for January will be shown in the Board's statement, "Assets and Liabilities of All Banks in the United States" available at the end of February# Hot for publication U. S. Government deposits, which had increased contra-seasonally in December, declined $1.8 billion in January, about the same as in the last two years. Time deposits increased further in the January reporting period reflecting in part crediting of year-end interest payments. Interbank time deposits at city banks (not included in data on deposits and currency) increased at a rapid rate in January reflecting in part deposit of foreign bank funds previously invested in Treasury bills and bankers' acceptances on which yields recently have fallen sharply. Demand deposits adjusted and currency outside banks are estimated to have declined about $800 million, or almost one per cent, between December 31> 1956 and December 31# 1957. A substantial increase in demand deposits adjusted--probably about $1.5 billion—between December 25 and December 31 offset in part the decline in these deposits that had occurred earlier in the year, , Currency outside banks, however, is estimated to have declined about $300 million between December 25 and December 31• Bank reserves. Member bank reserve positions eased somewhat further in January and banks moved from a position of low net borrowed reserves to one of free reserves, as shown in Table 4. Free reserves averaged $90 million in January compared with net borrowed reserves of $130 million in December. This was the first month banks held free reserves since January 1957 when positions had eased temporarily. Borrowings declined to an average level of $450 million in January and excess reserves remained around $550 million. The January easing at central reserve and reserve city banks, generally reflected continuation of a downtrend in net borrowed reserves since September, At country banks, however, free reserves had declined during the latter part of 1957 and the increase in January brought them to a level only slightly below that of September. Over January, as shown in Table 5, more reserves were supplied to banks principally through currency inflow and a decline in required reserves than were absorbed largely through reductions in System holdings of U. S. Government securities and in float. System holdings of U, S. Government securities declined $375 million, somewhat over half in holdings under repurchase agreements. Last year, holdings of U, S. Government Not for publication L.U.3 - 8 Table h Free Reserves (Excess reserves minus member bank borrowings? based on average of daily figures; in millions of dollars) * 19$ht 1955* Period All member December December U59 - 215 - W - 195 - 213 - 36 1956: March June September December 1957* January February March April May June July August September October November December 1958: January - H7 126 316 505 UiU 508 383 - h71 m ll66 - 3hh Chicago Reserve City Country - 5o ~ 161 - 16 «• 83 - 26 - 338 550 338 - 17U * 33 - 201 - 91 - 256 - 111 - 93 - 86 - 298 356 296 203 319 305 380 - hi «• 1*0 - 53 - 253 - 210 - 165 . U8 . 28 - 26 - 115 - 115 - 123 - 77 - 25 - 172 3 69 299 - h33 336 301 252 277 315 - 75 6U 157 - 95 - 99 - 150 - 323 - 1+18 336 New York - 123 101 300 10U 185 181 289 - 2$h - 2h9 - 2h2 - - 263 367 188 U52 liOO 389 3i|2 228 152 - 293 - 133 92 - Ill - 80 - 105 - k6 25U 158 - 127 - 365 - 29 1 - 112 - 192 First Second Third Fourth - 310 Ill 230 128 - 170 - 96 - 157 - 166 - 1U7 - 175 - 71 - 113 - 329 2*18 3ltl 211* 1957: First Second Third Fourth - 108 U85 LLo 256 - 88 - 196 - 115 - lUl — 56 - 105 - 221 373 Ij.28 320 - m - 193 2U0 189 II4.5 - 26 Quarterly averages 1955* First Second Third Fourth 1956$ 1958: Note: Jan. 1 8 15 22 29 Feb, 5 . 9 26 3 19U 2U3 221 - 2bX - 109 7h - 180 - 62 - 71 67 33 - 67 99 79 10 h 3 — Sh Data for second half of January and February are preliminary* Not for publication 3hh i 280 269 192 210 278 2bh 37h 375 31a 278 338 365 316 22h 286 276 227 173 26U hlh 227 211t securities had declined $675 million. The currency inflow was somewhat smaller last year than this but required reserves declined more and in addition, reserves were supplied through $300 million of gold purchases from the International Monetary Fund, On balance, free reserves increased $225 million this year, somewhat more than the $150 million increase last year. Reserve positions eased further during early February 1958, whereas a year ago they were tightening again, and borrowings were substantially larger than excess reserves. Interest rates. Effective between January 23 and February 6, with the approval of the Board of Governors, the discount rate was lowered to 2-3/4 per cent from 3 per cent at ten Reserve Banks. Immediately following the announcement of the reduction in the discount rate the prime rate--the minimum charged on short-term loans to business—was lowered from 4-1/2 per cent to 4 per cent at leading banks in New York and other major cities. The higher rate had been in effect since early August 1957 when it had been increased to 4-1/2 per cent from 4 per cent. During January and early February, other shortterm money market rates declined a full percentage point or more. By early February, the rate on 4-6 months prime commercial paper was 2-5/8 per cent compared with 3-3/4 per cent in late December; on 90-day bankers' acceptances, 2-3/8 per cent compared with 3-3/8 per cent; and on 3-6 month finance paper, 2-1/8 per cent compared with 3-1/2 per cent. Not for publication L»U*3 - 10- Table 5 Changes in Member Bank Reserves, with Relevant Factors (Monthly average of daily figures; in millions of dollars) January Item Jan* - Dec* July - Dec* 1957 1957 1956 1957 1956 - 12k - 2l*0 + 138 + 602 — 115 + 295 — - 110 - 130 + 358 + 80 + 52k * + 237 + 58 1958 Member bank reserve balances Total Required reserves 1/ Excess reserves if" 90 3U + 78 1*0 75 (signs iiidle ate e:'feet on i•eserves) Principal factors -1,239 — 156 - 510 196 156 273 118 + 90 + 59 + 127 + 50 + 851* + 161 - 190 k + 31*0 + 32 + 21*1* + 132 + 723 - 286 — 613 + 665 + 238 - 632 - 960 + 723 +1,213 - 780 + - 371 - 157 - 217 + 1*. - 673 - 1*1*2 ~ 231 - 13 + 993 ""698 + 295 + 23 +1,21*3 +1,012 + 231 + 163 + 3k - 783 - 883 + 100 7 + - 259 3 - 282 + 8 - 295 + 2 + + - - 151 + 17 -1,029 Currency in circulation Gold stock and foreign accounts Treasury operations Federal Reserve float Other factors + 873 + 735 + 61 - 132 - 325 + 32 + 96 + 109 - 290 + 73 + + + + Effect of above factors on reserves + 509 - Federal Reserve loans and investments: Total U» S. Govt* securities Outright Repurchase agreements Acceptances Discounts and advances$ To member banks To others 81 17 22 12 + 180 1/ Data for January 1958 are preliminary. Hotet Changes are based on data for January and December; June and December; and December of each year* Not for publication 59 17 30 - 11 Loans and Investments at All Commercial Banks (In billions of dollars) L.U;3 U. S. Loans ConAll and Govt* Other Total Business Real Secuestate rity Farm sumer tithei* invest- secur- secur- loans ities ities ments Date 19lt7$ 1918: 1919: 1950: 1951: 1952: 1953* 1951: 1955: Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. 31 31 31 31 31 31 31 31 31 116.2 11U. 2 120.1 126.6 132.5 11*1.5 11*5.5 155.7 160.3 69.2 62.6 67,0 62.0 61.5 63.3 63.li 69.0 61.6 9.0 9.2 10.2 12.It 13.3 llt.l lit. 7 16.3 16.7 37.9 lt2.lt lt2.9 52.2 57.6 61t.O 67.lt 70.lt 82.0 18.3 18.9 17.1 21.9 25.9 27.9 27.2 26.9 33.2 9.h 2.1 10.8 2.3 11.5 2.6 13.5 2.9 llt.6 2.6 15.7 3.2 16.7 3.6 I8.lt lt.5 20.8 5.0 3.8 1.7 lt.8 2.9 3.1 5.8 2.9 7.1* 3.1t 7.5 9 .It 3.9 5.0 10.9 5.2 10.9 lt.5 13.2 2.9 3.1 3.1+ lt.2 lt.5 lt.9 5.1 5.6 6.5 1956: March June Sept. Dec. 28 30 26 31 158.5 159.3 160.7 I6iu5 58.6 56.6 57.0 58.6 16.6 16.5 16.6 16.3 83.3 86.2 87.2 89.7 31.5 36.1 37.0 38.7 21.2 21.8 22.3 22.5 lt.5 lt.lt It.i lt.3 lt.lt lt.3 It.2 lt.2 13.lt lit. 2 llt.lt llt.6 6.6 6.8 6.7 7.0 1957: Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec. Dec. 1953: Jan. 30 27 27 2lt 29 26 31p 28p 25p 30p 27p 25p 31e 29e 161.6 161.1 161.a 163.8 163.8 161i.3 l61t.l l6it.6 165.1 166.5 165.9 168.6 I69.lt 166.6 57.7 56.8 55.7 57.5 57.1 5>.5 56.3 56.2 16.2 16.3 16*5 16.7 16.8 16.8 16.8 16.9 17.1 17.6 17.it 17.7 17.8 17.9 87.7 87.9 89.1 89.7 89.9 92.0 91.0 91.5 92.2 91.6 91.6 93.1 93.3 91.0 37.6 37.8 39.0 39.0 38.9 lt0.5 39.6 39.9 lt0.3 39.7 39.6 1*0.5 22.5 22.5 22,5 22.5 22.5 22.6 22.7 22.8 22.9 22.9 23.0 23.1 23.1 23.1 3.7 3.7 3.6 3.8 3.8 3.9 3.7 3.8 3.8 3.7 3.6 lt.0 lt.2 3.6 lt.2 lt.2 lt.2 lt.1 lt.1 lt.0 3.9 3.8 3.8 lt.0 lt.0 lt.1 lt.1 lt.2 lit. 5 lit. 5 llt.6 Ht.9 15.1 l5.lt 15.5 15.6 15.7 15.8 15.7 15.8 15.8 15.8 6*8 6.8 6.8 6.9 7.0 7a 7.1 7.1 7.2 7.1 7.2 7.2 7.2 7.1 55.9 57.3 56.8 57.9 58.3 57.7 lto.5 38.8 e - Estimated Note: Data exclude interbank loans. Total loans are after and types of loans before deductions for valuation reserves. Consumer and "other loans" are partly estimated for all dates. Other data are partly estimated on all but June and December call dates. All data for January 29* 1958# are estimates and subject to error# Beginning with October 1957 data by type of loan have been revised in order to bring them in line with preliminary member bank call report data for December 31, 1957. Not for publication Banking Section, Board of Governors, February 13, 1958
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