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Form f. R. 131


Office Correspondence

Chairman Eccles


p a te December ig, 1936

Mr* Goldenweiser


In connection with your Treasury meeting•


Tr. 9
December 15, 1936

Excess reserves
Excess reserves of member banks were reduced slightly in the week
ending last Wednesday and will be reduced by perhaps as much as f80,0Q0,000 more during the current statement week ending December 16, as a result of an increase in Treasury deposits at the Reserve banks and a further
growth of money in circulation*
Before Christmas excess reserves may decline as low as $1,900,000,000,
but after the holidays they will increase rapidly*
Holdings of Government securities by New York City banks
Holdings of Government securities by New York City banks have remained
unchanged since December 2*

This was somewhat unexpected in view of the fact

that in this period offerings of Treasury bills, which are usually bought
heavily by New York banks, exceeded maturities by $50,000,000, and of the
fact that for a week or two prior to new Treasury financing these banks
generally purchase Government obligations about to mature in order to offer
them in exchange for new issues* Dealers in Government securities also
usually purchase such maturities for the same purpose, largely with funds
borrowed from banks, and during the latest statement week loans to brokers
and dealers in securities by New York banks increased by $56,000,000, reflecting principally larger loans to dealers in Government securities*
Stock market
Activity in the stock market during the week ended December 12 was
at about the same level as in other recent weeks, varying between 1,500,000

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and 2,500,000 shares per day, and prices fluctuated within narrow limits.
Average prices were about the same as in the week before election•
The proportion of the total trading that is represented by trading in
so-called low-priced stocks has been increasing of late. The proportion of
trading represented by a selected group of 225 stocks priced on June 30 at
$15 per share or less has gradually increased since last August - from about
32 percent of the total number of shares traded to more than 40 percent, and
from about 10 percent of the dollar volume to more than 15 percent•
Business conditions
Industrial production and the distribution of commodities to consumers
increased considerably further in November. Factory employment and payrolls
appear to have been sustained, although a decline is usual at this time of
year. The Board's adjusted index of industrial production increased from 109
percent of the 1923-1925 average in October to about 1L4 percent in November,
the highest since October 1929*

Adjusted indexes for department store sales

and freight-car loadings also increased substantially in November and were at
the highest levels since the middle of 1931*
Commodity prices
Wholesale commodity prices have shown a broad advance since the end of
October, reflecting speculative buying, continued growth in domestic and
foreign consumption of industrial materials, and declining stocks of some
commodities. Some of the buying has been for armament purposes. In this
period of a month and a half the Bureau of Labor Statistics index of wholesale prices has advanced 2 points to 83 percent of the 1926 average. This
increase has reflected a rise in prices for industrial commodities as well
as in prices of farm products and foods.