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Form i\ R. 131


Office Correspondence

Chairman Eccles


p a te December 7,1936

Mr» Goldenweise3^


In connection with your Treasury meeting.

Tr. 8
December 7, 1936
Excess reserves
Excess reserves of member banks showed no change in the week ending
December 2.
Reporting member banks
Deposits of weekly reporting member banks increased further in recent
weeks, reflecting largely the steady inflow of gold and Treasury disbursements, with little change in loans and investments. New York banks increased
their holdings of Government obligations in the week ending December 2, bringing them to the level of four weeks ago*

These banks generally increase their

holdings of Government obligations in the weeks preceding new Treasury financing, as the result of purchases of securities about to mature to be offered in
exchange for new issues. Commercial loans at New York banks continued to increase somewhat, while outside New York they have shown little change in recent
Foreign trade surplus in October
The foreign trade figures just out for October show that part of the
recent inflow of gold may reflect the season1s merchandise movement. The export surplus amounted to |53,OOO,OOO, which is an increase of $21,000,000 over
October 1935*

Orders arising out of rearmament programs abroad undoubtedly

played a part. Aircraft and other machinery, iron and steel manufactures, copper,
coal, and cotton were among the exports showing the greatest increase over last
year. The increase in our imports was chiefly in rubber, fertilizer, and certain food products.

Page 2
Stock market
The stock market has been rather less active during the last two weeks,
with trading amounting as a rule to about 2,000,000 shares per day. The average level of stock prices has not changed much, but it has had recently a
slightly downward trend —

which was first shown in railroad stocks and later

in industrials•
Foreigners sold American securities last week. The heaviest selling *
occurred on Wednesday and coincided with a sharp decline on the stock exchange here and a break in London accompanying the "constitutional crisis"*
Englishmen sold American stocks on balance every day of the week. Other
countries, with occasional exceptions, bought moderate amounts. The net
result was the withdrawal of $5,000,000 to $10,000,000 of foreign money
from our security markets. British stocks in London have also declined
somewhat from their prices in the middle of November, which were the highest since the autumn of 1930.
Dividend payments
Statistics on dividends declared during November, as compiled by the
New York Times, summarize the cumulative effect of the many dividend declarations of recent weeks, when corporations have been making distributions
to avoid the tax on undistributed earnings. The total for November was
$880,000,000, exclusive of declarations by banks and insurance companies*
This compares with a preceding maximum of about $560,000,000 in December
1930. Dividend declarations during the past month included about 1,100
corporations of which more than 300 were extra. Sub-groups which show large
declarations, although not necessarily the largest increases as compared
with last November, are oil companies, public utilities, and companies making

1 - ^
Tr. 7
November 30, 1936



Excess reserves
On November 26 member bank excess reserves amounted to $2,210,000,000,
a drop of f70,000,000 from a week ago.

This decline reflected principally

a seasonal increase of $50,000,000 in money in circulation*
During the current statement week ending December 2 it is expected that
excess reserves will show little change.

In fact, little change in excess

reserves is expected to occur between now and the December 15 financing.
Money in circulation will increase, but it is likely that this increase
will be partially offset by additions to the gold stock.

During the

Christinas season money in circulation is expected to increase further by
approximately |200,000,000, but there will be a rapid decrease after
Christmas, and by the end of January it is estimated that over $300,000,000 will return from circulation.
Reporting member banks
Growth in excess reserves in recent months has been accompanied by
an increase in bankers 1 balances to new high levels.

On November 18

domestic bankers1 deposits in weekly reporting banks amounted to nearly
|6,300,000,000 as compared with an average of about $5,600,000,000 in the
first half of this year.

Over |2,500,000,000 of these deposits are in

New York City banks.
Holdings of Government obligations by New York City banks declined
further in the week ending November 25 and showed little change on

Government obligations held by these banks are now back to where

they were prior to ihe heavy financing of the Treasury in June.


cial loans at New York banks declined during the week while Street loans

Page 2

Stock market
Activity in the stock market has diminished somewhat further during
the past week, with sales approximating 2,000,000 shares per day. Average prices, after a sharp decline on Monday and a subsequent advance, were
on Friday, November 27 at about the same level as on the preceding Saturday.
The Standard Statistics index for 90 stocks, at 137.7 percent of the 1926
average, was about half way between the highest and lowest levels reached
since the election and somewhat above the level of late October. Industrial
stocks continue to be higher than before the election, "while railroad and
utility stocks continue to be lower.
A seat on the Hew York Stock Exchange sold during the week at $95,000,
down |7,000 from the preceding: week and at the lowest level since the spring
of 1935, when a seat sold at $65,000.
Reduced foreign buying o£ American securities following
the President's warning
Since the President's statement to the press on November 13 expressing
concern over the flow of foreign funds to our security markets and indicating
that measures of control were being considered, foreign buying of iUnerican
securities has been irregular. On the two days following the statement, and
three separate later days, foreign sales exceeded purchases. For the entire
period November 14 - November 28 it is estimated that foreigners have added
less than $15,000,000 to their holdings. This contrasts with the practically
uninterrupted buying on balance in the previous month and a half during which
weekly additions to holdings of American securities ranged from $25,000,000
to |50,000,000*

Page 3

The irregularity in the stock market during the past two or three
weeks and the absence of a rise may be related to the sharp decline in
foreign buying, both as a cause and as a consequence•