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50
BOARD OF GOVERNORS
OF" THE
FEDERAL RESERVE SYSTEM
R-693
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
August 21, 1940
Dear Sir:
There are enclosed for your information a table showing applications for membership received "tzy- the Board during 19/+0, and a
statement containing excerpts from the bank relations reports submitted by the Federal Reserve Banks for the '1lonth of July.
In response to the inquiry made in the letter accompanying
last month's summary of bank relations reports (R-678) as to whether
the summ~J was useful to Federal Reserve Bru1ks and should be continued, replies have been received from ten of the Federal Reserve Banks,
copies of which are attached. It will be noted that of these ten all
but three appear definitely interested in having the report continued.
The two banks from which roplies have not yet bGen received indicated
in response to a similar inquiry a year ago that they favored .the continuance of the report and copies of the lotters written at that time
are also attached.
The few suggestions made as to methods of improving the report seem to tend in different directions·--in some cases there is interest primarily, if not exclusively, in relations with member and
nonmember banks. In other cases the interest seems to be very largely in the general conunent on business and banking conditions. In
maki.IJ.g up the su..'lli!lary, we are, of course, limited by the nature of
the material submitted b,y the Federal Reserve Banks. In the absence
of any suggestion that this mute:).~ial be submitted in a uniform manner,
the reports come to the Board var-ting widely from one another in nature. Some of the Federal Reserve Banks submit a brief comprehensive
statement, sometimes comprising less than a page, which is used practically in entirety in the summary. Other Reserve Banks submit long
detailed reports of many pages from which paragraphs here and there
are selected. The majority of the banks submit a single report for
the month, but one of the Federal Reserve Banks submits copies of the
separate reports of each bank representative making a visitation trip.
Accordingly, whereas the report of onG bank may be quoted almost in
51
R-693
-2-
entirety, only a small fraction or fractions of what another bank
reports may be quoted.
In compliance with the expressed wishE":S of the majority of
the Federal Reserve Banks, the summary will be continued.
Very~-;;?1.~__.
.
L. P. Bethea,
Assistant Secretary.
Enclosures
TO THE PHESIDENTS OF ALL FEDERAL RESERVE BANKS
FOR FEDERAL RESERVE 1IRtlB:2:ESHTP JN DECEviBER 31,
1939, AND BANKS VIHICH APPLIED FOE l1lEMBEHSHTP DUP.ING 1940
BAI~KS ELIGIBLE'~
Federal
Reserve
District
Nu.r:,ber of Nonl"!lemt·,er Commercial Ba'1ks EJi.g:ible::- for
FederRl Reserve Membership
on December 31, 1939
--------~--T_o_t_a_l_
nichmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total
!
Deposits of l'Jo:wember
Banks Eligible-l~
:for Federal Reserve Membership on Do~embor 31, 1939
I Commercial
_._l_c_n_p_a_r_l_i_s_t_ _..___J_u_l_y _,__T_h_i_s_Y_t:_'a_r--'1'--___
_
T_·o_t_a_l
__
j;
l.__o_·n_P_a_r_Li~t
1
Deposits of Bar~s
Which Applied for
Federal P..cserve
_;,lembership Dur'"",g-
I
I
J 'Ily
This Year
(In thousands of dollars)
469,330
981,529
550,836
577,670
256,010
956,374547,781
524,789
28
12
481,555
302,A55
1,114,286
428,385
313,805
70,881
970,388
296,810
l
4
4
14
2
189,225
198,993
154,549
545,398
53,167
154,327
97,609
508,733
0
2,300
2,800
1,600
8, 700
4,300
13
93
5,994,411
4,751,174
15,800
98,100
141
224
225
475
107
2l4
218
455
0
0
0
3
394
484
1,219
664
220
49
1,024
412
l
0
8
6
420
487
282
194
74
334
0
155
0
163
5,209
Boston
York
Philadelphia
Cleveland
I·~ew
~:-
Nu1rb er of Bc:cnlcs
Which Applied for
Federal R.:::servc
llaiDcrship fu-ing-
H-693-a
3,425
l
l
Q
.,
_v_:.~.
...L"\.1\
3
16
l
0
0
0
0
5,000
3,000
25,600
300
16,600
1,800
26,100
7,60r)
0
7,300
400
0
500
By eligible banks is meant banks with sufficient capital stock to meet the minimum statutory capital requirements for Federal Reserve membership.
~H~Newly
organized bank.
53
R-693-b
August 21, 1940
Not for publication
EXCERPTS FROM BANK RELATIONS HEPORTS
J'OR THE MONTII OF JULY 1940
BOSTON
During July 35 member bankn were visited, 31 in New Hampshire, 2 in Connecticut, and 2 in Vermont. Many of the New Hampshire
banks occupy banking quarters .iointly with affiliated mutual savings
banks and this afforded in a number of instances the opportunity of
joint conferences with officerf3 of both banks.
With one or two exceptbns--Berlin, New Hampshire notably-the communities visited are tradi.'1.g centers of various sizes and the
sites of small manufacturing plants making either textiles, shoes or
paper products. The pri.ncipo.l source of income in most of these communities is the sw1unGr trade of vacationists and tourists. The pay
rolls of the large paper mills at Berlin, New Ha~npshire, employing
several thousand workors, arG o.t present larger than at any time in
the past several years. All other paper mills in the section visited
are operating full time. t;.c:tivity ru:1ong the woolen mills and shoe
factories was reported as being "spotty".
Tho summc~r or vacati.un trade throughout the entire section
was not up to an average normal. Adverse weather conditions and the
almost entire cessation of Ca::1adian tourist trade into New England
were said to have destroyed the hope of a profitable season at many
points.
At practically all of the ban~<S visited deposits and loans
showed some slight increase, the loan increase being almost entirely
due to the demand from small borrowers. Two member banks had borrowed recently, one from a Boston correspondent and the other from a
local savings bank. Loan rates at practically all of the banks range
fron 5% to 6~;, Gxcepttng loans to municipalities which have been made
at ratos ranging from .067b to 3!%.
There was some complaint in certain localities in New Hampshire of outside bank competition for local business. There was no
complaint of competition from governmental lending agencies--on the
other hand several bankers referred to the friendly spirit of cooperation with thr.::ir institutions which the management of governmental
lending agencies wure manifesting.
The situation abroc.:d and its por5sible effect upon business
and banking in this country v;as the principal topic of interest on
54
-··2·-
the part of many of tho
l;a~1kers
R-693--b
visited.
Ho ncmm8r1h:r ~Jan::er nw 1if:)sted any interest in membership
in the Fode.:.·a.l Hecer-:re ;·;ys GeLt cnJ. n·:; c.;.·i.tici . ~m \laS of£'er·:;d by anyone
intervimved 17ii:.h respect tu t;l.e opercttion3 aacl polir~L:s of the System. T:1e few complaints heard were of a routine natur•? and had to
do with tha attitud'" of individual examine:c·s 1rit~1 regard to some
tech~1icall,y slow loan, lacJ~. of borrmver 1 s Gtatements, etc.
NEW YORK
During the month of July, our of'ficer;3 and representatives
visited 131 banks--72 member e.nd 59 nonmember institutions--located
in various sections of the district. The following is a resume of
the reports of visits to banlw in one county in Connecticnt and seven countief:> in New York State.
Fairfield County, Connecticut
Most of these banks appear· to bG :b."!sitant about purchasing
securities at this time, pre.fe:;rring to maintain a high cash position
in view of uncertainties in eonnection with the Eu.copean war, ol.U' national defense program, and tbe cGming presidential election. One of
the largest banks in the county vihieh sold most of its investment
portfolio (chiefly United States Governments) has approximately 59
per cent of its total deposits ((?26, 100,000) in cash and bank balances. The pn;sident oi' another institution vthich has a bond account
of only $29,000 continues to hold more than half of hi[; bank's deposits ($2,200,000) in cash. In general the bankers appear to have
adopted a ver<J conservative policy with respeet to high quality low
yield securities and have :i.n nany instancf)S Dliminatecl most of the
longer maturities from their portfolios.
The demand for cred.H is so.:i.d to have improved slightly,
especially for small insta.ll:aent loans and mortgages, and three in-stitutions have established 11 broker" rGlationships vdth insurance
companies for the purpose of arranging mortgage loans for them.
Several of the larger bonks in the county have advertised that they
are prepared to cooperate fully with local firms participating in
national defense projects, althou&;h as yet few a}lplications have
been received.
The subject of membership wa~:; again discuS~-l<:Jd o.t all sixteen nonmemb2r banh; with the result that six intend to review the
matter at an early date, fou:· indicate thd, they n,:,ed more time to
"clean hmwe", and six appear i21different, iHcluding one v:hlch is
55
R-693-b
-3not a member of the Federal Depor3i t Insura'1ce Corporation.
Gene::;ee, Monroe, and Ol. .leans Counties, New York (Buffalo Branch
Territory)
1
The demand for loEms, particularly in the larger institutiom3, continues very light, witl1 total loans of $100,081,000, a reduction of about 4 per cent since January 1. Several bankers situated
in the agricultural sections mentioned that the Production Credit
Association is actively solicitbg loans and, 1::lf offering lower rates
than those prevailing L1 the banks, has taken a number of desirable
borrowing accounts from these institutions. One bank officer remarked
that the critical attitude of the examiners has prevented h:i.m from
r;ranttng a number of loans which he otherwise would make.
Our member banks appea:cod well satisfied with our services,
and no complaints or criticisms in com1ection with the Federal Reserve SystetJ. were expressed. As our member bank representation in
this area is small, the following information is submitted with relation to the nonmember institutions.
l_if..2.!__of Banks
n~a:sons
fo;r Not
~foining
the System
3
Menbnrs of a bank holding £;roup, so that apparent:cyany decision as to membership rests with the holding
cowpany affiliate.
1
Bank will shor·tl;y be taken ov<'lr by another bank and
<J;)crated as a branch, the Federal Deposit Insurance
Corporati,Jn to pm'•::!hase unacceptabl(; assets.
4
Apparently cou.ld not qualify d.uc to various unsatisfttctor~;r
i~eutu1\es.
5
These banks aru apparently in satisfactor-y condition
and eotJ.ld probably qualify; howev,;:r, they are all
s:nall institutions and give as th(.;:ix reasons for not
.io:Lning tho 2-~r:>tom:
(a) Correspondent banks are adequately serving their
needs.
(b) They ce..n see no advantages to be gained, while
on the other hand they would be subject to additLmal ruJ.o~3 and regulations.
1
This institution is friendly to the System and would
JOln except that the provisions of the Clayton Act
prevent l t fro;n so doing at this time.
56
-4Reasons for Not Joining the System
No, of Banks
2
R-693-b
These are fairly large banks, whj.ch, although commercial institutions, do only a limited volume of com-·
mercial banking business; in practical effect, the,y
are savings banks. The managements of these institutions feel that they would gain very little by becoming
members.
PHILADELPHIA
During July 53 banks were visited, of which 29 were member
banlcs and 24 nonmember institutions.
Central Penn§Ylvania
Industrial conditions in the area covered b,y this report
are somewhat better than a year ago. All nine furnaces at the Steelton plant of the Bethlehem Steel Company are in operation and at present this plant is working five days a week, employing about J ,800
workers.
The anthracite industry experienced good business last
winter and in some sections operations have been fairly well maintained thus far this year.
Conditions in farming conununities show little .change during
the past twelve months. Returns for milk are higher but prices for
other farm products are considered low and profits generally are small.
The 1940 props, while lute becau::::e of excess rain during the planting
season, appear to be in good condition.
The real estate market is quiet, Desirable homes and apartments are well occupied at satisfactory rentals, but there is only a
limited amount of new construction and few sales are being made. Several bankers in the larger mining towns reported that real estate prices
in their respective communities are depressed because of the increasing
number of homes being sold by the Sheriff at unusually low prices.
There is only a limited demand for credit and small loans
constitute the principal credit ext1.mded. The executive officer at a
nonmember bank with resources slightly in excess of $1,000,000 stated
that loans at his institution continue to decline in spite of the fact
that the lending policy is much less rigid than it was a few years ago.
Investment accounts, principally because of holdings of railroad securities, are worth less than book value. At most institutions
57
-5-
R-693-b
a definite bond policy· has been adopted and, Ylith the aid of supervisory st:rvices, deterr:1ined efforts are being made to eliminate all
holdings of substandard c.nd defaulted securities. Several bankers
reported that new purchases are being confined almost entirely to
Government obligations.
The president of a nonmember bank with deposits of approximatel,y $1,900,000 complained about the R.F.C. increasing the interest rate from 3-~ per cent to 4 per cent on preferred stock purchased
from banks, on which no reductions have been made. He contends that
earnings are meager because of low yields on the higher grade securities and that this increase in rate is a. serious drain upon income at
his institution. This same complaint was expressed by tho executive
offieer of a nonmember bank with deposits of about ~900,000. That
officer stated that he fails to see how the Government is aiding
banks which are in difficulties by adding this burden.
In discussing membership with the board of directors of a
nonmember bank having deposits of $2,100,000 our representative was
advised that one of the objections was that, because of differences
between State and System regulations, the published reports would
not be in conformity. To date the Department of: Banking of Pennsylvania does not requi::·e reserves against depreciation or loans not
charged off to be deducted when reporting at the call period. Our
representative stated that we ·were endeavoring to have the Department of Banking of Pennsylvania adopt a uniform form and llad hopes
that this would soon be done.
During the month, 31~ banks were visited, of which
me.raber banks and 37 nonmember ba..11.ks.
L~7
were
With few exceptions, visits to member and nonmember bonks
in the Cleveland office territory were in agricultural communities,
and very little of pr·imary interest to the Board was developed from
conversations with officers of these banks. Quite naturally, the war
situation and the defense progra..T. were favorite topics for discussion,
and it is impossible to avoid spending a comlidero.ble amount of time
listening to different points of view wit~1 relation to national politics.
The only major criticisr;1 respecting SJstem matters relates
to the failure of banks in certain sections to receive notices of
Treasur-J offerings in time to enter subscriptions before the books
have closed. In connection with the recent offering of the 2! per
58
R-693- b
-6-
cent issue of 1954-56, our Pittsburgh bra.nc:n reports that banks in
Washington, Butler, Punxsutavmey, Somerset, Waynesburg, Pennsylvania,
and others, reported at thE: close of business July 11 th<..>.t they had
received nothing on the offering. On the mo:rning of the 12th, banks
in Elizabeth, Kittanning, Scottdc..le, Parnassus, Export, and Zelienople,
all in Pennsylvania, reported receiving subscription blanks and sale
closing notices in the same mail. This has happened many times before,
both in Pittsburgh and Cincinnati areas, as well as in 1nain office
territory, and introduces an elenent. of dissatirlfaction which can
easily offset a subGtantial amount of constructive bank :::·elations
work.
This will continue to be a
stantial size, where mail service h:
as banks so situated have at learJt a
subscriptions before annmmcement is
have been closed.
problem even in cities
not of the be::;t, until
reasonable opportilllity
made that subscription
of subsuch time
to enter
books
During Ju1,y 95 ba:1k~; were visited, of which 47 were Elembers
and /}8 were nonmember banks.
The economic consequences of the war upon the Fifth District
have been quite uneven. As n result, there are both dark and bright
cpots so far as business eondi tioas arG concer:::1ed. With respect to
t1e former, there are two importo.nt aspects---cotton and tobacco.
The price for the 1940 c;c~op will depend to a large extent
upon the ammmt of Uw Government loan. Trade circles ant:i..eipate a
loan on 8.90¢ basis, but it is known that Senators from cotton p:::-oducing States have sought to induce the Departlilcnt of AGriculture to fix
the basis at 10.25¢. The new crop ha;; made up some or its earlier
backwardness and it is expected that production will run close to
11,100,000 bales as aga:bst 11,817,000 bale:;; last season. The outlook for cotton prices is quite obscure because of the export situation. However, tr<tde ci:ccl~s hold that, if present expectations are
met with respect to production, com3wnption, a'·ld exports, prices will
necessarily reach the loan level, or insufficient cotton will be
available to meet current requirements.
As for cotton textiles, operations were reduced in the latter part of July and the outlook ar:J u whole is quite uneven. The
J~uture will depend largely upon the extent to which purchases for
preparedness purposes offset the loss of export m~:rkets.
59
-7-
R-693-b
The outlook for tobacco is by no means satisfactory. The
crop is likely to be about 40 per cent under that of 1939 because of
compliance vvi th the crop control program, but the diminished supply
does not assure prices equal to those of 1939 without increased Government support. The Commodity Credit Corporation purchased 177,000,000
pounds last year and is now holding the bulk of that amount on option
for foreign buyers. It is believed that, if the Corporation purchases
about one-third of this year's crop, prices should approximate those
of 1939. The tobacco market anticipates Commodity Credit Corporation
purchases again this year, but with allowance for these and Government
payments to planters under crop control programs, farm incomes from
tobacco are likely to fall short of 1939 results.
Fortunately, there are some bright spots in the Fifth District
partly due to international conditions. Shipbuilding and repairs have
been going ahead at a high level both at Baltimore and in the area of
Hampton Roads. Substantial amounts will also be expended by the Federal
Government in connection with barracks, av.iation fields, etc. In the
first half of 1940 employment in Baltimore was at the highest level
since 1937 and pay rolls were higher than at any time in the last decade. However, the situation has been and is developing unevenly, for
19 industries reported gains in both employment and pay rolls, May-June,
19L.O, while 16 reported declines. Among the latter are several adversely
affected by loss of export markets.
The chemical industries have been stL~ulated in West Virginia
because of war developments, and conditions in Kanawha County are considered quite favorable. Other industrial centers of West Virginia
have also expanded production or anticipate such expansion and the production of coal has increased substantially over 1939 levels, with
stimulating effect upon retail trade.
Taking the situation as a whole, with allowance for better
than ten-year average yields for other crops as an offset for the unfavorable outlook for both cotton and tobacco, farm purchasing power
should, in the 1940-41 season,come close to average. With this as a
basis, when allowance is also made for increased industrial activity in
lines other than cotton textiles sufficient or more to offset declines
in the latter, one may safely say that the outlook for the District may
be regarded as favorable, considering the unsettled national and international situation.
ATLANTA
During the month
bers and 31 norunembers.
l+O
banks were visited, of which 9 were mem-
60
-8-
R-693-b
Bankers in the sections visited generally reported favorable
earnings during the first six months of this year. Although deposits
of most banks are higher than a year ago, demand for credit is said to
have been very favorable since the first of the year and very few bankers complained of excess idle funds. Although agricultural loans constitute the bulk of the business of most of these banks, many of them
are devoting more attention to personal, automobile, and other installment loans which they are finding a splendid source of revenue.
Several of the banks visited have disposed of their Government securities since the first of the year and in most cases have not
reinvested the proceeds. Officers of these banks stated that they are
hesitant to purchase bonds at the present market since they expect to
see bond prices decline before the end of the year.
Most of the banks visited have a good volume of savings accounts on which 2 per cent interest is paid. Although many of them
stated that they would like to reduce the rate or discontinue savings
acco~Dts altogether, they hesitate to do so because of the fact that
many of their depositors are young people, who are learning the value
of thrift, or elderly people who have no other source of income, and,
consequently, they feel that they are under obligation to their commLmity to continue to carry these accounts. In most banks new savings
accounts are only accepted from local people who are custo:T.ers of the
bank.
The average rate charged for agricultural loans by the banks
visited is 8 per cent, while 6 per cent is charged on personal and consumer loans.
All nonmember bankers visited were found very courteous and
appeared to regard the Federal Reserve System veiJr highly. However,
none of them showed any real interest in membership. Without exception
nor~ernber bankers, when approached on the subject of membership, stated
that the loss of exchange which would result from remitting at par was
their principal objection to membership. A nu~ber of nonmember bankers
stated that they are at present enjoying most of the benefits of Federal Reserve membership through the facilities offered by their city
correspondents. All member bankers visited appeared to be highly appreciative of the attention sho¥m them by our visits and all expressed entire satisfaction with the services of the Federal Reserve Bank.
CHICAGO
During the month of July 55 banks were visited, of which 19
were member banks and 36 nonmember banks.
61
-9-
R-693-b
Deposits continued to increase. In the larger cities there
is some slight inquiry for loans. However, the manufacturers as a rule
are only discussing the possibility of borrowing; they are not yet actually borrowing in any substantial amount. There has been some increase in loans in country banks, but this has been more than offset
by the Government taking up the corn loans. Some of the banks are
evincing interest in term loans. A group of bankers in one of the
larger cities recently made a loan of $18,000,000 due serially over a
period of ten years. A number of the outlying banks in Chicago have
shovm a substantial increase in mortgage loans. This is a result mainly
of the purchase of F.H.A. mortgages. Banks with substandard bonds continue in their efforts to dispose of them whenever practicable.
The question of bank offices is still one of current interest.
An officer of a national bank with something over a million of deposits
stated that they recently had an opportunity to establish a branch in
a community where a former bank had approximately $400,000 in deposits.
As they were reluctant to give up their national charter and their membership in the System, he said, 11 We were forced to sit by and see our
State bank competitor get it • 11 The President of a State bank with
$1,250,000 deposits operating an office asked us within the last week,
"When will a way be opened for us to join the System and retain the office?" He stated the office has $250,000 in deposits which he feels is
not enough to justify the organization of a bank at that point.
ST. LOUIS
During July 130 banks were visited of which 35 were member and
95 were nonmember banks.
FJJCcept in the new oil fields, where banking--along with other
business--is relatively active, general banking conditions in Illinois
shmv little change from those obtaining a year ago. Demand for credit
is described as fair, with the trend of personal loans continuing upward. There was a fair vol~me of wheat production loans this season,
much of which has been liquidated since harvest. Elevators, wheat handlers and mills apparently are borrovving less than is usual at this time
of year, because much grain is goine into storage on farms or into the
Government loan. Interest rates on time deposits range from l per cent
to the legal lL~it. In a number of instances banks are limiting the
amount of time rnoney on which th~f will pay interest. Rates received
from customers range from 5 per cent to 7-l/2 per cent. There were the
usual polerr~cs on competition of Government loan agencies, severity of
supervision, increasing costs of operation, taxes, etc. As elsewhere
in the District, bankers in this area a.re becoming increasingly financial statement conscious. It was found that credit files are generally
62
-10-
R-693-b
in good shape, with •.rirtually all lines of $500 or over supported by
statements. Nowhere was there a complaint heard of services rendered
by the Federal Reserve, either from member of nonmember banks.
Taken as a whole, the status of banks visited in Missouri
was somewhat more favorable than a year ago. Earnings in munerous instances are better, and der:1and for credit is slightly larger and more
diversified. Rates paid on time deposits range from l per cent to
2-l/2 per cent, and on loans to customers from 5 per cent to 8 per cent
is charged. Credit fil-es were found to be in good shape, except in a
lL~ited number of cases.
Some months ago an Illinois State bank was examined for mem...
bt;;rship but the necessary transactions were never completed. It now
develops that several of the bank's older directors decided against membership on the ground that Federal authorities may exercise undue control over merriber banks. The bank's cashier is still interested in
membership and expressed the hope that eventually his board will see fit
to join the System.
When the lack of membership signs was mentioned to the cashier
of an Illinois national bank, he emphatically indicated that he was not
interested and gave as his reason that he felt the public had not forgotten that membership had not helped his bank to take c::tre of its depositors following the banking holiday. He did not, however, in any
way indicate that he felt this was a criticism of the System.
MINNEAPOLIS
During the month of July 218 banks were visited, of which 117
were member banks a..."1d 101 were nonmember institutions.
A departmental head of our bank vms appointed chairman of the
Minnesota Bankers Association 1 s Ainericc;m Institute of Banking Committee,
the activities of wh1ch are the extension o.f A.I.B. study groups into
the less populated cormnunities of the State. In additj_on to organizing
the study groups throughout the sectional clearing house association, it
is planned to stage a number of meetings of county key bankers in the
L.1.rger centers (exclusive of Minneapolis, St. Paul, and Duluth) for the
purpose of explaining thoroughly the facilities of the American Institute of Banking which are available to baDkers and bank employees.
Through personal contacts with banks in this district, we have
finally consummated arrangements to obtain immediate exchange from a
group of banks Vlhich heretofore have always given us out-of-town exchange
in payment of our cash letters.
63
-11-
R.-693-b
Southern and Vvestern. Montana
Calls were made on the editors of all weekly and daily newspapers with a circulation of ?.,000 or more, of which there were 15. To
assist in making these cal1.s, some of the bankers introduced our representative but in other instances, calls were made direct. Usually the
call was explained on the basis that our representative was in town
gathering statistics from the merchants and bankers and thought the
editor might be int·3rested in seeing some of our news releases that he
h~d not been receiving in the past.
Samples of these releases were
left with him for his later inspection but in some instances, h8 insisted on discussj_ng them in detail on the spot. If he decided that
he wished to see copies of any of these releases regularly, he was requested to drop a line to our Minneapolis office. To date, four requests for additional material have been received.
In a few instances, an editor commented on some of our releases that he had seen occasionally in the past but had not understood
:_heir import and consequently had made no use of them. In such cases
our representative explained in detail how these figures were collected
and how the reports were prepared, in such a way that the editor might
see some possible news value to the material but without any suggestion
that any of it should be published. In evern.; instance, the editor was
invited to feel free to write us regarding the significance of any figures in any of our reports and to call on us at any time that he might
want any special information regarding business or banking conditions
or about the Federal Reserve System.
North and South Dakota
The Bank of North Dakota is said to be the only State O'l;"ffied
bank in the United States. It now has d8posits of $23,000,000, making
it the largest ban...l<: in this district west of Minneapolis. Most of its
deposits represent public funds, but demand, time, and savings deposits
of individuals are also rece:Lved. It appears that most of the bank's
activities center in the la:..'ld department which handles State Rural Credit
mortgage loans and. operates farms ovmed by the State. Approximately
6,000 farms are so ovmed with total acreage of approximately 1,500,000
acres. The sales department in 1939 disposed of 266 farms, 57,000 acres,
at an average price of $10.25 per acre.
Northeastern Minnesota
The bankers invariably are deeply concerned over the European
situation, and many of them are ver>J reluctant about employing their
idle funds until the situation becomes more stable. Deposits have increased in virtually every bank visited, while the bankers as a whole
64
-12-
R-693-b
have increased their loans. Most of the increases in loans have come
from advances on automobiles, tractors, washing machines, radios, etc.,
and, in addition, many banks have gone in for Federal Housing Administration mortgages, which they have not heretofore regarded with much
favor. All banks visited have had good experience to date on all such
loans. Earnings in most of these bar~s have shown an increase in 1940
to date over the same period in 1939. In fact, but very few bankers
had much of anything to complain about.
Central Minnesota
In two or three of the banks carrying substantial volumes of
automobile paper, the officers are seriously considering withholding
loans from young men who \"lill be among the first called for military
training. It seems to be an accepted conclusion that there will be a
peacetime draft, and the bankers are worried about defaulted automobile
payments by those called into service.
KANSAS CITY
During July 91 banks were visited, of which 47 were member
banks and 44 were nonmembers.
Visits to barLt{s in July were confined largely to northern and
western Oklahoma but scattered calls were made also in other parts of
the District.
Out of B4 banks called on in the Oklahoma wheat belt, only 5
were found not making wheat loans at l-l/2 per cent. Wheat loans entail a great amount of work and little profit, yet bankers feel an obligation to farmers and to their communities to make them. If the
farmer sold his wheat, he would get about 55 cents a bushel while with
a loan approximately 62 cents can be secured. Bankers feel that the.y
should. help farmers get these additional few cents. While nearly all
banks are mc>king these loans out of a feeling of obligation to their
communities, they report that farmers are taking the funds secured at
these abnormally low rates of interest and paying off bank loans that
are very profitable to the banks. It is said that many of these loans
are sold to city banks, the local bank retaining.l/4 of 1 per cent. ,.City
banks prefer these loans to any other available short time paper.
Many cases were
wheat and then depositing
need the money, a loan is
above the market price.
redeem his whe~-:.t <md take
reported of farmers getting a loan on their
the mone-.r in the bnnk. Although they do not
the only wc:.y farmers ccm 11 sell 11 their wheat
If the price of wheat advances the farmer can
the profit, while if i t falls below the loan
65
-13-
R-693- b
rate, the Government gets the wheat. This practice is an iuportant
factor in increasing bank deposits. It is also responsible for an
abnormally large amount of wheat going into storage with a consequent
restriction of the supply for milling purposes.
In the sections of Oklahoma visited, most vf the bank earnings usually come in the last half of the year. But nearly '"ill banks
have had very satisfactory earnings so far this year. Ba11kers are
showing enterprise in developing new outlets for loans. Time payment
loans nearly everywhere are on the increase. One banker was found
who specializes in making loans on wheat warehouse receipts to nonceoperating farmers. He lends up to 60 per cent of' the market value at
6 per cent. Many banks want more bonds but hesitate to buy at present
prices.
During ,July population figures were released for Oklahoma and
these figures were a'::.tracting much attention. A decrease of nearly
75,000 in the ten-year period was shovm, and a. decrease in population
is something new to Oklahoma people. In the for+,y years bet1ireen 1890
and 1930, the population of that State increased more than nine fold,
the increase between 1910 and 1930 alone being nearly three-quarters of
a million. The population decline occurred for the rc,ost part in the
central and western counties of the State, extreme eastern and southeastern counties rather 1.mif'ormly shmJing an increase. This population
change, however, is not peculiar to Oklaho.::na G.S Kansas and Nebro.ska experienced very similar declines. The number of farms in OklahoiTk1. decreased 24,890 in the ten-;year period.
DALLAS
In July 38 banks were visited, of which 30 were member banks
and 8 nonmember banks.
North Louisiana
Among the signific3.nt tJrends in bank credit policies noted in
this section of the district is a tendency on the part of many memner
banks--even in the smaller cor:::'1lUI1it:ies--to withJrc:w from or greatly restrict lEmding operations for the purpose of fin::mcing cotton farming.
The banks are either finding comp,;;t:Ltion from Governmt::nt lending agencies for this class of loans too strong to cope vrith or have decided
that tenant farmers are too hazCJ.rdous as credit risks.
One member bank, which bas
these deterrent factors and continut:'S
'.'3.rmers, has inaugurated a unique and
self against the abnormal risks which
so far successfully withstood
to lend liberally to the cotton
succes.sful scheme to protect itsuch loans involve. It hccs
66
-14-
R-693-b
induced its farmer customers to form themselv~;s into a private cooperative bank credit associaticn. By mutual agreem~nt the bank deducts 6
per cent of the proceeds of each of its loans to members of the association and sets this amount aside in a reserve fund to cover (or be applied on) any member's indebtedness that the bank is unabl8 to collect.
In this way the bank hcts been able to minimize its losses on agricultural loans. Th~ plan was put in operation originally as the only
available means of making bank credit available to certain irnpoverishr-;d
tenant farmers whom the better class of farmers were willing to assist
by pooling their credit resources in a cooperative organization.
A great many of the mnmber banks were found to be carrying
only nominal amounts of Governrnent bonds in their portfolios, although
substantial holdings of municipals were in evidence, Some banks sold
:)ff their Governments last fall when the war flurry occurred, others
toolc profits by selling this yer-Lr, and in both types of these C<'~Jes
therfO is evident a reluctance to repurchase pending further dev . . lopment.s
in the Europet..n vvar.
Southeast TeXr::ts
Earnings for banks in this section range from the break-even
point to excellent, depending largely upon the amount and ma.tur1 ty of
investment securities being carried. I~one ol' the 5nstitutions visited
has made any recent addition to long-term bond holdings. On the other
hand, a number of them have recently ei thcr actU'o>lly 3hortened maturities or are giving serious consideration to such a move. This action
was motivated by the extremely low yields nov; obtaining and the increased offerings which defense costs a.nd other Govc:rtU1wnt expenditures
vdll necessi t::,te.
Loan demand continues at abnorm.l:t.lly low levels with the usual
indications of an enlarged participation in the installment and personal
category. No instance of the need for additional or outside eredit to
handle defense or Government orders was revealed. In fact, no definite
information was obtained of any successful bids for Government orders.
Except in an isolated case, no more than 1 per cent is ;.xdd on time or
savings dt;posits with several banks re~orting no interest-bearing deposj_ts whatever.
SAN FRANCISCO
During· the month of July 36 banks werEo visited, of which 17
were member be>.nks :ind 19 were nonmember ba:nks.
... 6?
-15.,..
R-693-b
PUBLIC RELATIONS ACTIVITIES OF FEDJ:tmL RESERVE BAI\IKS
.Tu1y 1940
Federal
He serve
Bank
Visits to Banks
Meetings Attended
Addresses Made
Member Nonmember Total Number Attendance Number Attendance
35
0
0
1
50
59
131
2
85
0
0
29
24
53
0
0
0
0
Cleveland
47
37
8L~
')
<.
550
2
51
Richmond
47
48
95
7
1,580
0
0
Atlanta
9
31
40
l
125
0
0
Chicago
19
36
55
0
0
0
0
St. Louis
35
95
130
1
Lt50
11
Minneapolis
117
1.01
218
1
350
11
11
1)
Kansas City
47
l;.h
91
2
0
0
Dallas
30
8
38
l
75
0
0
San Francisco
17
19
36
3
196
0
0
Boston
35
New York
72
Philadelphia
1/
Not reported
1)
... 68
R-693-c
August 21, 1940
REPLIES HECEIVED FROM TEN OF THE FEDERAL RESERVE BANKS
TO BOARD'S LETTER R-678 OF JULY 19, 19i±Q., MAKING INQUIRY
CONCERNING THE DESIRABILI1'Y OF CONTINUING
THE MONTHLY BA.UK RELATIONS REPORTS
(Replies to the above-mentioned letter have not yet been
received b-.f the Board .from two of' the Federal Reserve
Banks, but capias of their resporwec to letter R-506 of
July 19, 1939, which contained a similar inquiry, are
attached hereto as pages 11 and 12.)
69
R-693-:!
Page 1
FEDERAL
~mSERVE
BANK OF BOSTON
July 23, 1940
Mr. L. P. :Sethea, Assistant Secretary,
Board of Governors of the Federal Reserve System,
Washington, D. C.
Dear Mr. Bethea:
This will acknowledge receipt of the Board's letter R-678, dated July 19, 1940.
iThile I attempt to keep our Directors thoroughly
informed about everything, nevertheless I do not feel that
I am justified with burdening them unduly, with the result
that I spend no small portion of my time centering upon
those things I believe our Directors would be particularly
interested in. The details of the bank relations report
I have not passed on to our Directors. I have, however,
on different occasions mentioned things that I thought
might be of interest to them.
Personal~r, I read the report and know that I
profit by it, and would prefer to have it continued. However, at one Conference at least, there seemed to be a
majori~ opinion of the Presidents that tne report be
discontinued. I know that the compilation of the report
involves labor and must be expensive, and if the replies
to your inquiry should disclose that only a few of us
want this information, I think it can be properly discontinued.
Yours very truly,
(Signed)
R. A. Ynung
President.
70
R-693-c
Page 2
FEDKR.AL HESERVE BANK OF NEVJ YORK
July 24, 1940
Board of Governors
of' the Federal Reserve s-.:rstem,
Washington, D. C.
Gentlemen:
In the absence of Mr. Harrison, I wish to acknowledge receipt of the Board's letter of July 19, 1940,
R-678. The Boa:;.nd asks whether, in our opinion, the present practice of distributing exeerpts from bank :celatio.s
reports should be continued. We assmne that the Board
will wish to continue to receive monthly reports from
the Federal Reser-ve Banks and, if this is the case, vre
are definitely of the opinion that the STh~aary prepared
from these reports is worthv;hile. A number of our officers look over the reports each month, and those having to do with the Bank Relations Department give them
close study. I think it is quite desirable to have our
men b~ow how similar activities are conducted in the
other Federal Reserve Banks and what the trend of banking opinion is in other parts of the country, and we
have felt that the swnmaries give us some very interesting light on these subjects.
Very truly yours,
(Signed)
R. M. Gidney
R. l\1. Gidney,
Vice President.
71
R-693-c
Page 3
FEDERAL RESERVE BANK OF' PHILADELPHIA
August 1, 1940
Board of Governors of the
Federal Reserve System
Washington, D. C.
Dear Sirs:
Reference is made to your letter of .July 19,
1940, R-678, in which you request an opinion from this
bank as to whether or not the Board should continue its
present practice of sending monthly to each Reserve
Bank a statement containing excerpts from the bank relations reports submitted b.Y the various banks for the
previous month and a table showing applications for
membership received by the Board during the current
year and in the preceding month.
We have found these compilations quite informative and of value in helping us to keep posted
on developments in the other districts and we should
not like to see them discontinued or made too brief.
V0ry tr-uly yours,
(Signed)
Jo~~
S. Sinclair
72
R-693-c
Page /._
FED~BAL
RESERVE BANK OF CLEVELAND
August 19, 1940
Mr. Chester Morrill, Secretar"'J
Board of Governors of the
Federal Reserve ~Jstem
Washington, D. C.
Dear
~1r.
Mor'rill:
Consideration has been given to the request contained in letter R-678, dated July 19, 1940, regarding the
distribution of exc3rpts from monthly reports of bank relations activities of the Federal reserve bar~s.
7he subject was also discussed at a meeting of our
board of directors held on August 15, 1940. It is the opinion of the O.irectors a~d officers of this bank that the detailed reports are not of sufficie:1t val~e to ju~1tify their
preparation except for the tables showing the applications
for membership received and the public relations activities
conducted qy each Federal reserve bank.
The excerpts i'r0m reports of visitations by representatives of Federal reserve banks are pri.tilaril~~ of local
interest and it is believed they could be discontinued. We
are interested in the information regarding applications
for membership and the number of vicitations ~~d addresses
made by representatives of the banks, also the number of
meetings attended.
In the report of bank rele.tions activities for
June 1940, this information is shown on t~1e first and last
pages of the report designated R-678-a.
Ver-;[ truly :rours,
(Signed)
M. J. Fleming
President
73
R-693-c
Page 5
FEDERAL RESERVE BANK OF RICHMOND
July 27, 1940
Board of Governors of
the Federal Reserve System,
Washington, D. C.
Dear Sirs:
Referring to yotU' letter of July"25, 1940,
R-682, relative to material showing applications for
membership received and excerpts from the bank relations reports submitted qy the various Federal Reserve banks, I think your practice of sending copies
to the Federal Reserve banks is well worth while and
should be continued. For some t irne I have been sending a COP,Y to each of the directors of this bank and
its two branches, as well as to certain members of
our staff. I always read the sumr:1a!j:- with interest,
as do some of our other officers and some of' our
directors.
It is my intention to study the reports
that are sent to you (lf this bcnk to see if they can
be improved.
Very truly yours,
(Signed)
Hugh Leach
Hugh Leach,
President.
74
R-693-c
Page 6
FEDERAL
R~SERVE
BANK OF
ATLM~TA
July 2.3, 1940
Mr. L. P. Bethea, AssistBJ."lt Secretary,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Dear Mr. Bethea:
Reference is made to the Board's letter of July
19, 1940 (R-678).
We at this bank are of the opi:.1ion that the distribution of excerpts from bank relations reports serves a
useful purpose. The compilations are read by all of the
officers, and they are careful.l.v studied by those who are
the more actively engaged in bank relations work, such as
visiting member and nor.Jllember banks. We think that we are
benefited by information concerning conditions and developments in other Federal Reserve districts. THe also feel
that we are better able to do the work in this district
through reports of what is being done by other Federal.
Reserve "banks.
Mr. Malcolm H. Bryan, Vice President, who has
immediate supervision of our bank relations work, concurs
in what is said herein.
Very truly yours,
(Signed)
Robt. S. Parker
Robt. S. Parker,
President.
75
R-693-c
Page 7
FEDERAL R.ESER.VE BANK OF CHICAGO
July 22, 1940
~.lr. L. P. Bethea,
Assistant Secretary,
Board of Governors of
the Federal Reserve 8,ystem,
Washington, D. C.
Dear Mr. Bethea:
In answer to your letter of the 19th instant, R-678, concerning the value of a monthly
statement showing excerpts from bank relations reports, would state that we in Chicago question very
much the value of this release, with the exception
that we do find the statement of applications for
membership received 1zy" the Board from the various
districts, both for the current year and the last
preceding month, of great interest; also the statement on the last page giving the public relations
activities of various Federal Reserve banks, including visitors to the banks, meetings attended,
and addreszes made.
Sincerely
(Signed)
yoQ~s,
Geo. J. Schaller
President.
76
R-693-C
Page 8
FEDERAL RESERVE DANK OF MINNEAPOLIS
July 22, 1940
Mr. L. P. Bethea, Asst. Secretary
Board of Governors of the
Federal Reserve System
Washington, D. C.
Dear Mr. Bethea:
I have considered t:1e suggestion made jn your letter of
July 19, 1940. I find that the excerpts from bank relations reports
which you have been accustomed to send us have some value. I am
particularly interested in those hints which creep into the reports
dealing with public relations methods in the different banks. Possibly the report could be further condensed with little loss if more
public relations matter were inserted.
Every now and then I find some bank has an idea whicl-;. is
well worth adopting. It occurs to me that the reports might be of
even more value if each bank were encouraged to insert in its report
those definite actions which it may have taken to encourage good
will, increased membership, or additional services in its district.
You might well consider the possible advantages of reporting on a
separate sheet such procedures, without naming the individual banks
reporting. This would give every Federal Reserva bank a chance to
digest the ideas and would eliminate the feeling that any individual
bank was unduly aggressive in presenting its case.
It even occurs to me that it might be desirable to have
each Federal Reserve bank make a sepc.rate report on each item of
this character that it has tried, with u resQ~e of the results.
Each bank could digest such a resume with the view of adopting
feasible ideas. I do think it is highly essential that the name
of the individual Federal Reserve bank be withheld in such original resumes.
Please take this in the spirit in which it is intended-merely a reaction to your inquiry.
Regards,
(Signed)
J. N. Peyton
President.
77
R-693-c
Page 9
FEDERAL RESERVE BANK OF DALLAS
August 2, 1940
Board of Governors of the
Federal Reserve System
Washington, D. C.
ATTENTION:
Mr. L. P. Bethea
Assistant Secretary
Gentlemen:
The Board's letter R-678, ciated July 19, 1940, has
been carefully considered and it is the U.."l.animous opinion of
the officers of this bank that excerpts from the bank relations reports of the various Federal Reserve banks are of
considerable interest and value and that their distribution
to the Reserve banks should be continued.
The only suggestion we have to offer is that the
reports be condensed still further, if practicable, qy excluding information and comments that are of a pure~T local
nature.
I find the reports ve~J helpful, as they keep me
aJvised about things that are happening and being discussed
in other districts, and I am sure the other officers of the
bank feel the same way about them.
Very truly yours,
(Signed)
R. R. Gilbert
E.. R. Gilbert
President
78
R-693-c
Page 10
FEDERAL RESERVE BANK OF S.fu.\1 FRANCISCQ
July 25, 1940
Board of Governors of the
Federal Reserve System,
V!ashington, D. C.
Dear Sirs:
In its letter of July 19, 1940, R-678,
the Board invited our opinion as to whether or not
the compilation and distribution of excerpts from
the bank relations reports of the twelve Reserve
banks is sufficiently interesting and L~formative
to justify its continuance.
In answer to a similar inquiry on July
19 a year ago, v;e expressed our views in a letter
dated August 3, 1939. A current review of the situation finds us in an unchanged state of mind, and
we suggest that the bank relations report, as well
as the Board's dissemination of excerpts from such
reports, be subject to trial of suspension.
For convenience, a copf of our letter
of
Au~~st
J, 1939 is enclosed.
Yours very truly,
(Signed)
Wm. A. Day
President.
79
R-69.3-c
Page 10-a
F,;,;;DERJ',.L HESERVE BANK OF SAN FRANCISCO
August 3, 1939
Air Mail
Board of Governors of the
Federal Heserve System,
Washington, D. C.
Dear Sirs:
I{eceipt is aclr..:cwv:ledgBd of your letter R-506,
which was l1eld ponding my return to San Francisco.
On many occasions, our officers have attempted
to appraise the value of the summaries of the bank relations reports. The consensus seems to have boen that
most of tho important facts presented are repetitions of
what has been learned through other channels.
On occasion we have found that it was not until a report had bc;en discontinued that its usefulness
was properly measured. iv1e.y v:e 1wt suggest that the bank
relations report be subjected to the trial of suspension?
If its need subsequently should becor:~e apparent, thero
would be no difficulty in renewing its pre pant tion. In
the meantime, so that the Board could know vJhether ot~ not
Reserve banks were maintaining appropriate public relations activities, i t might be desirable to have the Federal Reserve examiners review the activities of the
respective banks when they are under examination.
Yow~s
very t1·uly,
(Signed)
VI. A. Day
W. A. Day
President
80
R-69.3-c
Page 11
FEDERAL RESERVE BMJK OF ST. LOUIS
August 7, 1939
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Attention:
Mr. S. R. Carpenter, Asst. Secretary
Gentlemen:
Replying to your letter of July 19, I believe
the surrunSJrJ of bank relations reports submitted by the
several Federal Reserve ba..1.ks, which is sent to us each
month, is of considerable interest and value, and I am
decidedly in favor of its continuance.
It gives us, and doubtless the other Federal
Reserve banks, a vivid picture of what is transpiring
among member ba.nks in all parts of the country. We have
gotten many useful suggestions and much information from
reading the swnmary, which material is available from no
other source.
You ask whether
ened to the length of the
sive. Personally I would
form of previous issues.
ployees of this bank find
informative reading.
we would rather have it shortJlli~e issue or made more inclulike it in the more comprehensive
A number of officers and emthe su1nmary interesting and
Very truly yours,
(Signed)
F. Guy Hitt
F. Guy Hitt,
First Vice President.
81
R-693-c
Page 12
FEDERAL RESERVE BANK OF KANSAS CITY
July 25, 1939
Mr. S. R. Carpenter
Assistant Secretary
Board of Governors of
the Federal Reserve System
Washington, D. C.
Dear Mr. Carpenter:
I certainly think that the su.,:nmary of
bank relations reports which the Board has been
sending to the several Federal Reserve banks are
very much worth while and should not be discontinued.
The swn;nary which accompanied your letter of July 19 (R-506) is sufficiently brief and
should not be shortened further, but on the whole
I believe it is better in this form tha>'1 in the
more comprehensive report which you formerly issued.
Yours very truly,
(Signed)
Geo. H. Hamilton
Geo. H. Hamil ton
President
@FedFRASER