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108
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R-7~
WASHINGTON
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD
September 19, 1940
..
...
Dear Sir:
There are enclosed for your information a table showing applications for
•
membership received qy the Board during
1940, and a statement containing excerpts
from the bank relations reports submitted
by the J<·ederal Reserve Banks for the month
of August •
.
'
L. P. Bethea,
Assistant Secretary.
Enclosures
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
R-706-a·
BANKS ELIGIBLElc FOH FEDERAL RESERVE MEMBERSHIP ON DECElABEH ..J.L.
1939, AND BANKS WHICH APPLIED FOR i.l:EMBEH.'3HIP
.
DURING 1940
-----------.~~-----~~--~--~-----=~:~~--~~~----.-~~--~----------------~-
Federlll
Reserve
District
I
Number of Nonmember Com- i
mercial Banks El_igible-lc for
Federal Heserve Membership I
On December 3l.L...lli.2
! Total ! On Par List·:HH~- I
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Fr'lncisco
Tote>.1
141
221.
225
475
394
484
1,219
664
141
224
225
4?4
2')"
..)"52
1,079
434
1~20
78
487
282
194
/+02
5,209
Deposits of Nonmember
~· Deposits of Ba.nks
Commercial Banks Eligible·:~Wrd.ch Applied for
Federal Reserve
for Federal Reserve MemberFederal Reserve
i·;iembershi p DurinR'-_--+-s=h=i_:2....21} December _31 1 1939 ~mbershiJ2... During--A11£?Ust I This Year
Total 1 On Par I,.ist>HH: 1 August I This Year
(In thousands of dolJa rs)
Number of Banks
V.i'hich Applied for
0
2
0
2
")
'·
1
6
1
469,330
0
981,529
981,529
3,200
5:50,836
577,670
550,336
577,367
0
4,600
0
3,200
3,000
30,200
10
2
34
13
4En, 555
302,655
1,114,286
1~28, 385
396,/+47
70,987
1,054,464
309,111
1,100
1,000
6,200
600
17,700
2,800
32,300
8,200
4
2,800
3,200
10,700
0
3.)UJ_
469,330
3
HI\
18
5
189,:225
198 ;?93
53,439
l7t3,372
0
1,600
174
182
0
l
4
1
13
3
154,549
545,393
110,025
2,000
768
700
3,69'7
20
113
5,994,411
5,293,675
21,000
51~1,
ll9,100
~~
By eli[~ible banks is meant bCt. nks with sufficient capital stock to rrteet tl1e minimum
requirements for Federal Reserve membership.
~He
Includes one newly orgE•.nized bmk having no deposits.
~HH~-
Revised. Figures shown in lc:.st month 1 s st;::.tement did not include uninsured nonmember banks on the
Par List which were eligjble for Federal R.eserve membership on December 31, 1939.
st~.tutory
5,0QQ_
C[:pital
110
R-706..()
September 19, 1940
Not for publication
f~PTS
FROM BANK RELATIONS REPORTS
FOR THE MONTH 01<"' AUGUST 1940
BOSTON
Durlng the month of August visits were made to 27 member
banks and branches and 8 nonmember banks, the majority of banks visited being located in the State of Maine.
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.
.
.
Production, employment, and p~ rolls were reported to be
increasing at the mills and factories (woolen, paper, and shoe) scattered throughout the sections visited and retail trade in these sections reflected this movement. The improved condition was more marked
in and around Bath, Maine, than in any other section visited. Here
the shipyards a..."l.d plants manufacturing marine equipment and operating
almost entirely· against Government orders, have combined pay rolls of
more than $100,000 a week. One concern is erecting and equipping a
large new factory. This activity is said to have resulted in a shortage of small residential properties and a mark-up of anywhere from
ten to thirty pe:c cent in sales values of this type of property.
There is no speculative building going on and bankers report very few
inquiries from builders of this type of property. A few small houses
are being built by ir.dividual shipyard and factory workers and some
are said to be financing the building through the Federal Housing
Administration. It is understood that this type of Government loan
is readily available through banks of the loeality.
In farming districts the canning crops are reported to be
good and early prices were said to be satisfactory to the growers.
The summer tourist trade throughout the sections visited, while reported exceptionalzy light during June and July, was well above the
August average at some points •
Loans and deposits were up slightly better than seasonally
at mos.t banks visited although many bankers complained of their inability to lend a greater volume of their available funds. Lending rates
at most of ·the bunks ranged from 6 per cent to as low as 5 per cent,
excepting lom1s to municipaliti0s which ranged from 3-1/2 per cent
downward. Mortgage loans throughout the oection carry 5-l/2 per cent
rate. Several bankers referred to the possibility of reducing the interest rate on time deposits at the end of the present year. Reductions in the interest rate had been made blf several banks.
serves.
Several bankers expressed concern over mounting excess reAt one or tv10 points reference was rnade to the alleged
111
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practice of certain outside banks coliciting local business, the competition r::oming from tvvo of the larger Maine banks and one large bank
outdde the Sta-t.e.
During the month of [l.ugnr::t, om· officers and representatives
visjted 99 brmlu:;--56 mem'oer e.nJ 43 nonmJmber insti tutions--1ocatecl in
various sectior.s of trw district. The follovd·.g is a resur:w of the
repo.t·ts of visi"i:;e. "to ba~1ks in SuffclK Co1..mt~y, New· York, whic.:h comprises
more than two-thi·2ds of thG area of Long Is1a.nd and cx.t,mdu easbrf.:.rd to
the end of the Isl~:md.
Invest~nent portfolios o:~' tJ.1e corruaercial banks total $25,600,000
showin_g a decreuso of ;~n,2oo)ouo since las:~. April,, the holdings oi'
United States Gov~;rn:nent obli:;atiors havin,~ declir~ed abo'.lt ~H;OOO,OOO
to the present a.ggregate of C",lJ, 200,000. 'The banl:.erG continue to be
hesit<.mt about purcha::;iag securities in view of the ws.r developments
and prefer to retain their large rcmotmts of idle funds. A number of
bank officers are Bhowing a,J. iucruasl:d interest in their railroad securities, particularly their speculative holdings, in view of the reports of better railroad earnings.
Loans and discounts a.ggregate $21,600,000, reflecting little
chan.:re in the total since l&.st AprLL. A number of bankers state that
the :Lncome of their institutions is J"lOW so low that they intend to improve the earning capac:i.t;y by endeavoring to obtain more loans from
farmers through personaJ. solicitation, a good man,y of such loans having gene in the past to the Governmmrt' s ~redi t agencies, and produce
dealers.
The sub,ject of membership in the Federal Reserve System was
brought up for discussion with officers of eight of tho eleven nonmember banks and in cases in which interest was stimulated, fellow-up
visits were made, with the result that three hmre since filed applications with us and three are planning to ta·,:e fc.vorable act.Lon within
the next few weeks. The officers of the other tvm banks .:nclicate that
they will discuss the :natter with their directors at an earlJ· date.
The :cemaining three nom:1ember institutions appe:;.r to have problems to
overcome, such as large holdings of other real estate and substandard
bonds, before they will be in a position to quali(l for membership.
..
Agriculture is the most important industry in the county .
Largo quantities of early potf'_toes have alr·eady been exported to for--·
eign cou.."l'lt:cieo and shipped to distant points in tb~ Unit;)d States.
The combined production of early and late potatoes is said to be
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R-706-b
slightly in excess of last year 1 s .:;rops. During the la::;t two weeks
the price of late potato~3s has increased from sixty-five to eighty
cents per hundredweight. Approximately 1,080 farmers have enrolled
in the 1940 Federal agricultural conservation program as compared
with 1,047 last year. The Long Island Cauliflower Association, which
in the past has imported cauliflower seed from Holland and Denmark,
is now planning to grow seed in this country for the first time as
its s-u.pply of seed on hand is only sufficient for next year 1 s crop
and it is believed im:.)robable that seed mey be secured from abroad
in the ne1,1r future. The duck farmers in the county expect to raise
about 5,500,000 pounds of ducks this year and if current prices of
thirteen and fourteen cents a pound prevail, a fair profit will be
made.
This county is also otV3 of the largest and best known
oyster growing regions in the eow1try and i t is busHy preparing for
the season which starts tb.e last weel~ in August. Reports indicate
that there will be a. norme.l suppJ..y of oysters of excellent quality.
The summer resort areas report one of the best seasons since
1929, the two best known summering plac2s, Southampton and East
Hampton, enjoying an excDllcnt seo.son.
During the month of August, the brenk relations work was
concentrated to some extent on visit~' to nml.IDember ban1w in various
parts of the dioti·ict in an effort to intGrcot t:.1l'1m in membership in
tho Federal Reserve Systc:m. In addition to the three applications
received fror:: ncnmembcr i:·anks in Suffolk County, four banks in other
sections of t0e district have filed. applicatio:·1s, making a total of
seven, and five others c:xpect to adopt resolutionc to apply for membership within the next month. Sevor&l nonmember ban}::ers ~ while giving no definite an~~wer regarding the course they may pursue with
respect to filing an c.ppl~Lco.tion, have ohoiil1 enough :interest to arrange for a further discussion of t;1e subject at our bunk.
During August repre;:;cntatives of this Bank visited 73 banking offices, comprisir:g 43 member banks and ;2 brrmches, ~md ;:8 nonmember banks. Seventee.~t s:Jecir,;,l vL>its c. re included of whieh 12 were
for the purpose of' discussi.ng me:mbe:vship.
The urea. (in sout.heust,3rn PojmsyJ.v-aniu) covered l~y- this report is served by 36 me1nter b0.nks anci tv1o ·branches having total re·sourees of ~~96,4.+8,00C, and 15 nor:>.tnembers v.ith total resources of
$26,204,000.
112
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Agricultural conditions are disappointing; ~leve:re dry
weather in part of the area se~ciously reduced corn production while
prevailing low prices for farm products are greatly curtailing farm
lm~ome in general.
A slightly higher price for milk only partially
offsets the losses resulting from low prices of other products.
Industrial conditions are very good. Much of the increase
in activity results from Government orders and the volume has necessitated expansion of some plants. A considerable increase in the
nu.rnber of workers employed eithG:r has taken place or is expected in
the near futm·e.
Retail trade is uneven.
Real estate conditimu; are fairly good. Considerable new
co,lstruction is reported in progress with sales being made be foro
completion of the structures.
Bank deposits, particularly of interest bearing classifications, continue to increase.
A majority of the banker;~ reported depreciation of investments but few stated that it was suffieient to cause impairment of
capUaL Loan demand is improving slightly, chi.efly as a result of
demand for small loans. Liquidation i~o> considered satisfactory,
particularly on the sr:1all loans whtch are usually made on a monthly
amortization basis. Bankers stated t~~nt they were in a position to
tuke car•3 of a11y credit demand which might m'ise, even that from an
unusually large increase in business.
The officers of twelve banks, r;elected beeause of their
probable acc:eptabili·b.r, wore :Lnterview1;.;d spc,cially in a..11 effort to
influence a favorable decisio~.1 toward membership in the J<,ederal
Reserve System. In most cases the subject has been u..11der discussion for the past several years but no definite action has been
taken. Several rather promising situations were developed cmd it
is believed that applications will be received from somn of these
bankiJ. All seemed interest,;d in the discussion and wero frank in
their cormnents on the subject.
The president of an institution with deposits of about
$1,300,000 said he wan a gr•Jat belj_ovor in tho Ft;d.eral Res0rve Systam but cou.ld see no advantage to be gained for his institution
through joining. His institution has nev::.:r borrow·ed money and ho
feels it is a practice which should not be follov1ed except in emorgoncios.
113
114
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The chief executive offjcer of a bank nit}J l1f;;arly ~~3,000,000
on deposit has been irreconcilable on the sub;ject oi' membership. His
U..J.friendliness apparently results from his l't3action to Sy::;tern efforts
to enforce par clearance and direct remittanc<;;. He says iw does not
like vrhat was done in the !Jast and docs not trust the Syst,;m for the
future.
The cashier of GJJ.cther i.nsti tution vrJ. "LG dt::posi ts of
{'il,850, 000 said his directors d.id not feDl that membership would be
of particular adventnge to the bank inasmuch as it had always been
able to get all neceDsa:::y assistance: from correspondents. It was
pointed out to this officer that correspondents were able to help
largely bDcause of their membership in tha 8-.fiJtom, which made available to them the facilities of the System and that membernhip of t!;e
subject institution would. make these same facilities available to it
at first hand. 'rhis apparently was a new id.ea and seemed to impress
him considerably.
During the month of August 111 banks were visited, of v;hich
61 were member and 50 were nonmembe:r·.
During the m'mth, fou.r Ohio State bm1ks, having resources
in excess of 1,;5 ,821,000, were admitted to membership in the System.
A small manufu.cturing town, in the westG:,·n c:entral part of
the State, reports that two years ago 276 people were on relief at
that point, and that ect the present time thel'e are no local peo}lle
receiving relief chocks. In this particular instance, the change in
conditions is due to the ·3Dtablishment of <l factory by the Good;y"ear
Company, absorbing all lo8al unemployment.
Another city in the same section raports thut inclustr.f is
going at top speed, with bonuses pClicl montr~ly to employees in some
plants.
•
In tho city of Dayton, om; bank noted an J.ncroase in loans
of fair size for plant expcmsion, traceable directly to the Natio;ml
Defc.mse progran. Another Dayton bank, based on infor:::ation secured
from the National Defense Procuremc.mt Bulletin, is visiting certain
customers and no:1Custo::K.:rs h:-:.ndling active lines dcccribod in tho
bullotin, which they hope will r:Jsult in their making some loans in
the reasonably ncar :!'u-Lurc .
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In the City of Springfield, industry continues to show
activity against a seasonal trend, despite the fact that industry
there has not received much stimulus from orders related to national
preparedness~
RICHM01TD
During the month of August 69 banks were visited, of which
39 were member and JO nonmember banks.
Industrial and mining activities in the Fifth Federal Reserve District are continuing to move toward higher levels. The
cotton textile industry, after a period of curtailment, is again
pointing upward. Rayon progress has been uninterrupted, and several
new plant extensions are in prospect. Coal mini.."lg is unseasonally
high, and still better levels are expected through the first quarter
of 1941.
The cotton crop in North Carolina will be considerably
larger than last year, but the tobacco crop in that State will show
a greater loss than in other tobacco-growing States of this District.
Despite a marked fall in gross income, the improvement in
tobacco prices will give the average grower about as ~uch net profit as last year when production costs rose to a new high record.
Considerable damage b,y storms and high water was suffered
proper~J in the Caroli.."las, which da~ge in South Carolina has been estimated at $5,000,000 for crops alone.
qy crops and
Construction is running at the best levels experienced
since the late 1920 1 s.
Deposits of banks in Allegheny, Amherst, Giles, Nelson, and
Rockbridge Counties, Virginia, are at their seasonal low, but are
higher than a year ago in most banks.
The new loan volume in several banks has been running somewhat higher than maturities, and in other banks new louns and maturities are about equal. The traditional 6 per cent lending rate has
given ground for some borrowers in a few communities as a result of
outside competition, and selected loans are made as low as 4 per cent.
There is still fear of extending this practice, lest the entire loanrate structure gravitate to the lower level. In ~"l attempt to get
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new loans and at the same time avoid the general lowering of customer rates a.t home, some banks offer to lend in cor.ununities other than
their own.
Bank deposits (Union, West Virginia) are somewhat higher
than usual at this time of the year, but there is not much demand
for loans. Many of the farmers in this cow~unity were referred to
as L~ the hands of the land banks, and it was stated that the Production Credit Corporation was constuntly bidding for seasonal loans,
in both instances at rates below the bank rates. Bankers say farmers are willing to pledge chattel liens on all s·~ock and equipment
to Government lending agew~ies, yet take exception to pledging the
same collateral to the local bank. Loan demands are considerably
better at Peterstovrr1, where the people have better outlets for employment.
ATLANTA
During the month of August 61 banks were visited, of which
18 were member banks and 43 noTh~ember banks.
In the area (in Southeastern Mississippi) bounded by"
i11eridian on the east, Philadelphia on the north, Jackson on the west,
and McComb on the south, i t is estiraated that the current year's cotton crop will not exceed 50 per cent of normal. This area experienced six weeks of rain from the latter part of June until early
Augtl.st and it is reported that many farmers were u...··mble to enter
their fields for five consecutive weeks. As a consequence, the cotton fields are extreme~v gras&y, and the cotton that will be gathered will be tras:b.y and of the lower grs.des. In the main the corn
crop is good. and the farmers are also hc.r-vesting mmsually large hay
crops.
At Meridian the bankers advised that the farmers in that
vicinity would probably not be as seriousl:r affected b;,' the poor
crop conditions as might be expected because of the fact that many
of them had surplus cattle to sell. Additional cash income will
also be derived shortly from the sale of pulp wood. This is normally a quiet season for banks in the fe.rming ar.::as tut merchants
and bankers were unanimous in their reports of unusual}¥ good retail
trade during the months of July and August.
Southeastern Alabama. and southwestern Georgia are devoted
largely to agricultural activities which provide the principal source
of income to most of the communities visited. Cotton and peanuts are
the principal money crops throughout this sectio11 and in several of
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R-706-b
the southwest Georgia cm.<nties visited the tobacco crop is o.f considerable importance. Hog and cattle rai.s:lng in r:J.oGt of the corrununi ties
visited is also reported to be developing rapidly into an irnport<~nt
source o:f fa.rm income.
Bankers generally reported that business last year was con3id.erably below normal because of poor crop conditions that prevailed
throughout most of the area. Fall collections are said to have been
only fair and in most communi ties banks vrerE: required to earry over
considerable agricultural paper. Present crop conditions, however,
are ver:1 favorable and bankers expressed considerablE: optimism over
prospects for fall business. In several communities cotton :1nd peanuts have begun to move and consider<cblc agricultural paper is being
liquidated. In a numbc;r of southwest Georgia counties vitli ted, a
marked improvement in business a~tivity was reported since the tobacco markets opened early in August. Officers of two banks located in
one of the principal market d.ties informed our representative that
around 50 per cent of their f,•J.rm loans had already been liquidated
from the procGecls of tobacco sale:3 alone.
With few exceptions ba;1kcrs reported that demand for loans
this year had been very sat:isfactory 0.nd earnings of most of the banks
visited rcre said to be consider0-bly br~tter tlnn n. year ago. Very little complaint of competition from gov<orrun<.Jnt~ll L:mding agencies
wns heard--on the otller Land a nUJriber of bankers commented on the
friendly, cooperative spirit existing betNc:en their institutions and
these agendes.
CHICAGO
During the month, calLs vvere made on 58 banks, of which 45
were member o.nd 13 ncruncmib er.
Two State banl',s were admitted as members of the System in
August, and six applications were received. Permission was granted
for the organization of a new nntional bank :Ln Illinois, for the conversion of one State bank to a n::ctional in Michigan, :o. nd for the conYersion of one national to a State bank in Iowa. Two applications
are pending for permission to organize m.tiom:l banks in Chicago.
Several national banks have indicated their intention to surrender
their rights to exercise fiduci.sry powers.
Excess reserves cc,nti:aue to be a problem. At present, the
largest percentage in this district is shown in the countr<J banks,
which carry $204,000,000 against a requirement of $90,000,000. Pres-sure of idle money is being felt more and more through banks soliciting loans outside of their ovm territory; this, in addition to tho
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118
usual competition for loans from the Goverrunent lending agencies.
Some country banks report a slight increase in loans. One l<1rge bank
in Detroit sb.tes that its loans have increased $2,000,000 in the last
week or ten days, due principally to loans made to subcontractors for
defense projects. Othor banks in Detroit report that they are receiving inquiries from subcontractors and '~xpect E!. loan increase in the
future as a result. Banks in Indianapolis and Milw-aukee report inquiries rather than actual loans. None of the bankers interviewed ex-·
pect the demanci for money to be sufficient to affect the prevailing
interest rates. Four outlying bR-rLI<.s in Chicago report that they are
making some term loans in small am.otmts. In view o.f the proposed conscription bill, banks are carefully scrutinizing insto.llment paper
si&;ned by makers under 31 years of a.ge.
There is apparently a disposition on the part of some of the
member ban.l<s to give prominence in their local advertising to their
membernhip in the Federal Reserve System. In at least three instances
that have come to our attention rt::;centl,y, ref.~:rence W9.S ;nade by the
member banks to tho facilities and protection provided for their patrons as a result of memb·2rship.
Fi.eports from the district c>how that normal trade is holding
up very well, and it is expected tl"Jat this will continue if present
prices for agricultural products are mn.intainc;,d. Trade should also
receive an added stLuulus from defense needs.
Employment has shovm some incre'lB(3 in the last month. At
one plant manufactu:ci.ng a.irplanc Emgines, 5,000 people are now employ•.;;d
:Js compared vdth only a few hundred a year ago.
There is considerable
eomplaint in some sectiom;, however, because relief rolls have not decreased as employment increased.
Production of 194.1 model automobile~> h<'tS been expanding ;~r!ld
ually in recent weeks and is somewhe.t ahe:J.d of the same time a yeG.r
ago. There has been a moderate der::line in residentiEtl building.
ST. LOUIS
During the month o£' August 157 banks wcro vi::.:;ited, of which
39 were member banks and l.lS v;ere norunomber bn.n1<:3.
During August, visits made by the field representative vrore
principally to ba.nk::J locatou :Ln northern ArkansaD o.n.d :::outhern Missouri. Agricultural activities and conditions in this general region
are very simila.r in both Status. The:r·3 is rolo.tively little industrial
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activity in th(' area, and the population relies very largely on agriculture for its support. 'l'h-Ls year early crops, wheat, barley, oats,
rye, hay, etc., were unusually favorable. The wheat harvest turned
out better than expected, both in point of quality and quantity. Furthermore, weather was ideal .for harvesting and threshing the crop.
Considerable quantities of the wheat produced have gone into the Government 71 cent loan, so +,hat the movement to market has not been as
heaV'J as is ordinarily the case. Drouth and heat somevrhat redueed
prospects .for corn, hay, and some other crops in J1me and late July,
but rains since ha.ve served largely to correct this situG.tion.
Accounts given by bankers, merelnnts and others interviewed
indicate that general business at this thte is better than a year ago,
and best since 1937. VJhile the number of industri:::Jl plants i.s limited
and scattered, they ht:we for the most part been operatine on high
schedules since late spring. Most of the plant.~' are branches of large
companies with headquarter~< :Ln St. Lo1.tis or elsewhere. It bas been a
particularly fnvor:.1.bl<~ se!l.son for dairying. All whoh; milk produced
has found ready sale :::1-l:, cr•::;ameries ~:.nd cheese fc:;ctories. In the hilly
sections there is a large lumbering industry, and demand for hu:1ber
has been tbe best in a nwnber of year.:;. Hural electrification is
rapidly extending, 1.s fer eY.;illtple, more th<>.n 31,.0 Htiles will be in service in Dall.1.s County and adjacent counties within the next few weeh:s.
Taken as a whole, bankin(t rondi tion;;; were found to be satisfactory, rrl. th general improvement over a ye:u· ago. Demand for credit
is more active, and ti""tere were fewer complaints of Government lendine
agencies. Quite general :.y there has been ·3X[-ansion in demand for funds
to finance livestock operation3. In many communities it was reported
that farmers had quite thoroughly cleared up their 1939 indebtednees,
and payments this year are expected to oe stiLL better. One Arkansas
banker s.-:J.id. that 96 per cent o.f his 1.939 loans to farmers had been
liquidated, and that he expected the 191.0 payoff to be about 100 per
cent.
In Arkansas there are many banks not on the par list. In
discussing this phase a majority of bankers indicated that they could
not at this tir;w sacrifice revenue derived from c::.tsh letter exchange.
Apparently the par collection factor is tbe ;n:dn barrier o.gainst certain banks joining the System. Univers:\lly complete satisfaction vm.s
expressed relative to services rendered by the Federsl Heserve Bank.
It vns found that even in small country banks cred.i.t files are quite
complete and adeque.te. Gcmer:1lly banks visited are using the Federal
Reserve Bcmk statement forra. Interest rates charged on custol!ter loans
were reported from n. minimum of 6 per cent to a maximum of 10 per cent.
On time deposits interest rat,,,s p:d.d vary from nothing to 2-l/2 per
cent.
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MINNEAPOLIS
During the month of August 101 banks were visited, of which
48 were member and 53 were nonmember banks.
Editors of 42 newspapers in southeastern Mirmesota were visited and offered the Monthly Review and other press releases issued by
the F'ederal Reserve Bank of Minneapolis.
The personal call on the editors of the daily papers and the
le.rger weekly papers is effective. Editors of these p<;1.pers took t~'i.me
to sit down and discuss whatever subjects occurred to them and, in
several cases, became intimate enough to offer constructive criticism
and suggestions on presentation of our material to newspapers. Most
of these editors seemed to enjoy the visit and were grateful for the
call and the offer of our services. Most of them have business men's
viewpoints and with a little cultivation they could bB made real
friends of the Federa.l Reserve Banks.
The personal call on the small weekly paper editor, on the
other hand, often appeared to be of little value, if it was not actu-·
ally harmful. In the first place the small paper editor is a very
busy man. He usually has learned bls business through apprenticeship
and has the viewpoint of a craftsmn.n, mec:·nni.c, or manunl worker more
than that of a business man. He does not care :1bout sitting do~m and
spending ten, twenty, or thirty minutes tnlki.ng about anything. To
him, that time is wnsted. B8cn.use he is c;. pro~iuction m.::.n, however, he
would be grateful for well prepared news releases that would have news
value to his readers providing the relen.ses were all ready to run.
Without a single exception, cditqrs were prim.ari.ly interest-ed in local information. They are eager to get information, statistical or otherwise, about their ovm city or county. Occasionally they
can use State, or section-of-State, figures such as southeastern Minnesota, but such information very seldom r-.'l.tes the front page.
In general we have adequate :Ln.furm<ltion for whieh the papers
are hungry. We have been publishin£· a good part ol' j_t, but it has not
been in the proper .form. It was suggested frequently that we prepare
subjective, newspaper-style releases from the information we have in
our office and send them to the papers that might be interested. The
newspaper man is busy Emd he does not have U111e to sit dovm ~;.nd dig
out a story from o. mass of ste.tistics. The story must be edited or
he will throw the materi.3.1 in the waste basket. If we want editors
to use our material and give us crGo.it for it, beth in their minds and
in their colunms, it must be set up in such form that it can be used
V'Jith a minimum of effort.
121
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R-706-b
Newspaper men are highly apprE;ciative of stories that furnish them with good copy. If the Federal Reserve Bank vmuld furnish
t!-1em with edited releases 7 they vmuld bE: grateful to the Reserve Bank.
The editor of one of the lc-.rgest dailies in the State (outside the
Twin Cities and Duluth) said: nyou have ®limited possibilities in
getting publicity and good will out of this material if you just wanted to." He then went on to enumerate some of the reasons why the material we ·:rere now offering could not do the job. Every poi:nt hinged
on the fact that the info:r'nk'lt:ion was not presented in a usable form
and the news man was not grateful for "data" but for J. "story".
KANSAS CITY
During the month of Augu.st 61 bA.nks were visited, of which
32 were member banks and 29 were nonmember banks.
Visits were made in August, to b:mks in nearly every State in
the District. The largest number, however, were in Colorado and Ko:msas.
In the western section of the Jistrict the favorable livestock
situation is the principal factor accour:t.::.ng for the generally good condition found in those States. The crop situation is :auch less favorable
than tha.t of livestock as rainf:J.ll be.s C1::en deficient and irrigation
water is short. In sections of the northeastern part of Colorado it is
said that the grain cr:.:.•ps ar·3 only 25 per cent and other feed crops 50
ner cent of normal.
The eastern section of Wyoming has also been dFJ, but again
it is the livestock situation that is the dominating one in most sections of that State. In a general way, bankers seem to be advising
livestock men to take advantage of present good prices of cattle and
steep to reduce their indebtedness. There is a tendency to fe'::l that
feeder cattle are too high. This is attributed in part to the fact
that buyers from Illinois, Iowa, rmd other Stat.;~s that have an abundance of corn and other feed are seeking li'restock to utilize these
products. Because of this situation, some bankers in Colorado feel
tha.t feeding operations may be curta.iled.
vVyoming banks as a rule do net have large holdings of Government bonds as judged by standards in other parts of the couctr~/· These
banks are interested in higher rates than found in Government securities
and there has been a good demand for livestock lo:ms. Some V.!yoming
btJnks are holding municipal obligati::;ns -::.hat are giving them a faj_r return and these banks ·;;vuld be glad to get rid of all their GovE:rnments
in favor of municipals if they could find them.
-13-
R-706-b
Govern.:nent lending agencies ir" Wyo:nJ.ng are reported much
less competitive than in some places and bankers in that State are
not greatly concerned about them. A. very different situation, however, seems to exist in western riebraska. Considel~able complaint was
heard rsgarding the position of FSA borrowers. It is said that everything such borrowers have is tied up by these loans with the result
that bank loans go unpaid. In some cases these borrowers cannot pay
the taxes on their real estate and, where banks h.ave loa..'1s secured by
such asset2, the banks find it necessary to [:Jay the taxes to protect
themselves.
A good deal of apprehension is found regar'ding the war situation. The drift toward war is deplored but, at the sarne ti,ne, a
condition of helplessness so far as doing anything about it is felt.
Considerable concern is expressed about the amount of skillad labor
that is being draV'm awB.y from m:my co:rnraunities to other centers.
Ban.l.(s called on in ColorOtdo appear to be rn.aking all of the
wheat loans being placed in their communities. The banks, however,
as a rule do not retRin. these loans but tend to send them either to
their co:r·respondents or to a Goverrunent agency. Deposits nearly
eve:rJ'1"1"here seem to be increasing. A good many small tovvns were visited that seem gradually to be giving way to county seat tovms. Automobiles and good roads are concentrating retail trade in the larger
centers and the town with ::>.. population of less than 1,000 is losing
ground. The future of banks in such coromunities se~ns a ve~J uncertain one as rural people tend also to do their banking where they do
their shopping.
DALT,AS
During AuP,Ust 30 banks were visited, of which 23 vvere member
and 7 nonrnember banks.
Southwest Texas
Visits vvere made to 19 banks in the 9 counties of southvmst
Texas which are tributary to S?.n Angelo, the '1sheep and wool capi t<tl'l
of the State of Texas.
This rich agricultural region, which is one of the most important centers of wool and mohc:d_r production in t~e United States, is
enjoying o.n unusuc:.lly prosperous year which is uttribut.able in a large
measure to the heavier-than-nori!lCcl r:1.inf;:1.ll which its ranges and pastures have received in recent months. Sheepmen are reported to be i.n
excellent financial condition, although the unsettled conditions that
122
123
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R.-706-b
have recently prevailed in the wool marl:~et have :"lowed up the sale of
the spring wool clip and a large portion of it is being held in warehouses awaiting a more active I!iarket demand.
Seve~al of the banks in this section of the State are using
the credit facilities of the Federal Reserve Bank. Every member bank
wl1ich was visited expressed complete satisfaction with Federal Reserve
services and relationsbips. Even the subject of the competition of
GoverP.ment lending agencies, which has been a favorite target of criticism heretofore, came in for ver;r little adverse comment on the part
of this group of member banks. The president of one such institution
did say that the local Production Credit Association had captured some
of his bank's choice a.ccor;.nts. His complaint, howe•rer, lost some of
its force when, a few minutes later, in recounting some of his personal farming operations, he inadvertently mentioned that he himself ha.d
obtained a produc:-ion loan from that agency this year.
A g-.ceat marzy- of the banks 17Cr's foun·i to be carr.:ring red.uced
holdings of Government :securities. One institution ;vi th cash resources
of $750,000 and deposits of $l,COO,OOO, is car:r-Jing no securities whatever. The general at,titude of these banl<:ers, with regard to the GoYermnent bond market, is one of caCLtious waiting to see how the market
wiil ree1.ct to developments in the i:r.r.:ediate future in connection with
the fall elections, the ·gar in Europe, a.nd :,he n:ttional defense program.
One banker expressed the l1ope t~1at the Feder:=tl Reserve System
would permit Governmr;;nt bonr.: ra:t.es to find a level vrhere the yield would
be attractive to the smsl:!..er ocmks.
N8w :Mexico and Arizona
One banh:er expressed satisf<::.ction over the prospect of a comprehensive revision of banking laws c;.nd banking supervision as a result
of the Wagner Committee 1 s hearings. He deplored the piecemeal type of
banking legislation that has been enact•::;d in recent years, saying that
the frequent revisions and amendinents of exis-Gir:g laws have tended to
confuse r;:-,ther than strengthen the barJ.-'!.(ing situation.
One nonmember explained its failure to join the System by referring to its operation of a profitable out-of-tovm branch, vrhich it
would .tave to close if it jcined the Feclerccl R-eserve S;:,rstem or be forced
to increase its capital to such an extent that the additional t'3.xes on
its capital structure vvould be prohibitive. The ether nomnember intimated that its prd'erence for remaining outside the Sy·stem was bc.sed on
its fear of Government controL
124
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R-706-b
SAN FRANCISCO
During the month of August 104 banks were visited, of which
73 1vere member and 31 nonmember institutions.
Santa Barbara County
Business in Santa Barbara is reported to be as good as could
be expected, considering present conditions and agricultural prices.
The "tourist" crop has not been up to expectations, although a number
of wealthy refugees have taken up residence.
Of the orchard crops in the county, lemons constitute the
bulk. This county is noted for the quality and high yie1d of its lemons, and the growers should make sorr;e money. Not a great many ora,nges
are raised, and the results to the growers, due to disappoihting prices,
are problematical. A considerable quantity of sugar beets, of high
sugar content, are raised, and the growers should have a successful
year. Growers of mustard seed are contracting at high prices, due to
the war abroad. Beef cattle are bringing fair prices. Lima bean growers will probably break a little better than even. Growers of flower
seeds should have a good year. Growers of vegetable crops on the whole
are receiving poor prices.
A considerable arn.ount of housing is in evidence, and the banks
are beginning to participate in F.H.A. loans. Heretofore, most housing
operations have been financed through building and lo.:m associa ti1x.cs,
as there apparently was an aversion on the part of builders to build
under the auspices of the F.H.A.
San Diego County
This COUi!ty has enjoyed a healthy increase in population over
the last ten years. San Diego City itself increased 36 per cent, to
202,000, and the beach and. inland towns :..~eport moderate gro1"lth in a
very desirable type of people.
Agriculturally, the county did only n.oderately well. The
avocado crop this year was larger than 1939, and better prices were obtained, so the grow·ers should make some money. However, increased acreage is coming in each year. Orange growers sho~ld break better than
even, but results to lemon growers are problematical. Grape acreage
is decreasing yearly. Bean growers should. do fa.irly well. Haising of
thoroughbred horses is developing on a smalJ. scal12.
There is consider.<:1bl(~ acti v:i.ty :in building throughout the county,
building operations in 1940 to date greatly exceeding lust year. There
125
R-706-b
-16-
is a shortage of low income houses in San Diego, a.Yld it is reported
that the Government intends to erect a large number of' houses for families of enlisted men.
The three plants in San Diego manufacturing airplanes and
parts are operating at capacity, with personnel at a. peak and backlog
of unfilled orders amounting to many millions. Extensive additions
are in progress. It is estimated that Govern.rnent e:A-penditures for
milita:rJ purposes in the San Diego area, not including those for airplanes, ·will run up to $25,000,000, and the expenditure of these vast
sums should be of great benefit to the area during the next few ye::Jrs.
Absence of the Fleet, which normally has an expenditure of $2,500,000
a month, has quite an effect upon the merchants.
The tourist crop this year has been disappointj_ng, although
at the presEont tirr~e the hotels, etc., are doing a large business due
to the current racing season at Del Mar.
PUBLIC K:.-:LATIONS AC'.l·:::VITIES OF FSD:SR4.L HtSERVE BANKS
r.ugr~st
19i../J
Federal
Reserve
Visits to .Bant_§__ _d.setin .·s ~.::i~pd•c;d_ _.:\ddJ;'..§:.§.Ses Made
Jjs.nk::;.._______~Me;:,be:r· Nomtl0'il~JCl' r~~)t.S.l : :unioc-r .A-. t':ncl::uwe Ll.lt":.1ber Attendc!.l'l££
L
Boston
New York
27
t3
56
Philadelphia
L15
4:3
r,, ...
Cleveland
61
?•:C.
0
0
3
50
99
73
lll
1
4
290
110
1120
69
f.,
4'
--4--'
~6
Richmond
1\tlanta
Chicago
St. Louis
39
30
]>)
.. u
43
45
39
13
Minneapolis
Kansas City
Dallas
San Francisco
43
32
23
73
Q_!_
u
2
110
58
157
53
lOl
~;
;:
0
0
0
0
0
0
0
2
190
0
0
0
0
~
__,
162
3
112 I
26i3b
0
0
90
990
1
61
3
2'"7
()
0
0
0
ry
30
104.
J..
100
1.54
0
0
0
(
31
l/
.-'/
3
lJot ·::ompletely reported
0
@FedFRASER