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261
BOARD OF GOVERNORS
CIF"THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDRESS DF"F"ICIAL. CORRESPONDENCE
TO THE BOARD
May 17, 19?.57 •
•
SUDJECT:
Monthly Report of Bank and
Public Relations Activities.
Dear Sir:
There is inclosed for your inf'orma-tion a slunmctry of the bank relation;:; reports
submitted by the Federal reserve banks for
the month o:f April i.n .r·esponse to the Board 1 s
letter of August 25, 1936 (X-9680).
Very truly yours,
Chester Morrill,
Secretary.
InclosurE..
TO ALL PPESIDEN'I'S
262
X-9892-a
r,:ay 14, 1937
Memorandum to the Board
Subject:
Mr. Harr~mond, Division of Bank
Operations.
From:
Summary of Bank Relations
Reports.
Reports of bank relations as requested i.n the Board's letter of
Px.gust 25, 1936 (X-9680) have been received for the month of April and
excerpt~; therefrom will be found on the f'ollowir..g pages.
A table showing for all twelve banks the number of visits m<:<de, meetings attended,
and addresr:es delivered he.s also been prepared nnd follows the quotations.
The attitude toward the Federal Heserve System
The objections of non-men:bArs to joining the System, as brought out
in present and preceding reports, appear to bE:; mainly at> follows:
l.
2.
3.
4.
5.
The income from exchange charged on customerro' checks would
havr:: to te gi.ven up.
Capita} requ5.rement.,s would be difficult or impossible to meet.
Too many reports v.ould have to bu submit ted.
Charge--offr; W':JUld bP required and lin8S of crcr'!i t to officers
and special ct~stomers would hnvG to brJ curtailed.
Branch offices would have to be given up.
Banking conditions
Reserve requirements and the bond market appear tc be of most general interest. Complaints as to .increasc~d reserves come principally from
small bankers in the middle west, many of whom say that its purpose was
to enable the Fr;~deral I:eserve banks to hold more securities. In the east
and north, cash paymentE for agricultural supplies n.no equipment seem common. In the S&D.Ee parts of the country banks al'''=' increusingly interested
in mortgage loans, personal 1oc::ns, and pay-as-you-go checl:ing accounts.
In the south, seGd o.nd fertiUz2r requiremsnt::; appear to have created
more demcnd for credit by farmern than eL,ewhcre. In th<:: west bankers
complain consic'<3nbly of government lendinr:; agencies and particularly of
the Production Credit M~socia"tions.
Both indHetr:Lal anc a{1Ticulture.l conrli tions appear to be generally
good, o.nc~ f:ll.'Gh ~"lir.:satisfaction as bankc;rs cx:)ro;:·s relnte;3 chiefly to
governmer1t f.int nees and thu slE;cL demand for crr:di t from private enter91'iSG.
Exeerp+.s f'r.)m the re0orts follow:
tuched ~o the orlgiuol he~sof).
(The repo:'"'ts themselves are at-
263
X-9892-a
(In addition to statistics of visits to banks and meetings attended,
the Boston report contains a statement regarding Presldent Young's trip
to Portle.nd on April 7 to address a group of bankers,)
New York
Delaware, Madison, Otsego, and Schoharie Countit?:.Q
Bond portfolios in'the majority of banks in these counties were
said to show som<e appreciation, although greatly reduced ln amount as a
result of the market reaction of the past few weeks. Officers of eleven
banks, however, stated that the book value of their securities was less
than market value. United States government bonds in somo cases comprised as much as 60 - 70 per cent of the total portfolio value, ,the
average being about 40 per cent, and considerable apprehension was expressed by many of the officers interviewed with respect to the future
of the entire bond market, and the possible attitude of examiners toward
present or further depreciation in government obligations.
Queens County
Several banks have inaugurated a no-minimum bnlance pay-as-you-go
checking account plan using, under contract, the cdpyrighted system
developed by the ~a+..ional Safety Bank and Trust Company of New York
known as the Checkrnaster Plan. A charge of five cents is m.<J.C.:.e for each
item handled (deposit slips, checks drawn, etc.). One National bank
(deposits :~1,8CY)~C")0) started the plan five months ago and has alree.dy
opened 757 accounts. The balance on deposit :i.n these accounts on day
of visit was ~3'7,300 or an average of ubout ~50 per account. ·rhe officer interviewed said thr1t at present the income from this class of
business amounts to a.ppro::.d.mately ~-12 a de.y. Ik pointed out that there
is a fertile field in Flushing for development of a substantial personal
loan department and checkmaster plan of checking accounts on account of
the large population of ths white collar clas~;. He commented that
through the chec:Jt.:master plan the ·"bank has something that every man on
the stn:et can twe", and he estimates that withir: tvm or three years his
bank should have 4,000 such accounts which would give an annual income
ranging from *a~~, OOU to $15,000.
Suffolk County
Loc.ns and discounts of the county b<:mks now total ~·22,349,000 showing u decrease of about ~1, 500,000 since the first of the ye;:.,r. The decline is due lorgely to the fact that many farmt:;rs this year are in a
much improved fln~mci.'3l condition because of tho good income received
from last year 1 :3 crops of potatOEJS und cs.uliflovver, so thet they are paying cash for seed and fertilizer instead of borrcwing.
264
\l
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X-9892-a.
Phil adelphi~
LackE.:.wanna Coun'tY,
The prevailing interest rate is two per cent hut one institq.tton
recently announceo a reduction to lili· per cent ru1d while it exporiunced
some wi thdra;vals, the mamJ.gement stated the total was not su great as
they had expected.
The p1·evai.ling loaning rate is six iJer cent bnt ~he same lnsti tution which rr.;duced the intered rate on deposit~: to 1;,~ p9r cent, has
reduced its lo.~ming rate to fj_ve P·'~I' cent, and Dtated that as a rosul t
of this i t had nxparLmced an incrr,;asc in crE~d:i.L dem8.nd of .::600,000 of
which $40,),000 i:::: cons:Lciered to be tusin:;Ds which would net Lavo been
available ~:. t the sb~ per cen·~ rate. ThL; action forcr-<e1 other banks in
this immediate vicinity to reduce the rate to five pe:r- cr:mt on some of
their lin<;s of credit.
Northern~rt
of Third District
In near1;y all of the communi ties visited it was reported that genPra.l. business conditions he.d improvAd during the past yar::~r· with br-meficia.l effects upon the loan portfolios of the respective banks. Credit
demand, hvv'rever, continues to be li.t:;ht. 'i'he increase whlch might be expected at this season oi' the yee.r clue to the needs of the farmers has
so frr failed to re~ch th? usual proportions.
All of the member banks Dppeared to be in a position to meet the
increased reserve requirementc withcut much difficulty although many of
the banke.;,~s contPnded the recent increase~~ wore poorly tiwed for the
bankr in the coal mining nnd agriculturaJ. r0gions, arJ this ir the period
when deposits may bG expected to d3cline and the demanC: for loans to increase. Several of thorn expresJed doubt that the Board of Governors
woul.d lowr.;r the requirements i 11hen business incrc;ased, expre:::~~ing the
opinion that thir. authority wns used for the sole purpos0 of providing
funds to finance the operations of the O;Jen Market Committee.
Much concern wr.ts expressed ovor the possibill ty of nn eno.ctment by
the Pennsylvania Legislature reducing the maximum legr~l rate of interest
to 5 por cent, as this matter is receiving consideration from State officials at this time.
It W.:l.S found that an increG.sing number of banks are extending personal and equl.pmcmt loans with very satisfactory results. In many instances this was found to constitute the chlef clemnnd for credit.
The cashie:..~s of two non-memter institutions, both of which will be
required to DE'Come members by 1942 in order to retain deposit insurance,
stated that under the reserve r:;quirernents, as effective R'lay lst they
265
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X--9892-a
Philadelphia continued
are in a better position as non-member institutions, for while under the
Pennsylvania State law they are required to carry sligttly higher total
reserves than under the Federal reserve regu1ations, they are permitted
to have one-third of this reserve represented by Government bonds or
obligations of political sub-divisions or the Commonwealth of Pennsylvania. One of these officers also stated that membership would bar several officers of his bank from borrowing from the bank, even for business purposes, which was also a factor in their decision to remain out
of the System for awhile longer.
Cleveland
The principal item of interest to bankers generally continues to be
the future course of the Government bond market. Many banks express
strong resentmEmt that the market is being managed; that bond prices
should be allo1~ed to seek their own level thus affording the investors
an opportunity to better determine what the trend of prices would be.
Some concern was expressed over the attitude examiners would take in respect of how· G-overnments should be carried in a bank 1 s sta t.emen t in the
event of a major· decline, and what the policy of the Reserve banks would
be in such event with respect to the loan value of Governments pledged
to secure member bank notes.
There is continued protest on the part of small banks against the
increase in reserve requirements, based upon the necessity for keeping
employed every possible dollar as an earning asset. This protef;t comes
particularly from banks which have found it necessary to sell investments in order to meet the added reGerve requir(;ments. Many of thes(~
banks have not paid dividends for years because of restricted earnings.
Low earnings are the result of a. number of factors, such us the refusal
of these institutions to apply service charges; the fact that the larger
part of their deposits is time deposits upon which o.n averar,-e rate of 2
per centum interest is paid; the yield on inves'lments is low; mcmy of
them are paying interest on debentures sold to the R. F. C., and many,
particularly in mining towns, are affected by the handling of large payroll accounts, which tends to increase expense with no compensating income.
There is continued complaint of competi ti'On between banks and the
Federal Land Bank, and Production Credit Corporation. It has been said
that farraers, normally an independent class, were being demoralized by
so-called patronage and subsidies. Our own observation is that protest
comes largely from banks which have tried to maintain rates on loans at
the levels prevailing in past years. There apparently is still a number
of bankers who would prefer to make no loans at 7 or 8 per centum to
making loans at 4 or 5 per centum.
·
266
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X--98~J2-a
')
There is a steady increc~se in the numbor of banks instituting personal loan or small loan departmen-~s as w~l-~ as in a number o.f banks now
·ha.r.dling automobile instalrnBnt note,:. The e:xperier.:ce to date has been
that this business is highly rrofitable and losses are negligible.
There L3 a remarkable drnilar:L ty to the reaction of nonmember banks
with r~)SPE'Ct to membership in the Federal Recerve System, and rather
than repeat extracts from ropo~tE of our field representatives, which in
substance say the same things over and over, suppoL:e Yl€~ consider 'ivhat
might be a typical case.
)
There hn.ile been very few new ban.ks cha.rtcred in our district in r·eccnt yenrzo; theref01·e, most of our nonmember banks have hec;n in eYhotonc~ for several years.
Generally &pecking, thGy sre located in the
agricultural :oections L~f our district and, as a consequence, they have
idle funds when crops ore sold and probably need to lJorrow to mainta.in
their cash position during the planting season. Almost without exception offieers of nonmember banks will readily agree that the Feceral
Reserve Act is .: :_ remarkable legislativ€ effort c.nd that the syste:n has
wonderful possibilities in devr::loping the brmki.ng f tructure of this
country. However, with respect to their o-vvn particular ban:!-;: they feel
t.hn.t there are certain adjustments to be made ·before a definite appJ_ication for membership should be given us. Th·~re are, :)erhaps, assets to
be rut in better condition, or in any event trw time is ,iust not exactly
right for a serious conddex·ation of membership. With respect to the
nonpar b:mks, of which there ure ovE.:r 300 in our district, thei.r main
considera t:i.ou is thEdr ability to charge exchange fo•-' the ?Hyrnent of
checks oravm. by their customers. Thi;:; e.xchc:-:.ng'::J revenue amounts in many
C&3es to a con::tderr,blc eum, and whHn nonpar bankers givo <my tbought
( whi.ch they selriom do) to thG princi.ples involved :;_n discounting the:Lr
custonH:Jrs' clwcks, tbey rather e&sily convince themseJ.ves that as long
as other banks charge exchange and receive the resulting r8venue they
might also. One nonpa;r nonme1nber Stnte bank in South Carolina told our
representative thet la.:;t yea:c revenue de:civeu frc~m charging exchange on
customers 1 checks amounted to w_<nr:t_y ~Ei ,:JDO. The bank has deposits of
$~600' 000 •
There is no lack of friendliness on t.he part of nonmember banks to
our representn.tiv6s or to the official staff of our bank, but there ic a
decided inertio. with r~~spect to taking the steps necessary to qualify
for and apply for Stnte bank mern"!Jership. It must be frankly admitted
that the large c:i ty brmks, nearly c:._ll of which c_re members of the System,
do not encour;_;_ge nonmember banks to becom<; members. The:.; argue somewhat
along this line: that t!w cl ty bcnk cu.n ~~nd will do prac ticnlly everything for the present nonmem1~er that the Feder::cl Reserve Bank could do
267
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X-9892-a
and that, in eddl.tinn, the nonmember b&nk will te relieved of what are
generally regarded. as an r:.xcescive wnount of details relating to red
tape.
Our representatives report e. noticea'~-1le tendency to rebel against
excessive supervision. For instance, one nonmember State bmk in South
Caroline. told our representative that frankly he did not know anything
about the Federal Reserve System, and upon being engaged in conversation
about the System by our representative he said that if men·,bership in the
Syst0m involved mE·mbE~rship in the Federal Lei)Osit Insur·ance Corporation
he would be opposed to such a step. This was a smeJ.l bank, with deposits
of $150,000.
In die.cussing their affairs with nonmember banks our representatives
report a numbr-)r of very unusual lending policies; as, for in;,:tance, very
large loans in relation to capital structure are frequent1y made when it
would appear to be apparent that the loans in q11estion would be slowly
repaid. As an example, on0 nonmember bank told our representative of the
loan of $:so, 000 on locc.l church proiJerty which it had made, end, as our
representative expressed it, "the bnnk literally built the church." The
loan is being reduced at the rate of abo~1t ~1,000 a year, and in the
meantime the bank hao practically all of its capital invest•:Jd :!..n this
one loan.
We are compelled. to report, reluctantly, that while without exception our v:tsi ts have been of the most friendl;y nature there is no real
interest at this thw in State bo.nx membership in our district. At the
same time, we do not see any evidence of tmpending withdrawals from our
par list. So, it appears that our district, with regard to the respective relations of ffi(~mber ban!<::s, par nollmember banks, and nonpar nonmember banks, 'iliill remain substm.tially the same.
Atlanta
Nashville and ad.icining trade territory
The business of the city and trade territory is reported to be active and profitable in most lines, and there is a better demand for funds
in mercantile and iDdustria.l establishments. In this section a~riculture
and live stock raising predominates and without exception the officers of
the banks reported business conditions as being generally good and stated
that they confidently looked forward to a continuance of present conditions during the remainder of 1937. Tobacco is grown extensively and the
price rece:Lved for this crop last season provided the section with substantial funds, which were supplf.,mented by good prices received for hogs,
lambs, and beef cattle. This section of the stnte is also noted for the
ra~s1ng of fine mules, for which there has been an excellent demand during the past twelve months.
'268
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.X-9892-a.
Southern .Alabama
The farn1ers are incree sing thei.r ecr"':agP for cul ti vat ion and are
purchas:tng fertilizer in larw:r quan.ti ties than for several years past.
Because of the increased acreage and large purchases of fertilizer the
farmers are findi..ng it necessary to borrow rather heavi l;r from thetr
bankers, resulting in an :l.ncrease in the volume of loans by country
banks to farmers. A maj or·i ty of the banks visited sta.teri that their
volume of loans is in E:xcess of that at 1:-he same date in l9t.;6. The
chief crops of this section are cotton an\J. corn, but a large P'·:rccntage
of the farmers have learned the vds(:om of diversification and in some
sectiom> Irish potatoes, peanuts and other crops nre grown for the purpose of supplemec1ting the so-called "money crop" (cotton) of this section.
Southwef:t
Qeorgi~L.§JlC
soutteast
f',l~
Thr:! bankers in this section of the district stated that weather
conditions had b::en e.xceeding~Ly fine for the prepar<J tion cf farm l&nds.
The two main crops -- cotton [-md corn -- ar::; now up, and from present
indications incres.sed production ma:'r be expect€d.. The farmers are reported to have used fertilizer this yeo.r in generous proportions, thc3reby increasing business for the fertilizer companie2 and the amount of
loans to f.s.rmers. It was grat-ifying to lenrn tha.t the farmers of this
section are each year enlarging their acre&ge in what is termed '~supple
mental crops", such as peanuts, Irish potatoes ::md tomatoes, and the
raising of cattle and hogs.
Chicago
IllinoiB
Due to the April l tax period, there was a, considera.ble decline in
deposits, particularly in Chicago banks, which caused a few banks to borrow at the Federal Bese:cve bank for a short time. Most of these fur.ds
have come back to the district. Some sliglct increase in loans at member
b[mks has beEn repcrted.
Some labor trouble is reported :i.n certain sections. However, the
situation is ap})arently better than in some of the nE,ighboring states.
Fa.rm labor is scarc8 a."ld some skilled labor in othe:c lines is hard to
obtain. Wage 1ncrea::>es have been somewhat generc.tl. The farming si tuat:ion is said to b·? sold out on hay n.nd grain.
E:everal non-member bankers called ~t the Federal Reserve bank during the month to discuss membership in the System. Some of these banks
v.:r·e considered favorable prospects for membership.
269
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X-'.3892-a
Chtca;;o continued
A number of banks report that loans op real estate have increased.
Other de'!lund for money is principully for feed 9.nd Sf')ed. Come tenant
farmers who were unable to secure vc<.:ommodations locally hc:ve be~::n GPplying to county agencies for loans. A ve~.'J small amo1mt of corn ls in
the hands of farmers.
Michigan
Calls were made on the principal Detrt1i t banks durinr; the month.
Opinions received during interviews can be summarized a::; follows:
Loans are increns.ing
Installment payments are somewhat in ar:cea.rs due to
labor troulJle
On one d:1y, 276 cases involving ev:i.ctions on account
of non-payment:. of rent were presented to the Ch·cuit
Court CommJss:i.oners.
There is laxl ty in making of mort;;ngL1 loans, :::lue to
compcti.t:ton.
A gradue.l increase in over-the-counter \noney rc.tes J.~l
expected.
Fr1 endly t.ownrd the Federal Reserve &j stern.
Wisconsin
Labor situation is repo-rtc:d critical, particulc.rly in ;J.Uwc.ukoo,
where a number of strikes :u-e in progrer:s and others arc threatened.
Business generally iJ good. One large mu.nufacturcr col!lrnc:nts on tbe
fnct that a very lt:rgo percPntage of sales of farm nachino:ry is being
made for cash.
St. Louis
Southern Indiana and Illinois
Custody service was considered of prime importance by two of the
banks visited. One concentrates securities at the head office because
of superior marketing 0onditions there. The other is of the opinion tha.t
it would be appreciated by country momberB if the facilitic s were extended
to permit the deposit of securities of customE~rs u.s well DE st:,curi ties
belonging to m~.;;mber banks.
In connection with purchase or sale of Govcrnmeni~ bonds, severe.l
bank officr~·rs stated the.t results were better through the Federal Reserve
Bank than w ··::en those tra.nsnctions were pb.eed V'i th brokerage houses, one
having tc.ken the trouble to mL:.ke some compe.ro.t,j.·Jc tests be"Lwr.;en Chicago
brokerage houses and the Federal Reserve Bank of St. Louis.
270
-9St. Louis continued
Several banks reported increased use of non-cash collection facilities and commented on the excellent results of that servh:e, especially
the direct sending privilege.
The only adverse comment made by several members was in connection
with increE;.sed reserve requirements. One was e specia.LJ.y emphatic in his
viev11s regarding the matter though he admitted that the bank was carrying
exc8ss balances in an amount fully equaling the additional reser·ve required. Others also contended that there is no undue expansion of credit
in this area, and that so far as countr·y banks are concerned, the increased requirements are wholly unnecessary.
Minneapolis
Territory adjacent to the Twin Cities
One me.nber banker wc.s anxious to obtatn further information in
regard to the revisions cf Regulations D and Q, c'nd we sr)ent more than
an hour reviewin,1 them. At the end of that t:ime, he a:::-ked the specific
question, "Why C'm 1 t all these regulc.tions bG worded so that the country
banker can un:~crstc.nd them?"
A few bonkers ezores:~ed their plonzurc that tho Federal Reserve
and Treasury r.:uthori ties had not ru:::hed in to support t 1he market when the
price of government bonds first bcgc".n to slip. Py ~::.llowing the market
to find its mm lev?l, +,hey felt it verts a "free" market instead of a
11 pE1gged 11 market which they -oelieYed had been in existence for many months.
The hope was also expressed that now that the spell of t~e $2,450 million
figure hcd been broken the Fecccrlcll Reserve authori sics would not be afraid
to sell v:!"Jen the opportunity ceme, net only the secnri ties recently acquired but a portion of tht.~ previous holdings. There was a ·1Uestion in
the :ninds of some of the bankers as to the actual necessity of increasing reserve requirements the full 100 per cent, although none of them
would have any difficulty in meeting the additional requii<ements. They
seemed to be of the opinion that it might have been better to have left
requirements at the level reached March 1 ln order that chang<:"JS might be
made in either direction as circumsknces demc.nded, at some time in the
future.
While only a few of tho banks admi ttcd that they were actually
losing loans to Production Credit Associutions, other bankers complained
that their customers were udng the lower PC.A rates as a club to procure
lower rates on barnyard loans from tbe banks nnd thn.t this indirect loss
of income was greater than thd. sustained from actual transfers of loans
to the PCA. As has been noted on other trips, there seE"n,:; to be a
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Minneapolis continued
.
,,.
..
number of discontented borrowers constantly shiftlng from one loaning
agency to another, some borrowers obtaining loans from a bank to pay
off PCA indebtedness and vice versa. Several bankers commented on the
changed attitude of farmers toward their obligations [tnd felt that. both
the state and federal governments lw.d contributed towqrd this new attitude by moratoria and the almost compulsory debt compromises in recent
years.
Banker.-:; vmre unanimous in their praise of the FHA Title I and
Title II loans. One banker had about decided to dispose of all of his
government bonds replacing them Vlri th purchased FHA inzured loans. He
felt that by insuring the loans the government guaranteed them and thus
there was exactly the same credit behind the FHA loans as government
bonds. In addition to the much more satisfactory yield on the FHA loans,
he thought that by so doing he would avoid the "jittery" feeling he had
experienced during the last month. Because of the unusually large volume
of building in one of the former summer resort sections, which is in tho
process of being converted to a suburban tract section, one bank has made
a larger volume of FHA Title II loans than it expects to be able to hold
and consequently is considering selling some and is holding them at
3 point premium.
Land sales have been few but practically all farms that have been
in distress or tied up in estates have been purchaf:ed and wfth these off
the market, bankers are looking for a farm land boom next fall if a satisfactory crop is obtained this year.
Northern Minnesota
2t
Most of the oanks in the smaller towns are paying a rate of
percent on deposits and the banks in the larger centers are paying a rate of
2 per cent, although there is some variation. Interest re.tes on chattel
mortgage loans USlli"llly range from 7 per cent to 8 per cent, most of such
loans being made at the latter figure. Farm mortgages ordinarily carry
a rate of
percent to 6 percent, but the bankers are exceedingly careful
in making such loans at this time, and if they do make them, restrict the
amounts and obtatn ample collateral security.
4t
Prices at auction sales uniformly have been high. Average milk
cows usually sold at from $~50 to $60 although prices ranging from $80 to
~585 were reported.
Settlement at such sales was largely on a cash basis.
There is an increasing demand for land in this agricultural section, both for rcnt&l purposes and to purchase. As early as last fall,
inquiries were being received for land to rent this spring and many additional inqulries were received during the early spring months. Many
272
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X-9892-a
farmers looking for land to re11t were from the drought stricken regions
of North Dru~ota. It was rapcrted that the representative of a farm mortgage company at Crookston had sold thirty-three farms since January 1,
1937. Some sales were reported at ot~er points. In many instances, the
land was sold at prices ranging from one-third to one-half the peak
prices. At one point, an 80 acre farm, with fair buildings, v1as ref:! en tly sold to a local buyer at $45 per acre or ~?3, 600, of which $1, 500 was
paid in cash and the remaining $2,300 financed locally at 4 per cent.
Northern Wisconsin
The ste.tions or branches operated by State ba.nks in northern Wisconsin appear to be profitable, and the bankers expressed themselves as
being very well satisfiad with their venture in this limited form of
branch banking. The
State Bank of
_operates several
stations, and the management took a great deal of pleasure in showing
me the earnings and expense statements of these branches for 1936.
Ever-J branch earned a profit, ranging from $700 to :~2, 500 after paying
all direct expenses and a proportion of head office overht:Jad based on
the distribt:.tion of deposits.
Kansas City
Bankars visiten reacted in very different ways regarding the increase in rese:::-ve requi:-emonts. Some voiced no objection cince they
say it will ha-.:;e little be~Lring on their situation. I-bwever, many of
these same banLer3 h:.:..ve their misgivings, for tncy fee.L that the increased reserves are piling up funds in the reserve banks to invest in
Gove:'.'nmont bonds at a time whon these banJwrs ere unvrilling to put their
ovm fllnds in an;y substantial r~.mount in long-term obligations. Other
bankers report it will cause them to borrow or soll bonds c.:.nd the bonds
will be sold first. Some ban.!.:ers aro not disturbod by the Vl'Jakness in
the bond market as they expect to hold their securities until maturity.
On the whole, country bankers seem to be aL a co;.1siderable loss to
1.L."1derstand the reason for the increase in r·eserve rer::uirements for country banks. They understand that the policy is related to the problem of
curbing specule.tion, to rapidly rising comrnodi ty prices, and to near
boom CO<"-tdi tions in certain industries, but. they 1".'ed that is a world
apart from th~::!msclves. Their problem as they sec it is to take ca:;:·e
of fo.rmors and s:nall busL1ess men, and in cases where the new reserve
requirements pinch somewhat they are unable to see a reason for it. In
short, man:,..- country bankers complain of the inflexible nature of reserve requirement changes.
Dallas
Eastern Nm'J Mexico
ized.
Banldng conditions in this State arG satisfactory and well stabilAll banks are in excellent cash posi-tion. Although the demand
273
-12Dallas
...
X-8892-a
continued
for loans is somewhat stronger than a yeqr ago, interest rates are lower.
Previously, loans on livestock, with negligible exceptions, were made
at the rate of ten percent per annum. All such loans are not;; being made
at eight percent. Holdings of government securities were freely discussed, but there was no indication of any panicky feeling. Many of the
banks said they were in a posltinn to maintnin their holdings, an1 for
that reason they have scarcely more thml un ncademic interest in market
fluctuations. A few banks mentioned the increase in reserv;; requirementB. They seem to accept it as a neccssc.r-.v step in the control of
credit expansion. Only one New Mexico bank is rediscounting vri th us,
and only two indicated that·they would possibly borrow from us tl':.is summer. These happen to·he.ve government securities which they do not crtre
to sell to meet seasonal needs. Banks in this state do not go in for
crop financing to the extent that is customary in other states of the
district. While loans to farmers are freely made in the cgriculturel
sections, the~· are usually based on the worth and reputation of the
farmers .rathel.' than upon chattel mortgages or crop prospects.
Northern Louisiana
The Pre~ident of a comparatively ne~ State member bank expressed
satisfaction v.ri th membership, <hough he s:1id it cost his b~mk the loss
of some very desirable business. He hn.d reference to the relinquishment
of two branches, which were established af~;er February 25, 1927, and for
that reason were ineligible to be retained a.fter his bank's o.dmission
to membership. These branch offices served as valuable "feeders", and
when closed were promptly replaced with branches established by a nonmember competitor. Recently oil wasdiscovered in the region served by
one of these branches and the resulting influx of capital consideratly
augmented the nonmember bank's deposits. Needless to say, the latter institution is not interested in membership and \'lrill not be interested so
long as the Federal Reserve Act retains ite present restricttons with
respect to branch banking.
The Vice-president of a National benk denounced the competitive
methods and activities of the government-sponsored Production Credit
Associations, stating that the local agency is not only sending representa.ti ves to the homes of local farmers in an effort to win their business from the banks, but had gone so far as to solicit the business of
his bank's customers in his own lobby. He approves the deletion of the
definition of "interest" from Regulation c~, and also the recent increase
in reserve requirements. He attributes the late disturbance in the gov..,.
ernment bond market to economic forces beyond the contrcl of the Bnard
of Governors - an inevitable "swing" toward a higher level of interest
rates.
274
-13-
X-9892-a
Dallas continued
The effects of the increase in reserve requirements on two of
the banks in this section present a striking contrast. The first bank,
with deposits of $170,000, has already about exhausted its loanable
funds in loans to cotton fe.rmers, and fears that it will be necessary
to borrow rather heavily to meet its enlarged reserve requirements. To
the second bank, on the other hand, the new requirements are only a
matter of academic interest, as it has no net demand deposit liabilities
subject to reserve requirements. Its demand deposits of $500,000 are
more than offset by its "due from banks".
San Francisco
During April visits were made to bnnks in Kellogg, Wallace, and
Wardner (Idaho) for the purpose of ascertaining the reaction of the
bankers to their affiliation having been changed from the Spokane to the
Seattle Branch. We found no oppoaition to the change, the only criticism
bEling that on one or two occasions supplies of currency had been delayed,
which matter has since been checked up with the Por:t Offlce Department.
•
Kent and Auburn (Washington) are located in a valley south of
Seattle where the raising of garden truck is the principul a.r,ricultural
pursuit. The banks in these communities find a good demand for loans,
particularly in view of the fact that there has been a recent increased
development in the fre8zing of fresh peas, corn, beans, and spinach. It
is possible that one or two of the banks might be required to rediscount
wit!1. the F'ederal Reserve Bank later this season.
APRIL, 1937
l;'ederal
Reserve
BGnk
Boston
h1o,.:;r
York
Philadelphia
Cleveland
.l'i ..... ;
~
Richmond
Atlanta
Chicago
St. Louis
I
•c-rf
rl
I
Minneapolis
Kansas City
Dallas
San Francisco
A·
#
l,leetin~s
Nlember
NUJaber
-,
I
t-
At tandance 1
duresses macie
l'Ju.inber
At tcndance
2
9
95
3,244
~''-'
133
126
7
1,014'';-
ff
ll
15~
85
24Z
4
49~
3
202
63
60
12
35
C3
1:31
15
2,381
150
7C)
l;)'J
5
17
63
l
3
3
'.._
400
950
2
lu
21J
')
l,:J49
6
2
3
4
104
29
88
..L
'2;;1
2.3
5
283
9
182
10
%9
50
7
8
36
')
38
16
lOl
Attendance at 2 not re:tJorted
1~umber not indica ted
j
attended
19
"'
#
225
l,lJl
l
4
,,
1
~
None
1
-'-
60
335
65
None
'I
if
150
585
130
MQ
{ _,
@FedFRASER