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270 BOARD OF" GOVERNORS R-114 CF" THE FEDERAL RESERVE SYSTEM WASHINGTON ACCRESS OFFICIAL. CORRESPONDENCE TO THE BOARD November 20, 1937. SUBJECT: Monthly Report of Bank and Public Relations Activities. Dear Sir: There is inclosed for your information a summary of the bank relations reports submitted by the Federal Reserve banks for the month of October in response to the Boe1.rd 1 s letter of August 25, 1936 (X-9680). Very truly yours, Chester Morrill, Secretary. Inclosure, TO PRESIDENTS OF ALL FEDERAL RESERVE BANKS. 271 R-114-a November 16, TO The Board FP.O';! ]r. He.'1'!mond, Division of SUBJECT: B~nk Operations. U~l57. SU:'!lmary of Bank Relations Reports. Reports of bank relations as requested in the Bon.rd's letter of August 25, 1956 (X-9680) have been received for the month of October and excerpts therefrom will be found on the following.pnges. A table showing for ell twelve bcnks the number of visits made, meetings attrnded, and addresses delivered has also been prepured and follows the quote.tions. The attitude toward the Federal Reserve System Banks, especially in the west, continue to express dissatisfaction with the present reserve requirements, which hrvt:- eith<.:r made borrowing necessary or at least have interfered with ID-'lintens.nce of the customary br::l&nces with correspondents. At the same time there is evidence of some feeling that membership in the Feder<::.l Reserve System will become more desirable if there is a. prolonged busint1SS recession. Banking conditions Despite the feeling about reserve requirE:ments, there is also continued complaint about idle funds and inadequat..:: earnings. Service charges and special types of loans are being developed. The pressure to charge excha.nge seems to be as strong as ever or eve:n to be increasing. Banks express concern over the prospects for their bond portfolios. Gener~l economic conditions With the exception of certain regions in the west and in the south, concern as to business trends seems to preveil. In the excepted regions the abundance of the crops is apparently felt to mitigate the effect of price declines. In manufacturing regions tr~re are reports of cancelled orders, shut-downs, and increased unemployment. Both New York and Chicago report mention by bankers of continued or increased hoarding. Excerpts from the reports follow: attached to the original hereof). (The reports themsEJlves u.re 272 -2- R.-114-a Boston Eight country banks located in Massachusetts and within a radius of fifty miles of Boston, and five member banks, one non-member bank and the Receiver for five closed State bcnks in southern Connecticut, were visited during the month of October. In several of these communities mEmufc.cturing concerns making shoes, furniture and textiles are locatr:;d, and bankers interviewed stated that plant op(~rations ere being curtailed and poyrolls reduced in line with a rapid decline in the volume of new orders for the commodities mcnufactured at these pltmts. The outlook of those who offered any expressions as to the future of business in their communities was decidedly pessimistic. With one exception the banks reported a recent decline in the demc.nds made upon them for credit. At two or three of the b'~nks comment was mr,de upon the increase in the number of trnnsactions conducted for customers involving the purchase of listed stocks immediately following the recent market decline. In a fev. instances new loans were made to customers for this purpose, <-~nd in other instc.nces the customers drew down their Sc<vings accounts. While the tot2l withdrawn from sc:.vings accounts was negligible insof~cr as concerns the member banks visited and was not regarded as being subst&ntial as to 2.11 banks in the communities, the movement was being closely watched and speculated on at the time by the bankr.)rs. Such stock transactions as the member b<mks handled for their customGrs were said to be mostly in high-grade, n~n-speculativ8 issues. No unfavorable comments were hoe.rd with respect to the policies of the administration of the System or of the operntions of the Fedore.l Reserve Bank of Boston, with the exception of an objecti')n voiced at one cf the smaller banks tJ the present reserve requirements. New York Greene, Madison, Otsego, and Schoharie Counties, New York Demand for accommodation generally continues light although officers of nine banks characterized i t as being fair to good. Loan ond discount totals are for the most part lower, one bank reporting its list to be at the lowest level reached during the past ten to twelve years. The interest rate charged is customarily 6 percent, although a few banks grant a lower rate to borrowers on prime collateral, and the majority make concessions in the cnse of loans to municipal:ities. Only one bsnk reported ~:m average loan rate as low as 5 percent. Bank executives with only two exceptions, stated that they found no objectionable competition in the lending activities of the Production Credit Association. Some are referring prospective borrowers to this agency - borrowers to whom they do not feel justified in extending credit bec:lUS<-~ of the risk involvf~d. 273 -3- R-114-a New York continued Oswego and Wayne Counties, New Yorls_ Only six benk officers stated thc..t their bond portf.::-lios show D. material appreciation, and &.11 expressed a great deal of olarm ~;ver the recent action of the stock and bond markets. This subject appecred to be uppermost in their minds .::.nd sev8ral remarked that, even tb:mgh few of their customers wc..re e<ctively interested in tht.: purchase or sale )f secur-i tie(~, these markets nevertheless heve a very profound effect on business lccnlly. One officer added thct he had alrendy noted instances of hon.rding for the first time since 1933. Dem~md for accommodation continues to bt:; r~~irly good, only four b.snks reporting s.ny substantircl decrease in lo~:.n and discount t()tnlt=J. The rr:.te is usuully 6 percent, although two or three of the lr·rger brnks grant lo~ms s2cured by prime c.:;li.E·teral at 5~, 5, und oven as low r·s tt percent. The me j:;ri ty, however, mukc nn excspticm ,:Jnly in tho cc;:.se 'Jf br.ms to municipalities and school dintricts. The lending activities ~f the Producti.m Credit Association were discussed v:i th pr[Lctically all of the bcnk -~Jfficers interviewed und nnne of them voiced any great :Jbjection tr; its r·ctivities; in fo.ct, n number expressed their &pprovr!l, foe ling thut the fl:JS·)Cinti·-:ln is o.ssisting farmers who wculd not be able to secure acc::Jmmodatic'n fr:_;m the ::>rdinory sourcos. Middlesex Ccunty, New Jers-3y The majority of b[.nkers interviewed, including thc)se in tbe industrial centers of Nevi Brunsvdck and Perth Amboy, report a light demcnd for commercial credit. Earnings ccmtinu8 t) be a problum with !n·.JSt ,,f the banks in the county, loans and discounts being only a portion of' the total of a few years ago, a substantic.l pert of their bond accounts consisting of United Sthtes government issues c.t low yields and e. fairly sizable umount of cc.sh being Ctlrried :J.S 1111invested funds. However, an officer of one bE:.nk (deposits ~1,600,000) pointed out that e<Jrnings for the current six months will be the best for [:ny like period since the bank wes org~;mized in 1923. This institution hn.s made consid·:,rable effort to obt~:oin mortgeges insured under provisions of Title II of the Notional Housing Act rc.nd h[;S m;;.tde contacts with two mortg<' ge finencing compL:.nies, to secure npplicctions, the b~.nk puying these concerns c moderB.te commission for their s~:'rvices. The totnl of such mortgc.ges already grcnted plus commitments received from the FLder&l Housing Administrution is $412,000. This totr.l covers about 95 sepnrc..te properties, c.pproxim<·.tely h<:lf of which rcpre::ents new construction. An officer of one N<::. tionDl b.':lnk hc:ving trust powers (deposits of about $1,000,000) rcmorked thc..t he is not cccepting cny more trust business end that he pl&ns to retire from this field cs soon as possible ts he thinks trust business C[ nnot be hc.ndled properly or profi tc:bly by :1 bank of this size. 274 -4- R-114-a New York continued (New York reports that in the area covered by its October visita79 banks had issued preferred stock or debentures, t:.nd that of these 7. had subsea_uently retired their entire issues and 3:3 had so far effected no retirement.) tions Philadelphia Information obtc.ined by our representatives indicD.tes thvt there is c:.. noticeable decline in business activity within the arec. covered by this report. The reasons given are: excess inventories, sec.sonc~l dem2.nds of the various businesses, strikes in other industries, and an uncertrd.nty DS to tho future resulting in the adoption of e "go slow" ~:ttitude on the pr. rt of some manufacturers and business men. Agricultural conditions c.re considered fair, al thoUf;h the tobacco crop was poor this yeo.r due to hec.vy dcmage caused by rust. The tom<lto crop wus ruined by rain and thE: prices pcid for })Otc.toos were sr..:.id to be insufficient to cover the cost of production. Grcdn ::end other stock feeds yielded well 'J.nd provided about the only money crops produced in this section this ye[r. Some complrd.nt V1HS mnde bec~~use the priczes of food and other necessities are advc.ncing more rapidly then wages. In severo.l communi ties there have been building programs t2nding to relieve housing short<:cgcs but it W':'.S stc. ted tho.t recently there hE'.S been L: noticec,ble diminution in the willingness of people to purchase homes. This hrcs been :tttributed to the m;,tural conservatism of the residents of this aroa r:.nd their unwillingnE)ss to invest while uncertainty created by the recent decline in the securities market exists. Nc[~rly all of the communi ties report tlw.t rvE'.ilable houses f',re few and that rents are incres.sing. 'I'he fact that in some communities there is still some closed b;mk reel csto.te 3.Vailablt at low prices, is soid to have o. bad influence upon the regular market and t.o restrain a more arabi tious building progr1:~m. Several bankers stated that they had not experienced much difficulty with collateral loans during the recent decline in the securities market because they did not permit margins to shrink too much before making ~i call upon the borrower. The executive officer of one institution with deposits of about £.11,000,000 stated that the margin requirements of the Board of Governors Wf::S one of the best things ever promulgated and something which should have beEm in existence years ngo. (This statement was made before the recent changes in mc:crgin requirements.) He inUm.::.ted thc.t he did not f<lvor reducing thE: requiremE.nts and stated that none of the loans made under this rcgub.tion caused his bank any concern during this recent decline. -5- R-114-a 275 C:l:eveland The attention of bonks in this district centers largely in the securities markets. Portfolios of banks generally v:ero acquired at higher levels, and existing paper lol'!ses arc contemplate<~ vdth misgivings. There is continued evidence of a gradual shifting from long-term to shortterm investments. Many banks which have not yet mud.e this shift are merely awaiting a favorable market opportunity to do so. Notwithstanding a substanti[;.l recession in me jar lines of business in this district, the total volume of loans extended by member bnnks shows no decline. ·rhis is explained pr..rtly by the fact the.t banks r:.re increr:.singly active in the field of installment finance pr;per, u.nd of mortgr..ge lo::ms, particularly in farming areas. The current business recession hao affected the basic industries of this district more than it has the smaller miscellaneous manufacturing lines. In some instances, such as the practiced suspension of operHtions of·a large steel unit at Lorain, Ohio, a large nmount of unemployment has been created, but has not yet lasted long enough to cause noticeable distress or to result .in substnntic.l savings withdrc.wo.ls. Kentucky bankers D.re regarding v:i th some apprehension the p::cyment of lo[:.ns which will occur 'lhen the tobacco markets open in December, since it will swell the present volume of unemployed funds. Banks find it difficult to loan funds locally and presE;nt conditions in the securities markets are ::: serious d.rawbcck to the investment of depo:..1its. Kentucky bc.nkers continuf~ to compl<::in of the actl vi ty of Government lending a.gencieo, which they r:eprE:sent nre t:.king from the banks desirable locns which the bonks would glfldly mcke. During the lv.st fer; clo.ys of Octob<=.r two nonmember br:.nkn in our Kentucky territory, by volunt'lry action of the bo.?..rds of directors, were placed in the h~mds of the Stete Depe.rtment for liquidr...tion. A few sco.ttered complaints have been received from me:mber bc..nks in sections where certificntes of deposit nrG preferred by depositors to sr.vings r.ccouniE, thf.i t subsh.ntial deposit c:ccounts are being lost to nonmember insured bonks by renson of the less restrictive provisions of Regulation IV of the Federal Deposit Insurance Corporation as compared with the provisions of Regul£~tion Q respecting payment before maturity. Richmond In the Fifth Federal Reserve District the total district production of cotton is 1,610,000 bE~les, which is .11.5 percent above the 1956 crop, compared with the national increase of 41.7 percent. With the larger cotton crop c,nd the low price, it is estimated th1:..t the income of our district from the production and sale of cotton this yeur will be less than in 1956; but this loss in purchasing power will we bcliE':Ve be fully made up by the increased income over 1956 of the ·production and sr..le of tobacco. 276 -6- R-114-a H.ichmond continued The tobacco crop i.s a better slightly higher as a generc·.l :rule. quc.~l:i.ty th::..n lest year-, ;vi th prices The Aituation in the cotton textile field is very blue. Tbe inform<:ction from best avnil:.:ble sources is thnt textile plcnts in our district are opereting slightly um1er 60 percent of ct·.1JDci ty, but thi::; D.pplie s to the larger c.nd more efficient units. The smaller units not so cffici.antly mfnw.ged probably average operrctions of ~'pproximrltely SO percent c:~poci ty. An outstanding feat1rrc uf the recent developments in textiles hrs b0en the freedom with V"hich b.rgt; r~nd respons·i blc rwtion~J. concerns, o s well r.s others, hnve cencelled orders. Textile people ara bewildorod and report little evidence of c. convincing m:turo r::.t hs.nd to support a contention thot immediate improvemr-:nt may be expected. It is reported thc.t furniture mr..nuf~1cturing nnd tho furniture busigenerc.lly E.re suffering on <.:.ccount of the slowing down of i.nst&llment buying. l\1nnufacturing concerns he-eve large inventories on hand. The ~·hole SL:.le deale:cs are in somewl1r:tt the s:~mt: st<..tc. Some furniture factories have completely closed dovm, v.itL onl;;r shipping rooms opcr:: ting, completing old ordGrs. Otherr., manufe::.cturing spccir l types of furnitur,;, are opern.ting on short. Ume. There is also the thrr::at of lc-.bor difficulties. m~ss Newport News, v<'w~re the Newport No,:s Sh:i.pbuilding and Dry Dock Compcny is locc::tGd, is a bright spot in our district. The comp<~ny is working full tin-:e c,.nd h<>.s contr~<.cts on k:nd, not including repair ',Y.Jr 1<, :::mcunting to approxir:wtely 35 :nillicn c~ollDr;:;;. It cm·plo;rs 6,100 people, vvi th an annur:.l pr:.yroll of Ecppr•:xx:i'!!L.te1y 10 milli:m d::.:·lL.rs. The cc·npc:ny hes rGcently secured o. ccntrn.ct t.:J builc ::. hx;t f·')r thr~ United StDtes Lin<JS Company to tal-::e the place of the Leviathan, and as thir. contract :orogres;::es the compeny will take on from l, 500 to 2, 000 &ddi tione.l employees. Generully S}JeuLing, it h::cd been hoped that the increase in unemployment following the m~:rketing of e.gricultural products, or their prepc.rntion for m::crket, would be in le.rge measure offset by an incroase in employment in stores end manufccturing concerns in prep;~.r<:tion for the coming holic'ay serson; but with tho textile mills working port time am~ the general state of affairs in business, including industry ~nd cgri.culture in the term, it is likely that there will be en increo.;:;e in unemployment. AtlontEl New Orleens Visits wEre made to the four member bo.nks in New Orle!lTIS and the officers of these banks reported the.t business in New Orlecns and its rcdjccent territory is considered good, there being some increased demLnd for funds from customers. The crops of cotton, rice o.nd :.mgar cc:no in 277 -7- R-114-a Atlanta continued this territory are bountiful and, while prices are low, the general impression is that aggreg!l.te returns from these crops will probc~bly equal those received for the yec·-r 1956. Southeast Alabama This is the crop moving season in this section and the officers and 8mployees of the eleven banks visited were found to be very busy. Southeast Alabama has produced lc:..rge crops of cotton and per..nuts this year, although rains just prior to the harvesting season reduced the grade of cotton considerably and, as a consequence, a substantial portion-of this crop will be below "middling". It is reported thut staple length is excellent. Practically all of the bankers in this particuh·.r section feel tht,t due to the recent reduction in the price of cotton a large portion of the crop will be held in the form of collateral to Commodity Credit Corporation notes, particularly since the Corporation has agreed to accept lower grades than heretofore. It wqs reported th~t this section of the St~tte has produced an unusuolly large pec.nut crop and thBt the local bankers are of the opinion that this will be a "life saver" during the months following this seoson of low priced cotton. Only one bonker interviewed voiced a desire to see reserve requirements reduced at this time. Northeast Georgia Practically all farmers in this section are selling cotton at the current price. However, the mc.jority of the fnrmers, according to information received, will undoubtedly agree to reduce ncreagEO and comply with the requirements of the Department of Agriculture in order to obtnin the maximum returns from this year's crop. Interest rates on t:imt:o and savings deposits are not uniform. Some of the smaller bankers in this rural section are not accepting interest bearing deposits while other banks are pr.~ying the maximum permit ted by the regulation. In practically every instance the banker interviewed advised that he had enjoyed a good demand for locns during the current year and registered no complaint regErding the Governmental loan e.gt:oncies. East Tennessee The bonks in this section are in· better condition th(~n for severnl years pust. The princip~.l sources of revenue are tobacco, live stock rt::ising e.nd truck fa.rming. Weather conditions have been exceedingly favorable for the growing of tobacco and grain crops. The live stock market, while not z~.t its peak, held up well <:md prices obtained have, in the main, been satisfactory. The tob&cco crop for this section will not be ~s good in 278 -8- R-114-a Atlanta continued value us last year on account of a wet curing season, but the poundage will be approximately 20 percent more than for 1936. It is the opinion of tho bankers that the price will be somcwh:.lt less than last year but it is believed tJ::le increased yield will offset the reduction in price. The attitude of the bankers in this section in regard to business conditions in general is exceedingly optimistic. Most of them have "cleaned house" and current earnings are as good as, or bettar than, last year. A substa..TJ.tial portion of the 1956 earnings consisted of bond profits but this year's earnings are of a type that th.:: bankers may reasonably expect to be recurring. Chicago Calls on member banks during the month of October wore made principally in the State of Wisconsin. Throe of the banks visited were recently admitted to the System. Practically every bank reported an increase in deposits, while two reported a slight increase in loans. Three banks (not located in the larger cities) told us that they were lending to some of their smaller correspondent country banks. One bank loca.t~d in a small resort town indicated tht:.t it might be necessary, due to expected seasonal decline in deposits, for it to borrow from the Federal Reserve bank between now and the first of the year, at which time deposits would increase because of tax collections. One bank in a manufacturing town stated that their loans had decreased from a point several years ago of $5,000,000 to approximately $1,000,000. A thorough canvass of former borrowers resulted in obtaining one temporary loan. Deposits in this bank are growing steadily, notwithstanding which the banker interviewed stated that he was quite sure that considerable amounts of currency were being placed in safety deposit boxes. He further stated that his bank had not sold a Government Bond to a customer in several months, while in the past such sales were not infrequent. The bankers reported in some instances that their local merchants ' had rather heavy inventories, but seemed to think there were no distressed situations; that while the present inventor,y cmlld probably be replaced at lower prices, the merchants would be able to clear their shelvos in time. In two or three places it was reported that the chain stores had reduced their prices on several hundred items. Generally, business was reported to have slowed down during the last thirty or sixty days. In one town a large manufacturing concern that until recently had been operating seven days a week has within tae last two weeks reduced its working time to four days a week due to lack of orders. -9- R-114-a 279 Chice.go continued Several nonmember banks were visitad. Two of these were considering the possibility of converting into National banks. Two indicated that they wanted to reduce certain lines now extended to their customers, &nd another advised that it would be necessary to further re<luce the amount invested in building before applying for membership. One member banker stated that he had not become reconciled to the increased reserve requirements, saying that the amount of reserve now carried at the Federal Reserve bank made it difficult to maintain a comfortable worldr.g balance with his corruspondent banks. St. Louis Throughout Missouri there continues to be a pronounced scarcity of livo stock for feeding, which will force considerable corn on the market as many farmers are financially unable to hold their grain for higher prices. Should a reasonable Government loe.n on corn be made available, considerable b(;mefi t would result. In all parts of the Stnte there is an ample supply of roughage of all kinds for the winter. The abundance of vegetables and other edibles raised on the farm has resultod in the storing and canning of supplies to such an extent that living costs will be materially reduce~ for farm residents. Sowing of fall wheat has been completed and the acreage will compare favorably with that devoted to wheat in the fall of 1956. The cotton crop in Missouri will be late, picking having been retarded by much rain. Interest in the oil boom in Illinois contirruos u.nabated and during the month several additional wells were brought in over a comparatively wide· area, indicating that thu field is not a restricted one;. Promising drilling operations now in progress have given a decided impetus to leasing of additional oil rights on the part of severr.tl major oil companies. B.'lnks throughout Missouri are enjoying n slightly better local demand for loans created largoly b<Jcause farmers desire to purchase pigs and yearling calves for feeding purposes. Such advances, however, are not being mado to .an extent which would nocessi kte borrowing b;y· the banks from either the'ir correspondents or the Federal Reserve Bank. During tho p~:cst year the number of banks that have inaugurated service charges has greatly increased. A number of smaller banks have derived enough income from this source to show an operating profit that is very oncour~tging. There is some uneasiness concerning the do cline in Government securities, but so f:.tr as could be determined no bank is inclined to actu.:~lly dispose of any holdings. On the other hand, some hesit~tion is manifested regarding possible further purchases. It appears that the Government cotton loan will be use<l rather extensively in the strictly cotton sections of Tennessee. Several banks are taking all such available loans to hold as investments. 280 -10- R-114-a St. ·Louis continued A number of Missouri bankers commented upon the impairment of the par collection system. They are disturbed by the increasing number of nonpar points, pnrt:i.cularly in western and northwestern State>s. While a number of banks reported increasod use of chuck collection facilities, because of service charges by correspondents, it was stated that tho sorvice would be used morG fr!Jely except for the difficulty of romembering which are and. which aro not par points. In this connection, our officers visit any bank which notifi'3s us of its inkntion to withdraw from the par list. Sometimes thv bank decides to continue to romi t at pai·. Such a visit \.;as made during tho month, with favorable results. We understand that ono of the roa:;;om:: why & certain National bank convertt:Jd into a State non-memb·~r bank was in ardor to obtain revenue from exchange charges. Increased use of custody, currency shipments, wire transfer, and purchaso and sale of Governmont bonds services were noted, "and a number of inquiries wer8 mad:J about thi~Se services with the idea of possible use in the future. Several banks inquired about the discount facility. The feeling was expressed that thG br·~;adened lending powers of the Reserve bank will have a tendency to maku t~1e System more popular. Minneapolis Between October 25 and 29 inclusive five group meetings of South Dakota bankers were attended. The meetings worG wall attended by bankers from pru.ctically every section of South Dakota and by reprcs8ntatives of banks in the larger out-of-state cities of Chic·1go, Mirmeapoli:3, St. Paul, and Sioux City. With some variations th0 progr<'ms followed the same general form. Much of the time at oach meeting was spent in discussion of the now uniform schedule of service cha.rges D.nd the agricul tura.l program in tho State of South Dakota. (In this connection it is noted thri.t only two bonks of th:Jse represent:Jd at the meetings do not collect service charges for the reason that they believe many of their cust•)mers cannot aff~rd to pay them.) The Reserve Bank representatives were very kindly received at all of the meetings and at the banks visited. Few criticisms of the Federal Reserve System in general or of the Federal Resorv:~ Bank of Minneapolis in particular were notod oxcept on the question of exchange. One banker exprGSSed tho boliof that a small Stab bank has the right to operate even though excr..ange chargos consti tut•.:; the rev:mue that really keeps the bank open. Private discussion ino.icc,ttJd that many nonmembur banks have not actually rudiscounted with their correspond~:mts at th] moment, but ar0 contomplating doing so in the vGry near future. An officer of a bank in Sioux City, Iowa, said that his institution has had discounts recently which were large in dollars and in number of banks maldng thorn. 281 -11- R-114-a Kansas City Under present conditions th8re is no great urge for eligible state banks to become members, but, even so, visits at such banks reveal that there is interest in membership and that in a number of cases dir;~ctors of banks have authorized negotiations to be opened to this end. It is s1.gnificant that some eligible state banks are thinking of membership in connection with the possibility of a surious business depression. They roalizJ that memb3r. ship gives a certain amount of protection in tha.t credit accommodation would b0 as~urcd. A number of state banks, however, that have decided on membership, fed that it is more desirable to give up thair state charters and becomo national banks. There is still considerablu discussion <:cS to rosorv! requirements. Country bankers, .::specially, feGl that 14 percent is too high to permit the maintenance of satisfactory r0lations with their city correspondents. A decrease of 12 percent since a year ago in intorbank deposits of reporting member banks is due, no doubt, in part D.t least to higher reserves. Small banks value these connections with city correspondents in order th<.;.t loans for largo borrowers or loans they do not wish to handle may be taken care of. Visits with barlkers in Nebraska, in sections of that state where a fair amount of corn is being raised, disclose the fact that banks are making a rather satisfactory amount of loans for feeding purposes. Some of these banks are also expecting to borrow in modest 2..mounts. In sections of Nebraska where there is corn, bankers report that property statements show a good increase in the number of hogs. In other sections of that state, whore the corn crop was a failuru this year, bankers inform us that very little feeding is being done in their communities. Bankers report that the let-down experienced in other parts of the country has not as yet made itself felt in Wyoming. Cattle prices are the highest they have been since 1929. Following a number of years of drouth, the ranges in wyoming are generally in excellent condition. As a result, live stock is also in good condition, lambs carrying the best W8ight in years. Sheep prices are up moderately and wool is bringing the best price in years. Favorable prices, and the desire on the part of ranchers to pay tho debts contracted in other years, are causing all classes of cattle to be sold. It is reported that banks and other lending agencies are encouraging this liquidation. The subject most commonly discussed at the present tim0 by Oklahoma bankers is that of cotton loans. This state has nearly a normal cotton crop, one that is three times as large as the poor crop of last year. Th~ low price of cotton is creating much interest in cotton loans, but judging from conversations with bankers there are many technical questions in connection with these loans that are far from being understood. 282 -12- R-114-a Dallas West Texas One of the large~:;t cotton crops in thA history of West Texat> was in process of being harvested in October. Increased acrea;;e and idr~al weath3r conditions during the growing season EtCCGunt for a bumper crop that has literally swamped ginning, compr,;ss Etnd storage fa.c:U.i ties. Local bankers and business men report t~1at, notwi thst~.;.nding the severo c:utumn decline which Cttrried the price of cotton sharply below thr-) Llvcl of earlier expectations, r-3turns from tho crop, including funds recnivoci under th\J govornmant 1 s financing orogram, aro producing a marked stimulation of g(mcral business activity and t:t distinct f8ol:Lng of optimism and SA.tisfr,ction ttmong the producer~;. Although this situation is surprising :i.n vL w of th3 drrwtic decline in th~ pricG of tho product as comparod to the previous year 1 s price level, it m::1y be accounted for in part by the relatively low costs of cotton production pr,wailing in West T-.Jxns, whoru, in contrast with other cotton prod·u.cing areaB of the Eleventh District, the tru.ctor rws largely displaced man-power as a means of cultivation, and production costs are correspondingly lor1cr. Tho extraordi mry volume and rapid gath:;ring of the erop h::tVe created an acute situation that has reached distress proportions at many points. Ginning :.:;.nO. co:npross facili.ties aro so hoG.vily over-taxed that gins and pross0s are running night c:md day, with but l i ttlo :;::>respects for reliaving tlw congestion in the near future. New warehouses· are being hc.stily constructed. Rcpr0sent.:; ti ves <-'f th::J Cornmodi ty Crodi t Gnrp0r.-:. tion have found it necessary t,J arran}~e for the reconccntr.-J.tion •,)f fr'.)m 400,000 to 500,000 bales at Houst.)n !.:;.nd Galvoston. The needs of trw producers have placed a heaV'J strain upon the banks of West Texas. In view of the price situation producers arc taking heavy recourse to the relief offerod by the government's cotton financing program. Tho sudden and voluminous demand for its corrunodi ty loans have made it difficult to commmmato the loans without considorabl,~ dclayo in connection with the process of warohou.sing D.nd grading the stapL) a::1d sending the lo&n applications through trw noceDsary channels of analysis and approval. In this cmorgoncy the local bc..r..ks are according th0 producers thc: full,.;st moasure of fimmcial rmd clerical assistance. Many of tho commodity loans are being made by the banks themsJlvos. The FeC.ernl Resorvo Bank of Dall& s, in addition to stssisting the movement of th0 crop through its regular loan faci.liti:Js, has offered to make advances to member banks under Section lOB of tho Act, secured by the not:.;s of producers in favor of the Commodity Crodi t Corporc;tion pending completion of papers involved in the c~ c. c. loans. 283 -15- R-114-a San Francisco Seattle Branch Information received during visits to the Wenatchee-Okanogan District, October 5 to 7, inclusive, was that the price of apples was not entirely satisfactory to the growers and that there was a tendency for tho producers to withhold sales. Last year a heavy fro3t visited this section during tho picking season and caused a great deal of damage. The producers were thoruforo picking the apples a little earlier than usual and e::x:pocted to be through shortly aftar the first of November. Thero was a largo crop of whoat in this district this year, but again thu reduction of price since tho oarly contracts were made at ~; dollo.r r..;;.s c~~us0d farmers to withhold salos. Livestock was roportod to be in excellent condition d th tfl.-e usual amount of sales expected for thu se&son. Condi tiom; in Aberdoen and aoquiam, vi si td. on Octo b.;r 27, with respect to lumber and lumb.:::r products, cr.;; vury uns1tisfactory. The Orientn.l demand for lumb,Jr, except for n few small shipments to Jap~,_n, is negligible, and wo were informed thut tho California mn.rket is V<3ry poor. On account of lack of 0rders, most of -:,he mills aro down, the exceptions being one lurge mill in Hoquit-tm and two smaller mills in Aberdeen. The plywood plants and rmc iJulp mill are in oporE.ttion. Unless conditions improvo thl;ro will undoubtodly bu considerable uneraploym,mt and local businoss housus will feel the effects. Condi ticms agriculturally in Grays HarbrJr County hu.vo boon satisfactory this year. Therv has been a considerabL; increc:lse in acreage planted to peas for canning and freezing purposes. The fr.rmcrs have also been successful in the raising of w~riJu.s typos of seed, part:~cularly cabbag·J, clover and turnip. A largu C:)ntract hus boon entered into by 'Jne of the local logging companies with the United Stat0s Government for the purpose of logging a very valuable stand of timber in the forest reserve arev.. It is expected that logging will commence early in December and will create employment for a large number of men. PUBLIC EELATIJNS ACTIVITIES OF FEDERAL RESERVE BArh\S OCTOBER, 1937 Federal Reserve Bank Visits to b<:cnks I Noni1 To t a 1 Member , memoer 1 Boston New York Philadelphia Cleveland I "<;j1 r-i I Richmond Atlantn Chicago St. Louis Minneapolis Kansas City Da11ns San Francisco • Meoti Number :ccttended Attendance Addressqs made Attendance Number 1 14 2 145 60 178 9 # None 50 6,605 4 <1, 238 4 2 5 1,615 5 # • None 13 113 47 97 81 38 39 41 10 32 11 17 13 60 23 9 4 3 1 28 9 98 80 21 4 49 5 710 530* 5,725 52 5 9 6 1,797 v 'Z :3 2,650~ 57 16 6 4 518-*'~"" 980 5 2 580 158 540 525 90 None 2 80 2 1 235 150 None #Attendance not reported. *Attendance at l not roportGd. *'~Attendc.nce at 2 not reported. •
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