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250
. BOARD OF' GOVERNORS
R-563
OF" THE
FEDERAL RESERVE SYSTEM
WASHINGTON
ADDREBB arrJCIAL CDRREBPDNDENCE
TD THE BOARD
December 19, 1938.
Dear Sir:
There is inclosed for your information a swmnary of the bank relations
reports submitted by the Federal Reserve
banks for the month of November in response to the Board's letter of August 25,
1936 (X-9680).
Very truly yours,
)
.,
Chester Morrill,
Secretary.
Inclosure.
TO PRESIDlt"NTS OF ALL FEDJt::HAL RESERVE BANKS.
_..~·.
R-365-a
December 14, 1938,
To:
The Board of Governors
From:
Subject:
Mr. Han@ond, Division of
Bank Operations.
S~~ary
of Bank Relations
Reports.
Reports of bank relations as requested in the Board's letter
of August 25, 1936 (X-9680) have been received for the month of
November and excerpts therefrom will be found on the following
pages. A table showing for all twelve banks the nunilier of visits
made, meetings attended, and addresses delivered has also been prepared and follows the quotations,
The reports as usual give evidence of the uncertainties that
banks are feeling with respect to bond portfolios and the efforts
they arc makir..g to enlarge their field of londlng. In various districts, there is increasing interest in mortgages, installment
loans, and personal loann. New York mentions the activities of certain banks in Wiking life insurance loans.
The lending activities of Production Credit Corporations and
other government agencies are frequently mentioned. In some regions the lending operations of these agencies are reported to be
competitive and the banks are highly resentful of it. In other
regions, bankers appe:1r to be well disposed toward the agencies,
particularly on tho ground that they handle a type of loan which
the banks themselv•3S would not choose to handle.
MinneB.polis and K,msns City both report thnt country banks are
much interested in the bearing of the wage and hour law upon their
busi.ness,
Jt~xcerpts from the reports follows:
attached to the original hereof) •
('rhe reports themselves nre
.,
BOSTON
The Sixteenth Annual'Meeting of the Stockholders of the Federal
Reserve Bank of Boston was held on November 3, 1938, with over 337
representatives of member banks in attendance.
Mr. Henry J. Nichols, Chairm~n of the Stockholders' Advisory
Comrni ttoe, and Vi"co President of The thtional Shavimut B::1.nk of Boston,
presided. A short address of wolcome was made by Mr. Roy A. Young,
President of the Fedor~l Reserve Bank of Boston. The speakers were
M1•. Frederick A. Carroll, Vice President of ·The Nation~l Shawmut Bank
of Boston, who spoke on "Pension l)lnns or Retirement Plans," and
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Dr. W. Randolph Burgess, Vice Chairman of the National Gi ty Bank
of New York, whose subject was "Monetary Policy and World Trade."
The proceedings of the meeting are in process of publication nnd
copies will be sent to the Board .of Governors of the Federal Reserve System and our member banks,
During November visits were made to ten member banks and three
nonmember banks in Vermont and Massachusetts.
At those places where factory pay rolls exist, they wore reported to be on tho increase. Retail trade, however, was reported
to be unsatisfactory at all points due to unseasonable weather
conditions.
The only complaint heard was that of insufficient demand for
bank loans. Two of the member banks and one savings bank havo invested heavily in FHA Title II mortgages on out-of'-state properties.
In each instance the banks sent committees of directors to inspect
the properties before buying the mortgages, and the policy was to
keep the average of the notes under ~~5, 000. The mortgages held by
both member banks are being serviced by the out-of-st!lte banking
institutions from which they were purchased, The saYings bank is
attempting to service its own paper.
N1"W YORK
Cattaraugus County (Buffalo Branch Territory)
y
Total security investments held by the banks visited aggreg~te
$14,154,000, of which $4,975,000, or 35 per cent, ~reUnited States
government issues, 'rhree institutions rE>port some appreciation in
their lists, but the remaining b'1nks show depreciation ranging to
as high as 13 per cent,
The demand for credit for commercial and agricultur"ll purposes
in general continues light, although several officers of the smaller
banks mentioned that they are experiencing a somewhat better demand
for loans. As a general rule, 6 per cent is charged by these banks
on 311 loans. One bank in the colmty recently opened e personal
loan department and several banks arc discounting finance p'lper for
local automobile dealers and electrical appliance coneerns, which
has affordod some outlet for funds, Both 'l'i tle I and Title II F'ederal Housing Administration loans are being granted in communities
where there is a demand for this type of accommodation.
Executives of the five nonmember banks, while friendly towards
the System, have, with one exception, given little consider~tion to
253
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membership, and in most instances their condition would not appear
to enable them to qualify. The president of one nonmember bank
(deposits $1,403,000) previously expressed the desire to file an
application, but states that he has decided to do nothing at this
time due to the provision of the law which requires a minimum capital of $500,000 if they desire to operate branches beyond the city
limits. This bank is apparently in good condition and its president keeps in close touch with the affairs of banks in neighboring
communities, having in mlnd that some time in th0 ncar futuro he
m'lY have an opportunity to absorb one or more of them as branches,
He believes some of these banks will be forced to suspend operations because of l~ck of earning power. As branch banks, however,
he feels they can be operated profitably. It is his opinion that
the Federal Reserve capital requirements in this connection are too
rigid.
Herkimer, Madison, Oneida, and Onondaga Counties
7
The majority of banks continue to have a net depreciation in
their security portfolios amounting to a rather sizable figure in
some instances. 'l'he comparatively few inst.i tutions which have a
net current appreciation (or a very small depreciation) are principally those located in the smaller or rur~l communities, whose investments consist of a larger proportionate amount of United States
government, municipal and other public issues, and a relatively
small amount of railroad obligations.
Officers of banks in the industrial and larger centers report
that there has been little seasonal expansion in loans this fall,
and that any substantial increase in the demand for old-type commercial loans appears remote. In order to improve their earnings, many
banks have broadened their loan policies and h'lve entered the field
of granting personal loans, handling automobile and other installment financing, purchasing Federal Housing Administration mortgages,
etc. One national bank in Syracuse (deposits $21,000,000) has
granted within the past year about $1,000,000 of loans secured by
cash surrender value of life insurance policies, charging a rate of
4 per cent on loans up to $5,000 and 3 per cent on amounts over
$5,000. In many instances the borrowers have transferred their loans
from insurance companies in order to take advantage of the lower rate
of interest charged by the bnnk.
Recent developments in tho industrial cities in this Central
New York area have generally been of an encouraging character. The
trend of business in Syracuse has been up~~rd throughout the fall
season. Improvement in the automobile industry has brightened the
business outlook there because of the numerous local manufacturing
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plants, large and small, which are engaged in pr~ducing materials
and parts for motor cars. Some of the shops proaucing special machinery, tools, and dies are very busy, which is loo~ed upon as a
good sign, indicating that manufacturers are re-toollng and.preparing for new and larger production. The monthly publicahon of
the Syracuse Chamber of Commerce shows that in the weel~ ending November 5, ·the total pay rolls of twenty-two industrial concerns
representing diversified lines of production amounted to $30?,000.
This is a new high to date for 1938 and is a gain of 22.5 per cent
over the week ending September 3, but a decroasu of 24.8 per cent
from the comparable week a year ago.
Jefferson, Lewis, and St. Lawrence Counties
. 1
Loans have shown little fluctuations throughout this area. Three
banks, howev·er, located in villages where industrial plants are active, have been able to expand their volume substantially through
personal loans and one, in addition, has developed a satisfactory
amount of Federal Housing Administration 'ri tle I loans, 'l'he total
of farmers' loans has remained almost stationary because no substantial volume of new loans is being made and payments on old loans
are sm~ll in tunount due to the low farm income. It is said that
the legitimate demands of the dairy farmers in this area have been
taken care of, but in general they are now operating without the extensive borrowing which was customtuy in the past. It is expected
that the demand for o.ccom."llod·:ttion will incre~se early in th.1a year
when taxes become due and milk production is low. The ff:lcilities
of the Production Credit Association have not heretofore been wittely
used in this t<::rri tory, i t is said, due to the schedules of repayments being considered too heavy, but tho b'lnks are not unfriendly
to the Association and will doubtless refer applications to it if
they cannot meet the demands for credit.
Nassau County
Investment portfolios now amount to $56,900,000 reflecting an
increase of about $1,300,000 since March, almost all of the increase
being in United States government issues which now totql $25,900,000.
A number of bankers indicate that they are limitinc new purchases of
securities to ·united States governments and that their holdings of
these securities are largely in maturities of ten ye'lrs or less.
Fourteen banks report that their bond accounts still have some appreciation while the others have t:t depreciation which in some cases is
large enough to cause an impairment in the common capital,
Lo11ns and discounts now aggregate $43,250,000 showing an increase
of $3,300,000 since the fir:Jt of the year, \fany b8.nkers speak of the
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improvement in earning power of their institutions resultJ.ng from
granting personal and Federal Housi.ng Administration. loans. Thirtytwo institutions now have approximately $1,300,000 outstanding in
personal loans as compared with $1,100,000 in March. Thirty banks
have placed a total of $1,700,000 in home repair loans under the
new ))rovisions of Title I of the National Housing Act and twentysix have granted $20,500,000 in Federal Housing Administration Title
II mortgages of which $15,500,000 have been sold to insurance companics, other banks, or the State Comptroller. A number of banks
are granting lon.ns to loc:1l borrowers against life insurance policies and two institutions are taking on loans of this type through
New York brokers who have been canvassing the country,
Morris, Sussex, and Warren Counties, New Jersey
In the eighteen counties visited, there are 237 commercial banks
of which 164 have issued preferred stock, capital notes or debentures
aggregating $27,715,114 par value. Up to the present time only nineteen institutions have paid off their entire issues amounting to
$2,367,f;OO, one hundred have made partial redemptions aggregating
$3,3?8,864.50 and forty-five have not retired any - leaving one
hundred forty-five banks with a total of $21,968,749.50 par value
still outstanding. The latter amount is retirable at $33,265,959.50
reflecting a redemption premium of $11,297,210.
f'HILADELPHIA
The a.rea covered by this report is for the most pa.rt in the
mountalnous reg.ions o.f Pennsylvania. Agricultural activities are
confined chiefly to dairy farml.ng, and the raising o.f grains, potatoes and poultr-y. Prices for all but poultry products are considered entirely too low. ~j1wat is selling at prices varying from 50
to 60 cents a bushel and potatoes are selling for 60 cents or less
a bushel, 20 c,mts being quoted at one bank as the lowest price.
In some sectione the blight ruined the pou:.to crop and some farmers
failed to harvect enough for noxt year's planting. Milk prices have
been low. In some communities milk has been selling for less than
~l a hundred pounds.
Recently, however, there has been an adjustment in the prices and the new schedule was said to call for a base
of $2.05 a hundred pounds.
Industrial conditions, except in the oil and gas fields, present a brighter picture than when these countL:s wore visited la::;t
spring. Nearly ovory community ruports a dt:cided improvement in pay
rolls and omploymont. Some towns which had lost industries either
through failure or transfer have had new concerns loca.t~) there as a
result of efforts by citizens' committees or the local boards of trade.
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In one county the establishment ot' new industries has resulted
in the employment of about 500 additional workers, in another
175, and in a third about 200.
Oil production is at a low level and many operations are
shut down entirely. The price has declined from $2.05 to $1.68
a barrel. Many gas wells have beon exhausted and thero is little drilling for new wells, although some is expected in the
future.
Deposits of the banks in this area have increased about
$375,000 since last visited in the spring but there has been no
appreciable general strengthening of credit demand. The 6 por
cent rate prevails on loons, but at several institutions the
rate varies according to tho collateral offered or risk involved.
F. H. A. mortgages are gaining in popularity among these
bankers and, while many are without opportunity for creating
them in their respective corrununi ties, they qre purchasing those
secured by properties in the larger eastern cities. The majority of the banks report depreciation in investments but only in
a few cases is it sufficient to imlYlir the capital. This matter
appears to be receiving the attention of the banl(s' officers and
directors,
Business activity has increased substantially since
early summer, showing a trend of industrial operations that has
been in sharp contract with that prevailing in the same period
last year. F'tct0ry employment and wage payments have expanded
almost steadily as has be:.m the case in the entire district.
Agricul turnl income also rns increased, and sales of' new passenger automobiles turned up slir,htly 1n October from the excoptionally low point reached the month before. The marked
improvement in building and construction reflects principally
a large increase in the volume of operations partly financed
by public funds.
CLEVELAND
There has been some criticism of charge-off requirements in
connection with bond depreciation under the new ext.mination program. This is occusioned largely by the fact that charge-offs are
requirGd (of necessity) at vary·ing price levels of securities, and
the greatest criticism naturally comes from institutions which
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were required to make such charge-offs when investment securities
wore at the lowest levels. The majority of banks, however, have
accepted charge--off requirements as part of a sound banking policy.
There is much criticism of the activities of Federal savings
and loan associations in connection with thoir advertising programs,
as well as the competitive factor which develops as a result of
higher rates paid by savings and loans as compared with member and
insured nonmember banks. Despite the prohibition in regulations
ugainst Federal savings and loan associations representing themselves as deposit institutions, there is no doubt that much of their
advertising is misleading the public. There is one such institution in Cleveland which has prominently displayed in its front
window, a sign to the effect that 11 d.3posits made up to the 5th of
the month will draw interest from the first of such month."
Tha~ greater use is not made of the two principal service
facilities of the Reserve banks by member banks - check collection,
and money services - appears to be due to the fact that Reserve
bank requirements in connection with the collection of checks,
despite the relaxation in certain respects, arc still more stringent than those of correspondent commercial banks in the principal
cities. Use of Federal reserve banks as agencies for furnishing
coin is limited because of the fact that most correspondent banks
will furnish wrapped coin upon request of a correspondent bank.
Suggestions made by member bankers to visiting representatives
during the month inclu<ie one that the Reserve System might consider bringing to the attention of member bar~s the desirability
of budgeting their expenses. One large bank in a principal city
is highly pleased with the results they have attained through a
budget system, and believes that an educational campaign on the
part of Reserve banks would be a great service to member banks not
now familiar with budgeting. Another banker has suggested the de-·
sirability of Reserve banks keeping member banks informed with
respect to called bond issues.
'fhe tobacco markets will open in Kentucky on December 7.
Immediately following these sales loans tend to run off sharply.
The excess funds which cannot now be profitably employed will be
greatly increased.
RICHMOND
During the month representatives of this bank had an opportunity to attend 7 bankers' meetings and visit 89 banks.
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There has been an increased interest in membership during
the past three months, which is doubtless due in part to bank
relations activities. One nonmember bank has been admitted to
mE:rnbership, three formal applications are now on file, and several other nonmember banks are giving serious consideration to
th~ matter.
While there is much dissatisf!.l.ction in this district as to
exchange charges on checks, there have been few voluntary changes
in the par list during the past few years. Since January 1, 1936,
one State member has withdrawn from the System to become a nonpar
bank, one national bank has converted into a nonpar State bank,
and one branch office of a nonmember bank has withdrawn from the
pa.r list. During the same period five nonpar banks and one nonpar branch agreed to remit at par, and one new nonmember bank and
one new branch of a nonmember bank were added to the par list when
they opened.
i
Service charges continue to be a live question and the subject was discussed at length at several of the group meetings attended by our representatives. Committees were appointed by some
of the groups in Maryland to prepare schedules. A number of regional clearing house associations have been organized in Virginia,
and the officers of the State association are actively engaged in
promoting others.
In West Virginia movements of coal recently have been rather
active, resulting in increased employment for train and maintenance crevfs, as well as miners. Some mines are operating two
eight-hour shifts five days a week. In Greenbrier County a large
lumber company handling htird woods exclusively is operating on a
much improved schedule over last year and now has approximately
50,000,000 feet of lumber in their yards in process of seasoning.
A number of glass factories in the north middle portion are closed
for lack of orders, which is attributed for the most part to foreign competition.
In the six counties nearest the District of Columbia there
few manufacturing plants except those in and adjacent to
Alexandria and Fredericksburg. In each of these two localities
the bankers report that industries are operating on full schedules
and that renovating and new home building ure above average. This
is particularly true of Alexandria and a large portion of Arlington
County.
ar~
1be average price of tobacco in Southside Virginia has been from
3 to
4k
cents per pound below last year.
The tendency has been for the
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finer grades to bring substantially lower prices, while the com;noner
grades have been bringing much higher prices than last year. The
cheaper grades on the early markets were approximately 50% higher than
last year, but as November progressed prices dropped about 25% from
the high. 'l'here was an acreage curtailment of a~)proximately 20% this
year, and, as a result of unfavorable weather conditious, the crop
averaged about 12% less per acre.
In recent years there has been a shifting in Southwest Virginia
from heavy-weight to lighter-weight cattle and to the development of
dairy herds. In many communities it was statt.::d that prices for beof
cattle this season had been unfavorable and that many cattle grov:ers
had not covered actual costs of operation. In n<.:tO.ition to agrict;..lture
and live stock there art:: many manufacturing ph.nts scattered throughout the numerous small uities anci towns. Many ccmp~..;.ratively new
hosiery mills are operating at full time and c, number of otht:rs are in
process of organization. These plants, usually located in enall communities, are equipped to employ fron, 200 to 600, according to the
labor suppl:;r available in the immediate section. The large rayon pli.1.Y1t
to be constructed near Pearisburg, however, is exp<Jcted to omplr,y from
15,000 to 20,000 - considerably more than the present population of the
entire county.
It is estimctted that approximately 14,000,000 pounds of burley·
tobacco will oe sold at the warehouses in Washington County, wh0r0 the
markets will open on December 7.
ATLANTA
Alabama
In November visits were made to 8 member and 3 nonmember banks in
the Counties of Jackson, DeKalb 3 Etowah and Calhoun, a section of nortb.east Alabama. The yield of cotton was reported to be between fort;y
and sixty per cent of tbat of lust year. In a few instances the fur:ners
had an almost total crop failure and loans ·t::J such fa:r·mers ·11ill have to
be carried over until next year. In this section there is .Less dlsposition on the part of the farmer to borrow on his crop frcm the Commodity Credit Corporation than was the case last y~ar. The banks visited
reported that collections generally were good.
The steoJ.. mills at Gadsden are operatin~; at about seventy per· cont
of capacity. These mills o.nd other plant~~ mo.nufacturing durable goods
have combined pay rolls t.>stimateci at around ~J300,000 pE:r month. Cotton
textile mills and the plr:1nt of the Goodyear Tlre & Rubter Company aro
operating with sizeable pay rolls also.
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Visits were made also to banks located in eight counties in central und east Alabama. The tovms of Anniston, Alexander City, Sylacauga
and Bessemer are primarily industrial centers. Textile mills, wood
planing mills, large saw mills, iron pipe factories, iron ore mines,
chmr.i.c&l plants, stone quarries, and other industrial plants located
in the towns named are operating with substantial pay rolls and a spirit
of op-t,imism is prevalent. Our representative was informed that inventories of the local merchants arc low.
Bank,§> located in towns which serve agricultural sections report that
collections are good. The chief money crop is cotton and farmers have
been faced 'Ni th a short crop and a low price. In this section also it
is reported that most of' the cotton crop has been sold, with a relatively smaU part being placed in the Government loan •
..,..
The banks in one of the tovms visited are considering a reduction
in the rate of interest paid on time deposits from two to one and onehalf per cent.
The iron ore mines located in the vicinity of Bessemer are operating practically on a full time basis. Steel mills in the Birmingham
district are running at approximately seventy-five per cent of capacity.
One small member state bank estimated its loss from exchange by reason of membership in the System at approximately $7,000 per annum.
CHICAGO
Notwithstanding the difficulty in employing funds, banks will have
sufficient earnings to make necessary charge-off's and other year-end
adjustments which will improve their condition. In view of the approaching semi-annual interest period, some banks are considering and some
have already agreed on a further reduction of savings and time certificate interest rates. There appears to be a better market for tank stock,
and a number of banks will increase their capital by selling stock
locally with the thought in mind that the time i.s drawing near when
they '.vill be able to pay dividends.
As a result of the failure to pass the banking amendment at the
November elections in Illinois removing the double liability on bank
stock, there will doubtless be a number of banks changing from State
to National charters. As a matter of fact, two banks are now being examined for this purpose. In Iowa, where no double liability is imposed,
tho situation is reversed, as several banks are contemplating giving
up their National charters and operating as State banks in order to establish branches. Three banks in Iowa have already taken this step or
are in the process of doing so. (Branch banking is prohibited in Illinois•)
There is a tendency on the part of banks that have conducted a savings
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and trust business largely, to expand their commercial business.
Better sentiment is reported among business men generally. I'Vi th
respect to the consumer demand for automobiles, reports from Detroit
indicate that the public has received the new models enthusiastically
and that retail sales have been much better than were anticipated at
any time up to the middle of November. Dealer sales in October were
25 per cent under 1957. Early in November the figures were still under
those of 1957, but it is believed that the total for the month will be
greater than last year.
Prospects in some lines of furniture continue good. One manufacturer of kitchen equipment, including cabinets for refrigerators, reports that his company has already received orders for twice the amount
of its total output last season, and that it expects to make some enlargement in its plant capacity.
The activity in corn loans referred to in last month's report continues. ~nile some farmers are resealing their 1957 crop, a large percentage of the maturing notes is being paid by the delivery of corn.
Loans on the 1958 crop became available December 1. It has now developed
that many farmers eligible under the A.A.A. are sealing their corn and
buying enough to meet their own requirements from neighbors who are ineligible for loans qy reason of non-compliance with the farm program,
the result being that the market for home consumption has been raised ns
much as five cents per bushel over the price obtainable if the corn tvere
shipped to terminals.
Farmers are well pleased with the sustained market for hogs, cattle,
and sheep. The real marketing season has not yet arrived, but if present prices are maintained, a large spending power ·Nill be placed in the
hands of the farmers in this district.
ST. LOUIS
7
fr~ring the month our officers and field representatives visited
227 banks, of which 120 were in Missouri, 41 in Kentucky, 57 in Indiana,
20 in Mississippi, and 9 in Illinois.
Business conditions show improvement in the rural sections visited,
although there has been no marked increase in the prices of farm commodities. Industrial employment has increased in the smaller manufacturing cities where labor difficulties have not affected operations.
Agricultural sections visited are primarily interested in feeding livestock. It is estimated that feeding operations this winter will be
larger than those of recent years. The low price of corn is one of the
principal reasons.
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Officers of six Kentucky banks reported that while considerable
of the dark fired tobacco crop was damaged by wild fire, a good price
was anticipated for the remainder of the crop. One entire crop was
sold in the barn for 12¢ per pound.
In northwest Missouri there are prospects of a new oil field. It
is known as the Forest City Basin, and embraces ten counties. A number
of companies are in the field obtaining oil leases, and the activity
has aroused considerable interest. While no wells have yet been drilled,
one has been started at Milan. Officers of three member banks and one
nonmember bank located in different Indiana cities also reported leasing of property for oil exploration. Some wells have been drilled, which
h'.lve been productive.
In many communities local demand for credit was reported as good.
Loan rates range from 4~% to 8%. Some of the larger banks have establi~;hcd personal loan departments with encouraging success.
Becausr.:J of liquldation of livestock holdings, deposits of country
banks continue to rise. T·1vo and one-half per cent is paid on time money
with few exceptions. One bank which is not a member of the FDIC continues to pay 4% per annum on savings accounts. This rate is confined
to old deposits.
Special comments were made· by the president of c Mississippi member bank on his visit to our Memphis Branch to attend the luncheon given
in connection with the conference of the boards of directors of the
parent bank and the branch. Two members of the Board of Governors,
Messrs. s~ymczak and Davis, attended the conference and the bank president's corr~ents were directed particularly to remarks made by Governor
Davis at the luncheon. The banker stated that this was the first meeting he had attended where -there was a note of optimism expressed instead
of a warning. Another member bank president. has sensed an effort on the
part of the Federal Heserve System as a whole to render greater service.
Although his bank does not accept interest bearing deposits, the
assistant cashier of a small Missouri nonmember bank complained about
the sum of $40,000 on deposit at the local post office. The bank's deposits are listed as $94,000. Earnings of the bank are unsatisfactory
&nd it was indicated that the bunk might withdraw from the p3.r list in
order to correct this situation. No action will be taken on the matter
for the present. Another nonpar Missouri bank has experienced a number
of losses on real estate loans which it is evidently endeavoring to eliminate out of earnings. The bank's cashier believes the practice of charging exchange is wrong but stated unsatisfactory conditions made it necessary. It appears that unless other banks in the adjacent territory with::draw from the par list, officers of this bank will again par its items \
as soon as the losses have been eliminated.
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The cashier of an Indiana nonmember bank located in a city of 5900
population, expressed the opinion that Federal Statutes should permit
branch banking, provided the capital structure of the parent bank is
10% of the total deposits of the parent bank and branch. It was mentioned by our visiting officer that officials of the Indiana bankers'
Association and of the State Banking Department were among the strongest
opponents of branch banking.
As our visiting officer entered a small Kentucky nonmember bank,
he noticed an elderly gentleman seated at a work bench on one side of
the lobby, 'ousy repairing trinkets of sevoral kinds. Not associating
him or his work with the bank, our officer proceeded to a teller's window where he mE•t the lady cc.shier, who explained to him that the elderly
gentleman was the bank's president. The president, who was 85 years
old, then explained that the trinket w-ork was a pet hobby at which he
loved to work when time permitted. Conversation with him left no doubt
as to his general soundness and the liquidity of his institution.
MINNEAPOLIS
Southwest Minnesota
Generally ::peaking, the banks with excesG funds have been active
in making 1957-8 corn loans and taking loans secured by resealed 1937-8
corn cmd will take 1938-9 loans secured by corn. Banks with exrJanded
local lmms prefer to limit their holdings of corn loans in order to
obtain more earnings and meet local demand. A few of the banks state
that there is too much "red tape" connected with these loans and they
refuse to handle them.
Ban}:s are becoming active in taking car and farm implement paper
on an amorth,ed basis endorsed by responsible debtors or otherwise secured. Apparently their experience has been satisfactory. A substantial number of tractors and power equipment is being sold in the territory, influenceci somewhat, it seems, by the loss of horses from sleeping
sickness.
Live stock feeder lo<ms have been popular investments, induced by
low corn fJrices, abundant roughage and tempting prices of feeder stock.
This business ie gradually tapering off nmv, following a gradual rise
in feeder stock prices to a point where the investrHent becomes more
speculative.
Open House, Kanabec S,tate Bonk, Mora,
JV!innesot~::.
Mr. Frank Powc;rs, President of the Bank, is one of the foremost
bankers of the State, both as to the earning power of his bank and as
264
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.i
R-363-a
to his relationships with his customers. Each year, he holds a stockholders meeting at which he outlines the problems of the bank and asks
the stockholders to defend the bank in the community. At this particular meeting, he discussed the new Federal Wages and Hours Law, which
he said was going to compel the Bank to open an hour later each morning and to close on Saturday afternoons. He asked the stockholders to
explain the reasons for this change and to assure the public that the
bank was desirous of giving as good service as before, but that the
new Law made it impossible. He announced that, while business conditions were not quite as good as last year, the net profits of the Bru1k
would equal those of last year and would permit payment of the usual
dividend.
Group Meetings in North Dakota
Some consideration was given to suggesting legislation designated
to nullify the "moratorium laws" now in effect in North Dakota. There
seemed to be some support to a movement to influence legislation along
this line until a legislator, who is also a North Dakota banker, made
the statement that bankers as a group are not very well regarded politically and that as a voting group their members will not influence any
legislation. He followed by saying that the borrowers who had taken advantage of these laws were in so deep financially that they were satisfied to continue to obtain protection from such legislation and until
such time as a new generation grows up and demands credit and is unable
to obtain assistance because banks are not protected such statutes will
not be eliminated and no organized effort by a minority group will materialize.
KANSAS CITY
..
The outstanding topic of discussion among bankers in November was
the wages and hours law. A greatly confused condition exists. Most
small banks do not believe they are engaged in interstate co~nerce and
yet they realize that an obligation may be accumulating. The hope is
universally expressed that an official ruling may be had in the uear
future that will clarify the situation. Opening an hour later or closing an hour earlier is the usual solution.
Among smaller banks, especially in agricultural regions, deposits
appear to be slowly decreasing. At the same time a good many such banks
report an increase in demand for loans. There is said to be a demand
for money to buy cattle and sheep in Colorado and in sections of Kansas
where there are large supplies of feed. Because of the relatively high
prices of livestock, however, bankers appear quite uncertain as to how
far it is safe to go with livestock loans. There appears to be a ruther
heavy demand for certain types of impossible loans. For instance, a
number of banks report that farmers are try:lng to borrow money to pay
interest to the Federal Land Bank.
265
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R-363-a
Resentment against the aggressive tactics of certain government
lending agencies shows no sign of abating. In particular, bankers
in Oklahoma are outspoken on this subject. Apparently considerable
effort is 'oeing made to meet this competition, especially as regards
rates. It is generally appreciated, however, that this is not a wholesorr.e competitive situation. The belief is prevalent that some of the
govarnment agencies aru accepting many subnormal risks.
From all indications most communities are becoming accustomed
to service charges. Banks report that there is virtually no complaint
of such charges and tha~ they are a substantial source of income. For
LnstD..nce, a banKer whose institution has deposits of $800,000 says
their earningr from service charges are equal to $8,000 a year.
There appears to be considerable concern a1:10ng banks regarding
the governmont bond situation. A good many cases ·11ere found where
these securities have been sold. Banks are holding large amounts of
local municipal obligationo, the return on such investments being about
3 per ccmt. In fr:i.ct, sor.l8 banks hole more municipals than Federal securities. Real eBtute loons o.ppear to be on the increase. Some of
these loans aro umortiz•3d while others are not.
Il<.Jnkurs in sr1all comrmni ties almost invariably inquire as to the
future of a sm<tll country br:.nk. Fev: of those institutions appear to
be i11aking any money ~:md a nwnbo:r. of cases were found where there are
d8fh"..i.te plc.ns for liquidation. Even in larger places many instances
are found of an overbanked condition and further consolidations and
liquida·t.:L::ms aplJear probo.ble.
'I'h(:~re is generai se.tisfaction with tho price of livestock.
The
bc::lir.:;f is alec.; exprcss ..:;d that bettor busindss conditions in the east
will be helpful to lj_vestor~k prices. The winter wheat si0untion appeors ~1nusually spotted. Rain is needed almost everywhere in the
Di::trict but in many places thero is a good st.and of 'Nheat and a fair
l:l.Llctmt of subsoil moisture.
In other localities, however, wheat is
in a "!ery poor condition. Banks repc•rt that eovernment crop insurance
is not po~Jular in western Kansas as many farmt::rs feel the premiums
a;ce .far too hlgh. There appGn.rs to be a good deal of speculation as
to the future of whe:1t Dnd especially what the recent tracie pact.s may
do for this corr.modit;;/. In general, however, there seens tc be little
expectation of substantially higher wheat prices.
Our officers visi tod thirty-three member· tnnks and three nonJ!lei.Jbers
located in f01..~rteen cf the fel'tile "bLu.cklc.nd" counties of North Texo.s.
-16-
266
In this urea, where agriculture is the predominant activity, .farm
income this year has curved steeply dovmward by reason of the combined
and successful efforts ·of nature and the AAA program to curtail the
production of cotton. Moisture deficiency reduced the per-acre yield
and the drastic cut in acreage allo·;vance further accentuated the decline.
The shrinkage in 19:38 .farm earnings, however, was offset in part by
the distribution of a large aggregate of subsidies on last year's operations and by· the appearance, for the first time in this section of the
State, of a decided trend toward the adoption of a. more diversified and
intelligent program of agricultural production. The new program has
four caraina.l objectives: The furtherance of rsclamation and floodcontrol projects, the planting of long-staple varieties of cotton, increased production of other "money crops,"· including cattle, hogs, poultry and dairy products, and the promotion of "dry lot" cattle-feeding
fucili ties through the increased usc of silos. On the whole it may be
said that agriculture in these fourteen CQunties stands to gain rather
than lose as the net result of the disrepute into which its chief product, cotton, has fallen as a source of re-.renue.
...
..,_
Member banks in this "blackland" region were found to be reasonably
prosperous. A majority of these banks regard the farmer as being a less
desirable credit ri.sk than he was in former years. Although government
aid has tended to make his debts somewhat more certain as to repayment,
it has also undermlned to some extent his thrift, lndustry and sense of
personal responsibility for his own fortunes, according to the testimony
of his local bankers •
The interviewed ba~k officers in the visited area professed general
satisfaction with their F'edercl. Reserve relationships and with the course
being pursued by the Board of Governors with respt:ct to monetar.t and
banking matters. A few criticism3 wvre voiced with respect to other
governmental agencies and organizations. The most common of these related to the manner in which the triple-A program is being administered particularly by county agents and other local officials, whose gross
inefficiency in some cases has been the target of wide-spread and sevnre
condemnation.
.
The question of reviving our former practice of holding annual
meetings of ou~ stockholders was discussed. The preponderance of opinion
was adverse. It was pointed out that the member banks in this district
have no problems or grievances to discuss so far as their Federal Reserve
relations are concerned,and that the holding of stockholders' meetings,
as such, for discussion of other subjocts would entail an unwarranted
and rather expensive duplication of the opportunities ulready afforded
for such discussions a.t the annual conventions and "group meetings" conducted qy the Texas Bankers Association.
Those who expressed approval of such meetings pointed out that the
members of Congress and the Board of Governors do not now have ad(~quate
267
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R-363-a
contact with the problems and views of the member b&nks, particularly
the country member banks, which, on a numerical basis, constitute the
bulk of the System's membership. They complained that legislation and
regulations vi tally affecting thous~::tnds of small banks are comJtantly
being adopted without giving such banks a re".sonable chance to be heard.
It was asser·ced that the governing and supervisory authorities rely
almost solely upon information and advice given them about rural ·oa.::."lk
problems by city bankers who happen to be bettor known but who do not
always know the true situation in the agricultural cor;mrunitios. These
complainants are inclined to beliGVo that if annual conventions W<::ore
held by the member banks they would afford a mediw~: tr.rough which thtir
views would become more articulate and effectiVE:.
SAN FRANCISCO
San Joaquin Valley, California
The crops which are currently being harvested have in genera.1 been
large. Prices, however, have been disapvointine; to grotNers, and thoro
has been a tendorJ.cy to hold off sales, particularly of gr·ain, hay and
cotton. There has also been c. late season for raisins, as the weath~"r
has not boen suitable for drying. This has slowed up the liquid'lt:ion
of some seasonal loc-ms, but on the whole bankers expectr~d that liquidation of' their seasonal loans would be complete by the e:1d of Nov;:,mb,:;r.
Orange County, California_
With one of the largest valencia crops on record harveotA<i at
prices about the lowest ever received, the gro;·;ers will either aljout
break even or will lose money, deyending upon the type of grower, s.~>~e
of his fruit, and the yield per acre. As a consequence, the grm·1ers
are in none too good a fralllo of mind. The 1939 val<:mcia crop promises
to be the largest on record, but its size will probably te reduced considerably by drop-rings and scarred f:::'ll.it caused by recent windstorms.
Bean growers have also fared poorly, with very ~.ow prices received.
On the other hand, beet and chili pepper gruwers received fair prj_ces
and should make some money. In spite of the low ;:1rice.s recei Vt:d for
agricultural products, retail business in the County has held up well,
and in one localit;,- at least is aheaJ of last 2ear. This is ~1ttribut
able to the increased expenditures required to harvest the Lum.per orange
crop. There will be many carry over citrus loans this fall, and an increased demand for funds during the coming sen.son. The b'lnks, hm~',3V0;r,
generally finance only tho Elorc substontial gnYiwrs, the ::nlance teiug
taken care of by the Production Credit AssJciution, sv that they are
not at all disturbed.
268
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R-36~~-a
Deposits have held u;' reir,arkably well, but it is a question
whether they will not be O.ravm (:,own considerably later on. Housing
ac"t1.vities show a moderate increase in some localities; in others
·tb.r:;1• ara c..t a standstill.
f:.s.lt
:;:uver
VCA.lley,
Ari:~ona
The cl trua crop is somewhat larger than that Clf last year. :t!;stiruatos for gr:lpE:frui.t for the 1938-39 season are placed at 2,800,000
boxes, and oranges at 5C0,000 boxes. The crop is moYing to market,
but there is little as;:;urnnce of increased :;>riCbS for the fruit.
'I'he win tel' lcttue.::> crop is developing
;3atisfact~)rily,
tions g0ne:r-ally indicate prieos to the grower should
b~;;
and condi-
r.;vod.
Arizona's 0ct.ton crop is estimo.ted a~ 197,000 bales, a3 cc..mpured
·iflth the 195'1 pr:-;ductior• of 513,000 brJ.les.
Although cattle a.tld Ghe·JP havo ho1d up remarkably we::ll, they nevertheless reflect the unsutisf~.:.ctory condition of the ranges, whi(.!h c..re
spt. "tt-Eid. It i~' !'t)portcO. that gr·~mnd. foed is scatterGd, but browse ls
still good ond \Jill no C.oubt be un irtrpvrtunt foctcr in keeping dmm
lcsscs during thr' cord.ng wintt::r. Many outfits v7iLi. ha\·e to feed some
c~.:nc&ntrE<t:.os bcf•)re s;y::·ing, ,;vcn if a milr1 winter is experienced.
Tho
cost of fead is cou;;;idGral;ly :Le;:;s than a year ago. There is some movemont c•f e:1ttle a.ud cheep tc sou'tht~l'n V'llle:;s for the winter. Although
;uany cattle are being corr(•l fed in this ~section, the eperaticn is less
th~.tn it was last year.
'l'ourist. ;·,ravel uffcrds on h1p~)rtant scurce of incc:me and e?1ployrncnt in t.he s·::.r.tte, tUHl, t..::>gethor •~ith the minos, which &r~::: employing
J;x:re r,:evple £:.ncJ ;;'roducing r~.;vr-3 copper them hus been the cuse fo:c over
~ ;;- ... ar, cond.i t.Llll5 are now better· thnn they havo bGon fer S<Jme time
past.
Bu::.lding activit;/ has lncr::;ased material:i.y c:iuring the yf.-ar, espE:"cin.lly resid.e:ncc:;;s, a.ll.d there ts n. progran: fer public school l>uilci.ings
under way :i.r1 the Salt River V<:.llo:r which is estim:::>.t<~d to involve a cost
of clos~'J to ~6,·JOO,OOO.
The 'J&rketing of turke)' s for the l'hanJ~sg.i ving trade had been compte tee. and the retuJ.~ns 1-:erc! considered quite satisfactory. All but a
ver:y ~mall percf"nt..a.gc.:: of the birds car1•ieu a prlrne grade and based upon.·
thE: NE-:;w York marl-:fJt of 29¢ p8r pound brought 24¢ per pound FOB shipping
point.
269
-.LPBids were opened a few uays ago for the cons-c.ructior;. of two tunn.o.L;:;
in connect,ion with the Sa.Lt I.ake Aqueciuct m.vision of the P.;.·o;,·o H.Gser··.roir Pr·oj ect and it is an tici.pated that •r:ork Hill be co1ru~.enced w1. r.hin
a f~w we13ks with greater f.;.Cti vi ty concer,:dng the proj ec !:, as a ribole fGllo;fing the ·,::in tor month.s. Clt:;nring of the dnu: ~.i.. tc~ ln F'r0 ·lc Cr~n.)tC•n,
constrnc.:tion of the dum r:md ne;¥ roud gr9.d.t:•s have; bt:Gn uncer Wt·<'J slnco
f-Jic.;y 1958 under a contract totaling :~i2,13~,ouo.oo which c~--11;:, for the
cvmpletioa of this phase of the work. in 1942. Estimates of t.h(: fbit•Jd
States Bureau of Recl<.:.rnation or the• c~.:.st •:..f thr: Aqueduct Ltvision alon~
is ~i:.5,500,000.JO and. t.he tot~d C•.Jst o~~ th(,~ ultlifta't,e vrojec!i c.·~ fLfte8n
and a half ~illion dollars.
ro
I
tf)
•.o
t0
I
PUBLIC RELli.TIO.liS ACTIVITIES OF FEDERAL RES&11VE BLNKS
p::
November - 19:38
Federal
Reserve
Bank
Visits to Banks
I
I!leetings Att.ended
Non-member!
Tot[<l
17
166
54
182
3
57
24
20
225
78
202
67
26
20
22
89
7
9
35
21
227
3
4
5
77
114
45
8
72
3
15
64
Member
Number
i
I
0
C\:2
Boston
New York
Philadelphia
Clevele.nd
20
7
10
~
11
I
Addresses Made
Attendance
Number
#
I
None
5,592
3,075
21200
1
None
6,280
205
5,775
567
1
None
None
l
1,030
5,370
4,000
846
None
None
1
':(
v
Attendance
80
140
I
Richmond
Atlanta
Chicago
St. Louis
46
Minneapolis
Kansas City
Dallas
San Francisco
45
42
42
49
# Number not reported.
1
181
54
3
3
12
6
140
50
628
50
@FedFRASER