Full text of Mimeograph Letters and Statements of the Board : Reports of Members of Federal Advisory Council to the Joint Conference of Federal Reserve Banks and Federal Advisory Council Held at Washington, D.C., November 15, 1920, Number X-2060, Volume 13, Page 1035

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1035

X-206G

REPORTS OF TVEWSERS

of
FEDERAL ADVIS O Y COUNCIL
R
to the
JOINT CONFERENCE
of
FEDERAL RESERVE BANKS A D FEDERAL ADVISORY COUNCIL
M
held at
Washington, D.C.
November 15, 1920*

1036
X-2060
D i s t r i c t No* 1 (Boston)
Wholesale c l o s i n g down of industry and general cessation of orders,
f o r goods, accompanied by continued cancellations of goods already ordered,
are the almost universal reports received from merchants and manufacturers
in this d i s t r i c t +

Reductions i n prices have so f a r done nothing to improve

demand and have indeed resulted in rendering "buyers s t i l l more timid*
The Retailer seems to be the most hopeful element in the situation*
There appears to be a f a i r demand from the individual consumer, and while
i t i s probable that in number of sales the r e t a i l e r i s not having h i s normal
business; nevertheless in dollars the liquidation of r e t a i l e r s 1 stocks i s
progressing s a t i s f a c t o r i l y without as yet severe price reduction*
Unfortunately the r e t a i l e r s generally are carrying abnormally large
stocks which they hope to reduce to normal proportions in the next s i x weeks
and about January 1st i t i s expected that sweeping price reductions w i l l
r e s u l t in generally increased s a l e s and the resumption of normal buying#
Some r e t a i l e r s have expressed the fear that the demand f o r goods from the
manufacturer w i l l become so general that a scramble may ensue, possibly
encouraging the manufacturer to raise p r i c e s .

Whether the public w i l l con-

tinue to buy enough to accomplish the f u l f i l l m e n t of these predictions w i l l
be proved in the next month#
Meanwhile the s i t u a t i o n i s most depressing*

Raw material prices con-

tinue to weaken, wool, cotton, hides, leather, ground wood pulp, sugar and
lumber continue to p i l e up in storage and cuts in prices do not stimulate
saless
There are, however, some encouraging features - Savings deposits have
not decreased in s p i t e of unemployment.

There i s undoubtedly plenty of

buying power and when i t i s reasonably sure that lowest prices have been



1037
D i s t r i c t No, 1 (Boston)

^

reached a revival i n industry i s confidently expected.

Meanwhile labor has

improved in e f f i c i e n c y from 25 to 50$ and i s generally ready to accept
lower wages i f industries can "be reopened.
Railroad transportation i s improving and there i s a slow liquidation,
which has encouraged the b e l i e f that in this d i s t r i c t the money s t r a i n i s
nearing i t s end.

It i s generally believed that e a s i e r money conditions w i l l

revive confidence and help to restore normal trade conditions on a much
s a f e r base than has been possible in the l a s t two years.
While not s t r i c t l y within the scope of a d i s t r i c t report, there i s one
matter a f f e c t i n g a l l d i s t r i c t s that I should l i k e to have discussed at this
meeting.

While the Federal Banks have in most ways cooperated so as to

obtain the Advantages of a great central bank with branches, in one way
there has not been cooperation 01 any agreement as to p o l i c y .

That i s in the

discrimination by the Federal Reserve Banks of some d i s t r i c t s against the
rediscount of good commercial paper that i s e l i g i b l e i n other d i s t r i c t s .
In our d i s t r i c t the bankers believe i t i s very bad p o l i c y not to have a more
general 'understanding1 and agreement between the o f f i c e r s and directors of
Federal Reserve Banks in the d i f f e r e n t d i s t r i c t s as to e l i g i b i l i t y of paper
f o r rediscount.




^FIIiI 15 STOCKTON.

• 1038
X~2060
D i s t r i c t No. 2 (New York)

The outstanding f a c t i s , of course, the tremendous slump i n commodity
p r i c e s s t i l l under way*

Bradstreet T s index number shews a decline of 25$

from February 1st to November 1st i n commodities a t wholesale.

The index

number of the New York Federal Reserve Bank shows a decline of over 2f$
from l a s t April to Noverrber 6th, and their s t a t i s t i c i a n s t a t e s that there
have been important breaks in a number of commodities since that d a t e .
T h i s i n d e x number i s b a s e d On t h e t w e l v e most i m p o r t a n t b a s i c c o m m o d i t i e s .

Other index numbers have not f a l l e n so f a s t , but i t i s probable that they
contain many quotations which do not represent the actual market f a c t s : there
i s a great di f f e r e n c e between quoted prices and the actual prices which a
large bwyer can obtain if he i s w i l l i n g to pay actual cash.

I t i s easy f o r

such a buyer to get marked concessions from quoted p r i c e s .
The general credit fabric has met t h i s almost unprecedented shock in a
g r a t i f y i n g way.

Federal Reserve Banks, member banks, and businesses are

cooperating l o y a l l y and e f f e c t i v e l y *

There i s no reason at a l l to apprehend

a banking or a money panic or to apprehend a s i t u a t i o n in which solvent
business men cannot borrow the funds which they need to protect their s o l vency.

There i s an increase in the amount of paper that has had to be re-

newed owing to i n a b i l i t y on the part of many borrowers to reduce their inventories.

Some good observers have the impression that inventories are

actually increasing, but data to confirm t h i s are inadequate.
The great banks in the Wall Street s e c t i o n in New York City have shown
a substantial increase in loans in the l a s t month.

Bank loans on s t o c k and

bond c o l l a t e r a l continue to go down, and commercial loans continue to increase.

Loans on war paper are about stationary.

expend loans in connection with the milk s i t u a t i o n .



Upstate banks have had to
The producers of

1039

D i s t r i c t No- 2 (New York)
'

-2-

X-20&)

evaporated milk have been caught with large inventories and have largelystopped. production.

The farmers have been s t a r t i n g their own evaporated

milk f a c t o r i e s and have been borrowing from the banks heavily in the
process; not much building i s required in t h i s , the process i s simple, and
the important thing i s to carry the product u n t i l i t can be s o l d .

Bank

expansion has occurred in connection with t h i s .
Employment continues to decline in the New York D i s t r i c t .

There has

been a decline from the peak, which came in March or April of this year, of
about 9$, according to one o f f i c i a l report.
decline of 2$ in the l a s t month.

The same report indicates a

Other u n o f f i c i a l f i g u r e s would suggest a

decline of perhaps as much as 15i from the peak, but t h i s would s t i l l leave
employment only about 5$ below normal, as the peak was much above normal.
In some industries, however, such as t e x t i l e s and automobiles, there has
been a decline of from 30% to Uo$ from the peak i n employment in t h i s State.
There has been a s t i f f increase in reported f a i l u r e s , but the published figures are not yet abnormally large.
There i s s t i l l a flow of funds away from New York City.
continue to borrow.

Country banks

There has been some outflow of currency to Cuba.

Foreign exchange rates have declined progressively, the exchange market
i s nervous, and there i s l i t t l e b a s i s f o r expecting early improvement.
The security market has been subjected to d r a s t i c cuts since November
of l a s t year and i s s t i l l reactionary.

Great slumps have occurred in the

l a s t month in the prices of common stocks of industrial corporations.

Rail-

road common stocks, following a recent advance, have reacted somewhatPreferred stocks are s t i l l declining-

The edge i s temporarily off the bond

market: following a shprp r i s e , the prices of bonds have become stationary
and, i n some c a s e s , have declined s l i g h t l y .

On the other hand, new note

i s s u e s are being absorbed exceedingly w e l l .

There has been an increase i n




1040
D i s t r i c t No. 2 (New York) - 3 -

X-2060

the l a s t two weeks in the sales on B r i t i s h and Dutch account of American
s e c u r i t i e s in the New York market.
Every "bank statement shows, that loans and discounts are going up,
while deposits are going down.

This i s s u f f i c i e n t answer to the c r i t i -

cism from some quarters that the banks are not properly taking care of
the commercial i n t e r e s t s of the country.




H. B. HEPBURN,

1041
X-2060
D i s t r i c t No* 3 (Philadelphia)

The "business s i t u a t i o n in the Third Federal Reserve D i s t r i c t may be
described as being very "blue"; merchandise i s s t e a d i l y f a l l i n g in price;
in some instances as much as from 50 to 7$ per cent, without finding purchasers.

"With cotton f o r next month's delivery quoted below 19 cents a

pound, refined sugar at 10 cents and raw sugar under 6 cents a pound, coffee
around 7 cents a pound, wool and s i l k demoralized, and a large number of
other materials and commodities s e l l i n g below the c o s t of production, i t i s
a question whether th& readjustment in values has not gone f a r enough*"
In t e x t i l e l i n e s the outlook i s bad*

Many m i l l s working only one-quarter

to one-half time, and some closed down altogether.
are particularly bad*

Leather and glazed kid

Manufacturers have large stocks on hand, both raw and

f i n i s h e d , with very few, if any, buyers,

The r e t a i l trade has only within

the past few weeks seemed ready to make a readjustment in their prices*
The merchants are new advertising extensively, o f f e r i n g their stocks at
greatly reduced p r i c e s , endeavoring to stimulate sales*
The public has apparently made up i t s mind that i t has been held up and
forced to pay exorbitant prices and i s on a strike against the r e t a i l e r , who
up to t h i s time has been unwilling to reduce h i s p r i c e s , and take the l o s s
on h i s stock? but has been trying to unload before the readjustment comes *
labor i s much more p l e n t i f u l and e f f i c i e n t , producing much more in a
day's work; transportation has improved so that merchandise i s moving more
expeditiously#

The Pennsylvania Railroad reports that i t handled the highest

volume of f r e i g h t t r a f f i c ever transported on i t s system during the month of
October- h Reports from a l l Divisions, which have j u s t reached the general
o f f i c e s in Philadelphia, show that during the month an average of nearly
24,000 loaded cars per day, or l 6 7 , 4 6 l per week, were forwarded to t h e i r
respective destinations•



This represents more than 870,000 tons of f r e i g h t

1042

D i s t r i c t No. 3 ( P h i l a d e l p h i a )
-2-

X«20£0

a day, or over 6,000,000 tons a week, loaded on the Pennsylvania R a i l r o a d ,
or accepted toy i t from connecting l i n e s .

The n e a r e s t approach t o the

f i g u r e s f o r October of t h i s y e a r were those of the corresponding month of
1919* when the d a i l y average of loaded c a r s handled was 23,700."

The

f a r m e r , however, s t i l l complains of h i s i n a b i l i t y to move h i s crops to
market because of s c a r c i t y of labor and c a r s h o r t a g e .
The f i n a n c i a l s i t u a t i o n as f a r as the demand f o r money i s concerned
seems t o have improved, although bank loans show btit l i t t l e r e d u c t i o n .

The

peak a p p a r e n t l y has been reached.
Seme borrowers have l i q u i d a t e d t h e i r borrowings; t h i s i s p a r t i c u l a r l y
t r i e of the medium-sized b u s i n e s s houses, but the l a r g e c o r p o r a t i o n s and
manufacturing concerns are borrowing h e a v i l y , goods having backed up on
them because of l a c k of orders and heavy c a n c e l l a t i o n s *
I t i s l i k e l y t h a t a f r e s h demand f o r money w i l l occur when the n e x t
q u a r t e r of taxes are due in December.
Altogether, we would say t h a t b u s i n e s s and f i n a n c i a l c o n d i t i o n s are
f a r from s a t i s f a c t o r y and that the January statements of b u s i n e s s concerns
are going t o show heavy i n v e n t o r i e s and increased d e b t s , with l o s s e s on
account of heavy shrinkage i n v a l u e s .

Business houses who have much commer-

c i a l paper out through note brokers are l i k e l y t o experience d i f f i c u l t y
in renewing t h i s paper when t h e i r new statements are e x h i b i t e d .




T,. L. RUE

X-20&)
D i s t r i c t No. U (Cleveland.)
The Fourth Federal Reserve D i s t r i c t has many and d i v e r s i f i e d i n d u s t r i e s ,
and except f o r some seasonal a c t i v i t y , the demand f o r c r e d i t may "be said to
be f a i r l y c o n s t a n t .
The expansion of Bank c r e d i t in the p a s t year has been, i n some measure,
caused by c a p a c i t y operation of P l a n t s , which have been l a r g e l y expanded.
The orders necessary to run these P l a n t s were in hand u n t i l q u i t e r e c e n t l y , when c a n c e l l a t i o n s began and new orders were l a r g e l y h e l d up; manuf a c t u r e r s , however, report some e x c e l l e n t i n q u i r i e s , which are as y e t unclosed.

Where new b u s i n e s s has been closed in i r o n , s t e e l and machinery,

p r i c e s have been cut by the s u c c e s s f u l s e l l e r or matitifScturer 1 .

In many

manufacturing e s t a b l i s h m e n t s the working hours f o r the week haVe been r e dticed fVom twehty (20) to t h i r t y (30) p e r c e n t , i n order t o prolong work and
avoid l o s i n g good men; in the large e s t a b l i s h m e n t s , however, i n c e r t a i n i n d u s t r i e s some Departments have been shut down, and the operation of others
reduced, so t h a t many have been thrown out of employment.

C o l l e c t i o n s are

g e n e r a l l y reported slow, and Notes and Acceptances a r e being o f f e r e d f r e e l y
by debtors i n place of c a s h ;

Many of the f a r m e r s , i n s t e a d of paying o u t ,

are asking f o r a d d i t i o n a l c r e d i t to buy l i v e s t o c k , and expect to consume
t h e i r products by f e e d i n g them, hoping they w i l l get more i n t h i s way.
The lumber people report a q u i e t b u s i n e s s .

Some lumber i s b e i n g o f f e r e d

to d e a l e r s a t c o n s i d e r a b l y reduced p r i c e s ; they a r e , however, unwilling to
take on a d d i t i o n a l s t o c k s , unless i t i s a s p e c i f i c m a t e r i a l f o r which there
i s on immediate order i n hand.
In the Burley tobacco D i s t r i c t , the non-resident buyers are proposing
t o give Acceptances in place of cash, as h e r e t o f o r e .

The f i g u r e s are so

l a r g e t h a t the Banks w i l l be obliged to r e - d i s c o u n t with the Federal Reserve
Bank, and with t h e i r City correspondents.



1044
District

No. 4 (Cleveland)
-2-

X-2060

The demand f o r c o a l has in the p a s t few weeks* g r e a t l y slackened, due
no doubt to the p r o s p e c t of decreased working h o u r s , and a f a i r amount of
s u p p l i e s on hand* "based on f u l l working time.

P r i c e s have dropped t h i r t y

to f o r t y per cent*




V. S. ROWE.

'
D i s t r i c t No. 5 (Richmond)

X.2060

The F i f t h D i s t r i c t i s l a r g e l y a g r i c u l t u r a l -

The more i n d u s t r i a l and

commercial s e c t i o n s f i n d t h e i r market i n t h e farming d i s t r i c t , and are
d i r e c t l y a f f e c t e d by conditions t h e r e .
Crops have "been u n i v e r s a l l y good, the weather f i n e f o r h a r v e s t i n g , b u t
prices disappointing.

The wave of p r o s p e r i t y f o l l o w i n g the h i g h p r i c e d crops

of l a s t y e a r led our people to p r o d i g a l i t y i n expenditures and they have
apparently thought i t - i m p o s s i b l e f o r p r i c e s to recede a g a i n .

Now t h a t r e -

c e s s i o n has occurred, although from n a t u r a l c a u s e s , the impression seems
to p r e v a i l l a r g e l y t h a t t h e r e has been combination somewhere t o prevent the
farmer from reaping the f r u i t s of h i s t o i l , and that i n t h i s to some e x t e n t
the Federal Reserve Banks have p a r t i c i p a t e d .
In tobacco s e c t i o n s there i s some improvement-

The farmers are r e a l i z i n g

t h a t i f business s t a r t s up they must s e t the b a l l i n motion by marketing t h e i r
p r o d u c t s , whether p r i c e s are a l l t h a t could be d e s i r e d o r n o t .
Cotton p r i c e s are so low t h a t no one w i l l s e l l , and, indeed, i f o f f e r e d
i n large q u a n t i t i e s , there would be no market.
half time.

They have no advance o r d e r s .

The m i l l s are running about

They cannot borrow money f o r s t o r i n g

the raw m a t e r i a l or manufactured product, even i f so i n c l i n e d .
There i s p r a c t i c a l l y no b u i l d i n g .

Lumber yards are h e a v i l y stacked and

are without orders*
t a b o r conditions a r e l e s s s t r a i n e d , many i n d u s t r i e s a r e l a y i n g off hands,
labor i s p l e n t i f u l b u t i n e f f i c i e n t , wages being reduced.
The market f o r r e a l e s t a t e , investment s e c u r i t i e s , e t c . , very a c t i v e
u n t i l r e c e n t l y , i s l a r g e l y c u r t a i l e d , lands s t i l l h i g h b u t no changing hands.
C o l l e c t i o n s slow, some f a i l u r e s and more would ensue i f s e t t l e m e n t s were
g e n e r a l l y demanded.

There i s , however, a s p i r i t of c o - o p e r a t i o n and everybody

f e e l s s a t i s f i e d t h a t p r e s e n t c o n d i t i o n s cannot be long p r o t r a c t e d and t h a t a



D i s t r i c t No. 5 (Richmond)
' '

1046
-2-

X-2060

country as productive as ours must be fundamentally sound.
The banks are g e n e r a l l y urging l i q u i d a t i o n b u t are i n c l i n e d to be l e n i e n t «
They a r e g r a n t i n g s h o r t extensions with hope of gradual c u r t a i l m e n t .
seeking no „new l o a n s .

They a r e

They r e a l i z e that without some movement of the crops

and some repayments, funds cannot be f u r n i s h e d f o r holding crops or f o r other
purposes.

Many of the banks themselves are borrowing e x c e s s i v e l y .

Our people g e n e r a l l y do not understand why, with good c o l l a t e r a l , they
cannot borrow a l l they want, nor why there should be a shortage of c a s h ,
prominent c i t i z e n asked a few days ago,, i n a l l s e r i o u s n e s s of a l l the money?

Where i s the Government p r i n t i n g p r e s s ?

,

A

What h a s become
Why cannot they

p r i n t s u f f i c i e n t t o take care of the crops?
The farmers had p l e n t y l a s t w i n t e r .
borrowed t o make t h e i r crops.

They spent l a v i s h l y .

They have

They now see no reason why t h e i r products

should'not be r e a d i l y marketed and not a few are i n d i f f e r e n t as to whether
t h e i r debts are paid or n o t .
In the l a s t ten days of October, loans to member banks i n the 5th
D i s t r i c t were c u r t a i l e d everywhere except i n
reduced from 136 m i l l i o n s to 1)2 m i l l i o n s .

North and South Carolina, being
Our Federal Reserve Bank i s now

borrowing 10 m i l l i o n d o l l a r s , although at one time i t was borrowing 30
millions.

In both the Federal Reserve and S t a t e Banking systems some banks

are uncomfortably expanded and t h e s e , as w e l l as some commercial houses, need
careful attention.
Lower p r i c e s are beginning to be n o t i c e a b l e b u t the people seem l i t t l e
i n c l i n e d to buy.

There i s a l a r g e c l a s s vtiio have an i d e a t h a t i n emergencies

l i k e the p r e s e n t , the Government should take c a r e of them.

This f e e l i n g seems

to p r e v a i l throughout the country ani the sooner we get away from i t the b e t t e r .




JOS. G. BROFN.

1047
D i s t r i c t No. 6

X—2O6O

(AtlantS)

In order ,to obtain a composite p i c t u r e of conditions i n our d i s t r i c t at
t h i s time, I addressed a communication t o bankers in the various f i n a n c i a l
c e n t e r s located t h e r e i n .

I f i n d p r e t t y much the same s t o r y coming from

Tennessee t h a t i s t o l d in Louisiana, these r e p r e s e n t i n g the extreme ends of
the d i s t r i c t .

The only v a r i a t i o n in t h e t e l l i n g of i t i s the d i f f e r e n c e i n

the commodities involved.

The c o ndition of the crop v a r i e s somewhat from a

poor y i e l d to a f a i r one but the market conditions are very much the same
whether i s be the products of the t e x t i l e m i l l s i n Tennessee, the lumber of
F l o r i d a , the r i c e of Louisiana or the cotton of Georgia.

The only notable

exception i s the a n t i c i p a t e d crop of annual t o u r i s t s to F l o r i d a which w i l l
mature more r a p i d j y beyond Thanksgiving.

F l o r i d a i s f u r t h e r favored by the

l a r g e s t c i t r u s f r u i t crop in i t s h i s t o r y and the n a v a l s t o r e s i n d u s t r y i s
reported t o be i n a prosperous c o n d i t i o n .

Tennessee i s c a r r y i n g a considerable

volume of both c o t t o n and tobacco over from l a s t season as well as s u f f e r i n g
from a stagnant market of the present crop.

I was s u r p r i s e d to l e a r n from

one of my correspondents t h a t some c o t t o n of the b e s t grade had sold r e c e n t l y
at 1 7 | cents.
In M i s s i s s i p p i the lumber i n d u s t r y i s in a condition of p r o s t r a t i o n and
h e r long s t a p l e c o t t o n , the p r i d e of h e r production, i s no b e t t e r off as to
demand than i t s s m a l l e r s i s t e r of the s h o r t s t a p l e v a r i e t y .

A c o t t o n producer

of the d e l t a country t o l d me r e c e n t l y t h a t he had made the most b e a u t i f u l
white cotton t h a t he had ever seen, picked and ginned without r e c e i v i n g a drop
of r a i n , the same kind of cotton which l a s t year brought 97s p e r pound b u t
which t h i s year could not be sold at 40 c e n t s .

He maintains t h a t t h i s i s under

the c o s t of production*
In Louisiana the problem of slow l i q u i d a t i o n of c o t t o n loans i s being
shared, and b e s i d e s the sugar, r i c e , and timber production have t h e i r own
burdens.

The sugar acreage is g r e a t e r than u s u a l m d while t h e r e are no




D i s t r i c t No. 6 ( A t l a n t a )

'

~2~

r

X-20b0

i n d i c a t i o n s of p r o f i t to the p l a n t e r , there w i l l probably be a f a i r demand a t
p r i c e s s u f f i c i e n t to l i q u i d a t e the c o s t of production*

The r i c e crop w i l l

reach the volume of about 13,000,000 pockets in the United S t a t e s of which
about two t h i r d s roust f i n d a market abroad*

The average p r i c e l a s t year was

around 11 c e n t s while t h i s year i t w i l l be aroiihd 5 c e n t s .
6losing down as ih o t h e r s e c t i o n s of the lumber b e l t *

The sawmills are

In Georgia the chief

cause of f i n a n c i a l concern i s i n the s t a t u s of the c o t t o n crop#
has done h i s worst there t h i s year*

The b o l l - w e e v i l

The d i s p o s i t i o n to hold by the producer i s

q u i t e marked % In t h a t s t a t e as i n o t h e r p a r t s of the c o t t o n a r e a , even i f the
producer would s e l l there i s but l i t t l e demand due to the deranged condition
of the export market*
In Alabama the c o n d i t i o n s are much the same as i n Georgia except t o the
e x t e n t t h a t they may be changed by the i n d u s t r i a l p r o d u c t i o n .

There i s a slow-

ing up however i n the demand f o r p i g i r o n and s t e e l products ana. i n the manuf a c t u r e of machinery*

These are a l l being somewhat a f f e c t e d by the Cuban

moratorium*
The mercantile c o n d i t i o n s i n the Sixth D i s t r i c t are not m a t e r i a l l y
d i f f e r e n t from those i n o t h e r d i s t r i c t s unless i t be t h a t because of the r e moteness of the merchants t h e r e i n from l a r g e merchandise c e n t e r s , t h a t p r i c e
reductions are much slower*

Notwithstanding these a d v e r s i t i e s , there e x i s t s a

very determined and c h e e r f u l a t t i t u d e toward the problems of b u s i n e s s throughout
the D i s t r i c t ,

The bankers t o g e t h e r with those of other p a r t s of the South are

i n d u s t r i o u s l y engaged i n organizing the Federal I n t e r n a t i o n a l Banking Company
to be located at New Orleans.

This w i l l be under the Edge Act and w i l l have a

minimum c a p i t a l of s i x m i l l i o n s of d o l l a r s .




OSCAR TOLLS

X-2060
D i s t r i c t #7(Chicago)
In general, the business Conditions i n t h i s D i s t r i c t have
continued t o follow the course which began e a r l i e r i n the year*

In

v a r i o u s b a s i c commodities, p r i c e r e c e s s i o n s have continued a s i n d i c a t e d
by the v a r i o u s index numbers t h a t have been p u b l i s h e d .

According t o

B r a d c t r e e t ' s index, t h e t o t a l decline since May 1 s t i s 18.5 p e r cent.
The p r i c e s of t e x t i l e s and hides have been e s p e c i a l l y a f f e c t e d , and
t h e r e has been a l s o a marked decline i n the p r i c e s of chemicals and
automobiles.
cement

On the other hand, the p r i c e s of i r o n , s t e e l , coke, coal

and g l a s s show l i t t l e change.

Kow f a r r e t a i l p r i c e s have been a f f e c t e d by the undoubted r e duction i n the wholesale p r i c e s of many commodities.; it, i s d i f f i c u l t t o
state.

To be sure, the United S t a t e s Bureau of Labor S t a t i s t i c s pub-

l i s h e s monthly index numbers of r e t a i l p r i c e s , which show a d e c l i n e from
the record high point of 215 i n July t o 203 i n August, but t h e s e index
numbers cover only a r t i c l e s of food, 22 i n number.

The l a r g e zzail order

houses have a l l announced r e d u c t i o n s i n p r i c e s , c h i e f l y on account of
the f a c t t h a t most of them were overstocked and f e l t compelled t o l i q u i date and s t i m u l a t e t h e s a l e s which have declined c o n s i d e r a b l y .

One mail

order house (Sears Roebuck & Company) s t a t e s t h a t i t s s a l e s f o r October
showed a d e c l i n e of %0 per cent from the same month l a s t y e a r .

Another

l a r g e mail order house (Montgomery Ward & Company) r e p o r t s t h a t i t s s a l e s
f o r October, 1920, showed a decrease of 37*9 per cent from October, 1919.
A s i m i l a r s i t u a t i o n i s i n d i c a t e d by the r e p o r t s of other l a r g e r e t a i l e r s .
I t can, t h e r e f o r e , be taken f o r granted t h a t l i q u i d a t i o n i s continuing.
I t cannot be expected t h a t t h e r e w i l l be any permanent changes i n
many commodities u n t i l wages a l s o decrease from t h e i r p r e s e n t high p o i n t .



1050
/ D i s t r i c t #7 (Chicago)

-t£t»

X-2060

In t h i s r e s p e c t t h e r e has been very l i t t l e change, though undoubtedly
w i t h i n t h e next months some a d j u s t m e n t s w i l l t a k e p l a c e .

In t h i s

connection one of t h e l a r g e s t e e l companies, s i t u a t e d c h i e f l y i n
Chicago, announced on October 2.6 t h a t i t was l a y i n g off 1,000 men. S t i l l
more r e c e n t l y i t was announced i n the d a i l y p r e s s t h a t an agreement had
been signed i n t h e b u i l d i n g t r a d e s of Chicago t o a r b i t r a t e a l l d i s p u t e s
a r i s i n g before May 1, 1922.

At the same time, t h e unions made a w r i t t e n

promise not t o ask f o r h i g h e r wages a t the e x p i r a t i o n of p r e s e n t contracts,

All t h i s gives r i s e t o a b e l i e f t h a t wages w i l l follow a d j u s t -

ments i n p r i c e s , though i t may be somewhat slowly.
As r e g a r d s t h e g r a i n s i t u a t i o n , t h e corn crop i s t h e h i g h e s t
i n f o u r t e e n y e a r s , and w i t h f o u r exceptions the b e s t i n t w e n t y - e i g h t
years.

I t w i l l amount t o over 3#000,000,000 b u s h e l s , which i s roughly

214,000,000 b u s h e l s $ore than i n 1919,
The wheat crop of 1$20 i s somewhat smaller t h a n l a s t y e a r ' s ,
t h e f i g u r e s being roughly 752,000,000 bushels a s a g a i n s t 940, 000,000
bushels.

The d i f f e r e n c e , however, i s almost made up by a c a r r y - o v e r

amounting t o over 150, 000,000 b u s h e l s .
The oat crop i s a l s o l a r g e , being about 1,444,000,000 b u s h e l s ,
which i s 156,000,000 b u s h e l s more than l a s t year and 2$,000,00C bushels
above t h e average f o r t h e l a s t t e n y e a r s .
As a r e s u l t of t h e s i z e of t h e s e crops and p a r t l y due t o general
c o n d i t i o n s , p r i c e s have receded.

Owing t o t h e s e lower p r i c e s t h e farmers

have t h r e a t e n e d t o withhold t h e i r crops u n t i l a h i g h e r p r i c e can be obt ai ned.
The e f f e c t of t h i s was n o t i c e a b l e f o r sometime e s p e c i a l l y i n t h e Southwest
but more r e c e n t l y shipments of g r a i n t o t h e primary markets have very cons i d e r a b l y i n c r e a s e d and a r e now up t o normal.



The b r i g h t p r o s p e c t s

1051
D i s t r i c t #7 (Chicago

X-2C60

-3-

i n t h e Southwest f o r next y e a r ' s crops have apparently had t h e psychologic
e f f e c t on the farmers there of inducing them t o l e t t h e i r g r a i n go a t
current market p r i c e s .

While throughout the Northwest the banks

have exerted t h e i r i n f l u e n c e t o induce or enforce l i q u i d a t i o n apparently
with some success.
The s i t u a t i o n i n the c a t t l e business, on t h e other hand, i s r e a l l y
a s e r i o u s one.

At the previous j o i n t meeting of the Federal Reserve

Board and t h e Federal Advisory Council, a committee appeared t o p r e s e n t
the s i t u a t i o n i n regard t o t h e c a t t l e r a i s i n g i n d u s t r y .

The conditions

then described have not improved, but those i n t e r e s t e d i n the l i v e stock
industry of the country now r e a l i z e t h a t n e i t h e r the government nor the
Federal Reserve Banks can render a d d i t i o n a l a i d .

They have turned to t h e

l a r g e r banks t o r e l i e v e soae of the dangers t o the i n d u s t r y , and i t i s
now proposed to have a group of banks s i t u a t e d i n Chicago, New York,
Boston, Omaha, Kansas City, Minneapolis and S t . Paul, underwrite a fund
of approximately $30,000,000 by means of which smaller and weaker banks
may be aided i n continuing to carry paper sold t o them by i n t r i n s i c a l l y
sound c a t t l e loan companies.

The Chicago banks have a l r e a d y agreed to
ranner
underwrite $8*000,000 of t h i s amount.
I t i s hoped i n t h i s
to
help the s i t u a t i o n , e s p e c i a l l y i n the s t a t e s of Montana, Idaho, Wyoming
and the Dakotas.
I t must be noted a s a s u r p r i s i n g f a c t , that i n s p i t e of the
stringency i n the money market, t h e r e has been no d i f f i c u l t y i n f l o a t i n g
new i s s u e s of s e c u r i t i e s .

To be sure, i n a l l cases the r a t e s of i n t e r e s t

and the terms of t h e i s s u e s have been unusually a t t r a c t i v e .

Among those

of s p e c i a l i n t e r e s t t o the Seventh Federal Reserve D i s t r i c t may be mentioned the following i s s u e s :




1052
D i s t r i c t #7 (Chicago)

$60,000,000
15, 000,000
40,000,000
50,000,000
8,000,000
1,000, 000
3,000,000
3,000,000
5,000,000
$00,000
^00,OCQ
-10,000.COO
$195,000,000

X-2C60

Armour & Company 7% n o t e s .
Morris & Company 7 a n o t e s .
Swift & Company '7% n o t e s .
Sears Roebuck & Cogtpany ~% n o t e s .
J
I l l i n o i s Central R.R. equipment n o t e s .
Public Service Company of Northern I l l i n o i s n o t e s .
Liquid Carbonic Company & n o t e s .
%
P f i s t e r & Vogel Leather Company 1% n o t e s .
Commonwealth Edison Company ~% n o t e s .
\
Edison E l e c t r i c Appliance Company ']% bonds.
S. F. Bowser & Company 6$ n o t e s .
National Leather Company
notes

Notwithstanding an increase i n savings bank d e p o s i t s , an unusually l a r g e
proportion of new i s s u e s have been -placed with small i n v e s t o r s so t h a t
i t has been found advisable t o issue s e c u r i t i e s i n denominations a s small
a s $100.00.

Government war i s s u e s a r e a l s o continuing to be absorbed by

the general p u b l i c i n a s a t i s f a c t o r y manner.
Business f a i l u r e s i n t h e Seventh Federal Reserve D i s t r i c t have
been somewhat on the i n c r e a s e in about the same proportion a s i n the
r e s t of the country. ,

The f a i l u r e s , however, have been n e i t h e r so l a r g e

nor so numerous a s t o cause any a n x i e t y , and on the whole r e p r e s e n t merely
the n a t u r a l process of weeding out firms which were enabled t o e x i s t
solely a s a r e s u l t of the abnormal conditions brought about by t h e war.
There has been considerable l i q u i d a t i o n of d e p o s i t s a t the c e n t e r s
e s p e c i a l l y t&ose of Country Banks,

This has r e t a r d e d t h e r e d u c t i o n i n the

borrowings a t the Federal Reserve Dinks by the l a r g e r member banks. However
f i f t y one banks i n Chicago r e p o r t i n g t o the Federal Reserve Bank on November
5 a s a g a i n s t 49 banks r e p o r t i n g on September 10th show the following contraction in their figures.
Loans and Investments reduced
Deposits reduced



$33,389,000
IS, 014, 000,
JAS. B. FORGtiL

1053
;

D i s t r i c t #8 ( S t . Louis)
PRICE READJUSTMENTS:

X-2C6o
Some manufacturers and a considerable number

of w h o l e s a l e r s , e s p e c i a l l y i n t e x t i l e , general c l o t h i n g , and footwear l i n e s ,
a r e making r e d u c t i o n s i n p r i c e s .

In not a few cases they a r e f r a n k l y

taking t h e i r l o s s e s , which, on account of the r e l a t i v e l y high p r o f i t s
during the p a s t s i x years, w i l l not embarrass many of the .concerns.

The

r e t a i l e r i n general i s not showing the same d i s p o s i t i o n t o reduce p r i c e s .
This i s due l a r g e l y t o the following reasons:
First:

He has on h i s shelves a considerable stock of high p r i c e d
goods upon which he wishes to get p r o f i t , or a t l e a s t c o s t .

Second: The consumer i s yet wary of buying.
Third:

Many r e t a i l e r s a r e poor merchants, and n e g l e c t t h e f i r s t and
l a s t r u l e of good merchandising - namely, t o t u r n t h e i r goods.
They have become accustomed during the l a s t several years, t o
such high p r o f i t s t h a t i t seems impossible t o many of them
t h a t they should have t o s e l l goods e i t h e r on a small, or no
margin of p r o f i t .

The p o t e n t i a l buying power of the p u b l i c i s jtet very great but they
had t o pay such r a p i d l y advancing p r i c e s during the war period, t h a t they
are r e b e l l i o u s *

As a coisequence, goods a r e not being turned at a

desirable rate.

A period of f a l l i n g p r i c e s , succeeding one of very

rapidly r i s i n g p r i c e s , does not - contrary t o popular opinion - stimulate
demand.

The a g r i c u l t u r e i n t e r e s t s , e s p e c i a l l y those having wheit and

cotton, g r e a t l y r e s e n t the f a l l i n g p r i c e s , and a r e making e f f o r t s t o hold
t h e i r commodities.

C o l l e c t i o n s i n general a r e only f a i r .

Normally, loans

would be paid off a t t h i s season of the year, out many w i l l continue o u t standing f o r a p e r i o d , u n t i l i t i s f a i r l y c l e a r both to the consumer and
to the farmer, t h a t nothing i s t o be gained from s t a y i n g out of the market.
FINANCE AND CREDIT:

S t . Louis bank c l e a r i n g s between January and

J u l y , 1920, were from 6$ t o 10% above the same p e r i o d of 1919*

Since

J u l y , bank c l e a r i n g s f o r every week except one have been below those of the
same weeks of 1919> the monthly d e c l i n e s being from lf> t o 9$ below those




1054
D i s t r i c t #S (St+ Louis)

-2-

of July t o November, IQIQ,,

X-2C60

Loans,, discounts, and d e p o s i t s of St, Louis

banks normally i n c r e a s e between July 1 s t and November 1 s t .

Last year

the i n c r e a s e i n l o a n s and discounts during t h i s period was 10$.

A

s l i g h t decrease of l e s s than one percent was shown t h i s year during the
July-November p e r i o d .

While the volume of loans and discounts i s g r e a t e r

on November 1 s t , 1$20 than on November 1 s t , 1919; yet the i n c r e a s e
occurred during t h e f i r s t half of the year.

On July 1 s t , 1920, loans

and discounts were but 33^ g r e a t e r than a year ago.

But, due to the

absence of the normal i n c r e a s e from July to November, l o a n s and discounts
on November 1 s t , 1920, were only 19$ more than on November 1 s t , 1919*
Thus, the demand f o r funds was g r e a t e r so much e a r l i e r i n the year, t h a t
the s t r a i n on t h e banks during l a s t summer and early autumn was marked*
This condition was accentuated by the decline in bank d e p o s i t s between
July 1 s t and November 1 s t of t h i s year.
S$ i n t h i s p e r i o d .

Last year d e p o s i t s increased

This year they declined 3$.

The d e p o s i t s of country

banks with S t . Louis banks, were 32$ smaller on November 1 s t , 1920 than
on November 1 s t , 1919LABOR SITUATION:

There i s l i t t l e unemployment, and i n p r a c t i c a l l y

no l i n e i s t h e r e a s c a r c i t y of l a b o r .

There i s l i t t l e or no d i s p o s i t i o n

t o demand i n c r e a s e s i n wages, and some groups of l a b o r e r s a r e becoming
i n t e r e s t e d i n the prospect of holding t h e i r jobs a t the p r e v a i l i n g wages.
I t i s q u i t e p o s s i b l e , with a f u r t h e r readjustment i n p r i c e s , t h a t the
wage earner w i l l be w i l l i n g t o accept a r e d u c t i o n i f , a f t e r a period, i t
seems very evident t h a t the manufacturer and d i s t r i b u t o r has stood a l l
the l o s s e s which a r e p o s s i b l e , and f a i r f o r him, .




1055
D i s t r i c t #8 (St* Louis)
BUILDING CONSTRUCTION:

X-2C60
Building c o n s t r u c t i o n has been, and s t i l l

continues, on a very moderate basis*

There has been a d i s p o s i t i o n t o

wait f o r lower p r i c e s in construction z i a t a r i a l s and wages*
SUMMARY:

The general business and f i n a n c i a l s i t u a t i o n i s not one

which i s occasioning any alarm.
future*

There i s a f e e l i n g of confidence i n the

Few business men believe t h a t we a r e soon t o have boom times,

and most of them a r e convinced of t h e n e c e s s i t y and a r e w i l l i n g t o
accept the l o s s e s of r e a d j u s t m e n t .

Indeed, t h e r e i s a wide spread d i s -

p o s i t i o n t o w a n t t t o get on a sound, s u b s t a n t i a l b a s i s as soon a s p o s s i b l e .
There a r e few who have any thought t h a t a panic i s t h r e a t e n e d , but on
the contrary, a r e calmly viewing a period of i n d u s t r i a l slowing up,
preliminary t o a spring period of some i n d u s t r i a l improvement, and subs t a n t i a l , if not exceedingly prosperous, business c o n d i t i o n s .




F„ 0. WATTS.

1056
, D i s t r i c t No. 9 (Minneapolis)

X-2C60

Business i n the Minneapolis D i s t r i c t i s slowing down q u i t e f a s t
in a l l l i n e s .

This began l a t a l a s t spring, s t a r t i n g i n the automobile

and t r a c t o r business and gradually extending, u n t i l now i t covers a l l
lines.

This D i s t r i c t , being l a r g e l y an a g r i c u l t u r a l one, our turnover

i s a f f e c t e d by the outcome of our farm products and the p r i c e which these
bring.

Grain crops, outside of corn, a r e not up t o the average, wheat

e s p e c i a l l y being below the average, and t h i s l a t t e r i s our g r e a t e s t cash
producing crop.

The y i e l d of corn i s above the average, but t h i s g r a i n

does not move t o market e a r l y , i t being mostly used up i n feeding l i v e
stock, which b r i n g s i n money t o the country a f t e r the t u r n of the y e a r .
tets,

rye, b a r l e y , and f l a x , a r e a s a r u l e below the average crop, w i t h

the p o s s i b l e exception of o a t s .
The very heavy cost of seeding and h a r v e s t i n g of t h i s y e a r ' s crop
has been a d r a i n on a l l of the banks i n the D i s t r i c t , and t h i s , with the
small r e t u r n i n bushels, i n a d d i t i o n to the very severe break i n p r i c e s
during the p a s t s i x t y days, i s making a very d i f f i c u l t s i t u a t i o n f o r a l l
of the i n t e r i o r banks.

N a t u r a l l y , l i q u i d a t i o n which goes on when the se crops

a r e being sold i n the f a l l i s being e n t i r e l y changed, f i r s t , because of t h e
f a c t t h a t what crops the farmers have, a t the present p r i c e s , a r e not s u f f i c i e n t t o pay a l l t h e i r debts, and second, because of the break i n p r i c e s
many farmers a r e r e f u s i n g t o s e l l what they- have, and t h e r e i s shrinkage
in t h e i r d e p o s i t s from those who owe nothing and who w i l l not s e l l t h e i r
g r a i n . Country banks a r e being importuned f o r a d d i t i o n a l accommodations, and
a s they a r e more or l e s s i n sympathy with the farmer i n h i s endeavor t o hold
h i s grain f o r higher p r i c e s , they a r e i n every way t r y i n g t o meet t h i s demand
by borrowing from the Federal Reserve Bank and t h e i r o t h e r c i t y correspondents.



1057
D i s t r i c t No. 9 (Minneapolis)

-2-

X-2C60

BANKING.
Conditions i n t h e banking business a r e not easy, e s p e c i a l l y
so i n the i n t e r i o r banking p o i n t s .

Many banks f i n d themselves heavily

loaned up, i n many cases with n o n - l i q u i d a s s e t s , caused by the heavy
speculation i n farm lands and the purchase of t r a c t o r s and automobiles,
and the e r e c t i o n of new b u i l d i n g s .

Tnis f o r c e s them i n t o tne Federal

Reserve Bank and the c i t y correspondents for excessive amounts - much more
than they ever were accustomed t o ask f o r in previous y e a r s , making the
s i t u a t i o n f a r from easy and, i n f a c t , i n many p l a c e s uncomfortably c l o s e .
The determined e f f o r t upon the p a r t of the farmers t o avoid
t h e s e l l i n g of t h e i r grain on the present low market i s a f f e c t i n g c o l l e c t i o n s ,
not only w i t h t h e i r own banks but with jobbers and manufacturers, through the
f a c t t h a t l o c a l merchants i n the various small towns a r e unable to l i q u i d a t e
their bills*

This i n t u r n stops the l i q u i d a t i o n of l o a n s to c i t y banks from

t h e i r l a r g e r customers, and from p r e s e n t appearances, means t h a t a great many
l o a n s which a r e n a t u r a l l y paid before t h e f i r s t cf the year a r e going t o be '
c a r r i e d over i n t o t h e new y e a r .

There i s one thing, however, which I

b e l i e v e t o be a good t h i n g , and t h a t i s the present closeness of money;
and tne l o s s which most of the farmers a r e up a g a i n s t on account of the p r i c e s
i s f o r c i n g the very closest economy, not only i n expenditures but i n purchases,
and if t h i s i s c a r r i e d through the next year I have no doubt t h a t our D i s t r i c t
w i l l snow a very rapid recovery and our conditions be more nearly normal a f t e r
t h e h a r v e s t i n g of next y e a r ' s crop.
At the p r e s e n t time I cannot see very much p r o s p e c t of t h e l a r g e r c i t y
banks being a b l e t o go out of debt to the Federal Reserve Bank f o r some months
t o come; i n f a c t , my opinion i s t h a t they w i l l be borrowers a t the Federal
Reserve Bank through the year 1921,



C. T. JAEKRAY

±058
'

. D i s t r i c t No. 10 (Kansas City)

X-SC60

Conditions i n t h i s D i s t r i c t have been unusual and d i s a p p o i n t i n g .
The second l a r g e s t crop of wheat was r a i s e d t h i s year i n Kansas and i t
was n a t u r a l t o expect t h a t d e p o s i t s would i n c r e a s e and l o a n s would be
l i q u i d a t e d , but on t h e other hand d e p o s i t s did not go up and t h e r e has
been a p r e s s i n g demand f o r money,

I# the f i r s t place the R a i l r o a d s could

not f u r n i s h c a r s t o move the wheat, and when the wheat began t o decline
the farmers did not care t o s e l l , but r e c e n t l y the banks in the l a r g e r
c e n t e r s have been p r e s s i n g the country banks to have the farmer ship any
way enough of h i s products t o pay h i s indebtedness*

This move i s beginning

t o show some r e s u l t , but r a t h e r slow*
There appears t o be nothing i n the mercantile t r a d e t o i n d i c a t e any
decided change i n the tendency p r e v a i l i n g f o r some time.

The sweeping

p r i c e reductions of the l a s t few weeks seem t o have u n s e t t l e d t h e p u b l i c
t o such an e x t e n t t h a t purchasers a r e holding off buying beyond the a c t u a l
n e c e s s i t i e s , expecting p r i c e s t o go down s t i l l more*
r e t a i l e r s a r e more cautious in t h e i r buying than ever*
endeavoring t o
mouth.

unload

Wholesalers and
Retailers are

t h e i r high cost stocks and a r e buying from hand t o

The wholesalers have had some unpleasant experiences with t h e i r

customers, some c a n c e l l i n g orders while others a c t u a l l y r e t u r n goods which
had been shipped t o them.
Underlying these conditions t h e r e seems t o be a f e e l i n g , however, uhat
business w i l l , with adjustments now going on, begin to improve a f t e r the
new y e a r .

Whether the "wish i s f a t h e r t o the thought" i s t o be seen l a t e r .

The l i v e stock s i t u a t i o n has improved*

There have not been a s many .

c a t t l e coming t o market a s compared with one or two y e a r s ago*

The farmers

have abundance of feed and i n a l l cases where p o s s i b l e the banks have t r i e d
t o a i d i n c a r r y i n g these c a t t l e over a s t h e r e i s no question but t h a t there



1059
X-2060

D i s t r i c t No. 10 (Kansas City)

i s a shortage i n meat animals.
Production of crude o i l i s about 400,000 b a r r e l s p e r day i n
Kansas and Oklahoma.

The output i s i n excess of the consumptive demand

and t h e t e i s a tendency t o hold back oh development o p e r a t i o n .
In the lead and s i n e f i e l d s production of ores has been r e g u l a t e d
by market demand.

In October, f o r i n s t a n c e , nearly a l l the mines were

shut down f o r p e r i o d ' o f two weeks in order to c u r t a i l the output and
dispose of l a r g e surplus stocks.
Building o p e r a t i o n s have slumped p e r c e p t i b l y during t h e l a s t half
of the year, but with g r e a t l y lowering p r i c e s of m a t e r i a l i n d i c a t i o n s
a r e t h a t renewed a c t i v i t y w i l l come along i n t h i s l i n e .




E. F. SWINNEY.

10<
P i f t r i c t No. 11 ( D a l l a s )

X~2C6o

The depressed cotton market and c a t t l e market h i t hard the two p r i n cipal i n d u s t r i e s of t h i s d i s t r i c t / making t h e loanable values of these
commodities u n c e r t a i n from the bankers' viewpoint, even if abundant funds
were a v a i l a b l e , and a s a consequence t h e r e i s a t the p r e s e n t time c o n s i d e r a b l e pessimism,- with the cotton r a i s e r s p r i m a r i l y because they cannot
borrow funds with which t o carry over t h e i r crops, and w i t h t h e c a t t l e
i n t e r e s t s because many cannot get renewals aba extensions of t h e i r p r e s e n t
l o a n s , and another l a r g e c l a s s a r e unable t o borrow money with which t o buy
c a t t l e t o r e - s t o c k t h e i r ranges, t h e ranges a s a whole being sparsely stocked
a t t h e p r e s e n t time.
These same c o n d i t i o n s make the banker more cautious and, with u n c e r t a i n
markets ahead f o r both of said main commodities, the conservative banker i s
slow t o a v a i l himself of discounting p r i v i l e g e s with the Federail Reserve Bank,
and a s a f u r t h e r consequence of t h i s dual s i t u a t i o n money remains t i g h t with
p r e v a i l i n g high r a t e s .
From a general view p o i n t , however, conditions a r e thoroughly sound, as
we have r a i s e d an abnormal cotton crop, which, even a t t h e low

p r i c e , when

marketed w i l l r e t u r n a v a s t sum of money; and I b e l i e v e I am s a f e i n saying
t h a t the major p o r t i o n of t h e c a t t l e l o a n s a r e being a d j u s t e d and extended,
so t h a t comparatively few c a t t l e from t h i s d i s t r i c t a r e being forced upon t h e
market and, a s t h e range c o n d i t i o n s are exceptionally good and c a t t l e w i l l
remain f a t during t h e w i n t e r , i t i s probable t h a t a l a r g e amount of these
loans w i l l be l i q u i d a t e d , even before s p r i n g .
1 b e l i e v e every w e l l - p o s t e d t h i n k i n g man h i s the utmost confidence i n t h e
outcome, without very s e r i o u s detriment or l o s s t o any one who i s reasonably
conservative, though t h e r e i s q u i t e a considerable element t h a t complain
g r e a t l y and seem unable t o r e a l i z e t h a t we a r e going through the necessary
readjustment period n e c e s s i t a t e d by the i n f l a t i o n during war times, and many



X-2060
D i s t r i c t No. 11 (Dallas)
seem not to r e a l i z e t h a t i t i s impossible to d e f l a t e without reducing and
r e s t r i c t i n g t o a considerable extent a l l commercial a c t i v i t i e s .
In my opinion one of the g r e a t e s t works f o r the banker i s t o t a l k w i t h
and convince h i s customers, and a l l with whom he comes i n contact, t h a t we
a r e going through a necessary period of re-adjustment, and such only a s has
followed a l l the g r e a t wars, but with our own country i n b e t t e r condition
and experiencing l e s s disturbance from t h i s readjustment than any other
n a t i o n i n the world.
The banks of t h i s d i s t r i c t a r e a s a whole i n a thoroughly s t r o n g and
s a f e p o s i t i o n , and indeed probably some could be properly c r i t i a i z e d f o r not
being more l i b e r a l toward t h e i r customers, and t o t h a t end a v a i l i n g themselves
t o a g r e a t e r extent of t h e i r discount p r i v i l e g e s w i t h the Federal Reserve Bank.




R. L. BALL.

1062
I j i s t r i c t No. 12 (San Francisco)

X-2060

F i n a n c i a l and Commercial S i t u a t i o n i n the Twelfth D i s t r i c t with s p e c i a l
r e f e r e n c e t o the Northwest:
lumber:

This l e a d i n g i n d u s t r y of the Northwest shows a f a l l i n g off due
to increased f r e i g h t r a t e s which make i t almost impossible f o r
our m i l l s to compete in the Eastern markets, although some of
the t i d e w a t e r m i l l s are g e t t i n g r e l i e f by water shipments*
However, the r a i l r o a d s a r e now purchasing lumber which i s keeping
some of our lumber m i l l s i n operation-

Housing c o n d i t i o n s through-

out the United S t a t e s a l s o would seem to i n d i c a t e t h a t b e f o r e long
there should be a pronounced demand f or the output of our m i l l s .
fis y e t the average wage paid in our lumber m i l l s , v i z , *8.00 p e r
diem, has not been reduced, hut unless l a b o r accepts a reduction
of the present s c a l e more.of our m i l l s w i l l have to c l o s e down.
Wheat;
Flour

The farmers who a r e able t o hold t h e i r wheat are n o t disposed t o
s e l l at the present p r i c e .

Indeed, t h e r e i s not much movement in

wheat as "buyers g e n e r a l l y are out of the market due i n l a r g e
measure t o the c o n d i t i o n of f o r e i g n exchange.
i s comparatively l i t t l e l i q u i d a t i o n

The r e s u l t i s there

of t h i s y e a r ' s c r o p .

Most of

the country f l o u r i n g m i l l s have closed down and those who are
buying a r e only purchasing i n small q u a n t i t i e s .

This check i n

l i q u i d a t i o n of our most important crop has r e s u l t e d i n the country
hanks l e a n i n g h e a v i l y on t h e i r c i t y correspondents at a time of the
year when u s u a l l y the country "banks are not only n o t indebted to
the c i t y banks, b u t on the o t h e r hand a r e c a r r y i n g hansoms b a l a n c e s .
Salmon:

While the salmon pack on the Columbia River i s moving and s e l l i n g
a t s a t i s f a c t o r y p r i c e s , n e v e r t h e l e s s fhe demand f o r Pinks and other
lower grades of salmon i s so l i m i t e d t h a t t h e r e i s a very l a r g e
carryover of the flasks, pack which means a t i e u p by the banks of




1063

,
-3D i s t r i c t Wo. 12 (San Francisco)

X-2060

l a r g e amounts of money.
Fruit:

Packing i n t h i s l i n e was munh c u r t a i l e d t h i s season by the high
p r i c e of sugar-

Although a goodly p o r t i o n of the output has

already been sold on c o n t r a c t , n e v e r t h e l e s s a p p a r e n t l y a cont r a c t i s regarded by purchasers only as an option, s i n c e i n many
cases purchasers are endeavoring to be r e l i e v e d from t h e i r
agreements.
Cattle-Wool: The s i t u a t i o n in the l i v e s t o c k i n d u s t r y i s very s e r i o u s .

The

absolute l a c k of demand f o r wool* making i t impossible t o dispose
of the same, has caused a very l a r g e c a r r y o v e r , with a consequent
t i e up of f u n d s .

Both with c a t t l e and sheep i t i s of paramount

importance t h a t p r o v i s i o n should be made f o r c a r r y i n g the stock
through the Winter.

.Although hay i s p l e n t i f u l and i s s e l l i n g as

low as $5-00 and $6.00 p e r ton (as a g a i n s t $20.00 to $25.00 l a s t
year) n e v e r t h e l e s s i t seems impossible f o r the stockmen to obtain
funds with which t o purchase f e e d .

Without an adequate supply

of f e e d the l o s s e s i n the sheep and c a t t l e b u s i n e s s t h i s coming
Winter w i l l be enormous.

This, t o g e t h e r with the f o r c e d s a l e s

now t a k i n g place of young cows and breeding ewes, not only vi 11
s e r i o u s l y c r i p p l e the l i v e s t o c k i n d u s t r y of the c o u n t r y , b u t
a l s o w i l l endanger the meat supply of the United S t a t e s .
General
Business:

Our wholesalers and jobbers continue to report b u s i n e s s as good
and g e n e r a l l y claim t h a t the volume i s g r e a t e r than f o r the same
period i n 1919down.

They s t a t e c o l l e c t i o n s are f a i r b u t slowing

All recognize however with c o n d i t i o n s a s they a r e through-

out the Northwest, t h a t s a l e s must f a l l o f f , and i n o r d e r to
move stocks some a r e quoting lower p r i c e s t o i n t e r i o r merchants.




A

y

r.

D i s t r i c t No. 12 (SanFtiicisco)

-3-

x-2060

They a l s o report some c a n c e l l a t i o n * of o r d e r s .
R e t a i l e r s i n P o r t l a n d , e s p e c i a l l y the department s t o r e s , shoe
s t o r e s and c l o t h i n g houses, are c u t t i n g p r i c e s from 25 to 35
per cent.

They advise they a r e "buying from the East only in

small q u a n t i t i e s , and t o supply t h e i r absolute needs. Ret a i l e r s s t a t e that the c h a r a c t e r of t h e i r s a l e s has changed
from a y e a r ago.

%e re as at t h a t time they could n o t c a r r y

goods expensive enough t o s a t i s f y the demand, today the d e mand f o r h i g h p r i c e d goods i s small and consumers are buyirijg
lower p r i c e d a r t i c l e s .
Labor:

As y e t t h e r e i s not much i d l e l a b o r , nor any m a t e r i a l reduct i o n i n Wages, but with the approach of Winter and the p o s s i b l e
c l o s i n g down of logging and lumber operations t h e r e i s a l i k e lihood of a l a r g e increase of the unemployed during t h i s
coming Winter. • How much trouble t h i s w i l l cause cannot be
de t e rained t oday»

Banks and
Banking:




From what has been said above one can e a s i l y see t h a t the
banks of the Northwest are a l l c a r r y i n g a heavy load; country
banks are leaning on t h e i r c i t y correspondents and the c i t y
correspondents are doing t h e i r b e s t to meet the s i t u a t i o n ; "but
with comparatively small l i q u i d a t i o n of b a s i c p r o d u c t s , and
with merchants and r e t a i l e r s s t i l l heavy borrowers, the f i n a n c i a l s i t u a t i o n i s f a s t becoming s e r i o u s .
While no c r i t i c i s m can be made i n regard to the p o l i c y of def l a t i o n adopted by the Federal Reserve Board l a s t Spring, i t
i s a m a t t e r f o r s e r i o u s c o n s i d e r a t i o n whether t h e c o n t i n u a t i o n
of the p r e s e n t p o l i c y of d e f l a t i o n may n o t become d e s t r u c t i v e

1065
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D i s t r i c t No. 12 (San F r a n c i s c o )




and s e r i o u s l y a f f e c t t h e p r o d u c t i o n of those t h i n g s t h a t are
a b s o l u t e l y n e c e s s a r y f o r the maintenance of us a l l .

If the

Board and Council can d e v i s e means to e a s e up the p r e s e n t
c r e d i t s t r i r i g e n c y without endangering our f i n a n c i a l system,
t h e i r d e t e r m i n a t i o n w i l l meet with u n i v e r s a l commendation.
In the w r i t e r ' s opinion a p u b l i c statement from t h e F e d e r a l
Reserve Board t h a t
" t h e l e g i t i m a t e c a r r y i n g of commodities which roust "be
consumed, such as g r a i n , c o t t o n , l i v e s t o c k and wool,
w i l l r e c e i v e l i b e r a l support from t h e Board a t t h i s
time"
would a i d the "banks m a t e r i a l l y i n h a n d l i n g the p r e s e n t s i t u a tion.

A. L. MILLS