The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
REPORTS OF MEMBERS of FEDERAL ADVISORY COUNCIL a t the STATUTORY MEETING held at Washington, D, C. February 21 and 2 2 , 1921. _i_ JL93 X-5053 D i s t r i c t No. 2 (New York) The F e d e r a l R e s e r v e Banks' m o n t h l y , and i n some c a s e s e v e n w e e k l y , r e p o r t s c o n c e r n i n g f i n a n c i a l and economic c o n d i t i o n s i n t h e i r d i s t r i c t s h a v e b e e n s o a d m i r a b l y p e r f e c t e d d u r i n g t h e l a s t two y e a r s t h a t i t would seem i m p o s s i b l e f o r i n d i v i d u a l members o f t h e F e d e r a l A d v i s o r y C o u n c i l t o p r e p a r e any s t a t e m e n t t h a t c o u l d match t h e s e v e r y c o m p l e t e r e p o r t s or c o u l d add t o t h e m a t e r i a l f u r n i s h e d b y . t h e m . I n c o m p l y i n g w i t h the B o a r d ' s r e q u e s t t o submit a r e p o r t , I presume t h a t i t i s t h e o b j e c t of t h e t h e Board t o s e c u r e t h e i n d i v i d u a l e x p r e s s i o n o f t h e members c o n c e r n i n g t h e g e n e r a l s i t u a t i o n , r a t h e r t h a n t o h a v e them a t tempt t o g i v e a d e t a i l e d s t a t i s t i c a l report. b e g t o submit my Approaching t h e m a t t e r from t h i s a n g l e , I thoughts as f o l l o w s : B u s i n e s s c u r r e n t s i n t h e Second D i s t r i c t h a v e f o l l o w e d v e r y much t h e same c o u r s e i n t h e l a s t t h r e e months a s i n t h e c o u n t r y a t l a r g e . There h a s b e e n a c o n t i n u o u s d e c l i n e i n s p e c u l a t i v e a c t i v i t y and a v e r y marked c u r t a i l m e n t o f p r o d u c t i o n i n t h e f a c t o r i e s ; b u t , on t h e o t h e r h a n d , r e t a i l t r a d e h a s c o n t i n u e d a t a h i g h l e v e l and t h e p u r c h a s i n g power o f tiae p u b l i c seems t o be f a i r l y u n i m p a i r e d . Our f o r e i g n t r a d e s t a t i s t i c s f o r O c t o b e r , November and December do W # show any n o t a b l e d e c l i n e ; OCTOBER NOVEMBER DECEMBER Exports 751,728,570 676,706 ,011 7 2 0 , 4 9 3 , 2 66 (The f i g u r e s b e i n g a s f o l l o w s : Imports 334,263,803 321,161,080 266,105,972 E x p o r t s o v e r Imports Balance 417,464,767 355,524,931 454,387,294 ) t h e r e d u c e d volume of f o r w a r d d e a l i n g s i n f o r e i g n exchange m i g h t p r e s a g e , h o w e v e r , a c o n s i d e r a b l e d e c l i n e i n our e x p o r t s and i m p o r t s d u r i n g t h e 193 -3- X-3053 f i r s t q u a r t e r of t h e c u r r e n t y e a r . B e t a i l d o m e s t i c t r a d e i s g e n e r a l l y r e p o r t e d a s good; especially by t h e l a r g e department s t o r e s , both i n the m e t r o p o l i t a n d i s t r i c t and outside. And t h i s i s t r u e e q u a l l y of t h e h o l i d a y t r a d e and of t r a d e s i n c e t h e f i r s t of t h e y e a r , I am informed t h a t c a r e f u l i n q u i r y among t h e department s t o r e s o f New York, a comparison o f r e p o r t s i n B o s t o n and e l s e where , i n d i c a t e t h a t t h e r e t a i l drygoods d e a l e r s i n t e n d t o s t a n d a r d i z e t h e i r s p r i n g s a l e s a s f a r a s p o s s i b l e on a b a s i s of 16 p e r cent* below t h a t of t h e same s e a s o n l a s t year. This i s i n the f a c e of c u t s i n cot,tors , w o o l e n s , k n i t g o o d s , men's c l o t h i n g , and t h e g r e a t v a r i e t y o f o t h e r merchandise a t w h o l e s a l e , t h a t h a v e reached a f u l l 4 0 t o 50 p e r c e n t . The f a c t t h a t t h e r e t a i l e r s do not i n t e n d f u r t h e r t o reduce i s f a i r l y good p r o o f t h a t t h e y t a k e a r a t h e r h o p e f u l v i e w of t h e s i t u a t i o n . W h o l e s a l e t r a d e , on t h e o t h e r hand, h a s been almost a t a s t a n d s t i l l , s o f a r a s l a r g e forward buying i s concerned. And the t r a d e i s l a r g e l y of a hand t o mouth c h a r a c t e r , a s i n t h e p a s t s i x months. Even a t the p r e s e n t e x t r a o r d i n a r i l y low l e v e l of p r i c e s , t h e r e s t i l l appears t o be l i t t l e d i s p o s i t i o n on t h e p a r t of l a r g e buyers t o make any h e a v y commitments. This i s r e a d i l y u n d e r s t o o d vfoen one b e a r s i n mind t h a t a l a r g e num- b e r o f important c o r p o r a t i o n s and f i r m s , caught w i t h a v e r y heavy l o a d of accumulated and u n s o l d raw m a t e r i a l s or f i n i s h e d a r t i c l e s , h a v e been p r a c t i c a l l y t a k e n o v e r by t h e i r c r e d i t o r s . The h o l d i n g s o f t h e s e c o n c e r n s , and o t h e r s t h a t h a v e s t i l l managed t o keep above w a t e r , w i l l be l i q u i d a t e d a s soon a s a demand w i l l a r i s e , a t p r i c e s t h a t w i l l e n a b l e t h e c r e d i t o r s t o c o l l e c t t h e i r d e b t s w i t h o u t s a c r i f i c e , or e v e n a t a l o s s . I t i s only -3- X-3053 -a-tf when t h e s e l a r g e a c c u m u l a t i o n s w i l l b e g i n a c t u a l l y t o move t h a t t h e new l e v e l of p r i c e s w i l l be e s t a b l i s h e d and t h a t t h e r e a l c o n d i t i o n of t h e d e b t o r s w i l l d e f i n i t e l y be a s c e r t a i n e d . I b i s may u l t i m a t e l y l e a d t o q u i t e a number o f f a i l u r e s , b u t i t i s g e n e r a l l y b e l i e v e d t h a t t h e l a r g e p r o f i t s made by t h e banks i n t h e p a s t h a v e e n a b l e d them t o p r o v i d e f o r impending l o s s e s i n t h i s regard. Up t o February 1 5 t h t h e i n d e x o f the g r e a t b a s i c c o m m o d i t i e s comp i l e d by t h e F e d e r a l B e s e r v e Bank of New York showed a d e c l i n e of 47 p e r cent, from t h e p e a k of l a s t May. The c u r t a i l m e n t i n m a n u f a c t u r i n g h a s run v e r y h i g h i n some l i n e s * and i n the t e x t i l e s a s high, a s 4 0 t o 50 p e r cent* Imports of b a s i c c o m m o d i t i e s , l i k e t i n , s i l k and r u b b e r , h a v e f a l l e n t o v e r y low l e v e l s * and i f the volume of bank c l e a r i n g s be any i n d e x of g e n e r a l volume of t r a d e , t h i s c u r t a i l m e n t , i f c o n t i n u e d , w o u l d l e a d u s t o e x p e c t a marked s h o r t a g e o f goods i n some l i n e s by t h e summer o r e a r l y f a l l . "While t h e f a l l i n w h o l e s a l e p r i c e s i s s a i d t o go beyond any p r e c e d e n t known i n a c e n t u r y , which might l e a d u s t o assume t h a t t h e y h a v e gone t o a l e v e l b e l o w t h e l i n e t h a t we might e n v i s a g e a s our f u t u r e n o r m a l , i t i s imp o s s i b l e t o f o r e t e l l how much f u r t h e r down t h e y may g o , o r when and how f a r t h e y may r i s e u n t i l we know what the European s e t t l e m e n t w i l l i n v o l v e w i t h r e g a r d t o the f u t u r e s t a n d a r d o f l i v i n g of t h e w o r l d , and w i t h t h a t , w i t h r e g a r d t o t h e volume of i t s f o r e i g n trade* We cannot a t t h i s t i m e a s s e s s w i t h any d e g r e e of c o n f i d e n c e when and how f a r the c r i p p l e d buying power o f Europe may be r e s t o r e d * As f a r a s our own home c o n s u m p t i o n i s c o n c e r n e d , we may n o t o v e r l o o k t h e f a c t t h a t t h e p u r c h a s i n g power of the f a r m i n g community h a s b e e n v e r y d r a s t i c a l l y r e d u c e d and t h a t a t p r e s e n t i t i s l i t t l e more than o n e - h a l f what i t was l a s t y e a r . 195 -4- X-3053 S t r i k i n g a b a l a n c e i n t r y i n g t o w e i g h t h e many p u z z l i n g f a c t o r s a t p l a y , one would, h a r d l y be i n c l i n e d t o reach t h e c o n c l u s i o n t h a t t h e r e i s a s t r o n g p r o b a b i l i t y of an e a r l y b u s i n e s s boom. F o r e i g n e x c h a n g e s h a v e g e n e r a l l y shown g r e a t e r s t r e n g t h d u r i n g t h i s l a s t month. The r e d u c e d volume of our e x p o r t s and t h e s h r i n k a g e of p r i c e s of our goods a r e l i k e l y t o h a v e p l a y e d an i m p o r t a n t p a r t i n t h e d e v e l o p m e n t of t h i s t r e n d . I t i s p r o b a b l y s a f e , h o w e v e r , t o say t h a t i n a d d i t i o n p s y c h o l o g y h a s e x e r c i s e d an i m p o r t a n t i n f l u e n c e i n t h i s regard, Hopes t h a t t h e i n d e m n i t y q u e s t i o n w i l l be s e t t l e d and t h a t a f t e r such a s e t t l e m e n t , c o u n t r i e s may be a b l e t o f i n d ways and means t o b a l a n c e t h e i r b u d g e t s and a l s o a d j u s t t h e i r i n d e b t e d n e s s t o u s , a r e no doubt a t t h e r o o t of t h e p r e s e n t r i s e . Stating this fact is p o i n t i n g out t h e u n s a f e ground on which t h e movement i s bottomed. A s e t t l e m e n t of the indemnity alone w i l l not a v a i l u n l e s s i t i s a s e t t l e ment t h a t w i l l r e s u l t i n a b a l a n c e d Europe; u n l e s s i t w i l l r e s u l t i n c r e a t i n g c o n d i t i o n s i n which b u d g e t s can be met w i t h o u t f u r t h e r i n c r e a s e i n n a t i o n a l d e b t s and i n which e x c h a n g e s c a n be s t a b i l i z e d . The n e x t weeks w i l l show w h e t h e r our h o p e s f o r a s a t i s f a c t o r y s e t t l e m e n t i n t h e n e a r f u t u r e may be f u l f i l l e d , o r w h e t h e r t h e b u s i n e s s w o r l d must a d j u s t i t s g a i t o n c e more t o a p r o l o n g e d p e r i o d of u n c e r t a i n t y and d i s o r g a n i z a tion. B a t e s f o r commercial p a p e r h a v e remained p r a c t i c a l l y unchanged, though t h e volume o f borrowing h a s b e e n m a t e r i a l l y d e c r e a s e d owing t o s h r i n k a g e o f p r i c e s and b u s i n e s s s t a g n a t i o n . banks s o h e a v i l y i n d e b t e d t o the F e d e r a l R e s e r v e However, w i t h t h e System, a l i q u i d a t i o n 196 a-3053 of comae r c i a l borrowing s h o u l d i n v o l v e l i q u i d a t i o n o f bank b o r r o w i n g s w i t h F e d e r a l R e s e r v e Banks, b u t s h o u l d not r e s u l t i n e a s i e r money r a t e s . Commercial l i q u i d a t i o n would a l s o mean a g r e a t e r s u p p l y o f i d l e f u n d s for investment. recently; The i n v e s t m e n t market h a s shown a good d e a l o f l i f e l a r g e volumes of s e c u r i t i e s h a v e b e e n o f f e r e d and p l a c e d . •While t h e f i r s t and most a t t r a c t i v e i s s u e s h a v e b e e n a c t i v e l y a b s o r b e d , t h e weaker o f f e r i n g s and the r e c e n t i s s u e s h a v e shown a g r e a t e r t e n d e n c y t o s t i c k i n the h a n d s of t h e d e a l e r s , so t h a t a good d e a l of s e c o n d a r y d i s t r i b u t i o n remains t o be done. On t h e w h o l e , i t i s r e a s o n - a b l e t o e x p e c t t h a t t h e i n v e s t m e n t market w i l l t a k e t h i s c o u r s e .from time to time. As l o n g a s the banks remain so h e a v i l y i n d e b t e d t o t h e F e d e r a l R e s e r v e Banks, and a s l o n g a s t h e d e s i r e mast n a t u r a l l y p r e v a i l on t h e p a r t of both t h e F e d e r a l R e s e r v e Banks and the member banks t o l i q u i d a t e t h e s e l o a n s , waves of p l e n t i f u l money s u p p l y w i l l be c o m p a r a t i v e l y s h o r t - l i v e d and a v a i l a b l e f u n d s a r e l i k e l y t o be f a i r l y r a p i d l y e x h a u s t e d from time t o t i m e . Large f o r e i g n l o a n s a r e r e p o r t e d i n p r o s p e c t and a w a i t i n g o n l y a eomevtihat more f a v o r a b l e t u r n of t h e market. Brokers r e p o r t t h a t t h e i r l o a n s a r e a t a v e r y l o w l e v e l , and some o f them a t the l o w e s t l e v e l s known i n y e a r s . The s t r e e t l o a n s of t h e l a r g e r Mew York banks r e f l e c t t h i s g r e a t d e c r e a s e i n b r o k e r a g e commitments and s h e # a d e c l i n e of about 50 p e r c e n t , f r o m t h e high, l e v e l of October and November 1919. The l i q u i d a t i o n i n s t o c k s h a s p r o b a b l y b e e n a s c o m p l e t e t h i s l a s t y e a r a s t h a t f o l l o w i n g any o f our r e c e n t and most s e v e r e f i n a n c i a l crises. I f -our own s i t u a t i o n w e r e n o t s o c l o s e l y i n t e r t w i n e d w i t h t h e 197 X-3053 ' - 6 - European t a n g l e , one m i g h t be i n c l i n e d t o s a y t h a t , judging from the a n a l o g i e s o f the a f t e r m a t h s f o l l o w i n g the p a n i c s and c r i s e s of the past, t h a t c o n d i t i o n s s h o u l d now i n d i c a t e a g r a d u a l upward t e n d e n c y . I n p r e s e n t c o n d i t i o n s , h o w e v e r , h e w o u l d be a b o l d man who w o u l d j u d g e t h e p r e s e n t s i t u a t i o n from p a s t a n a l o g i e s . Summing i t u p , one m i g h t s a y t h a t i n t h e s e c o n d F e d e r a l R e s e r v e D i s t r i c t c o n d i t i o n s , f i n a n c i a l and c o m m e r c i a l , h a v e b e e n g r e a t l y c o n solidated, Given a f a v o r a b l e development i n Europe, a l l f a c t o r s would p o i n t towards a marked improvement. recuperation, F a i l i n g a r e a l s e t t l e m e n t i n Europe, i n s o f a r a s i t w o u l d h a v e t o r e s t i n c l u s i v e l y on t h e a w a k e n i n g of our own l o c a l b u y i n g p o w e r , would seem l i k e l y t o p r o v e slow. D e c i d e d l y u n f a v o r a b l e d e v e l o p m e n t s i n Europe m i g h t i n d e e d h a v e i n s t o r e f o r u s a p e r i o d o f renewed l i q u i d a t i o n w i t h c o n s e q u e n t f u r t h e r recession in prices. P. M. WARBURG. -7- x-30^3 £ 9 g D i s t r i c t No. 4 ( C l e v e l a n d ) B u s i n e s s g e n e r a l l y i n the Fourth F e d e r a l Reserve D i s t r i c t i s f a c i n g the p r o b l e m s of d e f l a t i o n w i t h c o u r a g e and a s i n c e r e d e s i r e t o g e t h a c k t o a s t a b l e b a s i s as r a p i d l y as p o s s i b l e , Inventories g e n e r a l l y have been taken a t t h r f i r s t of t h e y e a r on the b a s i s o f w i s h i n g t o know t h e w o r s t , and w i t h a d e s i r e t o g e t a f r e s h s t a r t f r o m a p o i n t a s low i n v a l u e a s c o u l d b e s u b s t a n t i a t e d , even b y bankrupt values» The r e s u l t h a s b e e n t h a t many o f t h e s t a t e m e n t s w h i c h a r e now coming i n t o t h e b a n k s show l a r g e l o s s e s a s t h e r e s u l t of 1 9 2 0 o p e r a t i o n s t o s u c h an e x t e n t t h a t t h e p a p e r of may o f our g e n e r a l l y c o n s i d e r e d s t r o n g c o r p o r a t i o n s w i l l n o t b e e l i g i b l e u n d e r p r e s e n t r u l i n g s of our F e d e r a l R e s e r v e Bank* W h i l e t h e b u s i n e s s s i t u a t i o n i s s o marked by c r o s s c u r r e n t s and c o n t r a d i c t o r y movements t h a t a g e n e r a l c h a r a c t e r i z a t i o n i s impossible, still the p r e p o n d e r a n c e of o p i n i o n c e r t a i n l y i s t h a t i n a v a s t m a j o r i t y of l i n e s , v a l u e s c a n n o t g o much l o w e r , and t h e b e l i e f this fact, is that as the p u b l i c g r a d u a l l y r e a l i z e s t h e f u t u r e w i l l show a g r a d u a l i n c r e a s e i n v o l u m e . The r e c e n t p a r a l y s i s o f t r a d e h a s p a r t i a l l y r e s u l t e d f r o m t h e mere f a c t o f r a p i d l y c h a n g i n g v a l u e s , and s t a b i l i t y of p r i c e s - e v e n a t l o w e r l e v e l s - would b e a m a t t e r of importance t o a l l markets. W h i l e t h e r e i s some u n e m p l o y m e n t t h e r e i s n o p r o b l e m a s y e t of t a k i n g any c a r e ojy l a r g e number o f p e o p l e t o a v o i d s u f f e r i n g - Wages h a v e n o t b e e n reduced i n any b i g way, b u t i n s p o t s where t h e s u b j e c t h a s b e e n c o n s i d e r e d , l a b o r h a s shown a d i s p o s i t i o n t o t a k e i t s s h a r e of t h e b u r d e n of and p r i c e s / b a s of c o u r s e shown g r e a t l y i n c r e a s e d e f f i c i e n c y . reducing M a n u f a c t u r i n g , i r o n and s t e e l and t h e c o a l i n d u s t r i e s a r e a l l o p e r a t i n g a t n o t more t h a n h a l f time. All manufacturers are beginning to eat into t h e i r a c c u m u l a t i o n of i n v e n t o r i e s , and o r d e r s p r o s p e c t f o r the immediate f u t u r e . t h i r t y days ago. even b a c k t o raw m a t e r i a l s a r e i n This general s i t u a t i o n i s b e t t e r than X-3053 199 The movement of f r e i g h t , p r i n c i p a l l y o r e and c o a l on t h e Great Lakes w h i c h n o r m a l l y s t a r t s i n A p r i l w i l l b e g i n on a v e r y low b a s i s . The f a r m e r s a r e much i n c l i n e d t o h o l d t h e i r p r o d u c t s , w i t h t h e r e s u l t t h a t t h e r e i s c o n s i d e r a b l e borrowing by c o u n t r y s t a t e banks ( n o t members of t h e F e d e r a l R e s e r v e System) f r o m t h e c i t y b a n k s . They a r e , h o w e v e r , g o i n g ahead w i t h p r e p a r a t i o n s f o r p l a n t i n g t h e u s u a l s i z e d c r o p s . H i i l e t h e t o b a c c o s i t u a t i o n i n cur D i s t r i c t i s n o t v h a t we w o u l d l i k e t o h a v e i t , n e v e r t h e l e s s , i t i s by no means a s bad a s i t h a s b e e n pictured. I t i s true that there have been night r i d e r s ' t h r e a t s against p l a c i n g t h e l e a f on t h e m a r k e t , and a l s o t h r e a t s t o i n t i m i d a t e t h e p l a n t e r s a g a i n s t p l a n t i n g f u l l new c r o p s , y e t t h i s a c t i o n i s n a t u r a l l y o f t h e k i n d w h i c h r e c e i v e s t h e most p u b l i c i t y , While, t h e p r i c e of t o b a c c o i s v e r y l o w , n e v e r t h e l e s s t h e f a r m e r s a r e m a r k e t i n g i t v e r y r a p i d l y , and w h i l e i n many c a s e s t h e p r i c e s a r e c a u s i n g d i s t r e s s , a t t h e same t i m e t h e money coming i n i s g i v i n g r e l i e f t o t h e money market and i s h e l p i n g m a t e r i a l l y t o pay o f f d e b t s owed by t h e f a r m e r s . The r e t a i l t r a d e a p p e a r s t o be h o l d i n g up w e l l i n volume a t , of c o u r s e , c o n s i d e r a b l y reduced p r i c e s , b u t t h e d e s i r e t o r e d u c e i n v e n t o r i e s h a s n o t p r o g r e s s e d f a r enough, and t h e c o n v i c t i o n t h a t we h a v e r e a c h e d a s t a b i l i z a t i o n o f p r i c e s h a s n o t become s u f f i c i e n t l y s e t t l e d t o e n c o u r a g e b u y i n g i n volume from t h e w h o l e s a l e r s . C o n s i d e r a b l e i n t e r e s t h a s b e e n m a n i f e s t e d i n t h e F o r e i g n Trade Financing Corporation. T h i s h a s n o t , and w i l l n o t c a r r y t h r o u g h , h o w e v e r , t o a p o i n t where many of our p e o p l e w i l l p u r c h a s e s t o c k w i t h o u t a g r e a t d e a l more e d u c a t i o n , e s p e c i a l l y i n t h e volume n e c e s s a r y t o c o m p l e t e t h e D i s t r i c t ' s normal -share o f t h e c o n t e m p l a t e d c a p i t a l i z a t i o n . x-3053 -9- 200 I t i s hoped t h a t the i u p e n d i n g l e g i s l a t i o n p e r m i t t i n g the Government t o s e t t l e w i t h the r a i l r o a d s , i n p a r t a t l e a s t , f o r t h e b a l a n c e s due them as t h e r e s u l t of Government A d m i n i s t r a t i o n w i l l b e p a s s e d q u i c k l y , a s t h i s w i l l e n a b l e them t o take c a r e of t h e i r much d e l a y e d o b l i g a t i o n s , and rray p e r m i t of i n c r e a s e d b u y i n g cf i r o n and s t e e l , and t h u s a l l o w them t o p l a y t h e i r p a r t i n t h e i n c r e a s e d o p e r a t i o n of t h e s e b a s i s industries. The market f o r new i s s u e s of s e c u r i t i e s appears t o b e s u r p r i s i n g l y good. The s a l e of f o r e i g n government bonds i s c o n s i d e r a b l y b e t t e r than we had any r e a s o n t o e x p e c t . The v e r y h i g h r a t e s a r e a t t r a c t i n g c a p i t a l t o a d e g r e e which was n o t c o n s i d e r e d p o s s i b l e b y y s . Commercial d e p o s i t s i n 89 s e l e c t e d banks i n t h e c i t i e s i n t h e D i s t r i c t have remained s t a t i o n a r y d u r i n g the p a s t t h i r t y d a y s , w h i l e s a v i n g s d e p o s i t s have i n c r e a s e d s l i g h t l y . Member b a n k s w e r e on J a n u a r y 1 0 t h b o r r o w i n g f r o m t h e F e d e r a l R e s e r v e Bank - $ 1 2 2 , 5 6 l , 4 4 0 . 4 0 ; on F e b r u a r y l 6 t h , $8,799»225.53233.80. t h e i f borrowings had decreased The h i g h e s t p o i n t of b o r r o w i n g d u r i n g 1 9 2 1 - $ 1 2 8 , 1 2 2 , - Bank c l e a r i n g s h a v e d e c r e a s e d s l i g h t l y . The f e e l i n g of the b u s i n e s s and bank p e o p l e toward the F e d e r a l Res e r v e Bank and S y s t e m i s one of g r e a t r e s p e c t and a d m i r a t i o n . A spirit of d e s i r i n g t o c o o p e r a t e w i t h what i s r e c o g n i z e d as the f i r s t r e a l b a n k i n g s y s t e m w h i c h the c o u n t r y has had, p r e v a i l s v e r y g e n e r a l l y . I t would a p p e a r t h a t l i q u i d a t i o n i n our D i s t r i c t s t a r t e d r a t h e r early. Many of our i n p o r t a n t i n d u s t r i e s c o n t r o l t h e i r own raw m a t e r i a l and a r e engaged i n a l i n e , w h i c h , b e c a u s e of i t s v e r y n a t u r e , i s x->053 -10- c a l c u l a t e d t o s u f f e r l e s s than most o t h e r s i n any d e p r e s s i o n . Declines in b u s i n e s s a c t i v i t y a f f e c t i n d u s t r i e s u s i n g raw m a t e r i a l w h i c h d o e s n o t grow t u t i s m e r e l y produced b y t h e a c t i v i t i e s of men i n a way t h a t d i f f e r s ' w i d e l y from t h a t i n w h i c h i t a f f e c t s i n d u s t r i e s u s i n g raw m a t e r i a l s w h i c h do grow. but i t The p r o d u c t i o n o f i r o n o f e and c o a l can b e s h u t o f f o v e r - n i g h t , t a k e s some time t o s l o w down the p r o d u c t i o n of c o t t o n , w o o l , l e a t h e r and k i n d r e d t h i n g s . We r e a l i z e t h a t the o n l y permanent c u r e f o r i l l s of the k i n d we a r e now s u f f e r i n g i s i n the h e a l i n g power of n a t u r a l f o r c e s and comes s l o w l y . B u s i n e s s g e n e r a l l y i s on t h e u p g r a d e b u t w i t h a r a t h e r l o n g p u l l a h e a d and we c a n n o t e x p e c t i m m u n i t y f r o m some f u r t h e r b u s i n e s s c a s u a l t i e s , a s t h e s i n s of o v e r - e x t e n d e d c r e d i t a n d o v e r - e x p a n s i o n w i l l e x a c t t h e i r t o l l . I n c o n c l u s i o n I would say t h a t t h e g e n e r a l f e e l i n g i s h o p e f u l , and conservatively optimistic. C. E . SULLIVAN * - * ii - 202 X-3053 D i s t r i c t No. 6 (.Atlanta) The sum and s u b s t a n c e of r e c e n t developments i s t h a t t h e r e i s a more c h e e r f u l f e e l i n g i n the S i x t h F e d e r a l Reserve D i s t r i c t , t u t w i t h o u t much actual increase in business. The h o l i d a y t r a d e was much b e t t e r than was expected b u t s i n c e then the buyers seem t o have gone on a s t r i k e a g a i n . The commodity markets a r e i n a narrow, r e a c t i o n a r y groove, and r e t a i l mer, c hants a r e g r a d u a l l y lowering p r i c e s . * r e d u c t i o n s as t h e r e i s more or l e s s d i s t r u s t of the s t a b i l i t y of p r e s e n t prices. Buyers a r e h o l d i n g off pending f u r t h e r Meanwhile unemployment i s s t i l l very l a r g e throughout t h e D i s t r i c t i n c i d e n t to d e c r e a s e d p r o d u c t i o n , r e s u l t i n g i n a lowering of wages. In the l u n b e r and n a v a l s t o r e s i n d u s t r i e s wages have been reduced from 25$ to 4c$. Reports coming i n from d i f f e r e n t s e c t i o n s of the D i s t r i c t as t o g e n e r a l * c o n d i t i o n s a r e about the same i n t o n e , w i t h the e x c e p t i o n of F l o r i d a which seems to be i n a more e n v i a b l e p o s i t i o n . The demand f o r money i s s t e a d y b u t i t does n o t seem t o b e as g r e a t as i t was a few months ago. A * / There i s a s l i g h t f a l l i n g off i n l o a n s , and on an average about 75$ of t h o s e maturing a r e b e i n g renewed, The average r a t e with the l a r g e r banks i s about 72$* General d e p o s i t s show a f a l l i n g off i n t h e e n t i r e D i s t r i c t of about 30$» with t h e e x c e p t i o n of Savings D e p o s i t s which seem t o b e on the i n c r e a s e . In t h i s c o n n e c t i o n , t h e w r i t e r knows of one l a r g e n a t i o n a l bank i n t h e S i x t h D i s t r i c t whose s a v i n g s d e p o s i t s i n c r e a s e d 25$ d u r i n g the p a s t y e a r , which i n d i c a t e s t h a t the small d e p o s i t o r i s heading the abundant advice p u t out on t h i s s u b j e c t . Of c o u r s e , a t some p o i n t s where b u s i n e s s c o n d i t i o n s a r e p a r t i c u l a r l y bad s a v i n g s d e p o s i t s have d e c r e a s e d , b u t t h i s i s t h e e x c e p t i o n to t h e r u l e . http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis i 203 x-3053 ~ X2 — I n t h e upland, c o t t o n b e l t i t i s r e p o r t e d t h a t a b o u t Ui# of t h e c r o p i s b e i n g h e l d b y t h e p r o d u c e r s and by t h e f a c t o r s - In o r d e r t o p r e s e n t to your minds a c o m p o s i t e p i c t u r e of the Georgia s i t u a t i o n I have o n l y t o s^r t h a t i n 1 9 1 9 - 2 0 t h a t S t a t e produced 1 , 6 7 8 ,758 b a l e s of c o t t o n which n e t t e d about $ 3 3 5 , 0 0 0 , 0 0 0 , and i n a d d i t i o n t h e r e t o t h e s e e d s o l d f o r a b o u t $ 7 5 , 0 0 0 , - ©00, w h e r e a s , i n 1 9 2 0 - 2 1 the c r o p was o n l y 1 , 3 8 7 , 0 0 0 b a l e s , which a t p r e s e n t p r i c e s w i l l n e t o n l y a b o u t $ 8 5 , 0 0 0 $ 0 0 0 , o r j u s t a l i t t l e more t h a n t h e amount r e c e i v e d f o r the s e e d l a s t s e a s o n . ' Ginning r e p o r t s f o r t h e y e a r 1 9 2 0 - 2 1 show l e s s t h a n 2 , 0 0 0 b a l e s of s e a island cotton. T h i s i s u s e d p r i n c i p a l l y i n the m a n u f a c t u r e o f a u t o m o b i l e t i r e s , and s i n c e the extreme d e p r e s s i o n i n t h a t i n d u s t r y t h e p r i c e of s t a p l e r a n g e s from 2 5 / t o 40^ p e r pound, and i t i s d o u b t f u l i f i t could be s o l d f o r even t h a t p r i c e , w h i l e l a s t s e a s o n t h e b e s t g r a d e s s o l d a s h i g h a s $ 1 . 0 0 p e r pound. The b o l l w e e v i l has p r a c t i c a l l y p u t an end t o t h i s i n d u s t r y , t h e r e f o r e , i t i s hardly worth d i s c u s s i n g . and M i s s i s s i p p i T h i s c o t t o n i s grown i n F l o r i d a in this District. T e n n e s s e e i s c a r r y i n g l a r g e q u a n t i t i e s of c o t t o n , t o b a c c o and o t h e r commodities and t h e i r c o n d i t i o n i s not a l t o g e t h e r u n l i k e t h a t of the o t h e r S t a t e s i n the S i x t h D i s t r i c t . The n a v a l s t o r e s s i t u a t i o n i n G e o r g i a and F l o r i d a i s a b o u t on a p a r w i t h t h e c o t t o n s i t u a t i o n and t h e i n d i c a t i o n s a r e t h a t t h e r e w i l l b e no improvement w i t h i n t h e n e x t t w e l v e months. The banks i n France h a v e c a l l e d t h e i r l o a n s on r o s i n and s u c h c o n c e r n s as C o l g a t e & C o . , s o a p m a n u f a c t u r e r s , a r e i m p o r t i n g r o s i n f r o m France p a y i n g a b o u t $ 4 . 7 5 p e r b a r r e l f . 0. b. .American p o r t s , w h i c h i s much b e l o w t h e l o w e s t g r a d e s of r o s i n h e l d i n America. X-3053 - 13 - The market on t h i s commodity has b e e n c l o s e d s i n c e November 1 2 . 1 9 2 0 , a t w h i c h time t h e a v e r a g e g r a d e s were quoted a t $ l l » 3 0 j ? e r b a r r e l . The lumber i n d u s t r y i s about t h e same i n a l l s e c t i o n s of t h e S i x t h District. P r e s e n t p r i c e s a v e r a g e about $25 *00 p e r 1 , 0 0 0 f e e t a g a i n s t a p p r o x i m a t e l y $ 5 0 . 0 0 a t t h e same a y e a r ago* coming f r o m r a i l r o a d s and home b u i l d e r s * The p r i n c i p a l demand i s About 50$ of t h e m i l l s a r e c l o s e d and t h e o t h e r s a r e o p e r a t i n g a t about 7 5 $ of t h e i r c a p a c i t y * • i I t i s r e p o r t e d t h a t the c o a l i n d u s t r y i n Alabama h a s b e e n v e r y a c t i v e d u r i n g t h e p a s t f e w months, however, t h e demand f o r s t e a m c o a l h a s dropped h e a v i l y during the past t h i r t y days. A number of t h e f u r n a c e s a r e c l o s i n g on a c c o u n t of r e p a i r s and a l a c k of o r d e r s * R i c e i s one of L o u i s i a n a ' s p r i n c i p a l c r o p s and i t i s r e p o r t e d t h a t 85% of t h e c r o p i s s t i l l h e l d b y t h e p r o d u c e r s . Warehouses a r e f i l l e d to capacity. Even t h e t o u r i s t b u s i n e s s i n F l o r i d a h a s s u f f e r e d i n sympathy w i t h t h e d e p r e s s i o n i n o t h e r l i n e s , h o w e v e r , under t h e c i r c u m s t a n c e s , a s a whole the result is satisfactory. r i c h e r c l a s s which has The d e c l i n e i n t r a v e l h a s b e e n m a i n l y aaong t h e never b e e n of any g r e a t v a l u e t o t h i s S t a t e . The c i t r u s f r u i t c r o p h a s b e e n t h e l a r g e s t i n t h e h i s t o r y of F l o r i d a , b u t p r i c e s h a v e r e c e d e d i n p r o p o r t i o n to* the i n c r e a s e d p r o d u c t i o n . The F e d e r a l I n t e r n a t i o n a l Banking Company of New O r l e a n s , which was r e c e n t l y o r g a n i z e d b y the member banks i n t h i s D i s t r i c t i s r e a d y to f u n c t i o n , i n d e e d i t i s r e p o r t e d t h a t t h e f i r s t t r a n s a c t i o n of t h i s conpany i n v o l v e * t h e shipment of 1 5 v 0 0 0 b a l e s of M i s s i s s i p p i c o t t o n t o E u r o p e . - 1 4 . x-;o^ 2 0 5 The D i r e c t o r s of the F e d e r a l Reserve Bank of A t l a n t a , i n c l u d i n g t h e Branches a t New O r l e a n s , Birmingham, N a s h v i l l e and t h e Savannah Agency, met w i t h the D i r e c t o r s of the J a c k s o n v i l l e Branch, February 11th and 1 2 t h , a t which time an o p p o r t u n i t y was given eq.ch r e p r e s e n t a t i v e t o e x p r e s s h i s views r e g a r d i n g the s i t u a t i o n i n h i s immediate t e r r i t o r y , l ' n e i r r e p o r t s as a wnole were p e s s i m i s t i c , b u t w i t h one accord i-hey predicted a brighter future. E . W. LANE. *15- District No. 7 (Chicago) 2 0 6 „ X-3053 The g e n e r a l c o n d i t i o n of b u s i n e s s i n t h e S e v e n t h F e d e r a l R e s e r v e D i s t r i c t may be r e p o r t e d a s f a i r l y s a t i s f a c t o r y . Considerable grain has W e n s h i p p e d from t h e n o r t h - w e s t f o r e x p o r t , and t h i s h a s p r o v e d a g r e a t r e l i e f t o t h e banks i n t h e n o r t h - w e s t and p a r t i c u l a r l y i n 7owa> which s t a t e h a s b e e n more s o r e l y p r e s s e d f o r f u n d s t h a n a n y o t h e r i n our D i s t r i c t , T h i s i s e v i d e n c e d by the s t e a d y r e d u c t i o n of Iowa bank b o r r o w i n g s of t h e The peak of t h i s i t e m was a t t a i n e d e a r l y F e d e r a l R e s e r v e Bank of C h i c a g o . i n December, when t h e s e b o r r o w i n g s s t o o d a t $ 9 8 , 6 ) 6 , 0 0 0 . At t h e end of t h e y e a r t h e y had d e c l i n e d a l i t t l e more t h a n $3# 0 0 0 , 0 0 0 , and on February 1 6 t h t h e y had b e e n reduced t o $ 7 7 , 7 7 2 , 0 0 0 , showing l i q u i d a t i o n of $ 2 0 , 8 6 4 , 0 0 0 of t h e b o r r o w i n g s a t t h e F e d e r a l R e s e r v e Bank, from t h e a g r i c u l t u r a l s e c t i o n s , T h i s l i q u i d a t i o n of l o a n s i s a l s o r e f l e c t e d i n t h e s t a t e m e n t of t h e c o r r e s p o n d e n t banks i n r e s e r v e and c e n t r a l r e s e r v e c i t i e s of t h i s D i s t r i c t . At t h e p r e s e n t t i m e t h e r e d u c t i o n of l o a n s by commercial a n d i n d u s t r i a l b o r r o w e r s h a s slowed up somewhat. apparently i s affording r e l i e f whole, t h i s r e l i e f The m a r k e t i n g of l i v e s t o c k and g r a i n t o t h e banks, but t a k i n g t h e D i s t r i c t a s a i s n o t a s g r e a t a s had b e e n hoped f o r . At t h e p r e s e n t t i m e t h e r e i s g e n e r a l l y a s t r o n g demand f o r e x t e n s i o n of l o a n s , a l t h o u g h i n some l o c a l i t i e s t h e r e i s a s l i g h t e a s i n g of t h e demand. S p e c u l a t i v e t e n d e n c y i s no l o n g e r v e r y n o t i c e a b l e . prominent i n t h e i r l o c a l i t i e s , Bankers g e n e r a l l y r e p o r t t h a t p e o p l e seem t o have f i n a l l y r e a c h e d t h e c o n c l u s i o n t h a t economy i s h i g h l y d e s i r a b l e . The more p r o g r e s s i v e m e r c h a n t s r e p o r t a v e r y c o n s i d e r a b l e r e d u c t i o n i n s t o c k s of m e r c h a n d i s e compared w i t h a few months a g o , and m a n u f a c t u r e r s a r e making p e r s i s t e n t e f f o r t t o reduce i n v e n t o r i e s . While t h e r e h a s b e e n l i q u i d a t i o n of i n v e n t o r i e s by m a n u f a c t u r e r s , many a r e s t i l l q u a n t i t i e s of raw m a t e r i a l , carrying considerable p a r t l y f i n i s h e d g o o d s , a n d p r o d u c t s ready f o r - 1 6 - Shipmeiit, X-3053 This accounts, to some extent a t least, for the slownecs in the liquidation of loans in commercial and industrial centers* There i s a large amount of agricultural loans, both direct and indirect, yet to be liquidated, and bankers report from many sections that i t will take the proceeds of a new crop to repay these borrowings. In Wisconsin there has been quite a liquidation of country bank loans, especially in the tobacco growing sections. In one section this reduction has reached ten per cent in the l a s t thirty days. The condition of the country roads i s also a feature accounting for the alow movement of corn, and quite an old supply of same remains in the country. While there has been some disposition of farmers in the southwest to move their wheat in considerable quantities, going to gulf ports for export, i t i s not so marked in t h i s District, yet i t has a bearing on the bank situation here because of loans by larger banks t o correspondent banks in other d i s t r i c t s . The material decline in market lalues has also been a factor of retarding liquidation of loans, as borrowers are finding i t d i f f i c u l t to realize sufficient cash from grain and live stock t o meet obligations incurred when prices were inflated. Land values are beginning to recede from the high levels attained form mortgage bankers report they are making considerable loans, almost entirely to the best class of farmers, the money being used to pay debts already contracted and now carried by banks. They report l i t t l e or no liquidation of mortgage loans on farms t h i s season. The labor situation remains practically unchanged since last month. The best that can be s&ld of i t i s that a slight improvement i s noticeable. This i s confirmed by answers to lSbor questionaires from thirty prominent manufacturing concerns in Chicago, which give the number of employed as compared with December, 6.8# increase, and as compared -17i w i t h t h e same month a y e a r a g o , a d e c r e a s e of 2 2 . 8 ^ . pay r o l l f o r December shows The amount of d e c r e a s e , a n d a s compared w i t h t h e same month a y e a r a g o , 23% d e c r e a s e . The p e r c e n t a g e of c a p a c i t y of t h e s e p l a n t s o p e r a t i n g i n January 1920 was J a n u a r y 1921, 6l.g%. 208 X-3053 i n December 6 2 . 2 $ , and i n The Employers A s s o c i a t i o n of D e t r o i t s t a t e s that t h e number of men employed by t h e s e v e n t y - n i n e f i r m s r e p o r t i n g t o them, was 51,7*45 on February 8 t h . T h i s i s a b o u t 25$ of a y e a r a g o . weeks p r e v i o u s t h e r e p o r t was 3 6 , 0 0 0 men. t h a n Iki Three At t h e end of December l e s s of t h e 1 7 6 , 0 0 0 employed i n t h e l a t t e r p a r t of September, were working, w h i l e 29$ were w o r k i n g on February 8 t h . There were f o r t y - o n e shops working on reduced s c h e d u l e , a n a v e r a g e of t h i r t y - s i x h o u r s p e r man p e r week. I n many i n s t a n c e s where t h e p r o d u c t i o n h a s b e e n c u r t a i l e d and men l a i d o f f , t h e r e a r e s i g n s of i n c r e a s e d e f f i c i e n c y on t h e p a r t of those remaining. Some of t h e s e r e p o r t a r e d u c t i o n i n wages and a s h o r t e n i n g of h o u r s . The coal mines, w h i l e o p e r a t i n g a t f i f t y p e r c e n t c a p a c i t y , made no change i n t h e mine w o r k e r s wage s c a l e o r h o u r s . lumber m i l l s r e p o r t a r e d u c t i o n i n "Wages, b u t not i n h o u r s . The The b u i l d i n g t r a d e s of Chicago show t h e g r e a t e s t amount of unemployment, and t h e y a r e f o l l o w e d c l o s e l y by m e t a l and machinery w o r k e r s . It i s e s t i m a t e d t h e r e a r e a b o u t one hundred t h o u s a n d unemployed i n Chicago a t t h e p r e s e n t t i m e . While b u i l d i n g o p e r a t i o n s a r e b e i n g w i d e l y d i s c u s s e d b e c a u s e of t h e h o u s i n g problem, n o t h i n g so f a r h a s b e e n done i n a n o r g a n i z e d way f o r s t a r t i n g work i n t h e s p r i n g . The p l a n s a r e h e l d i n abeyance by h i g h c o s t s . R e n t a l s a r e a g a i n b e i n g i n c r e a s e d i n Chicago. Compared w i t h t h e peak p r i c e of 1920, most of t h e b u i l d i n g m a t e r i a l s have come down. Lumber h a s had a b i g d e c l i n e ; s t o c k s on hand a t most of t h e m i l l s a r e below n o r m a l . Manu- f a c t u r i n g o p e r a t i o n s have been c u r t a i l e d and a l l l o g g i n g o p e r a t i o n s t h i s 209 -18- x-3053 w i n t e r have been below n o r n a l . The Federal Reserve Bank of Chicago g i v e s t h e f o l l o w i n g r e p o r t by S t a t e s of borrowings and t h e i r p e r c e n t a g e above t h e i r b a s i c l i n e , whiqh may prove of i n t e r e s t . S t a t e of Borrowings Basic Line Illinois $157,375,000 27,020,000 $253,593,000 28,143,000 78,317.000 82,282,000 26.056 ..000 12.015.000 Indiana Iowa Michigan Wisconsin $371,0^00 34,039,000 73,190,000 $420.980. OOP P e r Cent 62.0 96.0 230.0 112.4 88.1 I t a l s o may be of i n t e r e s t t o know t h e number of Member Banks and number of banks borrowing, which f o l l o w s ! Number of Member Banks i n S t a t e Number of Banks Borrowing Number of Banks B o r rowing i n Excess of B a s i c Discount Line f o r t h e 10 day p e r i o d Illinois 391 182 103 Indiana 215 119 62 Iowa 46l 396 326 Michigan Chicago Branch 106 58 20 Michigan D e t r o i t Branch 120 83 34 Wisconsin 133 67 _sa_ 1,426. 255- 511. J . J . MITCHELL. 210 -19- X-3053 D i s t r i c t Ho. 8 ( S t . Louis) Our p r e s e n t banking and c r e d i t s t r u c t u r e c o n t i n u e s t o show i t s v a l u e over the o l d one. Longer time l i q u i d a t i o n , u n d e r our p r e s e n t system, r e p l a c e s s h o r t time bankruptcy under t h e old system. While a c t u a l b u s i n e s s h a s not d e c i d e d l y improved d u r i n g t h e l a s t t h r e e months a s measured by volume of b u s i n e s s and n e t p r o f i t s , y e t t h e r e i s a b e t t e r underlying tone. I t i s a time of " w a t c h f u l w a i t i n g " b u t n o t w i t h t h e a n x i e t y of t h r e e months ago. Even i n normal y e a r s , t h e f i r s t t h r e e months of a new y e a r a r e , i n t h i s d i s t r i c t , r a t h e r d u l l . There i s now more of a d i s p o s i t i o n t o be p a t i e n t , t o expect no g r e a t i n d u s t r i a l a c t i v i t i e s soon b u t t o work g r a d u a l l y back t o normal c o n d i t i o n s . t l h i l e unemployment h a s i n c r e a s e d , i t does n o t appear t o be a c companied by any marked d i s t r e s s . The movement f o r r e a d j u s t m e n t of wages, e s p e c i a l l y f o r u n s k i l l e d w o r k e r s , i s p r o g r e s s i n g . For u n i o n i s e d l a b o r , c o n f e r e n c e s between employers and employees a r e i n p r o g r e s s w i t h out p r o m i s e , a t t h e p r e s e n t , of any s e r i o u s s t r i k e s o r l a b o r t r o u b l e s . F r o z e n c r e d i t s a r e only v e r y slowly thawing out and t h e r e i s p r o s p e c t t h a t t h i s w i l l , u n d e r our p r e s e n t banking system, be a g r a d u a l process. Bank d e p o s i t s do n o t show t h e i r accustomed tendency t o i n - c r e a s e markedly and reach a h i g h p o i n t a t t h i s time of t h e y e a r . There w i l l be from March t o March of t h e p a s t twelve months l e s s d i f f e r e n c e between t h e low and h i g h p o i n t s i n d e p o s i t s t h a n t h a t which, u s u a l l y occurs. Taking J u l y 1 s t of l a s t y e a r a s a b a s i s of 100% f o r S t . Louis C l e a r i n g House Banks, d e p o s i t s reached a h i g h p o i n t of 106$ i n t h e week of J u l y 1 6 t h , t h e n f l u c t u a t e d around 100% u n t i l the week of September 211 "20~ X-3053 24 th; then began to decrease, reaching the lowest p o i n t of 91$ the week of November 12th, and then began to increase and reached the h i g h e s t p o i n t of 112$ the week of January 14th. In a l l t h i s time from July 1, 1920 to January 14, 1921, there was only a d i f f e r e n c e of 21$, which r e p r e s e n t s $24,500,000. oo d i f f e r e n c e i n deposits. Likewise i n the B i l l s Payable a t the Federal Reserve Bank there was a general tendency to increase during July and August, reaching 121$ the week of September 3rd, then suddenly decreasing f o r a few weeks, and then suddenly increasing to the high p o i n t of 131$ the week of October 8th. A decrease then began'and continued to the low point; of 39$ the week of January 14th. Spring demands f o r funds w i l l soon begin to come in. This w i l l tend to r e t a r d the decrease i n Federal Reserve Discounts f o r Member Banks. The quiescense i n the wholesale and j o b b e r s ' f i e l d , which c h a r a c t e r ized the period preceding the h o l i d a y s , 16 somewhat improved, due to the r e c e i p t of more orders and the improved prospect f o r s p r i n g , summer and autumn trade. factory. The holiday r e t a i l trade was, on the whole, s a t i s - In a number of cases the s a l e s exceeded those of l a s t year. The l a s t s i x t y days h a s seen a marked reduction i n the stock of goods on the shelves of wholesalers, jobbers and r e t a i l e r s . Further l i q u i d a t i o n w i l l be necessary i n some l i n e s , as f o r example, f u r n i t u r e , but i t i s l i k e l y t h a t t h i s w i l l come about i n a r e l a t i v e l y short p e r i o d , and t h a t by the close of the spring season there w i l l be a more normal r e l a t i o n between the e x i s t i n g supply and the promised demand f o r goods. In many -21- X-3053 l i n e s there i s a f e e l i n g tending to be supported by good reasoning, t h a t p r i c e s have reached t h e i r lowest level. yet, and properly so, buying c a r e f u l l y . The consuming public i s Consumers are s t i l l inclined to r e s i s t any marked tendency to increase p r i c e s , While t h e i r poten- t i a l buying power remains g r e a t , yet due to t h e i r acquired and forced a b i l i t y to economise, r e s u l t i n g from the war, as we.ll as the unemployment and reduced wages, prices mast continue on an appealing level to bring and keep them in the market. On the farms there has been somewhat of an increased d i s p o s i t i o n to move produce but farm loans w i l l be liquidated gradually and the prevailing and promised low prices w i l l not make the farmer an active buyer of other products in the spring. In general, i t would seem t h a t : (a) There i s a greater confidence in the fundamental soundness of the business and banking s i t u a t i o n . (b) A d i s p o s i t i o n to resume business e n t e r p r i s e s cautiously and not to expect "Boom times" t h i s year but to be s a t i s f i e d with moderate r e t u r n s , with l i t t l e or no net p r o f i t i f the business and i t s organizat i o n can be h e l d i n t a c t . (c) A general f e e l i n g that p a r t i c u l a r p r i c e s and cost of l i v i n g must be readjusted and equalized and t h i s , perhaps, on a lower basis than that which now p r e v a i l s . Some reductions may have gone too f a r , others not f a r enough, and some about f a r enough(d) Labor i n many cases may accept a readjustment of wages as l i v i n g costs are readjusted and i n general w i l l be disposed to render more e f f i c i e n t service. F. 0. WATTS 21,3 | X-3053 D i s t r i c t No. 12 (San Francisco). This report on business and f i n a n c i a l conditions in the Twelfth D i s t r i c t is based on l e t t e r s received from twenty-six banks located in d i f f e r e n t p a r t s of the d i s t r i c t : DEMAND FOR MONEY: Generally the l a r g e r c i t i e s report the demand f o r money as " a c t i v e , " "strong" or "excessive. " One or two banks i n Southern Oregon s t a t e the demand has "moderated" or i s "about as usual. " PREVAILING- INTEREST RATESt In most of the large centers, r a t e s of i n t e r e s t are from 6 to 8 per cent, with the ruling rate averaging 7 per cent; except i n Ogden, Sal v Lake and Boise tae minimum i s quoted a t 8 per cent. In country d i s t r i c t s the r a t e i s from 8 to 12 per cent. LOANS; Throughout the d i s t r i c t loans are l i q u i d a t i n g slowly, except i n Los Angeles where "Loans are said to be the highest i n the h i s tory of the c i t y ; " and i n Arizona "There i s no l i q u i d a t i o n as yet. " Ogden reports loans as having been "materially liquidated; 11 whereas a t Salt Lake i t i s s t a t e d "There i s a marked shortage of ' loaning funds, but general reduction i s being accomplished through pressure exerted by the banks." Boise reports loans increasing. DEPOSITS: Deposits a r e decreasing everywhere except in Los Angeles where they are "maintaining a h i # i level; " i n Ogden "They are holding t h e i r own; " whereas a t Salt Lake "Deposits have decreased on an average during the year 20 to 25%.'" 214 -23X-3053 LUMBER: Ihe lumber industry i s i n an u n s a t i s f a c t o r y condition. Most of the m i l l s are shut down and there are but few logging camps operating. Many lumbermen believe the industry w i l l show some improvement within the next ninety days, but t h i s imp rovement w i l l not be marked u n t i l : f i r s t , there i s an adjustment of f r e i g h t r a t e s that w i l l permit the F i r of the Northwest to compete i n the Middle West with the Yellow Pine of the South: second, u n t i l the cost of production i s lowered by a material reduction of wages; t h i r d , u n t i l there i s more money in the country available f o r building construction. LIVESTOCK: This industry a t present i s i n a deplorable s t a t e due, to the long Winter of 1919-1920 when i t was necessary to purchase large amounts of feed a t high p r i c e s (in Montana i t was necessary to feed c a t t l e s i x months); to the marked decline in p r i c e s which has caused many herds to be s a c r i f i c e d i n an e f f o r t to s a t i s f y the holders of mortgage loans; and to the increased f r e i g h t charges. However, l i v e s t o c k went i n t o t h i s Winter f a t and in excellent cond i t i o n , with cheap feed, $6. to $8. a ton f o r A l f a l f a and even as low as $3. a ton i n some sections, as against $20. to $40. l a s t year. These conditions, together with i d e a l Winter weather give promise to the sheep men of a lamb crop of one hundred per cent as compared to an average lamb crop l a s t year of f i f t y per cent. Should there be a market f o r wool at f a i r p r i c e s those sheep men 215 -24- X-3053 who have not had to s e l l t h e i r breeding stock i n order to pay t h e i r debts w i l l be able to recoup themselves on t h e i r heavy losses in the next two or three years, even though p r i c e s f o r wool, lanes and wethers remain at the present low l e v e l . Both c a t t l e and sheep men report that wages of herders have f a l l e n from a maximum of $125. to as low as $30, and $40. per month, with a considerable reduction i n the cost of supplies; and they s t a t e f u r t h e r that the e f f i c i e n c y of labor has increased i n a marked degree. CHOPS: Crop prospects throughout the D i s t r i c t generally are reported as "good. " There i s evidence however of discouragement on the p a r t of the farmers due to t h e i r i n a b i l i t y to move l a s t y e a r ' s crops even a t prevailing low p r i c e s . reduced acreage. This probably w i l l r e s u l t i n a In Arizona . i t i s s t a t e d that many farmers w i l l give up r a i s i n g cotton and return to d i v e r s i f i e d farming. Northwest there w i l l be about the same acreage i n wheat. In the There i s more than the usual amount of moisture i n the s o i l and Fall sown wheat never looked b e t t e r . TRADE: Wholesale trade was good throughout the d i s t r i c t u n t i l l a t e i n the F a l l when there was a decided f a l l i n g off i n volume; i n January there has been an even more marked decrease. Inventories taken a t the close of the year r e f l e c t the marked decline i n p r i c e s of most commodities. Wholesalers, fearing f u r t h e r d e c l i n e s , are s t i l l buying sparingly except i n cases where they f e e l that goods are well 216 -25- X-3053 below the cost of production. R e t a i l e r s everyv&ere report an excellent year in 1920, and a l t h o i # there i s considerable p r i c e c u t t i n g , nevertheless r e t a i l e r s are prospering (at l e a s t f o r the present); but l i k e the wholesalers they are buying sparingly. Until the l a t e F a l l collections were good with both wholesalers and r e t a i l e r s but f o r the l a s t two months they are reported as " f a i r " , "slow" and "poor. " In the l i v e s t o c k d i s t r i c t s much s t r e s s i s l a i d on the f a c t t h a t collections are "very slow. " LABOR: Unemployment i s increasing throughout the e n t i r e d i s t r i c t but esp e c i a l l y i n the Northwest due to the closing down of the m i l l s and logging camps. There has been no great amount of s u f f e r i n g as yet from t h i s cause. WAGES: Hi roughout the D i s t r i c t wages are f a l l i n g although as yet there has been no material reduction in the building trades. I t i s ex- pected when the logging canps open up that there w i l l be a reduction i n wages of about 15 to 20 per cent. In the a g r i c u l t u r a l d i s t r i c t s wages f o r farm hands have been reduced in many cases as much as 50 p e r cent and in some cases even more. No c i t y reports any reduction in wages paid f o r c l e r i c a l help. REMARKS: Although conditions today in the Twelfth D i s t r i c t generally a r e uns a t i s f a c t o r y , nevertheless there i s a f e e l i n g of optimism on the X-3053 —06— p a r t of a l l correspondents- I t i s thought that by April or May conditions w i l l be f a i r l y well s t a b i l i z e d and that the products -Lipids, forest and nv&ru will move f a s t e r with a resultant liquidation of existing heavy indebtedness* I t is very general— ly believed that the worst has passed, but that there may be a number of business f a i l u r e s as the outcome of present unsettled conditions. In almost every p a r t of the D i s t r i c t banks are over- loaned, and the country banks are not only using the Federal Reserve Bank f r e e l y , but also are leaning heavily on t h e i r c i t y correspondents, As an i l l u s t r a t i o n Portland Branch of the Federal Reserve Bank advises that i t s t o t a l loans to member banks are $9,490,000 whereas four banks alone in Portland report a t o t a l of loans to country banks of $7,978,646.49. If oar basic products move f r e e l y i n the Spring the presents i t u a t i o n w i l l improve materially. Should however the market f o r cotton, r i c e , wool, livestock, salmon, lumber, canned goods and our other products not be b e t t e r than i t i s today, there will be be d i f f i c u l t y i n financing the farmers and producers during the coming Summer and Fall* A, 1. MII&S.
@FedFRASER