Full text of Bank Suspensions, 1921-1936, (December 1937)

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1204

FEDERAL RESERVE BULLETIN

DECEMBER 1937

BANK SUSPENSIONS, 1921-1936

In the past forty-five years there have been TABLE 1.—NUMBER OF BANK SUSPENSIONS AND N U M OF SUSPENSIONS PER 100 ACTIVE BANKS, BY
nearly 18,000 bank suspensions2 in the BER
YEARS, 1892-1936 x
United States. These years may be divided
SuspenSuspeninto four periods. In the period 1892-1920,
sions per
sions per
100 b a n k s
Number 100 banks
2,926 suspensions occurred, an annual aver- Year Number
in operaYear
in operaof susof sustion on
tion on
pensions
pensions
age of 100; in 1921-1929 there were 5,712, an
J u n e 30
June 30
each year
each year
annual average of 'slightly less than 650;
during the four years 1930-1933 there were 1892...
1914
149
80
.7
.5
1915
152
491
.5
4.1
9,096 suspensions, of which 4,000 occurred 1893
1894
1916
52
83
.2
.7
1917
49
110
.2
.9
in 1933 ;3 and in the 1934-1936 period there 1895
47
141
1918
.2
1896 . . .
1.2
were 135 suspensions, or an average of 45 1897
1919
62
.2
1.2
139
5
1920
167
.6
1898
63
per year.
1921
505
32
1.7
1899
.3
3
1922
366
1900
35
1.2
Table 1 shows the annual figures from 1901
1923 _
2.2
.4
646
65
which these totals were computed, together 1902
1924
lib
2.7
54
.3
2.2
1925
618
._
52
.3
with the ratio of the number of suspensions 1903
1904
1926
976
3.5
125
.7
669
2.5
1927
1905
.
4
80
in each year to the number of active banks in 1906
1928
498
1.9
.3
53
that year. It may be noted that during the 1907
1929
659
2.6
.4
90
1930
1,350
5.7
153
.6
29 years prior to 1921 the annual rate of sus- 1908
3
1931
10.6
2,293
1909
78
1932
1,453
7.8
.
2
1910
58
pensions was less than one bank per 100 in 1911
1933 2
28.3
4,000
.3
85
operation in every year except 1893, 1896,1912
.4
1934
57
78
.3
4
.2
34
1935
103
and 1897. During the period from 1921 1913
44
.3
1936
through 1929 the ratios were substantially
Exclusive of mutual savings banks, figures for which have been
higher, and in each of the years 1930-1933 the omitted
from all data presented in this analysis. For information concerning
twelve mutual savings banks which suspended during
rate was considerably in excess of that re- the periodthe1921-1936,
see the September 1937 issue of the FEDERAL R E SERVE
BULLETIN,
910.
ported for any year prior to 1930. The two See explanatorypage
statement relative to bank suspension statistics in
1933,
page
1208.
peak years were 1931 and 1933, when the
number of suspensions per 100 active banks
prices, with a rapid acceleration during the
was 10.6 and 28.3, respectively.
war years. In such a period banking losses
The large number of bank suspensions are easily avoided and the misjudgments of
during 1921-1933 was preceded by a rapid bankers are not challenged as they are in a
expansion in the number and resources of period of falling prices. The conditions
banks during the two decades between 1900 which existed encouraged the chartering of
and 1920. This period was in general char- new banks, often where there was no real
acterized by rising commodity and land need for them. By the middle of 1920 the
This analysis is based largely on detailed statistics published number of national, State, and private banks
in the Bulletin for September 1937, pages 866-910.
Bank suspensions comprise all banks closed to the public, in operation was 30,235, or more than twice
either temporarily or permanently, by supervisory authorities or
by the banks' boards of directors on account of financial difficul- as many as were in operation in 1900.
ties, whether on a so-called moratorium basis or otherwise, unless
the closing was under a special bank holiday declared by civil au1921-1929.—The decade of the 1920's may
thorities. If a bank closed under a special holiday declared by
civil authorities and remained closed only during such holiday or be regarded as a generally prosperous one.
part thereof, it has not been counted as a bank suspension. Banks
which, without actually closing, obtained agreements from de- The depression which occurred at the beginpositors to waive a portion of their deposits or to defer the withdrawal of a portion of their deposits have not been classed as sus- ning of the period, though severe, was of
pensions. Banks which were reopened or taken over by other
institutions after suspension have been included as suspensions. short duration, and from 1922 on the general
The figures for 1933 include all banks not granted licenses following the banking holiday in March 1933 which were subsequently tendency of business activity was upward
placed in liquidation or receivership (including unlicensed banks
absorbed or succeeded by other banks), and all other unlicensed with only minor setbacks in 1924 and 1927.
banks which were not granted licenses to reopen by June 30, 1933.
See explanatory statement relative to bank suspension sta- Despite the expanding activity in industry
tistics in 1933, page 1208.
1

2

1

2

3




DECEMBER

1937

FEDERAL RESERVE BULLETIN

and commerce, the general level of commodity prices was stabilized for a number of
years much below the peak reached in war
years.
Agriculture, in particular, was passing
through a period of readjustment incidental
to the reduction of the prices of farm commodities and land after the war. The balance
of payments of agricultural regions in the
United States was unfavorable, and banks
serving agricultural communities were under
pressure. Suspensions among such banks
were numerous throughout the 1921-1929
period. Near the end of 1923 and in 1924
suspensions increased in the West North Central States, particularly in North Dakota
during the latter part of 1923 and in South
Dakota and Iowa in 1924. The number of
suspensions in that region declined moderately in the following year but increased
again in 1926, when prices of agricultural
products were lower. In the South Atlantic
States there was also a marked rise in 1926
in the number of suspended banks, reflecting
in part the collapse of the Florida real estate
boom. The number of suspensions in the
United States decreased in 1927 and again
in 1928, but in 1929 there was an increase in
the number of suspensions in nearly every
section of the country.
1930-1932.—During the depression years
following 1929 there was a rapid decline in
the income of customers of banks and in the
values underlying the loans and investments
of banks. The general fall in prices caused
widespread difficulties among banks serving
all classes of activity—commercial, industrial, and agricultural. Bank suspensions
became widespread and many banks were
under pressure'because of the withdrawal of
funds by depositors for hoarding. As economic conditions grew steadily worse suspensions increased, and as suspensions increased depositors became alarmed and withdrew funds, causing additional suspensions
and adding to the depth of the economic depression.




1205

Suspensions during 1930 involved 1,350
banks, with deposits of $837,000,000, compared with the highest previous figure of 976
banks, with deposits of $260,000,000, in 1926.
From January through October, 1930, the
rate of suspensions reported for each month
was not far above the monthly average for
the previous 9-year period, but there were
256 suspensions in November and 352 in December of that year. In these months 9 large
banks in different sections of the country suspended. The closing of these large banks resulted in the closing of many other banks,
partly because of affiliate and correspondent
relationships, and partly because of the
spread of fear among depositors, particularly
in territory near the location of the banks.
Following January 1931, when about 200
suspensions were reported, the number declined to less than 100 each month until June,
when 167 banks suspended. While suspensions during the two succeeding months were
less numerous than in June, a sharp increase
occurred in September. During the last
four months of 1931, 1,360 banks suspended
—more than in any previous full year. The
peak of this period was in October, after the
suspension of the gold standard in England,
when 522 banks closed. By the end of the
year a total of 2,293 banks had suspended.
In 1931, as in 1930, the East North Central
and West North Central groups of States accounted for the largest proportion of suspensions—610 and 717, respectively, or more
than half of all the banks that closed during
the year. Illinois and Iowa each reported
more than 200 suspensions during the year.
The New England States, which had previously been comparatively free from suspensions, reported 11 suspensions in 1930 and 33
in 1931, compared with a yearly average of 2
for the 9-year period 1921-1929. The Middle
Atlantic States also were seriously affected in
1931; 230 banks suspended in that region
during the year, compared with 30 in 1930
and a yearly average of 8 during 1921-1929.

1206

FEDERAL RESERVE BULLETIN

While the number of suspensions in 1931
was nearly 4 times greater than the annual
average for the 9-year period 1921-1929, the
deposits of banks suspending during this year
were proportionately even larger—about 9
times the yearly average for the 9-year period.
The placing of restrictions on deposit withdrawals, a practice that had been used in 1931
in the East North Central States, became
more prevalent in 1932 as a measure to cope
with the steady withdrawal of funds. These
restrictions on deposit withdrawals were usually imposed through "depositors' agreements" deferring withdrawal of varying percentages of deposits over periods of time
ranging up to five years, certain percentages
of deposits to be released at the end of the
first year and additional percentages at the
end of the succeeding years. New business
was conducted on an unrestricted basis. Unfortunately, comprehensive figures are not
available to show the number of banks that
obtained deposit deferment agreements, or
the amount of deposits involved in such deferment agreements, but from what information is available it appears that the practice
was followed in a number of States during
1931 and 1932.
Another type of bank moratoria that became common during this period, particularly
in the East North Central States, was the reorganization of banks through the waiver or
surrender of a portion of deposits by the
depositors. This was accomplished in some
cases through outright contributions by certain of the depositors, but usually there was
a segregation of assets for the benefit of waiving depositors under a trust agreement, with
a right in the bank to substitute assets during
a period of time running generally from two
to five years. Figures are not available at
present to show the losses sustained by depositors through this type of reorganization
of distressed banks.
The National Credit Corporation was
formed in October 1931 by banks at the suggestion of the President to relieve the situa-




DECEMBER

1937

tion by making loans to banks on sound but
not readily marketable assets, and the Reconstruction Finance Corporation was created
by Congress in January 1932 to make loans to
banks and other institutions. Member banks
were granted additional assistance through
the provisions of the Glass-Steagall Act
adopted in February. The Act gave the Federal Reserve Board power to permit the use of
United States Government securities as collateral against Federal Reserve notes. This
made it possible for the Federal Reserve
banks to increase their purchases of United
States Government securities, thereby providing member banks with funds to meet additional demands for currency and gold and
at the same time to reduce their indebtedness
at the Reserve banks. The Glass-Steagall
Act also contained provisions under which
member banks that were without adequate
amounts of eligible and acceptable assets
could under certain conditions receive assistance on the basis of other security satisfactory to the Reserve banks.
The number of suspensions had decreased
from 522 in October 1931 to 175 in November,
increasing to 358 in December. During the
spring, summer, and autumn of 1932 the
number of bank suspensions declined to less
than 100 per month, with the exception of the
months of June when 151 banks suspended
and July when 132 banks suspended. Near
the end of the year suspensions again increased in number, mainly in the Mid-Western and Far Western States. A total of
1,453 banks suspended in 1932, involving deposits aggregating $706,000,000. Fewer
large banks suspended, however, during the
year than in either 1930 or 1931. During the
first two months of 1933, 386 banks with deposits of nearly $195,000,000 suspended.
Many banks in a number of places had
closed temporarily in 1932 under special
"banking holidays" declared by civil authorities. The first of a series of State-wide banking holidays was declared in Nevada at the
beginning of November, 1932. Though origi-

DECEMBER

1937

FEDERAL RESERVE BULLETIN

nally for a 12-day period, it was subsequently
extended. Early in 1933 more local bank
holidays were declared by city authorities and
many existing ones were' extended, in order
to permit banks to obtain deposit deferment
or waiver agreements and to afford banks an
opportunity to raise funds and make adjustments necessary to enable them to continue to
meet their obligations.
The banking crisis of 1933.—On February
4 a one-day holiday was declared in Louisiana
because of difficulties in New Orleans. On
February 14 an 8-day banking holiday was
declared in Michigan because of difficulties
centering in Detroit. While the Michigan
holiday arrested withdrawals of deposits
from banks in that State, outside Michigan
there was an increase in the movement of
funds from weaker to stronger banks and in
currency withdrawals. Funds were withdrawn from banks in other States to send to
Michigan or to meet payments that otherwise would have been met from deposits in
Michigan banks. Developments of this nature were partly responsible for the rapid
spread of the banking holiday movement
among other States.
In a number of States new laws were passed
to provide for safeguarding of bank deposits
and for readjusting the liabilities of banks
without establishing receiverships. With a
view to enabling the banking situation in
any particular State to be better handled as
a whole, a joint resolution was adopted on
February 25 by the Congress of the United
States authorizing the Comptroller of the
Currency to exercise with respect to national
banks such powers as State officials might
have with respect to State banks.
The Governor of Maryland declared a
banking holiday on February 25, chiefly on
account of conditions in Baltimore, and at
about the same time restrictions were authorized on withdrawals of bank deposits in Indiana, Arkansas, and Ohio. On March 1
bank holidays were declared in Alabama,
Kentucky, Tennessee, and Nevada, and simi-




1207

lar action was taken in six other States on
March 2 and in seven others on March 3.
On the morning of March 4, the Governor of
the State of New York issued a proclamation declaring that day, which was a Saturday, and the following Monday to be bank
holidays. Similar action was taken in Illinois,
Massachusetts, New Jersey, Pennsylvania,
and elsewhere. These declarations of State
holidays in the various States had by March 4
closed or placed restrictions on practically
all banks in the country. Federal Reserve
banks also observed State holidays and closed
on March 4. All leading exchanges ceased
operations and business in general was practically at a standstill.
On March 6 the President issued a proclamation declaring a nation-wide bank holiday to continue through the four days ending
Thursday, March 9. During the holiday the
banks were not to pay out any coin, bullion,
or currency or to transact any other banking
business whatever, except as might be permitted by the Secretary of the Treasury.
On March 9 the Emergency Banking Act
was passed by Congress and signed by the
President. On this day also the President
issued a proclamation extending the bank
holiday indefinitely, and on March 10 by
Executive Order he conferred power on the
Secretary of the Treasury to license member
banks of the Federal Reserve System, found
to be in satisfactory condition, to conduct a
usual banking business with exceptions as to
paying out of gold and the furnishing of currency for hoarding purposes. Similar powers
were granted authorities of the various States
with respect to banks not members of the
Federal Reserve System. On Saturday,
March 11, the Reserve banks were authorized by the Secretary of the Treasury to reopen on the following Monday. It was announced the same day that on March 13 banks
in the 12 Federal Reserve bank cities would
be reopened; on March 14, banks in approximately 250 other cities having recognized

1208

FEDERAL RESERVE BULLETIN

clearing houses; and on March 15, banks in
other places.
By March 15, 4,507 national banks and
567 State bank members of the Federal Reserve System, with deposits (on December
31, 1932) of $16,195,000,000 and $9,358,000,000, respectively, had been licensed to reopen;
1,400 national banks and 225 State bank members, with deposits of $1,943,000,000 and
$926,000,000, respectively, had not been
granted licenses to reopen. Correspondingfigures with respect to banks not members
of the Federal Reserve System were not available prior to April 12, 1933 by which date
7,394 nonmember banks (exclusive of mutual
savings banks) with deposits of $4,946,000,000 had been authorized to reopen, and 2,938
such banks with deposits of $1,318,000,000
had not been granted authority to reopen.
On December 30, 1933, there were still 512
member banks with deposits of $528,000,000,
and 1,257 nonmember banks with deposits of
$497,000,000, which had not been granted
licenses to reopen and had not been placed in
liquidation or receivership. By December 31,
1934, however, all but 11 of the member banks
and 149 of the nonmember banks not licensed
following the banking holiday either had
been granted licenses to reopen or had been
placed in liquidation or receivership. At the
end of December 1936 there remained only
3 member banks and 7 nonmember banks
which had not been granted licenses to reopen and had not been placed in liquidation
or receivership.
Bank suspensions in 1933.—Because of
restrictions imposed on deposit withdrawals,
the reorganization of banks through deposit
waivers during local and State bank holidays,
changes in status of banks incident to the
national banking holiday, and the amount of
time required in many cases to determine
whether banks should be licensed or should
be placed in liquidation or receivership, statistics of bank suspensions for 1933 are not
wholly comparable with those for previous
years. The figures used in the present analy-




DECEMBER 1937

sis are, however, thought to be reasonably
comparable with statistics of suspensions in
former years. They comprise banks suspended before the banking holiday, licensed
banks suspended or placed on a restricted
basis following the banking holiday, unlicensed banks placed in liquidation or reTABLE 2.—SUMMARY CLASSIFICATION OF BANKS S U S PENDED IN 1933, BEFORE AND AFTER THE BANKING
HOLIDAY X
Nonmember
State
banks

State
member
banks

National
banks

Total

Private
banks

N u m b e r of banks

Banks suspended Jan. 1
to Mar. 4
Banks placed in receivership during the banking holiday (March 6
to March 15)
Licensed banks suspended March 16 to
December 31
Banks not licensed following the banking
holiday and later
placed in liquidation
or receivership (March
16, 1933 to Dec. 31,
1936)
Banks granted licenses
(July 1,1933 to Dec. 31,
1936)
Banks neither granted licenses to reopen nor
placed in liquidation
or receivership by Dec.
31, 1936
TotaL.

408

64

22

302

20

39

2

1

34

2

179

9

2

158

10

2,122

865

74

1,113

70

1,242

161

72

1,002

7

4,000

1,101

2 174

3

7
2,616

109

Deposits (in thousands of dollars)
Banks suspended Jan. 1
to Mar. 4
198, 417
71, 802
Banks placed in receivership during the bank r
ing holiday (March 6
15,080
1,381
to March 15)
Licensed banks suspended March 16 to
17,322
145, 072
December 31
Banks not licensed following the banking
holiday and later
placed in liquidation
or receivership (Mar.
16, 1933 to Dec. 31,
2, 519, 958 1, 361, 607
1936)
Banks granted licenses
(Julyl, 1933 to Dec. 31,
716, 423 158, 437
1936)
Banks neither granted licenses to reopen nor
placed in liquidation
or receivership by Dec.
1,748
31, 1936
Total

3, 596, €

21, 633

102, 115

2,867

109

12, 732

858

1,927

124,920

903

672, 260

477, 954

8,137

470, 482

516

1,266

1, 610, 549 '• 783, 3991, 189, 469 13, 281

1
Exclusive of mutual savings banks.
2 Includes 56 banks with deposits of $118,479,000 which did not receive licenses (as member banks) following the banking holiday and later
withdrew from the Federal Reserve System. Of these, 28 were subsequently granted licenses as nonmembers.

DECEMBER 1937

1209

FEDERAL RESERVE BULLETIN

NUMBER OF BANK SUSPENSIONS
ceivership, and all other unlicensed banks
which were not granted licenses to reopen by
By classes of banks.—Of the 14,943 banks
June 30, 1933. Supervisory authorities had that suspended in the 16-year period 1921by that date completed their examination of 1936, 2,719 were national banks, 592 were
all or nearly all the banks not granted licenses State member banks, 11,033 were nonmemimmediately following the banking holiday ber State banks, and 599 were private banks.
and had authorized such of the banks to re- The number of suspensions during this peopen as could then qualify for licenses. There riod, by years and by classes of banks, appear
remained, however, on June 30, 1933, 985in table 3.
unlicensed national banks with deposits of
$1,028,347,000, 114 unlicensed State member TABLE 3.—NUMBER OF BANK SUSPENSIONS, BY
CLASSES OF BANKS AND BY YEARS, 1921-1936 *
banks with deposits of $239,268,000, and
1,983 unlicensed nonmember banks with deNonmeml ber banks
Membe r banks
Year
Total
posits of $1,063,984,000, to be rehabilitated
Private
State
State
National
and reopened or to be placed in liquidation
or receivership. All such banks are treated 1921
44
19
390
505
52
13
23
281
366
49
as suspensions. A summary classification of 1922
32
23
1923
501
646
90
suspensions in 1933 is shown in table 2.
37
1924
38
578
775
122
39
433
1925
618
28
118
52
766
35
976
Bank suspensions in 1934-1936.—With 1926
123
33
514
31
669
the closing of the weak banks and strengthen- 1927
91
19
406
16
1928 . . __.
498
57
31
547
17
ing of the banking structure generally, fol- 1929
659
64
58
1,104
27
lowing the banking holiday in March 1933, 1930
1,350
161
80
107
1,697
2, 293
409
1931
37
1,085
and the stability brought about by deposit 1932
55
1,453
276
109
174
2,616
insurance and other Government measures 1933
4,000
1,101
1
13
43
1934
57
30
designed to ease the burdens of banks, sus- 1935
34
4
1
42
1
44
1936
pensions decreased in number to 57 in 1934,
599
11,033
592
14, 943
2,719
Total.
34 in 1935, and 44 in 1936.
s

1 Exclusive of mutual savings banks.
ANALYSIS OF BANK SUSPENSIONS, 1921-1936

In the discussions which follow, the numIn the following pages bank suspensions ber of banks suspended during the 16-year
are analyzed by years and periods, by classes period is compared with the number in operaand sizes of banks, by geographic areas, and tion on June 30, 1920, with certain excepby sizes of communities. The analysis re- tions.1 This date was chosen as the basis of
lates to the period beginning with 1921, that comparison because it marked approximately
year having been selected as a starting point the beginning of the banking difficulties exbecause sufficiently reliable data are not avail- perienced during the years 1921-1933 and
able to permit of a detailed analysis of sus- also because the number of active banks in
pensions in earlier years. It was in 1921 also the United States was near its peak at that
that the number and rate of suspensions time.
moved noticeably upward toward the high 1
order to test the reliability of using active banks as of
levels which were reached in subsequent JuneIn30,
1920 as a general base for comparison with suspended
banks, an average of the number of banks in operation, by
years, particularly 1930-1933. Detailed fig- classes, on June 30 in each of the years 1920-1935 was computed, and averages of the mid-year figures for 1920, 1925,
ures on which the analysis is based, covering and
1930 were also obtained, by size of loans and investments,
capital stock, and population of towns and cities. While the
the years 1921-1936, may be found in the distribution
of banks using the averages thus computed differed
from the 1920 figures, the conclusions drawn from
series of statistical tables which appeared on somewhat
the use of 1920 figures as a base were for the most part supby the average figures. In only a few cases, where the
pages 868-910 of the September 1937 issue ported
number of banks in a given classification changed substantially
of the FEDERAL RESERVE BULLETIN.




during the period, were any important differences in the distribution shown.

1210

FEDERAL RESERVE BULLETIN

DECEMBER 1937

As is indicated in table 4, the 2,719 national cent—were reported in the West North Cenbanks suspended during 1921-1936 repre- tral States, comprising Minnesota, Iowa,
sented a total of 34 suspensions for every 100 Missouri, North Dakota, South Dakota, Nenational banks in operation on June 30, 1920. braska, and Kansas. For this group of States
The 592 State member bank suspensions rep- the number of suspensions during the period
resented a suspension rate 1 of 43 per 100per 100 active banks on June 30, 1920
State member banks active on the same date, amounted to 58, the second highest suspenand the corresponding rate for nonmember sion rate shown for any geographic division.
State banks was 57. In relation to the aver- The areas for which the first and third highest
age number of banks in operation during the rates were recorded—the South Atlantic
period (based on June 30 figures, 1920-1935) States with a rate of 59 suspensions per 100
the rates of suspension per 100 active banks active banks and the East North Central
were 38 for national banks, 48 for State mem- States with a rate of 55—together accounted
ber banks, and 72 for nonmember State for 4,809 suspensions, or 34 percent of the
total. Both these areas are largely agriculbanks.
tural.
TABLE 4.—NUMBER OF BANKS IN OPERATION, NUMBER
The three groups of States having the
OF BANK SUSPENSIONS, AND SUSPENSION RATE,
1921-1936, BY CLASSES OF B A N K S
lowest suspension rates were the New England, Middle Atlantic, and Pacific States. In
Number of banks
Suspension rate,
1921-1936
in operation
these States there were 1,323 suspensions, or
Number
of bank
9 percent of the total, and the number of
Per 100
Per 100
Class of bank
suspenbanks in banks in
Average
On
sions,
banks
suspended per 100 in operation in each
operation
during
operaJune 30,
1921-1936
(average)
1920tion on
1920
group
on June 30, 1920 was 20, 29, and 31,
during
19352
June 30,
1920-1935 2
1920
respectively.
In table 5 are presented both a numerical
National b a n k s . _ .
8,024
7,232
2,719 •
33.9
37.6
State member
and
a percentage distribution, by geographic
banks
1,374
1,247
592
43.1
47.5
Nonmember State
divisions,
of the 14,344 banks (exclusive of
11,033
72.1
banks... _.
19,487
15, 303
56.6
mutual
savings
and private banks) which
14,
344
23, 782
60.3
Total
28, 885
49.7
suspended during the period 1921-1936, toExclusive of mutual savings and private banks.
gether with the number of suspensions per
Based on the number as of June 30 each year.
100 banks in operation on June 30, 1920.
By geographic divisions.2—While all parts
of the country suffered from the numerous TABLE 5.—NUMBER AND PERCENTAGE DISTRIBUTION OF
bank suspensions which occurred during the BANK SUSPENSIONS BY GEOGRAPHIC DIVISIONS,
1921-1936, AND RATE OF SUSPENSION PER 100
16 years ended in 1936, the agricultural sec- BANKS
IN OPERATION ON J U N E 30« 1920 *
tions were particularly affected. Of the total
of 14,344 suspensions (exclusive of mutual
Suspension rate
Number of
Percent 1921-1936, per 100
savings and private banks) 5,255—or 37 per- Geographic division suspensions,
of
total
banks
in operation
1921-1936
1

1

2

on June 30, 1920

1

Except where otherwise stated, the term "suspension rate"
as used here and in subsequent pages means the number of suspensions
per 100 banks in operation on June 30, 1920.
2
New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut.
Middle Atlantic: New York, New Jersey, Pennsylvania.
East North Central: Ohio, Indiana, Illinois, Michigan, Wisconsin.
West North Central: Minnesota, Iowa, Missouri, North Dakota,
South Dakota, Nebraska, Kansas.
South Atlantic: Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia,
Florida.
East South Central: Kentucky, Tennessee, Alabama, Mississippi.
West South Central: Arkansas, Louisiana, Oklahoma, Texas.
Mountain: Montana, Idaho, Wyoming, Colorado, New Mexico,
Arizona, Utah, Nevada.
Pacific: Washington, Oregon, California.




New England
__.
Middle Atlantic __ _ __
East North Central

142
748
2,938

1.0
5.2
20.5

19.5
28.8
54.7

West North Central
South Atlantic . . .
East South Central

5,255
1,871
759

36.6
13.1
5.3

58.4
59.0
41.8

1,367
831
433

9.5
5.8
3.0

42.0
52.8
31.3

14, 344

100.0

49.7

West South Central
Mountain
Pacific
Total
1

...

Exclusive of mutual savings and private banks.

1211

FEDERAL RESERVE BULLETIN

DECEMBER 1937

Table 6 shows the geographic distribution, try's total, in the 1921-1929 period. The
by areas, of banks (other than mutual sav- West North Central States had a larger numings and private banks) which suspended ber of suspended banks in both periods than
during the 1921-1929 and 1930-1933 periods, any other group of States, but the increase
respectively, and the percentage ratios of in the later period was small compared with
suspensions during each period to the num- that in some of the other geographic diviber of active banks at or near the beginning sions. While more than 47 percent of the
of the period. These figures indicate that the country's total suspensions during the years
New England and Middle Atlantic States 1921-1929 occurred in this group of States,
were comparatively free from bank suspen- only 30 percent of the total for the 1930-1933
sions until the depression years of 1930-1933. period was accounted for by these States.
During the 1930-1933 period 131 suspensions It will also be observed from table 6 that
occurred in the New England States, com- while only the South Atlantic, West North
pared with but 10 in the 1921-1929 period; Central, and Mountain States had an annual
in the Middle Atlantic States 692 suspensions rate of suspension during the period 1921were reported during the four depression 1929 of 3 or more banks per 100 active banks
years, compared with only 41 in the previous on June 30, 1920, all geographic divisions had
9 years. Nevertheless, even for the 4-year a suspension rate in the 1930-1933 period of
period these two groups of States together more than 4 banks per annum, based on the
were responsible for less than 10 percent of number of banks in operation on January 1,
1930. The highest annual rates shown in
the country's total.
The largest increase in the volume of sus- the period 1930-1933 were in the East North
pensions during the later period as compared Central, West North Central, and South
with the earlier one occurred in the East Atlantic States, respectively.
North Central States. There were 2,533 sus- By States.—The number of suspensions in
pensions in this area during the years 1930- the 10 States with the largest number of sus1933, or 29 percent of the United States total, pended banks is shown in table 7 for each of
as against only 375, or 7 percent of the coun- the periods 1921-1936, 1921-1929, and 1930TABLE 6.—NUMBER AND PERCENTAGE DISTRIBUTION, BY GEOGRAPHIC DIVISIONS, OF BANK SUSPENSIONS
DURING THE PERIODS 1921-1929 AND 1930-1933, AND RATES OF SUSPENSION PER 100 ACTIVE BANKS AT
OR NEAR THE BEGINNING OF EACH PERIOD 1
1930-1933

1921-1929

Geographic divisions

New England
Middle Atlantic__ .
East North Central
West North Central...
South Atlantic
East South Central
West South Central
Mountain
Pacific

.

Total
1

Number
of
suspensions

Annual
rate of
suspension per
100 banks
in operation on
June 30,
1920

Number
of
suspensions

Percent
of
total

Suspension
rate per
100 banks
in operation on
Jan. 1,
1930

Annual
rate of
suspension per
100 banks
in operation on
Jan. 1,
1930

10
41
375

.2
.8
6.9

1.4
1.6
7.0

.2
.2
.8

131
692
2,533

1.5
7.9
28.8

19.0
23.3
48.1

4.8
5.8
12.0

2,567
944
200

47.4
17.4
3.7

28.5
29.8
11.0

3.2
3.3
1.2

2,647
917
549

30.0
10.4
6.2

42.5
39.8
32.2

10.6
10.0
8.1

614
530
130

11.4
9.8
2.4

18.9
33.7
9.4

2.1
3.7
1.0

741
300
302

8.4
3.4
3.4

29.0
32.2
30.7

7.3
8.1

5,411

100.0

18.7

2.1

8,812

100.0

37.3

9.3

Exclusive of mutual savings and private banks.




Percent
of
total

Suspension
rate per
100 banks
in operation on
June 30,
1920

7.7

1212

FEDERAL RESERVE BULLETIN

DECEMBER 1937

TABLE 7.—NUMBER OF BANK SUSPENSIONS IN THE T E N STATES W I T H THE LARGEST NUMBER OF SUSPENSIONS

DURING THE PERIODS 1921-1936, 1921-1929, AND 1930-1933 X

State

Number
of suspensions
1921-1936

Number
of suspensions
1921-1929

State

Number
of suspensions
1930-1933

State

1 238
952
879

Iowa
North Dakota
Minnesota

452
427
419

Illinois
Iowa
Missouri

817
785
560

Nebraska
Minnesota
North Dakota

779
726
611

South Dakota
Nebraska
Georgia

392
366
322

Wisconsin
Michigan
Nebraska

505
470
409

Wisconsin
South Dakota
Indiana

593
520

Missouri
Oklahoma
South Carolina

293
264
225

Indiana
Pennsylvania
Ohio

407
401
331

486

Texas .

Iowa
Illinois
Missouri

Michigan
Total 10 States
Total, 38 other States and Dist. of
Columbia
United States, total
1

7,356
6,988
14, 344

. . . .

______

___ _

219

. * _

306

2,032

3,818

5,411

United States, total _

8,812

3,379

United States, total

_

Minnesota,

Total, 10 States
Total, 38-other States and Dist. of
Columbia

Total, 10 States
Total, 38 other States and Dist. of
Columbia
_ _ __

4,994

Exclusive of mutual savings and private banks.

1933. The 10 States having the largest num- TABLE 8.—NUMBER OF BANK SUSPENSIONS, 1921-1936,
SUSPENSIONS PER 100 BANKS I N OPERATION ON
ber of suspensions during 1921-1936 were AND
J U N E 30, 1920, IN THE 21 STATES HAVING A S U S located in the East North Central and West PENSION RATE OF MORE T H A N 50
North Central regions, and included all the
Number
Suspension rate,
of
1921-1936, per 100
State
States comprising the East North Central
suspensions, banks in operation
1921-1936
on J u n e 30, 1920
group except Ohio, and all those comprising
the West North Central group except Kansas. Florida
291
2 112.8
Dakota
83.1
572
A total of 7,356 banks suspended in these 10 ASouth
76.3
rkansas..
368
74.4
Michigan
486
States, compared with a total of 6,988 in the
South Carolina- _
__
74.4
337
other 38 States and the District of Columbia. Iowa
_ _ - _ , _ _
72.3
1, 238
23
69.7
When the two periods 1921-1929 and 1930- NNevada
o r t h Dakota
611
68.0
1933 are compared, it appears that only 4 Nebraska
____
,__ _ _ _
65.1
779
Carolina
374
64.7
States—Iowa, Minnesota, Missouri, and Ne- North
212
Mississippi.___
_ _ _ _ _
63.1
593
__
61.3
braska—were included in both periods among Wisconsin
60.4
436
Georgia
the 10 States having the largest number of Indiana
59.2
_
_ _ _ _ _ _
520
59.1
Montana
250
57.4
suspensions. North Dakota, which had the New
Mexico
__
_ _ _
70
second largest number of suspensions in the Arizona
56.3
49
122
55. 0
daho. _
_ _
__
879
1921-1929 period, was not among the 10 IMissouri
53.4
137
Louisiana
51.3
952
States in the 1930-1933 period. While Illinois Illinois .__ _ _ _ _
50.6
_ _ _ 64.1
Total, 21 States . _ .
had more suspensions during the later period
9,299
Total, 27 other States and
than any other State, it was not one of the
35.1
District of Columbia
.__
5,045
10 in which the largest number of banks
United States, total
14, 344
49.7
suspended during the earlier period.
Exclusive of mutual savings and private banks.
Florida, and to a lesser extent in some other States, the use of
Table 8 shows the 21 States in which there JuneIn1920
figures of active banks as a base for comparison of suspension
figures
a somewhat distorted picture because the number of banks
were more than 50 suspensions during the in the gives
State reached its peak some years later, in contrast with most
States
where
the peak was reached in 1920-1921.
period 1921-1936 per 100 active banks on
June 30, 1920. The suspension rate was ranging from 113 suspensions during the 16highest in Florida, South Dakota, Arkansas, year period per 100 active banks in the case
Michigan, South Carolina, Iowa, Nevada, of Florida to 65 in the case of Nebraska and
North Dakota, Nebraska, and North Carolina, North Carolina. Although the absolute num-




x

1
2

DECEMBER 1937

1213

FEDERAL RESERVE BULLETIN

ber of suspensions during the period was not
large in such States as Nevada, New Mexico,
Arizona, Idaho, and Louisiana, the number
of suspensions expressed as a ratio to the
number of banks in operation on June 30,
1920 was high because of the relatively small
number of banks in operation in those States.
DEPOSITS OF SUSPENDED BANKS

TABLE 9.—DEPOSITS OF SUSPENDED BANKS, 1921-1936,
BY CLASSES OF BANKS AND BY YEARS 1
(In thousands of dollars)
Member banks
Year

National
1921
1922
1923
1924
1925
1926

Nonmember banks

Total

__.

State

State

Private2

172,188
91,182
149, 601

20, 777
20,197
34, 244

17, 363
7,113
12, 559

125,159
61, 964
101, 025

8,889
1,908
1,773

210,151
167, 555
260, 378

64, 890
55, 574
43, 998

13, 645
9,883
23, 466

123, 888
94, 547
183, 517

7,728
7,551
9,397

The deposits of the 14,943 banks which
199, 329
45, 547
17, 942
4,337
131, 503
suspended in the 16 years from 1921 through 1927
142, 386
1928
36, 483
10, 247
2,946
92, 710
230, 643
7,712
1929
41, 614
16, 459
164, 858
1936 aggregated over $8,500,000,000. Dur837, 096
202, 399
... _
15, 262
170, 446
448, 989
ing the 9-year period ended with 1929 the de- 1930
1, 690, 232
1931
293, 957
21,157
439,171
935, 947
1932
706,188
214,150
7,806
55,153
429,079
posits of suspended banks averaged less than
1933
..
3, 596, 698 1, 610, 549
783, 399 1,189,469
13, 281
$200,000,000 per year, but in 1930 the amount 1934
36, 937
1,441
40
35, 456
10,015
4,702
5,313
of deposits involved in suspensions rose to 1935
11, 306
71
507
10,728
$837,000,000, or more than 4 times the aver- 1936
Total
111,259
8, 511, 885 2, 803, 500 1, 463, 585 4,133, 541
age for the previous 9 years. In 1931 the
Exclusive of the deposits of the 12 mutual savings banks which sustotal deposits of suspended banks amounted pended
during the period, aggregating $30,474,000.
Deposit
for 115 of the 599 private banks which suspended durto $1,690,000,000, exceeding the aggregate ing 1921-1936figures
are not available.
amount involved in the period 1921-1929. A
decline was shown in 1932, when the total 1936. It also shows the percentage ratios of
amounted to $706,000,000, but in 1933 the deposits involved in suspensions to those of
amount of deposits involved in bank suspen- active banks, based both on deposits of banks
sions reached its peak, approximately $3,600,- in operation on June 30, 1920 and on average
000,000.
deposits of banks in operation during 1920By classes of banks.—The deposits of sus- 1935. It will be observed that on the basis
pended banks, by classes of banks and by of June 1920 figures this ratio was 23 percent
years, during the period 1921-1936 are shown and on the average basis it was 20 percent.
in table 9. Total deposits of national banks Total deposits of national banks which
which suspended during the period amounted suspended during the 16-year period repreto $2,803,500,000, and those of State member sented 16 percent of the deposits of national
banks to $1,463,585,000. In both of these banks in operation in June 1920. The correclasses of banks more than half of the total sponding ratio for State member banks was
for the entire period was accounted for by 18 percent and for nonmember banks 39 persuspensions which occurred in 1933. Non- cent. The ratio of deposits of national banks
member State banks which suspended during which suspended during 1921-1936 to averthe 16-year period involved deposits aggre- age deposits of national banks in operation
gating $4,133,541,000. Complete figures for during 1920-1935 was 14 percent, and the
private banks are not available, but the de- corresponding ratio for State member banks
posits of 484 of the 599 private banks which was 13 percent and for nonmember banks 41
suspended in 1921-1936 aggregated $111,- percent. A comparison of the latter percent259,000.
ages with the suspension rates presented in
Table 10 shows, by classes of banks (ex- table 4 (which were based on the number of
cluding mutual savings and private banks), banks in operation) shows that, while nathe deposits of active banks and the deposits tional banks had the lowest rate of suspenof banks suspended during the period 1921- sions per 100 active banks, State member




1

2

1214

FEDERAL RESERVE BULLETIN

DECEMBER

1937

TABLE 10.—DEPOSITS OF ACTIVE BANKS, DEPOSITS OF BANKS SUSPENDED DURING 1921-1936, AND PERCENTAGE
RATIOS OF DEPOSITS OF SUSPENDED BANKS TO THOSE OF ACTIVE BANKS, BY CLASSES OF BANKS X
[Amounts in thousands of dollars]

Deposits of banks
in operation

Deposits of
suspended
banks,

Class of bank

National banks ,
State member banks
Nonmember State banks..
Total
1
2

Percentage ratio of deposits of suspended
banks, 1921-1936
.
To deposits
of banks in
operation on
June 30,
1920

To deposits
of banks in

On
June 30,
1920

Average
during
1920-19352

1921-1936

17,159,371
8, 241, 861
10, 703, 018

19, 540, 488
11,666,723
10, 048, 802

2, 803, 500
1, 463, 585
4, 133, 541

16.3
17.8
38.6

14.3
12.5
41. 1

36,104, 250

41,256,013

8, 400, 626

23.3

20. 4

(average)
during
1920-19352

Exclusive of mutual savings and private banks.
Based on the deposits as of June 30 each year.

banks had a slightly lower ratio of deposits of the total number of suspensions. This is
involved in suspensions to average deposits attributable to the fact that the average size
of banks in operation. This is attributable of banks in these regions was larger than
in part to the fact that average deposits of that of banks in other areas. In contrast,
State member banks during 1920-1935 were the West North Central States, where the
42 percent above their deposits in 1920, while average size of banks was relatively small,
average deposits of national banks during accounted for only 16 percent of the total
1920-1935 were only 14 percent above de- deposits of suspended banks, although 37 perposits of national banks at the beginning of cent of the country's suspensions occurred
the period. The number 'of banks, on the in those States.
other hand, showed about the same propor11.—DEPOSITS OP SUSPENDED BANKS, 1921tionate decline—9 percent in the case of State TABLE
1936, AND PERCENTAGE DISTRIBUTION OF THE D E member banks and 10 percent in the case of POSITS AND NUMBER OF SUSPENDED BANKS, BY
national banks. The increase in deposits of GEOGRAPHIC DIVISIONS
State member banks was partly a result of
Deposits of
Percent of
suspended
Percent
total dethe fact that a number of large national banks
banks,
of total
posits of
Geographic division
1921-1936
number
of
were converted into or absorbed by State
(in thousands suspended
suspensions
banks
of dollars)
member banks in the 1920's.
418,646
By geographic divisions.—The distribu- New
England _
5.0
1.0
1. 464, 285
Middle Atlantic
_
17.4
5.2
2, 792, 559
33.2
tion, by geographic divisions, of deposits in- East North Central
20.5
North Central
1, 324, 431
15.8
36.6
volved in bank suspensions (other than West
South Atlantic
995, 044
11.9
13.1
328, 682
3.9
5.3
mutual savings and private banks) during East South Central
6.4
537, 703
9.5
South Central
the 16-year period 1921-1936 is shown in West
254, 275
3.0
Mountain
5.8
285,001
3.4
table 11. The East North Central States Pacific.._ .
3.0
._
accounted for 33 percent of the deposits of
8, 400, 626
100.0
100.0
Total
all suspended banks, although only 21 percent of the number of bank suspensions oc- Exclusive of mutual savings and private banks.
curred in these States. The New England
Differences in the geographic distribution
and Middle Atlantic States combined, while of the number of bank suspensions and of the
accounting for 22 percent of the total de- amount of deposits involved, during the peposits involved in suspensions in the United riods 1921-1929 and 1930-1933, respectively,
States, were responsible for only 6 percent are shown in table 12. In the period 1921-




X

1

1929 suspensions in the West North Central
States accounted for 47 percent of the total
number and 39 percent of the total deposits
of suspended banks, while the corresponding
figures for the East North Central States
were 7 percent as to number and 9 percent as
to deposits. In the 1930-1933 period, due
to the failure of large banks in the eastern
section of the country, the East North Central
States with 29 percent of the total number
of suspensions accounted for 39 percent of
the aggregate deposits of suspended banks,
while the West North Central States with 30
percent of the total number of bank suspensions accounted for only 10 percent of the
total deposits involved.

among the States with the largest amount of
deposits involved in suspended banks, were
not included among the 10 States having the
most suspensions. These differences are attributable, of course, to the existence of substantial variations from one State to another
in the average size of suspended banks.
TABLE 13.—NUMBER AND DEPOSITS OF BANKS W H I C H
SUSPENDED DURING THE PERIOD 1921-1936 IN THE
T E N STATES HAVING THE LARGEST AMOUNT OF
DEPOSITS INVOLVED IN SUSPENSIONS X

State
Michigan
Ohio
Pennsylvania..
Illinois
New York_

TABLE 12.—PERCENTAGE DISTRIBUTION OF THE N U M - Iowa
BER AND DEPOSITS OF SUSPENDED BANKS, 1921Indiana
1929 AND 1930-1933, BY GEOGRAPHIC DIVISIONS X
New Jersey.
Missouri

1921-1929
Geographic division

1215

FEDERAL RESERVE BULLETIN

DECEMBER 1937

Percent
of
total
suspensions

Percent of
total deposits of
suspended
banks

1930

Percent
of

total
suspensions

Florida.
Total, 10 States
Total, 38 other States and
District of Columbia

Percent of
total deposits of
suspended
banks

United States, total
1

New England
Middle Atlantic
East North Central

.2
.8
6.9

1.4
4.1
8.7

West North Central
South Atlantic
East South Central

47.4
17.4
3.7

39.2
19.6
3.3

30.0
10.4
6.2

10.4
10. 1
4.1

West South Central
Mountain
Pacific
J

11.4
9.8
2.4

9.9
9.1
4.7

8.4
3.4
3.4

5.6
1.7
3.1

1.5
7.9

28.8

5.8
20.1
39.1

N u m b e r of
suspensions,
1921-1936

Deposits of suspended
banks, 1921-1936
(in thousands of dollars)

486
387
434

929, 245
813, 562
746, 531

952
181
1.238

577, 840
479.157
460, 525

520
133

279,534
238, 597
232, 056

879
291
5, 501
8,843
14, 344

202,

353

4, 959, 400
3, 441, 226
8, 400, 626

Exclusive of mutual savings and private banks.

SIZE OF SUSPENDED BANKS, MEASURED BY
LOANS AND INVESTMENTS1

Of the 14,344 banks (exclusive of mutual
savings and private banks) which suspended
during the 16-year period 1921-1936, 5,287
100.0
Total
100.0
100.0
had loans and investments of less than
i Exclusive of mutual savings and private banks.
$150,000 each, aggregating $451,742,000, as
By States.—In table 13 the 10 States with shown in tables 14 and 15; 2,666 had loans
the largest amount of deposits involved in and investments of $150,000-$249,999, totalsuspensions during the period 1921-1936 are ing $517,159,000; and 2,966 were in the
listed, and the number and deposits of sus- $250,000-$499,999 class, their total loans and
pended banks for these States are shown. investments amounting to $1,043,182,000.
There appears to have been little correlation These three size groups comprise 10,919 susbetween the number of suspensions and the pended banks, each with loans and investamount of deposits involved in the various ments of less than $500,000, or 76 percent of
States. Michigan, for example, which had all the national and State banks that susthe largest amount of deposits involved in pended during the 16-year period. The agsuspensions, was tenth on the list of States gregate loans and investments of these banks
having the largest number of suspensions 1 Loans and investments, rather than deposits, were used as
measure for this purpose since there was readily available a
(shown in table 7). Ohio and Pennsylvania, aclassification
of active banks by size on June 30, 1920, on the
of loans and investments. A similar classification on the
which were second and third, respectively, basis
basis of deposits has not been made.




1216

FEDERAL RESERVE BULLETIN

DECEMBER

1937

amounted to $2,012,083,000, or 20 percent of
the total loans and investments of all banks
suspended during 1921-1936.
Corresponding figures for large banks, also
shown in tables 14 and 15, indicate that those
with loans and investments of $10,000,000

and over numbered 101, accounting for 0.7
percent of the total number of suspensions,
and that their loans and investments aggregated $2,963,660,000, or nearly 30 percent of
total loans and investments of all suspended
banks. Banks reporting loans and investments of $2,000,000 or more accounted for
TABLE 14.—NUMBER AND PERCENTAGE DISTRIBUTION,
BY SIZE OF LOANS AND INVESTMENTS, OF BANKS IN only 5 percent of the number of suspensions
OPERATION ON J U N E 30, 1920 AND OF BANKS SUS- during the period, but the ratio of their aggrePENDED DURING THE PERIOD 1921-1936, TOGETHER
WITH THE SUSPENSION RATE PER 100 BANKS I N gate loans and investments to the total for
EACH GROUP 1
suspended banks of all sizes was 55 percent.
The rate of suspension, as measured by the
Bank
Banks in
Suspension
operation on
suspensions,
ratio
of the number and loans and investrate, 1921June 30, 1920
1921-19362
Size group—
1936, per 100
ments
of banks suspended in 1921-1936 to
loans and investments
banks in
(in thousands of dollars)
operation
PerPerthe
number
and loans and investments of
Num- cent of NumJune
cent of on
ber
ber
30, 1920
total
total
banks in operation on June 30, 1920, was
considerably greater for the groups of small
6,548
22.7
36.9
Under 150..
80.7
5,287
5,114
17.7
150-249
18.6
52.1
2,666
banks
than for the groups of large banks.
6,977
24.2
42.5
250-499
2,966
20.7
Almost
without exception the proportion was
4,991 17.3
500-999
12.4
35.8
1,787
9.5
2,733
6.1
1,000-1,999.
31.8
870
smaller
in each successively larger size
5.4
3.5
2,000-4,999 _
32.1
505
1,573
1
group.
Tables
14 and 15 show that the ratio
5,000-9,999
508
1.8
151
29.7
1.0
369
1.2
.6
10,000-49,999. ___
24.9
92
of
suspensions
to
banks in operation on the
.1
72
.2
12.5
50,000 and over..
9
base
date,
in
the
case
of banks with loans and
Total
49.7
28, 885 100.0 214, 344 100.0
investments of less than $150,000, was 81
1
Exclusive of mutual savings and private banks.
percent as to number and 75 percent as to
2
Eleven banks, the classification of which is unknown, are omitted
from the individual groupfiguresbut included in the total.
loans and investments. In the case of the
largest
size group, comprised of banks having
TABLE 15.—TOTAL LOANS AND INVESTMENTS OF
BANKS IN OPERATION ON J U N E 30, 1920 AND OFloans and investments of $50,000,000 and
BANKS SUSPENDED DURING THE PERIOD 1921-1936, over, the corresponding ratios were 13 perCLASSIFIED ACCORDING TO SIZE OF LOANS AND I N VESTMENTS, TOGETHER WITH PERCENTAGE RATIOS cent as to number and 14 percent as to loans
OF THE LOANS AND INVESTMENTS OF SUSPENDED and investments.
BANKS TO THOSE OF ACTIVE BANKS X
By periods.—In the 4-year period 1930Loans and mvest- Loans and mvest- Percentage
1933,
the distribution of suspended banks by
ratio, loans
ments of b£mks in
ments of susoperation
on
pended
banks,
and investsize
of
loans and investments was considerSize group—
1921-19362
June 30, 1920
ments of susloans and
pended banks ably different from that shown for banks
investments
to those of
(in thousands
Perbanks in
PerAmount
Amount
which suspended in the period 1921-1929.
operation
(in
(in
cent
cent
on June 30,
thousands
of
thousands
of
The suspension of a proportionately greater
1920
of dollars) total of dollars) total
number of large and medium-sized banks
1.7
451,742
4.5
75.1
601, 524
Under 150
during the years 1930-1933 than during the
1,010,745
2.8
517,159
5.2
51.2
150-249 . _
10.4
2 493 982
69
1,043 182
41.8
250 499
1921-1929 period accounted for the differ35.6
1, 245, 212
12.5
9.6
3, 501, 210
500-999
ence.
Table 16 shows that the proportion
3, 778, 474
10.5
1, 213, 082
12.2
32. 1
1,000-1,999
15.3
31.9
4,771,143
13.2
1, 521, 145
2,000-4,999
of suspended banks in the size groups with
10.1
29.1
1,010,072
9.6
3, 471, 381
5,000-9,999
loans and investments under $500,000 de10,000-49,999... _ 7, 365, 583
20.4
1, 712, 239
17.2
23.2
50,000 and over.-

9,155, 889

25.3

1, 251, 421

12.6

13.7

36,149,931

100.0

2 9, 965, 254

100.0

27.6

1
This variation in the suspension rates existed to about an
equal degree when average figures for active banks on June
30 in the years 1920, 1925, and 1930 were used as a basis of
comparison rather than the June 1920 figures. On this aver1
age base the ratios in the last column of table 14 are 87.2,
Exclusive of mutual savings and private banks.
2
Excluding thefiguresof eleven banks, whose loans and investments 60.0, 49.8, 40.4, 32.6, 28.7, 26.5, 22.0, 10.2, and 54.4 percent,
respectively.
are unavailable.

Total




1217

FEDERAL RESERVE BULLETIN

DECEMBER 1937

creased from the 9-year period to the 4-year TABLE 17.—NUMBER OF BANK SUSPENSIONS, 19211936,
BY CLASSES
OF B A N K S
(NATIONAL
AND
period, a corresponding increase being re- STATE)
, AND SUSPENSION RATE PER 100 B A N K S I N
flected in the case of banks in size groups of OPERATION ON J U N E 30, 1920, CLASSIFIED ACCORD$500,000 and over. During the 1921-1929 ING TO SIZE OF LOANS AND INVESTMENTS
period 85 percent of the banks which susSuspension rate, 1921N u m b e r of suspensions, 1936, per 100 b a n k s in
1921-1936
group—loans
pended had loans and investments under Size
operation on J u n e 30,1920
and investments
1

(in thousands
of dollars)

National3

TotaP

National

State*

Under 150
150-249
250-499

5,287
2,666
2,966

278
424
742

5,009
2,242
2,224

80.7
52.1
42.5

80.6
55.9
36.6

51.5
44.9

500-999
1,000-1,999
2,000-4,999

1,787
870
505

606
367
205

1,181
503
300

35.8
31.8
32.1

27.8
25.8
25.3

42.0
38.4
39.4

151
92

65
29
3

63

29.7
24.9
12.5

25.0
15.8
8.1

34.7
34.1
17.1

TABLE 16.—NUMBER AND PERCENTAGE DISTRIBUTION
OF B A N K SUSPENSIONS, GROUPED BY SIZE OF LOANS

Total

State 3

AND INVESTMENTS, 1921-1929 AND 1930-1933x
1921-1929

Size group—
loans a n d investments
(in thousands of dollars)

1930-1933
Number
of suspensions 2

Percent
of
total

Number
of suspensions

Percent
of
total

Under 160.
150-249.__.
250-499

2,313
1,123
1,151

42.7
20.8
21.3

1,526
1,797

500-999
1,000-1,999..
2,000-4,999_

532
201
74

9.8
3.7
1.4

1,245
665
427

14.1

13
4

' 136
88
9

1.5
1.0
.1

5,411

2 8, 812

100.0

5,000-9,999
10,000-49,999
50,000 a n d o v e r .

Total

33.0
17.3
20.4

5,000-9,999
10,000-49,999
50,000 a n d over
Total...

n4,344

2,719 211,625

1

Exclusive of m u t u a l savings and private banks.
2 Eleven banks, t h e classification of which is u n k n o w n , are omitted
from t h e individual group figures b u t included in t h e totals.
3
T h e ratios of b a n k suspensions during 1921-1936 to t h e average of t h e
n u m b e r of b a n k s in operation in June 1920, 1925, a n d 1930, distributed
according to t h e size groups shown in table 17, are as follows: national
banks—70.0, 53.3, 40.6, 31.2, 26.8, 22.2, 22.3,14.9, 7.9, and 35.0, respectively;
State banks—88.4, 61.5, 53.9, 47.5, 38.7, 36.0, 30.8, 28.1, 12.0, a n d 62.5,
respectively.

1

Exclusive of mutual savings and private banks.
Ten banks, the classification of which is unknown, are omitted from
the individual group figures but included in the total.

sion was much higher at small banks than
at large banks. The rates for national banks
$500,000, while only 71 percent of those sus- and for State banks did not differ materially
pending in the 1930-1933 period were in- in the case of banks with loans and investcluded in this class. Conversely, banks with ments under $250,000. In the medium and
loans and investments of $1,000,000 and over larger size groups, however, the number of
accounted for only 5 percent of the suspen- suspensions during 1921-1936 per 100 banks
sions in 1921-1929 and for 15 percent of those in operation on June 30, 1920, was materially
higher for State banks than for national
in 1930-1933.
By classes of banks.—The analysis of sus- banks.
By geographic divisions.—Corresponding
pensions by size and classes of banks, given
in table 17, indicates that in the case of both information by geographic divisions shown
national and State banks the rate of suspen- in table 18 indicates that with the exception
2

TABLE 18.—NUMBER OF SUSPENSIONS, 1921-1936, PER 100 B A N K S I N OPERATION ON J U N E 30,
GRAPHIC DIVISIONS AND BY SIZE OF LOANS AND INVESTMENTS X
Size group—loans a n d investments
(in thousands of dollars)

Under 150
150-249 . .
250-499
500-999
1,000-1,999
2,000-4,999_

. .

5,000-9,999
10,000 a n d over

Total

Middle
Atlantic

East
North
Central

80 7
52.1
42.5

6.7
5.7

27.4
32.8
30.8

88.9
61.1
48.2

91.5
58.2
44.2

35.8
31.8
32.1

19.0
19.9
26.8

30.9
26.9
28.4

46.5
42.0
48.3

29.7
22.9

28.3
25.6

31.3
19.2

49.7

19.5

28.8

'• Exclusive of mutual savings and private banks.




West
North

New
England

Total

1920,

BY GEO-

Pacific

East
South
Central

West
South
Central

Mountain

91.0
56.3
52.5

56.3
34.2
40.1

64.6
34.1
30.9

74.3
52.9
44.7

63.4
42.7
35.4

33.6
27.3
26.2

41.9
43.5
46.0

32.3
31.9
31.0

28.8
29.7
23.1

46.6
31.9
18.5

17.9
18.9
14.4

39.6
30.0

20.9
10.8

29.3
36.8

23.5
46.2

25.0
20.8

29.4

14.3
13.3

54.7

58.4

59.0

41.8

42.0

52.8

31.3

Central

South

Atlantic

1218

FEDERAL RESERVE BULLETIN

of the New England and Middle Atlantic regions the highest rate of suspension was
among the banks with loans and investments
under $150,000, and that in general the rate
declined as the size of banks increased. In
the New England States the suspension rate
was highest among banks with loans and investments of $500,000 and over; in the Middle
Atlantic States the suspension rate differed
relatively little among the size groups, ranging from 27 to 33 suspensions during the
1921-1936 period per 100 active banks in
June 1920 in the size groups with loans and
investments under $10,000,000.
The contrast in the rate of bank suspensions by size of banks, as between Northeastern States (New England and Middle
Atlantic) and the other geographic regions
suggests that the size of suspended banks
depends, in part at least, on the type of community in which the bank is located and by
economic factors within the region. In the
New England and Middle Atlantic sections
agricultural activities differ from those in
most other sections. There is a different
type of agriculture, with big markets nearby
for the products, and outlying agricultural
communities in the East were not forced to
undergo the same readjustment as agriculture in other sections of the country. The
resulting higher degree of stability has aided
the small banks in outlying agricultural communities. On the other hand, in the large
industrial and financial centers in the East
which suffered from severe business depression beginning in 1929 and 1930, the larger
banks were called upon to meet a constant
and prolonged strain which proved too great
for many of them, resulting in the later years
in a high suspension rate among the larger
banks.
Suspension of large banks.—Of the banks
which suspended in the period 1921-1936 the
30 largest had loans and investments aggregating $1,912,000,000. All 30 of these banks
suspended in the years 1930-1933, and their
combined loans and investments repre-




DECEMBER

1937

sented 23 percent of the total loans and
investments of all banks suspended during
this period. The individual bank figures
ranged from $22,000,000 to $380,000,000, five
of the banks having held loans and investments in excess of $100,000,000. The suspension of these large banks had a direct effect
on other banks whose correspondent accounts
were deposited with them and a profound
psychological effect on bank depositors generally, and doubtless contributed in an important degree to the closing of many banks
in various parts of the country.
SIZE OF SUSPENDED BANKS, MEASURED BY
CAPITAL STOCK

Capital stock is not as good a measure of
size of banks as loans and investments, or
deposits, because it is determined in part by
requirements of law and because of the practice of some banks of building up large surpluses rather than increasing capital stock.
However, there appears to be some relation
between the size of banks, measured in this
way, and the rate at which suspensions occurred. Table 19 gives a distribution of suspended banks (exclusive of mutual savings
and private banks) during the period 19211936, classified by size of capital stock, and
the suspension rate per 100 active banks in
June 1920 for banks in each size group.
While there was a smaller degree of variation
in the suspension rates of banks measured by
amounts of capital stock than in the corresponding distribution by size of loans and investments, the figures in table 19 support in
a general way the conclusions which were
reached in the analysis of suspended banks
by size of loans and investments.
It will be seen that 4,341 banks, representing 30 percent of the 14,344 suspensions during 1921-1936, had capital stock of less than
$25,000; and that 4,755 suspended banks, or
33 percent of the total, had capital stock of
$25,000-$49,999. About 83 percent of the
banks which suspended during 1921-1936 had
a capital of less than $100,000.

DECEMBER 1937

FEDERAL RESERVE

BULLETIN

1219

ference between the percentage of national
bank suspensions in small places and that of
State banks follows from the fact that relatively
fewer national than State banks are
Suspension rate, located in small towns and villages, due to
1921-1936,
Number
Percent
per 100
of susthe higher minimum capital requirements for
Size group—capital stock
of
banks in
pensions,
total
operation national banks than for State banks in many
1921-1936 2
on June 30,
1920
States.
In table 20 are shown the number of bank
Under $25,000
4,341
52.7
30.3
$25,000-$49,999
33.2
54.1 suspensions that occurred during 1921-1936,
4,755
$50,000-$99,999
19.3
48.3
2,767
grouped according to class of bank and also
15.2
2,185
41.3
$100,000-$499,Q99__._
174
42.9 according to the population of the town or
$500,000-$999,999__..
1.2
120
27.6
$1,000,000 and over.
city in which the banks were situated. The
214, 344
Total
100.0
rates of suspension per 100 banks in each
1
Exclusive of mutual savings and private banks.
class
in operation on June 30, 1920 are also
2
Two banks, the classification of which is unknown, are omitted from
the individual groupfiguresbut included in the total.
indicated. Although there were many more
bank suspensions in small than in large
The number of suspensions during the pe- places, the differences in the rates of suspenriod for every 100 banks in operation on sion were not nearly so marked because such
June 30, 1920, was 53 in the case of banks a large number of banks (particularly State
with capital stock of less than $25,000, and banks) operate in small cities, towns, and
54 in the case of those with capital stock of villages.
$25,000-$49,999. For banks with a capital In the case of national and State banks
stock of $100,000-$499,999 the suspension combined, 56 suspensions per 100 active
rate per 100 active banks was 41, and in the banks occurred during the 16-year period in
case of those whose capital amounted to communities of less than 500; in places with
$1,000,000 or more it was only 28, indicating a population of 500-999 the rate was 54 per
that suspensions were less numerous among 100 active banks; and in those with a populalarge banks than among small banks.
tion of 1,000-2,499 it was 50. An appreTABLE 19.—NUMBER AND PERCENTAGE DISTRIBUTION
OF BANK SUSPENSIONS, 1921-1936, AND SUSPENSION RATE PER 100 BANKS I N OPERATION ON J U N E
30, 1920, BY SIZE OF CAPITAL STOCK X

BANK SUSPENSIONS DISTRIBUTED BY POPULATION OF CITIES

TABLE 20.—NUMBER OF BANK SUSPENSIONS, 19211936, AND SUSPENSION RATE PER 100 BANKS I N
OPERATION ON J U N E 30, 1920, GROUPED ACCORDING
TO POPULATION OF TOWNS AND CITIES, AND BY
CLASSES OF B A N K S 1

Of the 14,344 bank suspensions during
1921-1936 (excluding mutual savings and
private banks), 4,652 or 32 percent occurred
rate per 100
Number of suspensions, Suspension
banks in operation on
in. towns of less than 500 population, and
1921-1936
June
30,
1920
of
10,277 or 72 percent in towns of less than Population
town or city
NaNa2,500 population. Only 710 banks, or 5 perTotal tional State Total tional State
cent of those suspended, were located in cities
4,652
56.3
4,373
41.7
Under 500
279
57.6
with a population of 100,000 and over.
2,801
2,316
41.7
500-999
485
54.4
58.1
2,824
2,074
35.2
1,000-2,499
750
49.7
58.4
Corresponding figures by classes of banks
43.0
31.8
1,303
52.0
878
425
show a much smaller percentage of national 2,500-4,999
39.7
45.8
32.5
798
497
5,000-9,999
301
40.9
50.4
709
29.9
469
240
10,000-24,999
banks than of State banks suspended in places
38.2
46.6
26.3
282
81
201
25,000-49,999
of small population. Only 10 percent of the 50,000-99,999
41.1
21.3
52.2
265
49
216
43.4
50.8
601
24.0
710
109
national bank suspensions were in places of 100,000 and over
14,
344
Total
2,719
11, 625
33.9
55.7
less than 500 population, compared with 38
percent in the case of State banks. This dif- 1 Exclusive of mutual savings and private banks.




1220

FEDERAL RESERVE BULLETIN

DECEMBER 1937

ciably smaller ratio was shown for banks 67 percent in places of less than 2,500 popusituated in towns and cities with a population lation, compared with 39 percent and 79 perof 2,500 and over. There was not so much cent, respectively, during the period 1921contrast, however, between the rates of bank 1929. Cities with a population of 100,000
suspensions in small places and large places, and over, on the other hand, contributed 6
respectively, as there was between small percent of the total suspensions in 1930-1933,
banks and large banks. This is accounted for compared with only 3 percent in 1921-1929.
in part by the fact that quite a number of
small banks located in the larger towns and BANK SUSPENSIONS IN RELATION TO NUMBER
OF BANKS PER CAPITA
cities suspended during the period.
There was a considerable difference be- With some exceptions, suspensions during*
tween national banks and State banks in the 1921-1936 were most numerous in States
rate of suspension according to the size of where the number of banks increased rapidly
community in which the suspensions occurred. prior to 1920 and in those which had a low
While the suspension rates were higher for population per bank in 1920. In the majority
State banks than for national banks in all of States with a high population per bank,
sizes of communities, the differences were suspension rates were substantially below the
particularly noticeable in the larger cities, average for the country as a whole. Table 22
where the rate of suspension of national gives (1) the percentage change in the numbanks per 100 active banks was much below ber of banks from 1900 to 1920, (2) the poputhe suspension rate of State banks. The rate lation per bank in 1920, and (3) the suspenof suspension of State banks was nearly as sion rate, for the ten States with the highest
high in large cities as in small cities.
22.—PERCENTAGE CHANGE I N THE NUMBER OF
In the 1930-1933 period there was a pro- TABLE
BANKS FROM 1900 TO 1920, POPULATION PER BANK
nounced spread of suspensions into the larger IN 1920, AND SUSPENSION RATE 1921-1936 PER 100
I N OPERATION ON J U N E 30, 1920, FOR T H E
centers. This may be seen from table 21, BT AE NN K SSTATES
WITH THE HIGHEST AND T H E T E N
which compares the number of suspensions STATES WITH THE LOWEST SUSPENSION RATE
by size of community for the two periods
Percentage
Suspension
1921-1929 and 1930-1933. During 1930-1933,
change in
Popula- rate, 19211936, per 100
number
of
tion
per
28 percent of the suspensions occurred in
States
banks be- banki in banks in operation on
1920
tween 1900
places with a population of less than 500 and
June 30, 1920?
and 1920
1

TABLE 21.—NUMBER AND PERCENTAGE DISTRIBUTION 10 States with highest suspension rate:
OF BANK SUSPENSIONS BY POPULATION OF TOWNS
Florida
AND CITIES, 1921-1929 AND 1930-19331
South Dakota
Arkansas
South Carolina
Michigan
1921-1929
1930-1933
Iowa
Nevada
Population of
North Dakota
Number Percent Number Percent
town or city
Nebraska
of susof
of susof
North Carolina
pensions
total
pensions
total
10 States with lowest suspension rate:
Pennsylvania
Under 500
28.3
2,108
39.0
2,496
Texas
500-999 .
-. .
1,089
20.1
1,690
19.2
Vermont
1,080
20.0
1,725
1,000-2,499
19.6
New York
California
9.7
2,500-4,999
437
8.1
858
Connecticut
6.4
224
4.1
5,000-9,999
567
Massachusetts
200
3.7
504
5.7
10,000-24,999
.
Delaware
Rhode Island
1.0
2.6
57
225
25,000-49,999
2.2
New Hampshire
1.2
65
195
50,000-99,999
6. 3
151
2.8
552
100,000 and over
United States, total....
8,812
5,411
100.0
100.0
TotaL
1

Exclusive of mutual savings and private banks.




+403. 8
+266. 5
+667. 2
+477. 5
+ 64.0
+ 67.4
+371. 4
+464. 8
+103. 4
+404. 0

3,725
917
3,605
3,709
4,236
1,242
2,346
720
1,084
4,412

112.8
83.1
76.3
74.4
74.4
72.3
69.7
68.0
65.1
64.7

+ 59.5
+332.1
+ 79.6

+ 66.7
- 50.7
+ 21.2

5,722
2,705
4,005
10, 795
4,760
8,522
14, 215
5,718
18, 315
5,539

30.8
27.9
22.7
22.2
19.3
18.7
17.0
15.4
12.1
11.3

+ 118.3

3,496

49.7

-

42.7

+148. 5
+ 37.0
-

54.1

1 Exclusive of mutual savings banks.
2 Exclusive of mutual savings and private banks.

DECEMBER 1937

1221

FEDERAL RESERVE BULLETIN

and the ten States with the lowest suspension table 24. It appears, however, that there was
little, if any, relationship between the average
rate.
age of suspended banks and the rate of susTHE AGE OF SUSPENDED BANKS
pensions per 100 active banks in the respecData regarding the charter age of banks tive geographic divisions. Banks which susat time of suspension are available at present pended in the West North Central States durfor national banks and for State banks during ing the 10-year period 1921-1930 were in
a period of 10 years only, 1921-1930. From existence prior to suspension for an average
table 23 it will be seen that 25 percent of the period of 18 years and 9 months, the longest
banks which suspended in this period were for any region, whereas in the Mountain
less than 10 years old at time of closing and States the average time of existence prior to
suspension was only 11 years and 7 months,
TABLE 23.—DISTRIBUTION OF SUSPENSIONS ACCORD- the shortest for any region.
In both these
ING TO THE CHARTER AGE OF THE BANKS, 1921-1930
geographic divisions the suspension rate durNumber of
ing the period was very high.
bank sus- Percent
x

Years in operation prior to suspension

pensions,
1921-1930

of total

Less than 5
5-9
10-14

735
925
1,266

11.1
14.0
19.1

15-19
20-24
25-29

1,283
1,213
561

19.4
18.3
8.5

30-34
35-39
40-44

272
180
100

45-49
50 and over
Total

43
40
6,618

TABLE 24.—AVERAGE CHARTER AGE OF SUSPENDED
BANKS, BY GEOGRAPHIC DIVISIONS, 1921-1930 *

4.1
2.7 New England
1.5 Middle Atlantic

East N o r t h Central

.7
.6

N u m b e r of
b a n k suspensions,
1921-1930

Geographic division

West N o r t h Central
South Atlantic

100.0 East South Central __
West South Central

1
Covers national and State bank suspensions only and excludes 85 M o u n t a i n
Pacific.
such banks for which data are not available.

Total

_ _

_ . . _ . .
.

Average age
Years

Months

18
64
631

17
17
16

10
2
5

2,965
1,165
352

18
15
17

9
4
5

811
470
142

14
11
14

1
7
11

6,618

16

8

64 percent were less than 20 years old; 36
i Covers national and State banks only and excludes 85 such banks in
percent, on the other hand, had been in opera- Montana
for which data are not available.
tion for 20 years or more. This clearly indicates that, although many of the suspensions A somewhat greater variation in the age
occurred among recently organized banks, of suspended banks was shown in the case of
long established institutions were by no individual States. As was indicated in the
means immune to the difficulties which pre- analysis by geographic divisions, the sections
vailed. Due, however, to such factors as con- of the country which had experienced the
versions, mergers, absorptions, and reorgan- longest period of development were in general
izations, the "charter age" of some banks is those in which the average age of suspended
not a good measure of their span of existence; banks was high, and the States most recently
technically, some banks that resulted from settled and developed were included among
mergers or conversions have been in existence those with a low average age of suspended
only a few years, while as a practical matter banks. For example, in Connecticut, Iowa,
they or their predecessors have been operat- Kentucky, Michigan, Nebraska, and West
ing without interruption for a long time.
Virginia, the average age of banks which
Considerable variation among the various suspended in the period 1921-1930 was appresections of the country obtained with respect ciably above the average for the United States
to the age of suspended banks, as indicated in as a whole, while in Arizona, California, Colo-




1222

FEDERAL RESERVE BULLETIN

DECEMBER 1937

rado, Florida, Texas, and Wyoming, it was cumulative figures of the amount of authormaterially below the average for the country. ized loans to open banks and the amount disbursed by the Reconstruction Finance CorAID TO BANKS FROM EXTERNAL SOURCES poration, together with the amount of such
Prior to 1932.—During the early 1920's loans outstanding at the close of each quarter
many banks facing financial difficulties were from 1932 through 1936.
aided through the extension of loans for agricultural and livestock purposes by the War TABLE 25.—LOANS BY THE RECONSTRUCTION FINANCE
CORPORATION TO OPEN BANKS, BY QUARTERS, IN THE
Finance Corporation. These advances were YEARS
1932-1936
made for the most part upon assets which
(Cumulative figures at end of quarter, in thousands of dollars)
though non-liquid were believed fundamenAmount
Amount
Amount
tally sound. They aggregated $172,114,000,
Quarter
authorized
disbursed outstanding
and were extended to 4,317 banks located in
37 States. Of these, 674 were national banks 1932First quarter
124,107
156,009
117,886
Second quarter.
487, 062
615, 391
419, 965
and 3,643 were State banks. By November
Third quarter__.
675, 254
525, 537
809, 318
Fourth quarter.
576,178
810.110
893, 745
30, 1929, the loans made to 4,136 banks, total1933
ing $164,051,000, had been completely repaid,
First quarter
987, 445
677, 611
1,172,520
Second quarter^.
1,038,930
614,467
1,234,058
and partial repayments amounting to $6,782,Third q u a r t e r . . .
1, 077,094
532, 953
1,268,023
F
o
u
r
t
h
quarter1,091,785
462, 950
1,
290,
700
000 had been made on other advances. Only
0.7 percent of the total originally advanced
First quarter
1, 309, 442 1, 103,080
353, 066
Second quarter.
1, 322,062 1,122,110
290,110
had not been repaid.
Third q u a r t e r . . .
1, 326, 733 1,130, 377
259, 949
F o u r t h quarter.
1, 329, 239 1, 133,063
229, 184
In the autumn of 1931 the National Credit
1935
Corporation, a private organization, was
First quarter
204, 785
1, 334, 436 1,135,083
1,141, 923
194, 741
Second quarter.
1,337,310
formed at the suggestion of the President to
180, 611
Third quarter. _.
1, 339, 386 1, 142, 290
167,003
F o u r t h quarter.
1, 339. 835 1, 142, 590
bolster the financial structure of the weaker
1936
banks through the aid of the stronger institu153, 984
First quarter
1,142,993
1,339,811
143,132
1, 339, 556 1, 143,167
Second quarter..
tions. 1 This Corporation made more than
132, 305
1, 339, 556 1,143, 206
Third q u a r t e r . . .
121,503
1, 339, 628 1,143. 206
Fourth quarter_
1,200 loans to banks in 31 States. At the
peak reached in February 1932, these loans
Loans by the Reconstruction Finance Corand commitments totaled $188,000,000. Despite this assistance, however, an increasing poration to closed banks.—Partly in response
number of banks were meeting with difficul- to a developing sentiment that recovery was
ties, and near the end of 1931 there was a being retarded by the fact that a huge volume
noticeable rise in the rate of bank suspen- of deposits, a large part of which would ultimately become available, remained tied up in
sions.
Loans by the Reconstruction Finance Cor- unliquidated banks which had suspended in
poration to open banks.—The Reconstruction 1931, 1932, and particularly 1933, the ReconFinance Corporation was organized in Jan- struction Finance Corporation established a
uary 1932 and within a short time this organ- Deposit Liquidation Division for the purpose
ization began to make loans to banks. By of stimulating and encouraging the extension
the middle of 1932 loans to 3,284 open banks, of additional loans to closed banks. The
aggregating $615,391,000, had been author- Division was established following a stateized. At the end of June 1933, loans to 5,584 ment issued by the President on October 15,
open banks had been authorized, totaling 1933. Some loans to closed banks, for the
$1,234,058,000. Table 25 shows, by quarters, purpose of aiding in the reorganization or
liquidation of such banks, had been made by
1
For statements of purpose of the Corporation and for general plan of organization and operation, see FEDERAL RESERVE the Reconstruction Finance Corporation from
BULLETIN for October 1931, pages 551-557.




FEDERAL RESERVE BULLETIN

DECEMBER 1937

1223

the time it was organized, but at the begin- length of time. Loans on the assets of many
closed banks provided the means for the
ning they were in limited amounts.
Banks that closed after January 1, 1933,prompt opening of successor banks, at which
were given first attention by the Deposit time a substantial part of the funds of the
Liquidation Division; loans were made later closed banks became immediately available.
to banks that closed prior to January 1933. Such loans also obviated the necessity of the
By June 30, 1934, loans amounting to $802,- dumping of large blocks of securities and
713,000 had been authorized to closed banks, mortgages by the receivers of closed banks
of which amount $544,060,000 had been dis- on an abnormally low market in an effort to
bursed. On June 30, 1935, the amount of such make depositors' claims available.
loans that had been authorized was $1,117,In a few instances loans on the assets of
928,000, of which $822,557,000 had been dis- closed banks have since been transferred by
bursed. Table 26 gives cumulative figures of the Reconstruction Finance Corporation to
the amount of loans to closed banks authorized operating banks, the outstanding example of
and disbursed by the Reconstruction Finance this being the'transfer of $35,000,000 in such
Corporation, and the amount outstanding, by manner at Detroit in the spring of 1935. In
quarters, from 1932 through 1936.
other cases new advances to receivers of
closed banks, secured by the unpledged assets
TABLE 26.—LOANS BY THE RECONSTRUCTION FINANCE
of these banks, have been made directly by
CORPORATION TO CLOSED B A N K S , BY QUARTERS, I N
operating banks.
THE YEARS 1932-1936
(Cumulative figures at end of quarter, in thousands of dollars)
Strengthening of the capital structure of
banks following the banking holiday.—Many
Amount
Amount
Amount
Quarter
authorized disbursed outstanding of the banks that did not reopen immediately
following the banking holiday needed addi1932
First quarter____
1,310
2,173
1,281 tional capital.
Existing stockholders and
Second quarter__
11.776
28, 848
10,499
Third quarter. __
32, 788
45, 628
19, 788 the public in general were not in a position
Fourth quarter^.
42, 572
57, 913
20, 220
to provide much of the additional capital
1933
First quarter.
48, 292 necessary, and the Government, through the
78, 251
97, 535
Second quarter
99.918
150,663
193,112
Third quarter
181,397 Reconstruction Finance Corporation, made
249, 958
321, 260
Fourth quarter
291.604
383, 377
572, 230
extensive purchases of preferred stock and
349, 059 capital
477, 836
713,037
First quarter
notes and debentures of banks.
361.296
544, 060
Second quarter
802, 713
367, 114 Banks that had been licensed immediately
622,138
Third quarter
961, 429
443, 343
761, 704
Fourth quarter
1, 035, 733
following the banking holiday without re372,065 organization were invited to cooperate in the
795, 632
First quarter
1,069, 976
Second quarter,.
320, 135
822, 557
1,117,928
Third quarter...
1,140,972
287. 3
850, 551
program for strengthening the capital strucFourth quarter..
1.170,157
245. 725
876, 125
ture of banks, and as a result many of the
First quarter
890.479
162,698 larger metropolitan banks also sold capital
1, 206, 027
901,630
Second quarter..
141,631
1, 224, 886
914,331
Third quarter...
120. 721 stock to the Reconstruction Finance Corpora1, 232, 462
Fourth quarter.
930, 223
108, 574
1, 248, 077
tion. A large number of banks were required
Includes loans to receivers, conservators, and liquidating agents, to obtain
additional capital funds before
loans through mortgage loan companies to aid closed banks, and loans
on assets of closed banks under Section 5e of the Reconstruction Finance being admitted to membership in the Federal
Corporation Act.
Deposit Insurance Corporation.
Loans to closed banks by the Reconstruc- By the end of June 1934 the program of
tion Finance Corporation provided immediate capital rehabilitation was well under way, the
cash which, in the ordinary liquidation proc- Reconstruction Finance Corporation having
ess, would not have been available for dis-outstanding on that date a total of $814,679,tribution to depositors for a considerable 000 invested in the capital stock of banks.
1

1




1224

FEDERAL RESERVE BULLETIN

DECEMBER 1937

Finance Corporation, shown in the last column of table 25, and the amount of the Corporation's outstanding investment in preferred stock, capital notes, and debentures
of banks, shown in table 27. As the investment in capital stock of banks increased, the
amount of outstanding loans declined.
Loans made by the Reconstruction Finance
Corporation to other types of financial institutions (such as mortgage loan companies,
insurance companies, and building and loan
associations) also assisted the banks indirectly in liquidating their assets. While
TABLE 27.—PURCHASES BY THE RECONSTRUCTION figures on the total advances to such organFINANCE CORPORATION OF PREFERRED STOCK AND
CAPITAL NOTES OR DEBENTURES OF BANKS, AND izations are available, there is no measure of
LOANS ON PREFERRED STOCK OF BANKS, BY QUAR- the extent to which such funds were used in
TERS, I N THE YEARS 1933-1936
repaying bank loans.
[Cumulative figures at end of quarter, in thousands of dollars]
Other aid to banks.—Certain organizations
other than those already mentioned also
Amount
Amount
Quarter
authorized disbursed outstanding assisted in the liquidation of bank assets,
thereby strengthening the position of open
1933
First quarter
14,933
12, 750
12, 750
the liquidation of
Second quarter..
43, 463 banks and facilitating
47,318
43, 468
Third quarter__.
63,102
69, 972
63,107
It is estimated that about a
Fourth quarter.
264, 200 closed banks.
496, 556
264, 346
half a billion dollars of the proceeds of Fed1934
593, 052
932,003
First quarter
593, 578
Second quarter..
814, 679 eral Land Bank and Federal Farm Mortgage
1,046, 946
817, 303
Third quarter.-.
827, 374
1,103, 596
890, 775
Fourth quarter.
863, 984 Corporation loans during the years 19331,153, 497
938,004
1936 were used to refinance mortgage in1935
902, 834
1,174,135
First quarter
989, 756
1,186, 972
904, 666 debtedness and other debts of farmers to com1, 006, 895
Second quarter..
1, 214, 593 1, 026, 070
904, 030
Third quarter. _.
1, 235, 678 1, 040, 973
Fourth quarter.
897, 016 mercial banks, open and closed.
It is roughly estimated also that approxiFirst quarter
1, 239, 077 1, 056, 768
877, 327
1. 242, 462 1.066,016
Second quarter..
819, 993 mately a half a billion dollars of home mort1, 242, 553 1,071,576
Third quarter....
701, 385
1, 244, 468 1, 073, 267
Fourth quarter.
i 654, 619 gage loans held by commercial banks and
receivers were taken over by the Home OwnOutstanding on October 31, 1937—$594,275,000.
ers' Loan Corporation up to the time it
ceased
lending, on June 12, 1936. For the
The supplying of capital funds by the
most
part
these loans were exchanged for
Reconstruction Finance Corporation was reguaranteed
bonds of the Home Owners' Loan
sponsible in part for the repayment by the
Corporation.
Closed banks which received
banks of funds previously borrowed. Some
the
bonds
were
able to borrow 80 percent of
indication of this fact is found in the comtheir
par
value
from the Reconstruction
parison between the amount of outstanding
Finance
Corporation.
loans to open banks by the Reconstruction
At the end of June 1935, which marked the
approximate peak, the Reconstruction Finance Corporation's investment in preferred
stock, capital notes, and debentures of 5,752
banks amounted to $904,666,000. On December 31, 1935/it amounted to $897,016,000.
By June 30, 1936 it had declined to $819,993,000, and on December 31, 1936 the total outstanding was $654,619,000. These and other
related figures, as reported at the end of each
quarter during the years 1933-1936, are
shown in table 27.

1