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Eighteenth oAnnual 'Report of the FEDERAL RESERVE BANK OF PHILADELPHIA Made to the Federal Reserve Board by the Chairman of the Board and Federal Reserve Agent of the Third Federal Reserve District 193 2 Eighteenth oAnnual cReport of the FEDERAL RESERVE BANK OF PHILADELPHIA Made to the Federal Reserve Board by the Chairman of the Board and Federal Reserve Agent of the Third Federal Reserve District 19 3 2 CONTENTS Page Profit and loss statement Statement of condition Business conditions Industrial activity: Manufacturing Mining and quarrying Building and real estate Agriculture Distribution Financial changes: Member banks Federal Reserve Bank Bill and security holdings Local use of reserve bank credit Reserve position Currency demand Federal reserve notes National bank notes Money rates Departmental operations Personnel and building Banking changes in the district Fiduciary powers Bankers' acceptances Member bank earnings and expenses Banking and business information Manufacturing Coal mining Building and real estate Retail and wholesale trade Other business indicators Banking The Business Review and other reports Survey of industrial, mercantile and agricultural credit conditions Committee on Banking and Industry 5 7 9 9 12 13 14 15 17 20 20 22 25 27 28 30 30 31 32 33 35 35 36 37 37 40 41 41 45 45 46 46 48 BILL AND SECURITY HOLDINGS FEDERAL RESERVE BANK OF PHILADELPHIA MILLIONS 0 L 1929 1930 1931 1932 DISTRIBUTION OF BILLS DISCOUNTED MILLIONS FOR PHILADELPHIA BANKS 932 Annual Report of the Federal Reserve Bank of Philadelphia for 1932 There was a sharp decline in business activity and in prices during the first half of 1932. In the summer, prices of securities and commodities advanced and the rise in production and in some types of distribution, which was of more than seasonal proportions, continued into the fall. Changes during the closing months of the year were downward, particularly in the case of commodity prices, but most of the indicators in general use continued above the low points recorded in the middle of the year. Pronounced declines in loans to customers, which continued with little break over most of the year, were reported by the banks. In the earlier months this was accompanied by decreases in deposits ; investments were sold, partly to furnish the funds to reduce borrowings. After the end of April, deposits were more stable and toward the end of the year increased; the banks added substantially to their holdings of United States securities and further reduced their borrowings from the reserve bank. Bank suspensions were far fewer than in 1931. Profit and loss account Federal Reserve Bank of Philadelphia (000's omitted) Earnings: From bills discounted From bills bought From United States securities From other sources Gross earnings Current expenses Current net earnings Additions to current net earnings Deductions from current net e a r n i n g s . . . . Net additions Net earnings available for distribution. . Distribution of net earnings: Dividends paid Paid to Government as a franchise tax. . Transferred to surplus account ^ ithdrawn from surplus. 1932 1931 1930 $2,594 197 2,037 173 $5,001 1,994 $3,007 $312 48 $264 $3,271 $1,407 214 969 124 $2,714 1.986 $728 $219 63 s 156 $884 $1,218 155 1.522 101 $2,996 2,041 $955 $193 45 $148 $1,103 $973 0 2,298 $1,005 0 121# $1,003 0 100 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The gross income of the reserve bank increased from $2,714,000 in 1931 to $5,001,000 in 1932, which was the largest amount since 1929. Earnings from bills discounted were much greater than in 1931, reflecting a higher average volume of discounts and a rate of discount somewhat above the percentage charged over most of 1931. Greatly increased holdings of United States securities resulted in an income from this source that was more than double that received in the earlier year. Current expenses did not change materially and are given below, distributed according to departments: Departmental expenses (000's omitted) Maintaining the accounts of the bank Loans and discounts Currency and coin* Transit and collections Fiscal agency functions Custody of securities, including purchases and sales. . Transfer and telegraphic service Official salaries and supervisory expenses. . . Federal reserve agent's department: (Custody of collateral against federal reserve notes, note issues, bank examination, library, statistical and business reporting and analysis work) Maintaining the general audit Bank relations Insurance (other than on currency, coin and security shipments) Operation of banking house This bank's portion of Federal Reserve Board expenses Miscellaneous . Totals* Cost of federal reserve currency Total current expenses 1932 1931 1930 $98 81 340 407 19 $96 58 361 434 21 $98 54 390 433 25 71 27 158 72 °7 160 68 °7 159 101 62 16 91 60 19 89 60 18 36 188 32 151 33 154 75 180 71 178 79 174 $1,859 135 $1,831 155 $1,861 180 $1,994 $1,986 $2,041 Omitting cost of federal reserve currency. Earnings available for distribution rose from $884,000 to $3,271,000. This was far more than sufficient to cover the dividend requirements, which approximated a million dollars, leaving a balance of $2,298,000 which was transferred to the surplus account of the bank. Even with this addition, and the transfer of $458,000 from the depreciation reserve on United States bonds, the surplus still is less than double the capital already paid in, to which figure it may be raised before the bank becomes subject to a franchise tax. Eighteenth Annual Report, Federal Reserve Bank of Philadelphia A statement of the surplus account follows: (000's omitted) Balance—close of previous year Transferred from: Profit and loss account Depreciation reserve on U. S. bonds Transferred to: Profit and loss account Depreciation reserve on U. S. bonds Balance close of this vear 1932 $26,486 2,298 458 0 0 0 0 $29,242 + + 1931 $27,065 121 458 $26,486 1930 $26,965 + 100 0 0 0 $27,065 Statement of condition Federal Reserve Bank of Philadelphia December 31, 1932 December 31. 1931 Changes $185,171 20,206 $205,377 4,921 $227,704 15,237 $242,941 3,656 -$42,533 + 4,969 -$37,564 + 1,265 11,149 36.451 $47,600 3.054 139.269 1.000 $190,923 322 965 30,359 2,989 1,339 $437,195 (000's omitted) 48,295 68,117 $116,412 4,065 68,652 5,610 $194,739 904 624 43,558 2.626 1,397 $490,445 - 37,146 - 31,666 -$68,812 - 1.011 + 70,617 - 4,610 - $3,816 - 582 + 341 - 13.199 + 363 58 -$53,250 $238,125 $269,372 -$31,247 121,686 647 2.157 85 $124,575 29,079 16,045 29,242 16 113 $437,195 123,939 3,551 7,609 391 $133,490 41,826 16,600 26,486 475 196 $490,445 - RESOURCES Gold reserves Reserves other than gold Total cash reserves Non-reserve cash Bills discounted: Secured by government obligations Other bills discounted Total bills discounted Bills bought United States securities Other securities Total hills and securities Due from foreign banks Federal reserve notes of other banks Uncollected items Bank premises All other resources Total resources LIABILITIES Federal reserve notes in circulation. . . Deposits: Member bank—reserve account Government Foreign bank Other deposits Total deposits Deferred availability items Capital paid in Surplus Depreciation reserve on U. S. bonds All other liabilities Total liabilities Ratio of total reserves to deposit and federal reserve note liabilities combined. . , Contingent liability on bills purchased for foreign correspondents , 7 56.6% $4,008 60.0% $24,604 2.253 2.904 5.452 306 -$10,915 - 12.747 555 + 2,756 - 459 83 -$53,250 3.4% -S20.596 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia DISTRIBUTION RETAIL AND WHOLESALE DOLLAR SALES 1923-25 AVG.= IOO I - — RETAIL 75 5 0 .ADJUSTED FOR SEASONAL VARIATIONS 1927 1928 1929 1930 1931 1932 1931 1932 FREIGHT CAR LOADINGS 25 ADJUSTED FOR SEASONAL VARIATIONS 927 1928 1929 1930 SALES OF NEW PASSENGER AUTOMOBILES J 150 125 1923-25 AVG = 100 A 100 75 50 v/vvi 25 1927 1928 1929 1930 1931 1932 COMMODITY PRICES 125 RETAIL. COST OF LIVING (PHILA 100 WHOLESALE 75 AND SCRANTON COMBINED) (UNITED STATES) 50 1927 1928 1929 1930 193 932 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Business conditions in the Philadelphia Federal Reserve District Most of the characteristics that marked other major depressions continued in full force throughout the year 1932. The volume of production and distribution in the district declined steadily, reaching in the middle of the year a record low level; such improvement as occurred in the fall proved to be temporary, though production was a little higher at the year-end than in the summer. Prices of commodities, securities, and real estate fell off, although at a somewhat less rapid rate than in the previous two years, owing largely to the rise of prices of some of these that occurred in the third quarter of the year. Earnings decreased precipitously, so that incomes from wages, salaries, dividends, interest, rents, and other sources were reduced further, thereby curtailing the ability of the population to buy goods, repay loans, and meet such ordinary expenses as taxes and interest on mortgages. Business retrenchment became general, and the shrinkage in employment in all occupations reached the largest proportions in the past decade. Commercial liquidations spread throughout the district, so that the number of business failures and the amount of liabilities involved reached the largest annual total in the past fifteen years: this was also true for the country as a whole. Industrial activity Output of factory products in 1932 showed a continuance of the drastic decline which began three years ago, reaching by the middle of the year the lowest level in the past decade, but in the fall months there was more than the usual seasonal increase. The index of manufacturing production Manufacturing Factory output Philadelphia Federal Reserve District Manufacturing — total. . . Metal products Textile products Transportation equipment Food products Tobacco and products.... Building materials Chemicals (and related products Leather and products Paper and printing Electric power output. . . . 1932 index numbers: 1923-25 = 100 1931 1930 1929 60 4 34.1 72.0 47.5 71.2 78.1 25.6 -21.3% -44.6 " -12.9 " -18.8" -10.6 " -17.1 " -40.3" -37.3% -66.5" -18.3 45.1 19.2 -26.5 -61.0 -45.3% -72.4" 89.4 98 83 118.9 -13.7" -13.9" -15.8 " -11.2" -22.3 -19.0 -26.6 -26.6" -22.7 " -29.4" -26.5" 1932 compared with -15.1 -31.9 " 49.4" -24.5" 34.7 " -69.3" Eighteenth Annual Report, Federal Reserve Bank of Philadelphia for the year as a whole declined from 77 in 1931 to 60 per cent of the 1923-25 average; this is a further drop of about 21 percent and compares with the decline of about the same percentage for the country as a whole. Output of fabricated metal products, building materials, and transportation equipment has shown the severest reduction during the past three years. The rate of production in such other important industries as textiles, foods, tobacco, chemicals and related products, and paper and printing showed smaller declines. Along with other forms of readjustment in management and equipment, strong efforts were made by factories to reduce their inventories to the lowest level possible. As a result, stocks of both finished goods and raw materials generally at the end of 1932 were the smallest in several years. It is estimated from our indexes and from the Census figures that the average employment in factories of this district in 1932 amounted to about 512,000 workers as compared with 611,000 in 1931. Similarly, the total amount of wages paid to factory workers in 1932 was roughly $407 millions as against $612 millions in 1931. The decline in wage earnings was much more severe than in either employment or operating time, owing largely to the downward readjustment of wages. Such a continuous decrease in wage earnings inevitably affected the purchasing power of a large body of consumers, a fact which accounts largely for the reduced volume of general trade. The trend in the number of wage earners employed and in the amount of wages paid by factories of this district by years since 1923 is illustrated by the table below. Factory employment and payrolls Employment 'average for year) Payrolls (total) 877,316 785,198 804,043 829,772 792,432* 757,282 804,244* 734,275 610,917 511,948 $1,075,814,441 960,702,296 1.003.933,900 1.063.166.001 996,186,543* 933.937,683 1.025.056,704* 866.172,915 612,384,251 406.623.143 1923. 1924. 1925. 1926. 1927. 1928. 1929. 1930. 1931. 1932. * From the Census of Manufactures for 60 counties in eastern Pennsylvania, southern New Jersey and Delaware; prior to 1927 these figures were not subdivided by counties. Figures for other years were computed from the indexes of employment and payrolls compiled by the Philadelphia Federal Reserve Bank. 10 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia INDUSTRIAL PRODUCTION ADJUSTED FOR SEASONAL VARIATIONS 1923-25AVG. = 100 TOTALI" 1927 1928 1929 1930 1931 1932 VALUE OF BUILDING CONTRACTS 1927 1928 1929 1930 11 193 1932 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Mining and quarrying Production of both anthracite and bituminous coal in Pennsylvania showed a fairly consistent decline during- the past three years, barring accidental fluctuations, although in the last half of 1932 there occurred a steady increase in the output of coal for domestic and industrial purposes. The trend in prices of bituminous coal has been noticeably downward in the past six years; quotations for anthracite in the same period showed variations, but in 1932 they declined to about 88 as compared with 91 per cent of the 1926 average in 1931. Stocks of anthracite held by retailers, producers, and on upper lake docks at the end of the year were from 38 to 44 per cent smaller than at the end of 1931. The tonnage of bituminous coal held in stock also declined in the year and on January 1, 1933 was the lowest since 1920. Employment in the anthracite industry has been shrinking steadily since 1926, and in the bituminous coal fields the decrease has been continuous in the past nine years. This shrinkage in employment of the coal industry may be attributed partly to various improvements in production methods with a consequent increase in the output per man per day and partly to the introduction and growth of other forms of industrial and household fuels. The table below shows the employment trend and production in the coal mining industry of Pennsylvania from 1923 through 1932. Coal mining 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 Employment Anthracite 157,743 160,009 160,312 165,386 165,259 160,681 151,501 150,804 139,431 108,198* Production (tons) Bituminous Total Anthracite 194,981 169,322 156,798 155,999 153,699 133,414 131,774 130,150 116,726 103,186* 352,724 329,331 317,110 321,385 318,958 294,095 283,275 280,954 256,157 211.384* 93,339,000 87,927,000 61,817,000 84,437,000 80,096,000 75,348,000 73,828,000 69,385.000 59,646,000 49,350,000 Bituminous 171,880,000 130,634,000 136,928,000 153,042,000 133,099,000 131,202,000 143,516,000 122,539,000 97,276,000 75,878,000 * Estimated. Source: Bureau of Mines, U. S. Department of Commerce. Activity in the quarrying and non-metallic mining industry showed extraordinary slackness throughout 1932. As a result, the volume of output and employment decreased further, reaching the lowest level in many years. 12 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Building and real estate The volume of building continued the sharp decline through 1932, the rate of decrease being even more pronounced than that in the output of manufactures. The total value of contracts awarded for new construction, repairs, alterations and additions decreased further and was only about 26 per cent of the 1929 volume. While the drop in contracts for dwellings was not as sharp as that in the total awards, the decrease as compared with three years ago was much heavier. Both the number and the value of building permits also showed a progressive falling off, although the rate of decline was growing less marked than in the previous two years. This adverse comparison reflected partly the influence of lower prices of materials and labor and partly the general industrial conditions. Employment and wage earnings in building trades showed a corresponding downward trend. For example, the average number of wage earners employed in building trades of Pennsylvania in 1932 is estimated at about 120,000 as compared with 176,000 in 1931, 249,000 in 1930 and almost 252,000 in 1929. The estimated amount of wages paid totaled roughly $130 millions as against $214 millions in 1931, $346 millions in 1930 and $365 millions in 1929. The real estate market continued highly unsatisfactory; the demand for houses and other real estate in general fell off further, and prices dropped persistently. Largely as a result of the inability caused by reduced incomes to meet such fixed charges as taxes, interest and rent, foreclosures continued excessively large. Comparison of the 1932 activity in building and real estate is indicated by the percentage changes in the following table: 1932 compared with Building and real estate activity 1931 1930 1929 Contracts awarded: Total Residential Building permits Employment (Pennsylvania) Payrolls (Pennsylvania) -45.4% -39.3 " -56.0 " -31.8 " -39.2 " -68.7% -63.5 " -74.6 " -52.0 " -62.4 " -74.4% -83.4 " -86.2 " -52.4 " -64.3 " Mortgages recorded Real estate deeds Sheriff deeds -33.1 " (b) - 8.6 " (c) +14.9 " (d) -52.3 " (a) -14.2 " (d) +49.2 " (c) -67.8 " (a) -26.5 " (a) (a) 1 city, (b) 2 cities, (c) 3 cities, (d) 4 cities. 13 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Agriculture Like other occupations, farming has sustained material losses of income under the depressing influences that have prevailed in recent years. Continued decline in prices of farm products, unusually large carry-over of important grain crops, and a severe drought in the fall months were among the factors that continued to make farming unsatisfactory in 1932. Income from farm production in this district (000's omitted) Gross income* $333,749 295,306 233,751 180,228 1929 1930.. 1931 1932 Cash income $284,397 253,259 199,592 152,456 *Gross income is cash income plus the value of the products consumed in the farm household on the farm where commodities were produced. Source: Department of Agriculture—state and federal. Nevertheless, farmers in this section, particularly in Pennsylvania, probably fared better than those in other parts of the country, owing largely to smaller indebtedness and fixed charges, according to figures published by the Pennsylvania Department of Agriculture. The number of farms mortgaged in 1930 was estimated to be about 34 per cent of all farms, as compared with the average of 42 per cent for the country. The ratio of charges to the total farm indebtedness in Pennsylvania—5.76—was the lowest with the exception of New Hampshire, Wisconsin, Iowa and Nebraska. In 1930 there were in Pennsylvania 172,419 farms and the average cash income totaled about $1,519 per farm as compared with $1,270 per farm in the country as a whole. Production of such leading crops as corn, wheat, hay, potatoes, tobacco, and nursery and greenhouse products was considerably smaller than in 1931 and somewhat below the five-year average, 1924-1928. Yields of vegetables and fruits also declined as compared with the preceding two years. The dairy industry, which for many years has been superseding in importance grains, beef cattle, swine and sheep, was less active in 1932 than in the previous three years. Output of milk and butter decreased further, in spite of some increase in the number of milch cows on farms. This is attributable to poorer pastures, reduced feeding, and unfavorable weather conditions generally. The cash income from the milk produced in 1932 on Pennsylvania farms was estimated at about $71 millions or 61 per cent of cash income realized from all livestock and livestock products; it was 45 per cent of total cash income. 14 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The poultry business, which is of considerable importance in this section from the standpoint of cash income, increased in volume by almost 35 per cent as compared with 1931, owing solely to the sale of live poultry which was 86 per cent of the total. Prices, however, were about 20 per cent lower than a year before. The number of cases of fresh eggs sent from this section to the four principal eastern markets showed a drop of 15 per cent in the year; egg prices on the average were 12 per cent lower in the Philadelphia market and 7 per cent lower than in the previous year in the New York market. The supply of farm labor increased steadily throughout the year, owing largely to the influx of industrial workers, but the demand for labor was considerably below the estimated normal in the three states comprising this district. The trend of farm wage rates was more sharply downward during 1932 than in either of the two preceding years; as compared with 1931, monthly wages for farm workers without board showed declines ranging from 19 per cent in New Jersey to nearly 24 per cent in Pennsylvania. Distribution The volume of business that moved from productive to distributive channels and to ultimate consumers in 1932 was greatly reduced as compared with the previous three years. This reduction was due in part to steadily declining prices and in part to the general curtailment of industrial activity with a consequent decline in the purchasing power of the rank and file of the population. Sales at retail and wholesale establishments continued downward for the third successive year and were only about 60 per cent of the 1929 dollar volume. The decline in sales was steady over most of the year as indicated by our seasonally adjusted indexes. This was also true of the stock of merchandise which declined consistently from month to month, when allowance is made for the normal seasonal changes. Retail and wholesale trade sales 1929. 1930. 1931. 1932. Retail W holesale :i $3,223,550,000 2,926,983,000 2,590,380,000 1,947,966,000 P,349,508,000* 2,917,421,000 2,485,643,000 1.998,457,000 *Census of Distribution, 1929; figures for other years computed by applying index Kt»rc to 1 Q^Q ficriirpsi numbers tr> 1929 figures. 15 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Registrations of new passenger automobiles were 64 per cent of the previous year, continuing the sharp decline in sales since 1929. The change in the sales of used cars on the whole was more favorable when contrasted with recent years. The amount of premiums paid on ordinary life insurance in 1932 was 18 per cent smaller than in 1931, 27 per cent less than in 1930, and 28 per cent smaller than in 1929. Individual borrowings on life insurance policies increased sharply. The volume of freight car loadings in this section was about 74 per cent of that in 1931. This decline was a continuation of the downward trend in the past three years, even though in the fall months of 1932 there was an upturn in the movement of goods. The falling off in the loadings of merchandise and miscellaneous commodities throughout the year was about as severe as that in the shipment of such heavier commodities as coal, timber, grain and ore. The value of foreign trade at the Port of Philadelphia was about one-third less than that in the preceding year. This was a further decline so that compared with 1929 both imports and exports were 67 per cent smaller; the decline in the national value of imports and exports was almost 70 per cent between 1929 and 1932. Further comparisons of trade activity in 1932 with the previous three years follow: 1932 compared with 1931 1930 1929 Changes in distribution of goods Retail trade Sales Stocks Wholesale trade Sales Stocks Freight car loadings Total Merchandise and miscellaneous -24.8% -17.1 " -33.4% -26.9 " -39.5% -31.7 " -19.6 -16.0 « -31.5 " -27.4 " -40.3 " -34.9 " a u -41.7 " -41.6 " -50.4 " -50.0 " Registrations of new passenger automobiles. Casoline consumption Life insurance sales -35.5 - 1.9 -17.7 it a -47.9 " + 17.5 " -27.1 " +22 2 " -2l7) " Foreign trade—Port of Philadelphia—value Imports Exports -30.5 -45.6 a a -51.7 " -60.4 " -67.1 " -67.3 " -26.2 -26.4 13 -60.6 " Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Financial changes in the Third Federal Reserve District Member banks The decline in deposits which marked the last quarter of 1931 continued, though at a slower rate, in the first four months of 1932, as shown by a decrease in the demand and time deposits of all member banks from a daily average of 2,079 millions in December to 1,964 millions in the following April. Thereafter the general level was quite stable for six months but increased to 1,980 millions in December. During the last eight months of the year, average deposits of Philadelphia member banks increased from 786 to 844 millions, offsetting declines in the deposits of banks located in other cities of more than 15,000 population from 622 to 606 millions, and a reduction in the smaller communities from 556 to 530 millions. Of the total decrease of 99 millions in the year in the deposits of all member banks, 68 millions was in net demand deposits and 31 millions in time deposits. Member bank loans and investments (000,000's omitted) December 31, 1932 Loans: On securities: To ^Vew York City brokers To other brokers To other customers . . December 31, 1931 December 31, 1930 $2 16 $729 8 229 13 240 242 577 688 755 $1,521 $1,767 337 219 633 Total loans and investments. . . $580 410 United States securities. . Other securities. . 653 $1,312 Total loans and discounts 550 S498 Bought commercial paper and bankers' acceptances Real estate loans Other (largely commercial) loans and discounts $16 60 480 Total loans on securities $5 25 700 747 $2,355 $2,558 $2,733 41 Banks in Philadelphia: Loans and discounts. . United States securities Other securities 521 652 810 232 220 172 248 106 258 Banks outside of Philadelphia: Loans and discounts United States securities Other securities 791 178 413 869 165 452 957 113 489 17 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia MEMBER BANK DEPOSITS PHILADELPHIA FEDERAL RESERVE DISTRICT TOTAL NET DEMAND AND TIME DEPOSITS 1929 1930 1931 1932 CLASSIFICATION OF DEPOSITS 1000 900 1929 1930 1931 1932 GEOGRAPHIC CHANGES IN DEPOSITS BANKS IN PHILADELPHIA 900 BANKS IN TOWNS OF 15000 OR MORE OUTSIDE OF PHILADELPHIA 800 700 600 500 BANKS IN TOWNS I I UNDER 15000 POPULATION 1929 1931 1930 IS 1932 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia MEMBER BANK LOANS AND INVESTMENTS PHILADELPHIA FEDERAL RESERVE DISTRICT MILLIONS # 850 OTHER LOANS TO CUSTOMERS 800 750 700 650 600 INVESTMENTS -OTHER THAN U.S. SECURITIES LOANS ON STOCKS AND BONDS TO CUSTOMERS 550 500 450 4.00 UNITED STATES SECURITIES 1929 Note: Distribution in 1929 partly estimated. 19 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The reduction in deposits during the past year reflects largely the influence of the repayment of loans, which declined from 1,521 to 1,312 millions. The loan decline, which was particularly rapid in the spring and which occurred in all classes of loans, may be considered the resultant of several factors: reduced business at declining prices, making it possible for some to finance their operations out of their own resources; repayments or reduction at maturity; low prices in the security markets, which discouraged dealing in stocks and other securities over most of the year; a marking down of assets to adjust them to current values. Although member banks in this district show a decrease in loans to the open market, which include loans on securities to New York brokers and bought commercial paper and bankers' bills, and a larger decline in securities other than those of the United States Government, the drop in these assets was nearly balanced by an increase of 73 millions in United States securities. The reduced activity of business found reflection, not only in the decline in loans and deposits, but also in a slower rate of turnover of deposits. Index numbers based on some of the larger member banks in Philadelphia show a decline in the rate of turnover of demand deposits of 23 per cent from 1931, and 42 per cent in comparison with 1930. Federal Reserve Bank Bill and Bills discounted held by this bank declined from 116 to security 47 millions in the course of the year. The highest point holdings was 134 millions on January 29th, and the lowest was a little less than 47 millions on November 14th. During January and February, the daily averages were in excess of that in December, 1931. In succeeding months there was a pronounced decline, owing largely to repayments by Philadelphia banks, which by the end of May had reduced their borrowings at this bank from about 60 millions to a little over 10 millions, a figure which changed little to the end of the year. Borrowings of country member banks were at the highest point in recent years during January, February and March, with an average of approximately 60 millions. There was a decline to 49 millions on May 18th, followed by an increase to 61 millions on July 27th and a subsequent decline to less than 40 millions in the fall. At the end of the year, the total under discount for these banks was 38 millions, a decrease of 13 millions from a year earlier. 20 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Trends in the total number of borrowing banks were similar to those shown in discounts for country banks. There was a decline of about 18 per cent in the course of the year. Discounts and advances were made for 609 member banks during 1932. Under the Glass-Steagall bill, approved February 27th, the reserve banks are authorized, upon receiving the permission of the Federal Reserve Board, to loan to groups of five or more member banks which wish to use the proceeds to help such of their number as do not have adequate amounts of eligible assets to obtain credit accommodation directly from the reserve banks. It was further provided that, until March 3, 1933, and in "exceptional and exigent circumstances," banks lacking such assets and having a capital not in excess of $5,000,000 might, with the permission of the Federal Reserve Board, obtain advances from the reserve bank upon their own notes, acceptably secured. Although in a few instances member banks contemplated forming loan groups under the first part of this act, plans were not completed for any of them, so that no loans were made. Several were made to banks under the second section. An amendment to the Reconstruction Finance Corporation Act similarly provided that the Federal Reserve Board might permit reserve banks to loan directly to individuals, partnerships and corporations. These loans also are to be granted only in unusual and exigent circumstances and the paper upon which such a loan is made must be of the kind and maturity that is eligible for rediscount under the Federal Reserve Act and must be endorsed and satisfactorily secured. The Federal Reserve Bank, in accordance with the terms of the law, also is required to determine that the applicant had not been able to secure adequate credit from other banking institutions. Applications for loans under these provisions on the whole were not as numerous as might have been expected. In the majority of instances, too, it was found that the applicants were not able to meet the eligibility requirements, so that only a few of these loans actually were made. Very few bankers' bills were presented to this bank for purchase. Throughout the year over 3 millions of foreign bills were carried in the statement, representing a participation in system holdings, and the bank also participated on several occasions in system purchases of domestic bills. The highest figure reached by "Bills bought" was about 7 millions on January 8th, and the lowest was 3 millions, extending over most of December. 21 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The bank held 69 millions of United States securities on January 1st; part of this represented securities bought from member banks under repurchase agreements. These securities shortly were taken back by the banks, reducing our holdings to 59 millions. This figure changed little until March. Thereafter the bank's holdings increased rapidly, owing to its participation in active open market purchases by the system. The termination of these purchases early in August found the bank with 139 millions of government securities, the highest amount in its history. Subsequent changes were minor. Holdings of securities other than issues of the United States totaled nearly 6 millions at the end of 1931, of which 3 millions was in municipal warrants and the balance in debentures of the Federal Intermediate Credit banks. The debentures matured or were sold early in the year, but over most of 1932 from one to two millions of municipal warrants were held. Bills bought U.S. securities Other securities* Totals $42 75 89 29 $18 25 13 4 $29 26 20 49 $1 # 1 1 42 73 5 4 53 111 2 $ 90 126 123 83 117 119 5 6 58 61 7 4 102 190 187 190 6 59 97 74 63 66 CO CO ON Annual averages: 1927 1928 1929 1930 1931 1932 Monthly averages: 1931—Dec. 1932—Jan Feb.. . Mar.. Apr May. . June.. Julv Aug.. . . Sept Oct Nov Dec . Bills discounted 64 77 107 128 72 4 136 o 214 65 57 50 3 3 3 139 139 139 1 1 209 200 193 49 51 3 3 139 139 1 1 192 194 122 •fi- Bill and security holdings (000,000's omitted) * Including foreign loans on gold. 189 1 2 2 168 156 175 200 Less than $1,000,000. Local use Every member bank must keep on deposit with the of reserve reserve bank a sum equal to certain percentages of its bank credit demand and time deposits. This sum is the bank's reserve deposit. Ordinarily, a bank will not maintain its reserve deposit at a figure much in excess of legal requirements, as such a deposit does not bear interest, but it will exercise caution 22 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia not to allow this deposit to fall below the required amount, thus avoiding penalty. Through the facility of the balances necessarily carried with the federal reserve bank, clearing transactions of all kinds and other transactions incident to the routine of banking operations are conducted. Requisitions upon the reserve bank for currency and coin, transfers of funds to other banks, the payment of checks, drafts and other items drawn upon the bank reduce the bank's reserve deposit, while deposits of currency and coin in the reserve bank, and such transactions as the collection of checks, drafts and other credit items naturally increase it. If a bank finds that its payments exceed receipts sufficiently to force the reserve deposit below requirements, it may borrow from the reserve bank and have the proceeds added to its account; if the deposit, as a result of the day's transactions, is much in excess of requirements, the excess may be used to repay borrowings. Specifically the principal factors which tend to raise or lower member bank reserve deposits in this district may be indicated briefly as follows: 1. Interdistrict settlements (settlements between federal reserve districts) : Payments between districts for checks, drafts and such other items as wire transfers are handled through the gold settlement fund. If the member banks have to pay more than they receive, their reserve deposits are reduced, and vice versa. 2. Treasury operations: Large sums are received by the government as a result of tax collections, payments for new securities, insurance premiums, and other transactions, but government disbursements, including interest, redemption of securities, pensions, insurance payments, wages, supplies and miscellaneous payments of this character within the district also reach large figures. If local receipts by the Treasurer exceed disbursements, the reserve deposits of member banks decrease, and vice versa. 3. Demand for currency and coin: If more currency is obtained from the reserve bank than the member banks return to it, reserve deposits are reduced, and vice versa. 23 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia There is a close relationship between the first and second of these factors because of the large amount of government securities issued each year. The bulk of these securities are paid for, not by cash, but by deposit credit at the banks to which they have been allotted. The government withdraws these deposits as it needs money for current use. The banks in turn, unless they have a surplus of funds, sell a large percentage of the securities allotted to them, most of the sales probably being made to New York firms. Payment is received either through the gold settlement fund, writh a resulting credit to reserve deposits at the reserve bank, or by deposit credit at New York banks. In the course of a year these sales reach large figures, as may be gathered from the fact that member banks in this district showed an increase of only 73 millions in holdings of United States securities during 1932, although they had received much the greater part of the 298 millions of new government securities allotted to banks in this district for which payment was made in cash or by deposit credit. The actual changes affecting the reserve deposits of member banks in the district during 1932 are reflected by the following operations: Factors affecting reserve deposits (000,000's omitted) Interdistrict settlements: Net gain arising largely from sale of securities Excess of currency returned to reserve bank over currency received by banks Receipts by Treasury in payment for new securities (cash or amounts withdrawn from depositary banks) All other Treasury transactions (including operations of Reconstruction Finance Corporation and new issues of national bank notes): Excess of local disbursements over receipts Indicated effect of foregoing transactions on member banks' reserve deposits Actual change in reserve deposits Indicated decline in reserve bank credit Effect on reserve deposits +$145 + 21 - 289 + 200 + $"7 9 - $79 The table shows that the various activities of the banks and the Treasury would have added 77 millions to the reserve deposits of the member banks, but that there was an actual decline of 2 millions in such deposits. These funds, totaling 79 millions, were applied to the reduction of reserve bank credit, of which 69 millions was evidenced by a reduction of bills discounted at this bank. In view of the very large purchases of government securities by the federal reserve system during the past year, it is probable 24 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia that some of the securities were acquired by the system, directly or indirectly, from member banks in this district and that these funds, supplied by the system, constituted one of the factors making possible a reduction in borrowings. Reserve position The ratio of average cash reserves to the federal reserve note and deposit liabilities in 1932 was 58.6 per cent, which compares with 78.8 per cent in 1931 and 81.7 per cent in 1930. The highest point this year was 69.7 per cent on April 19th and the low was 51.1 per cent on July 23rd. The net change in the year was a decline from 60 per cent to 56.6 per cent. Year end figures show declines in both the deposit and federal reserve note liabilities, but the decrease in cash reserves also was large. Note circulation is discussed in some detail in the section on "Currency demand." The decrease in deposits reflected lower figures for member banks' reserve deposits, government deposits and foreign bank deposits. Monthly averages of member bank reserves declined from 124 millions in December, 1931, to 116 millions in the spring and early summer. There was a rise thereafter, particularly pronounced in November and December, when temporary influences, which disappeared by the end of the year, raised the averages unduly. During 1932 the cash reserves of the bank declined from 243 to 205 millions. Reserves other than gold increased 5 millions, Reserve position (000,000's omitted in dollar figures) Member bank reserve deposits Total deposits $136 134 138 141 119 $139 137 140 150 124 $132 147 135 175 252 $172 192 225 257 221 63.6% 67.6' 81.7' 78.8' 58.6' 124 122 118 117 116 116 116 116 117 118 118 121 127 139 132 126 122 123 124 123 120 121 122 122 125 131 276 265 265 260 253 250 249 257 256 249 242 239 242 261 240 233 248 254 234 207 199 203 205 205 207 214 62.8' 60.4' 59.7' 64.9' 67.5' 62.5' 55.7' 52.7' 53.8' 55.2' 56.3' 56.8' 57.3' Annual averages: 1928 1929 . 1930.. 1931 1932 Monthly averages: 1931—Dec 1932—Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 25 Federal reserve Cash note reserves circulation Reserve ratio Eighteenth Annual Report, Federal Reserve Bank of Philadelphia RESERVE POSITION FEDERAL RESERVE BANK OF PHILADELPHIA r\ \ PERCENT 85 80 / 75 f RESER1•E 70 65 \ 1 RATIO \. — \ 1 1 II 5U 55 — 50 929 931 1930 1932 FED RES. NOTES IN CIRCULATION 1929 1931 1930 26 932 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia owing mainly to an accumulation of United States notes, while gold holdings declined 43 millions. Several well-defined movements are apparent in the gold figures. Up to March 2nd there was a decrease of 27 millions, reflecting losses in the settlements and transfers for the Treasury. In the next five weeks, ending April 6th, gold increased 31 millions, chiefly as a result of security sales by the member banks. Thereafter there was a rather steady decline totaling 74 millions to the lowest point of the year on July 27th; this was due largely to the acquisition of United States securities by this bank. Over the balance of the year the trend was upward and, by December 31st, 185 millions was on hand, an increase of 27 millions over July 27th. Currency demand In contrast with the extraordinary increase during the fall of 1931, the trend of currency demand during the first half of 1932 was generally downward. This was to be expected in view of the trend of business, but the total volume continued unusually large as compared with normal years. There was a rise of more than the usual amount early in July, but subsequently the decline was resumed, despite some improvement in business, and continued until the end of October. The increase in currency during the last two months of the year was less than that usually to be anticipated at a time when the holiday trade is active. Although it is evident that some currency has returned from circulation, it is impossible to state definitely what factors have brought it about. Quieter banking conditions in the district have made it possible for the banks to carry smaller amounts of money in their tills. The decline in wage payments and in the dollar volume of retail trade must have had something to do with the falling off in currency demand. And it probably is true that some of the hoarded money has returned, either by redeposit in banks, or as a result of investment or spending to meet living expenses. Offsetting factors include the need for cash in communities which are devoid of banking facilities and, possibly, an increased use of cash as a result of the tax on bank checks. Federal reserve note circulation in this district declined from 269 to 238 millions in the year, but this does not give an exact indication of the decline in circulating money. These notes are only one of a number of types of money in use. This bank, which is the principal source of money within the district, may pay out whatever 27 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia CURRENCY DEMAND FEDERAL RESERVE BANK OF PHILADELPHIA MILLIONS CD; r + 125 + 100 + 75 + 50 1 i + 25 O J 25 50 - 75 MARCH 31,1927 = 100 - 100 1930 1931 1932 kind of currency it may find convenient in meeting the requisitions of the member banks. Federal The Glass-Steagall Act, approved February 27, 1932, perreserve mitted the Federal Reserve Board over a period of one notes year to allow the reserve banks to pledge United States securities as collateral for federal reserve notes; this made possible the liberation of a large amount of gold then used for that purpose. On February 24, $2,037,000,000 in gold was being so used. In thus releasing gold, the Act opened the way for the system to make such purchases of United States securities as might appear necessary. The new Act in no way affected the reserve requirements against notes. Under the Federal Reserve Act, reserves in gold of 40 per cent must be kept against federal reserve notes in circulation and reserves in gold or lawful money of 35 per cent against deposits. The reserve banks must keep on deposit with the United States Treasurer a gold redemption fund equal to 5 per cent of the notes not covered by gold, but this redemption fund counts as part of the 40 per cent reserve against notes. 28 Eighteenth Annual Be port, Federal Reserve Bank of Philadelphia "Excess reserves" of a reserve bank are figured by deducting reserves of 35 per cent of the deposits and 40 per cent of the notes in circulation from the total cash reserves of the bank. But to figure "free gold" there also must be deducted the amount of gold needed, in addition to eligible paper, to bring the collateral pledged against federal reserve notes up to a full 100 per cent of the notes outstanding. Calculations follow which show the free gold position of this bank prior to the approval of the Glass-Steagall Act and on May 4. Excess reserves and free gold (000,000's omitted) Additional gold required as collateral for federal reserve notes Free gold 44 100 $144 $100 62 97 $19 Excess reserves 43 105 $81 Total required reserves $244 $148 Required as deposit reserve Required as note reserve (includes redemption fund).... Mav 4, 1932 $229 Total cash reserves . . Feb. 24, 1932 $3 Reflecting the influence of government security purchases, the free gold at this bank decreased in this period from 19 millions to 3 millions, a figure which was too small for current operations. On May 5, however, the Federal Reserve Board permitted the reserve banks to pledge United States securities as collateral for notes. The bank thus was enabled to continue participating in system purchases of government securities. In granting this permission, the Federal Reserve Board placed certain restrictions on the procedure, so that no greater amount of government obligations would be so used than is necessary to give the reserve banks a reasonable working gold balance for their operations. The maximum amount of securities pledged by this bank as collateral for outstanding notes was 56 millions; at the end of the year 52 millions was so used. Total issues of new federal reserve notes to the bank during 1932 amounted to 78 millions, which compares with the record total of 233 millions in 1931, and with 152 millions in 1930. Year-end statements of notes issued and collateral held follow: 29 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Federal reserve note issues and collateral (000's omitted) December 31 1932 1931 1930 Notes received from comptroller Notes on hand (held by federal reserve agent) $353,179 101,790 $388,667 93,600 $242,755 61,620 Notes issued to bank (outstanding). . . $251,389 $295,067 $181,135 78,290 73,710 47,463 52,000 54,700 125,300 116.949 0 38,700 121,300 22,444 0 $251,463 $296,949 $182,444 Collateral held: Gold and gold certificates on hand Gold fund—Federal Reserve Board Discounted and purchased bills United States securities Total collateral held National bank notes In the years from 1927 to 1931 the amount of national bank notes outstanding in this district changed little, moving within a range of roughly from 54 to 57 millions. During the first half of 1932 the outstanding notes increased from 57 to 65 millions, 3 millions of the increase being accounted for by banks in Philadelphia. These notes were issued against 2 per cent consols of 1930 or Panama Canal bonds. The Federal Home Loan Act was approved on July 22nd; one of its sections permitted national banks to pledge, over a period of three years, any outstanding bonds of the United States bearing interest up to 3 % per cent. Many banks in the district took advantage of this liberalization of the law with regard to acceptable security. From June 30th to December 31st outstanding notes increased from 65 to 73 millions. The law limits the amount of notes issued at any one time to a national bank to an amount equal to the capital stock of such bank. The total capital of all national banks in this district on December 31st was 124 millions; with 73 millions of notes then outstanding, there still remained considerable latitude for expansion. The Attorney General has ruled that the bonds referred to in this new legislation lose the circulation privilege at the end of the three-year period and that the notes issued upon the deposit of such bonds then must be retired. Money rates Open market money rates declined in 1932 to exceedingly low levels; prime commercial paper at the end of the year was offered for sale at as low as l ^ - l 1 / ! ' per cent. Nevertheless, Philadelphia so Eighteenth Annual Report, Federal Reserve Bank of Philadelphia banks continued through the year to quote 4!/^r5 per cent on the bulk of the commercial loans granted to customers in good standing. Rates were raised to this level during the period of gold drain and banking disturbances in the fall of 1931. The rate for brokers' call money in this city continued at 4 per cent, unchanged since May, 1930. In common with most of the other reserve banks, the discount rate of this bank was unchanged at zy± per cent during 1932. Departmental operations (000's omitted) 1932 1931 1930 1929 Number of pieces or transactions handled: 68 60 Notes and bills discounted 161 51 Notes (currency) counted 179,004 199,377 211,091 215,030 Coins counted 291,563 308,220 334,963 331,780 Ordinary checks handled (including return 63,154 70,134 72,846 70,234 items) U. S. government checks handled 2,054 2,130 1,929 1,952 Items payable at a future date (collection items): 1356 1,680 1,361 1,487 United States coupons paid All other items 607 548 570 594 Transfers of funds 123 122 126 116 U. S. securities issued, redeemed, or ex80 73 112 61 changed The discount department reported substantial increases both in the number of items handled and in the dollar total. This probably also was true of the vault department; although no figures are available on the number of pieces, the total of securities held in custody for member banks increased from an average of $301,000,000 in 1931 to $313,000,000 in 1932, and the amount of securities and cash held for this bank, the United States Treasury and others rose from $454,000,000 to $683,000,000. The collection department also had an increase in the number of items handled, but the currency, transit and fiscal agency departments show a decline in the physical volume of work. With the opening- of the local office of the Reconstruction Finance Corporation in the bank building, the bank had to set up a custody department to care for all notes and collateral turned over to the corporation and to arrange for the collection of maturing items. And, too, it wras necessary to provide a staff to examine applications for direct loans received from individuals, partnerships and corporations, but these applications dwindled rapidly as the year waned. 31 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The number of cities for which clearing house balances are paid daily through the reserve bank increased during- the year from 12 to 14, but the total of the balances decreased from $172,000,000 to $146,000,000. The number of county clearings systems in operation increased from 8 to 12 and the number of participating- banks from 102 to 186; the amount of items interchanged by these banks, settlement for which was handled by the reserve bank, increased from $48,000,000 to $70,000,000. Direct sendings of checks by banks in this district to the reserve banks in other districts, thereby expediting the receipt of payment, decreased from $5,100,000,000 to $3,300,000,000; this decline is not surprising in view of the falling off in the dollar volume of business and financial transactions. Redemptions of maturing issues of United States certificates of indebtedness and Treasury notes totaled $69,000,000 in this district, or 46 per cent of the amounts originally allotted here; in addition, $21,500,000 of Treasury bills were redeemed. Subscriptions to new issues of certificates, notes and bills issued by the United States totaled $3,283,000,000; $347,000,000 was allotted to the district. Personnel and building Board of directors Class Name Joseph Wayne, Jr., President, Philadelphia National Bank, Philadelphia, Pa. A - Group 2 George W. Reily, President, I Harrisburg National Bank, Harrisburg, Pa. [Group 3 John C. Cosgrove Residence Term expires [Group 1 Philadelphia, Pa. December 31, 1932 Harrisburg, Pa. Johnstown, Pa. December 31, 1933 December 31, 1934 C. Frederick C. Stout, Member, John R. Evans & Company, Ardmore, Pa. December 31, 1934 Philadelphia, Pa. | Group 2 Arthur W. Sewall, President, General Asphalt Company, Philadelphia, Pa. December 31, 1932 Philadelphia, Pa. ' Group 3 J. Carl De La Cour, Vice-President, Wm. S. Scull Company, Riverton, N. J. Camden, N. J. December 31, 1933 ['Group 1 Richard L. Austin, Philadelphia, Pa. December 31, 1932 Chairman of the Board Alba B. Johnson, Deputy ChairDecember 31, 1933 man of the Board Rosemont, Pa. Bridgeville, Del. December 31, 1934 Harrv L. Cannon The terms of office of Joseph Wayne, Jr., a class A director, and Arthur W. Sewall, a class B director, terminated on December 31st. At the elections held in the fall, they were elected by the banks of groups 1 and 2, respectively, without a dissenting vote. Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The term of Richard L. Austin, a class C director, also expired on December 31st, and he was redesignated by the Federal Reserve Board to serve as a director for a further period of three years and to hold office as chairman of the board and federal reserve agent during 1933. The Federal Reserve Board also reappointed Arthur E. Post and Ernest C. Hill as assistant federal reserve agents during 1933. At the first meeting of 1932, the board of directors again chose Howrard A. Loeb, chairman of the board of the Tradesmens National Bank and Trust Company of Philadelphia, to represent this district on the Federal Advisory Council. The officers of the bank also were reappointed for 1932 as follows: governor—George W. Norris; deputy governor—William H. Hutt; cashier and secretary—C. A. Mcllhenny; assistant cashiers—W. J. Davis, J. M. Toy, R. M. Miller, Jr., S. R. Earl; comptroller—William G. McCreedy. The number of employees other than officers increased during the year from 686 to 752, owing largely to employees taken on to handle work in connection with the activities of the bank as a custodian for the Reconstruction Finance Corporation. This increase also reflects employment given to 22 persons, starting in December, in the effort to alleviate some of the distress now so prevalent; the funds to compensate these additional employees were derived in part by graded temporary reductions in the salaries of the staff, in return for which a half-day holiday can be taken each month. During the year the property fronting on Chestnut Street between the bank building and the post office was acquired by the bank and the building situated thereon was removed. The erection on the lot to the other side of the building of an addition corresponding to six stories of the older building was begun; when completed, the front of the original building will be altered to conform to the front of the new building. Banking changes in the district Bank suspensions in this district declined from 101 in 1931 to 27 in 1932, of which only 7 were reported in the last half of the year. Eighteen of the banks had deposits under $1,000,000 and nine in excess of $1,000,000. None of the failures this year was in Philadelphia. Ten of the suspensions were member banks; the deposits of failed member banks made up 21 per cent of the total for all failed banks, but comprised only one-quarter of one per cent of 33 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia the total deposits at the beginning of the year of all member banks in the district. Consolidations or absorptions continued numerous in 1932. There were 23 instances in which member banks acquired the assets of nonmembers by one of these methods and three cases in which membership was lost for like reasons. The ten suspensions of member banks were offset in part by six cases of reopening and an additional case in which a new charter was taken out prior to reopening. The assets lost to the system by some of these changes were more than balanced by amounts gained by others. Consolidations or absorptions between member banks reduce the number of members, but not the total assets. Changes in the number of member banks are summarized below: National banks Changes in membership State bank members Totals 73 715 0 0 0 6 1 9 0 9 10 0 10 12 5 17 0 1 3 0 3 1 23 Gains in 1932: Primary organizations Suspended banks reopened Conversion from nonmember bank 642 2 6 1 Active membership, December 31, 1931 8 31 628 65 693 Losses during 1932: Suspensions.. Consolidation with or absorption by member banks Consolidation with or absorption by nonmember banks . National bank succeeded by national b a n k . . . . Active membership, December 31, 1932 The loans and investments of member banks on September 30, 1932, totaled $2,414,000,000, as against $3,524,000,000 for all banks in the district. The proportion held by members was close to 69 per cent, which compares with 66 per cent a year earlier, 62 per cent two years ago, and 61 per cent three years ago. The principal function of the bank relations department is to keep the banks of the district informed fully regarding the services offered by the federal reserve system and the ways in which they may be used most advantageously. During 1932 over 1,300 visits were made to banks as a matter of routine and 360 special visits to deal with specific problems, including the setting up of county clearings systems. 34 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The reports and subsequent follow-ups of the department of bank examination are designed, not only to secure full knowledge of the condition of banks, but also to help the banks to operate more efficiently and profitably. Bankers find these services helpful and visit this bank frequently to talk matters over with the officials here; the total number of visits received from bank officers during the year was in excess of 2,300. Fiduciary powers Changes during 1932 which increased the number of banks having fiduciary powers in this district include original grants to five banks and the reopening of one bank which had such powers. Decreases resulted in five instances from consolidations of banks having these powers, suspensions or liquidation in four other cases, and the surrender of powers by one bank. One bank which had partial powers was granted full powers. The total number of national banks permitted to exercise such powers declined in the year from 289 to 285, of which 222 were in Pennsylvania, 53 in New Jersey and 10 in Delaware. Number of banks granted National banks having fiduciary powers Full powers 224 254 262 268 264 262 December 31, 1927 31, 1928 31, 1929 31, 1930 31, 1931 31, 1932 Partial powers 36 32 30 29 25 23 Totals 260 286 292 297 289 285 Bankers' acceptances No change has taken place during the past year in the banks which have been granted authority to accept bills up to 100 per cent of combined capital and surplus. Five banks have been granted this privilege, all of them being in Philadelphia. Philadelphia banks continue to account for nearly all of the outstanding bankers' acceptances in this district, which totaled $12,300,000 at the end of 1932; this was a decline of 27 per cent from a year earlier, about the same as that shown in the national figures, and was only about half the year-end totals in 1929 and 1930. The decrease may be ascribed in considerable part to declines in prices and in the volume of products handled. Import bills continue to be the largest single class of bills; the amount based on goods stored in 35 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia or shipped between foreign countries, which was at a high point at the end of 1930, has shown the largest percentage decline since that time. Outstanding acceptances of banks in Third Federal Reserve District December 31, 1932 December 31, 1931 December 31, 1930 Based on: Imports Exports Domestic shipments Warehouse credits Dollar exchange Goods stored in or shipped between foreign countries 84,800,000 1.200,000 1,200,000 2.500,000 500,000 §8,500,000 900,000 2,000,000 1,900,000 600,000 $10,000,000 1,700,000 1,800,000 2,300,000 1,500,000 2,100,000 3,000,000 7,300,000 $12,300,000 $16,900,000 $24,600,000 Total Member bank earnings and expenses Net earnings from ordinary operations, as reported by member banks in this district for the year ended June 30, 1932, in comparison to loans and investments were slightly larger than in the preceding year. Extensive readjustments of loan and security values, Ratios of average loans and investments Earnings and expenses of member banks Years ended June 30 1932 1931 1930 4.88% .31" .28" 5.26% .32" .28" 5.59% .31" .34" Total earnings 5.47% 5.86% 6.24% Expenses: Salaries and wages paid Interest paid on borrowed money Interest paid on deposits Taxes Other expenses 1.14% .16" 1.67" 22 " 1.15% .06" 2.15 " .29" .63" 1.16% .20" 1.98" .31" .67" Total expenses 3.84% 4.28% 4.32% Net earnings Recoveries on charged-off assets Profit on securities sold 1.63% .12" .12" 1.58% .06" .23" 1.92% .07" .26" Net earnings, recoveries and profits on securities sold Losses and depreciation charged-off 1.87% 2.52" 1.87% 1.30" 2.25% .58" .57% 1.67% Earnings: Interest, discount and dividends received Trust department earnings Other earnings Net addition to profits .65%' *Net loss. 36 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia necessitated by adverse developments in business and decreases in security prices, resulted in charges against earnings that more than exceeded the earnings from operations, so that the banks as a whole had a net loss for the year, as shown in the preceding table. The bulk of the amount charged off as losses and depreciation represented a reduction in the value of securities and loans. Losses on loans were nearly 2 per cent of the average total of loans held during the year ended June 30, 1932, and losses on securities approximated 5 per cent of the total of investments held other than obligations of the United States. Banking and business information Through the generous co-operation of business concerns as well as private and public agencies, our Department of Research and Statistics has been able to continue the collection and analysis of economic data bearing on production and distribution of commodities in this district. Largely because of the length and severity of the depression, the demand for authoritative information on business conditions by trade, industry, banks and the public generally has increased greatly. It was met as promptly as possible in various ways but chiefly through the published reports, which give comprehensive data on banking and business conditions each month. The work of this department has been enlarged in scope and, it is believed, improved in quality without any marked increase in the working staff or in expenditure. Increased proficiency, owing chiefly to the absence of turnover, and the improvement in mechanical equipment, undoubtedly have increased the efficiency of the organization. A brief description of the principal features of the department's activity follows: Manufacturing Manufacturing is the most important single industry in this district since it employs one-third of the working population. It is also extremely diversified in its character. Yet prior to 1931, there was no general index of productive activity such as would indicate long-time trend and current changes in the rate and volume of output by factories. It was thus difficult to determine in any one month just what was taking place in the manufacturing industry as a whole. The department remedied this shortcoming by constructing an index number of factory productive activity which was first published in a supplement to our Business Review issued in January 1932. 37 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia This index is made up of 45 series of figures covering most of the important manufacturing lines, representing over two-thirds of the total output of manufactures in this district. Data were secured back to 1923, reduced to daily averages, and expressed for each line in percentages of the 1923-25 average which was taken as 100. Individual indexes, given both with and without adjustment for the usual seasonal variations, were combined into a general index according to the relative importance of the items composing this index as derived from the 1923 and 1925 biennial censuses and adjusted for the change in 1924, for which the census figures were not available. In order to obtain a general index number of industrial production, similar to that of the Federal Reserve Board, a further combination was made of the indexes of factory and coal mine output in the proportion of 91.6 per cent for manufacturing and 8.4 per cent for coal. This index is made available currently and it extends back to 1923. Before publishing these indexes, careful analyses and comparisons were made in order to test the accuracy of the new measurements. In addition, they were used internally for many months, and only after they proved to be reliable indicators were they published. In actual application over the past two years, these indexes have been found to be extremely useful instruments in measuring changes in the rate and volume of industrial production. In the fall of 1931, the Department of Research and Statistics and the United States Bureau of Labor Statistics adopted a co-operative plan under which this bank has become a collecting agency of the factory employment data from all those companies which have their factories located in Pennsylvania and Delaware, while the Bureau of Labor Statistics undertook to collect similar data from those companies which have plants all over the country including Pennsylvania and Delaware. Each month original data so gathered are exchanged between the two agencies. This arrangement eliminates duplication, which existed prior to 1932, and promotes greater co-operation on the part of manufacturing concerns. The Pennsylvania Department of Labor and Industry continues to co-operate with us by supplying certain additional information such as changes in employment and payrolls in some of the more important non-manufacturing industries. As a result of this co-operative arrangement with the Bureau of Labor Statistics, our factory employment indexes are increased to include about 55 per cent of the total workers engaged in manu 38 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia facturing. Since early 1932 the department has been engaged in revising the Pennsylvania factory employment indexes, the revision consisting of the following features: Data from new concerns are being added to the figures reported to us by the old companies. In many instances this has required securing back figures for the new companies in order to make the final indexes comparable with those for past months and years. Our old classification had to be revised, largely because of the introduction of industries which had not been covered. The new classification follows as closely as possible those of the Federal Reserve Board, the Bureau of Labor Statistics and the Bureau of the Census. The new indexes are being weighted so that every individual line will be properly represented according to its importance in the industry. This will correct any inequalities arising from varying sizes of representation, so that the final general index number will measure more precisely the general trend and monthly changes of employment and payrolls in the manufacturing industry as a whole. A further adjustment to the level as shown by the Census of Manufactures for 1929. Because of the sharp decline in 1930 from the high level of 1929, the 1930 state census is being used for further adjustment whenever it appears desirable. This revision, it is hoped, will be completed early in 1933. Then the employment indexes will be adjusted for seasonal variation by individual industries in the same manner as that followed by the Federal Reserve Board in adjusting the national factory employment indexes. In addition to the factory employment and payroll data, similar labor statistics are now available currently, through the Bureau of Labor Statistics and the Pennsylvania Department of Labor and Industry, for such non-manufacturing industries and services as coal mining, quarrying and non-metallic mining, construction, crude petroleum production, public utilities, transportation and communication, retail and wholesale trade, hotels, laundries, dyeing and cleaning establishments, and banking, insurance and real estate. Most of these figures do not extend further back than 1931; nevertheless, combined with factory employment and payrolls, they afford excellent material for a general index of industrial employment. This index is now in process of construction and when completed it will cover about 75 per cent of all occupations in Pennsylvania. 39 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia The occupations of the persons gainfully employed in the Philadelphia Federal Reserve District, computed from the Census of 1930, are given below: Occupation Number of workers Per cent of total Occupation 221,392 7.30 Agriculture Forestry and fishing. . . 6,264 0.21 Coal mines and other minerals 211,227 6.97 Building 220,742 7.28 Manufacturing 1,002,820 33.09 Transportation and communication 301,211 9.94 Banking, insurance and real estate 82,318 2.72 \\ holesale and retail trade 350,029 11.55 Other trade industries. . 12,568 0.42 Garages, automobile agencies and filling stations Recreation and amusement Other professional and semi-prof, services. . Hotels, restaurants, boarding houses, etc. Laundries and cleaning and pressing shops . Other domestic and personal service.... Industry, not specified. Total Number of workers Per cent of total 50,044 1.65 22,350 0.74 179,852 5.93 76.917 2.54 21,347 0.70 185,736 85,891 6.13 2.83 3,030,708 100.00 Coal mining The coal mining industry, particularly anthracite, is of vast importance in this district, chiefly because of its geographic concentration, the large investment of capital, and the growing competition from other fuels. The anthracite field alone employed about 108,000 workers in 1932, all being drawn from a half dozen adjoining counties. In the bituminous region covered by this district, over 50,000 workers depended on this industry for their livelihood. The two branches give employment to about 7 per cent of the total working population in this district. Obviously, reliable information on the conditions prevailing in coal mining is necessary from the standpoint of both banking and business. As in the case of manufacturing, therefore, this bank has been compiling essential facts reflecting current activity of the coal mining industry. Data showing the physical volume of production of anthracite and bituminous coal have been obtained from official sources, expressed in index numbers, and presented monthly in two sets, one adjusted for the normal seasonal variations and the other without such adjustment. To make the original figures comparable they have been reduced to a daily basis and expressed in percentages of the 1923-25 average. The indexes of anthracite output and bituminous coal production also were combined into one index number according to their relative importance. 40 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Through the courtesy of the Anthracite Institute, monthly figures showing employment and payrolls in the anthracite field are obtained from representative coal operators employing about 80 per cent of the total workers engaged in that industry. Monthly indexes are constructed from the actual figures and expressed in percentages of the 1923-25 average. Similarly adequate employment and payroll data are obtained for the bituminous coal industry in this section from the Bureau of Labor Statistics and current changes are presented in our monthly bulletion, The Business Review. Building and real estate Among the valuable indicators of conditions in the building and contracting industry are the monthly figures showing the value of contract awards and permits issued for new construction, additions and alterations. The indexes of these data have been improved in 1932. In the case of contracts awarded two separate indexes were computed, one of contracts for residential buildings and the other for the total awards. As in other instances all figures were first reduced to daily averages and then expressed in percentages of the 1923-25 average. Because of wide monthly fluctuations caused by such factors as the award of one or more very large contracts in a given month it was advisable, in the revision of the indexes and in the computation of seasonal factors, to use the average figures of contract awards for three months instead of those for one month, especially in view of the length of time that is required to complete a contract after it is awarded. Building trades in this district ordinarily employ over 200,000 workers or about 7 per cent of the total working population. Changes in this employment from month to month indicate current activity and thus supplement data on contract awards and permits granted which in the main reflect future activity. To measure these changes in employment and wage payments, fairly representative figures are obtained from the leading builders and contractors through the Pennsylvania Department of Labor and Industry. These figures are published each month in the bank's Business Review. Retail and wholesale trade In 1931 the Department of Research and Statistics undertook the revision of the retail trade indexes in the interest of greater accuracy and representativeness. To that end, many stores were 41 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Indexes of business conditions Philadelphia Federal Reserve District Adjusted for seasonal variation (1923-1925 average=100) Factory productive activity New Coal mining Building Freight Wholepassenger contract Retail automobile car sale awards loadsales sales registrations (value) Total A.nthra- Bitumi- ings nous cite or sales 1931 Jan.... Feb... Mar.. . April. . May. . June.. July... Aug.. . Sept... Oct.... Nov.. Dec. . 80 81 81 85 81 76 75 76 75 73 70 69 73 59 60 60 60 77 70 70 59 62 58 39 80 80 82 80 75 75 71 62 65 72 65 67 82 81 84 82 75 75 70 62 65 74 66 69 70 70 70 71 73 72 74 65 63 61 59 54 79 78 77 77 72 70 69 70 66 66 64 64 77 76 80 80 80 76 79 72 69 64 66 66 84 85 89 88 85 84 78 77 79 77 71 75 89 87 79 83 87 77 73 75 73 68 72 100 1932 Jan.... Feb. . . Mar.. . April. . May . . June . . July... Aug.. . Sept.. . Oct.... Nov.. . Dec.. . 70 67 63 60 56 55 55 57 64 62 59 57 38 37 34 33 31 30 37 35 31 30 32 37 53 57 77 78 49 43 54 48 60 61 64 72 54 58 81 81 49 42 55 48 61 61 65 75 46 48 54 60 50 46 48 48 52 58 58 55 62 61 59 58 49 47 46 46 48 52 51 53 65 65 63 61 63 63 57 56 55 53 55 54 67 68 64 69 64 64 56 52 58 61 53 56 83 71 46 42 51 64 45 43 46 42 39 67 Seasonal factors (Used in adjusting the actual indexes for seasonal changes. The average for the year equals 100) 99 Jan Feb.. . . 101 Mar.. . . 101 April.. . 98 May. . . 99 June... 100 July.... 97 Aug.. . . 100 Sept... . 102 Oct 104 Nov.. . . 102 Dec 97 81 95 117 122 123 108 98 96 100 97 86 77 108 107 82 104 100 87 82 100 101 128 103 98 114 109 102 91 90 88 88 94 102 107 110 105 90 94 95 97 104 102 103 105 111 108 101 90 89 91 94 94 96 97 94 95 114 114 113 109 81 83 97 100 100 98 73 80 90 113 120 165 54 74 112 151 144 140 113 110 96 82 70 54 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Indexes of business conditions Philadelphia Federal Reserve District Without adjustment for seasonal variation (1923-1925 average=100) Factory productive activity Annual averages NewFreight ( Hoal mining Building passenger Wholecar contract sale Retail automobile loadawards sales sales registrations Anthra- Bitumi- ings (value) Total or sales nous cite . . . . . . . . . . 102 95 103 108 104 102 110 96 77 60 75 107 118 137 160 165 132 108 62 34 116 105 79 104 98 93 92 86 72 60 115 108 77 104 99 93 91 86 73 61 117 89 94 105 91 90 98 84 67 52 106 102 102 106 90 71 52 99 97 98 94 94 98 85 73 59 Mar.. . . April.. . May. . . June... July.... Aug.. . . Sept... . Oct Nov... . Dec 78 82 82 83 80 76 73 76 76 76 71 67 59 56 70 73 73 83 69 67 59 60 50 30 88 85 69 83 74 66 58 62 66 91 68 66 89 86 69 86 75 66 57 62 66 95 68 68 79 77 71 65 66 63 65 61 64 66 64 57 71 74 73 75 75 72 72 74 73 71 65 57 67 69 75 74 75 73 73 67 78 73 75 74 85 123 1932 Jan Feb.. . . Mar.. . . April.. . May. . . June... July.... Aug.. . . Sept Oct Nov Dec.. . . 69 68 64 59 55 55 54 57 65 65 61 55 31 35 39 40 38 33 36 34 31 29 28 29 58 61 65 81 49 38 45 48 61 77 67 72 59 62 67 85 49 37 45 48 62 79 67 74 53 52 55 55 45 41 42 45 53 62 63 57 56 58 56 56 51 48 47 48 53 56 52 48 57 59 59 57 60 61 53 53 62 60 62 59 55 56 62 69 65 62 41 42 52 69 64 91 1923. 1924. 1925. 1926. 1927. 1928. 1929. 1930. 1931. 1932. . . . . . . . . . . 1931 Jan Feb 104 96 100 104 99 99 102 106 102 101 100 91 80 61 97 99 104 123 104 111 131 99 80 52 69 70 84 90 86 82 48 65 89 125 126 108 82 83 70 56 50 54 57 61 71 87 45 52 52 63 73 89 50 48 44 34 °7 36 Note: Monthly indexes for previous years are given in the Seventeenth Annual Report, 1931, pp. 33-38. 43 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia added to our reporting list and all reporting stores were asked to give us data currently and for months back to 1923 on the number of business days during which reporting stores were actually opened for business. This information was obtained without difficulty. It showed that the number of business days in retail trade of our district varied considerably as between the stores and localities. For example, stores in some cities observe a Wednesday afternoon closing for the first ten months of the year; others observe a halfday closing from the middle of June to the middle of September; still others show customary and accidental variations, so that the comparability of data may be affected from month to month and from year to year. The revision of these indexes was completed in 1932. After determining daily averages, an index number was constructed, with 1923-1925 as the base, for each of the following lines: department, men's apparel, women's apparel (for Philadelphia and for outside areas separately), shoe, and credit stores, so designated because they sell chiefly house furnishings, clothing, jewelry and musical instruments on longer credit terms than those common under ordinary charge accounts. Each index was also adjusted for seasonal variation. Individual indexes then were combined into one index of sales and stocks according to the relative importance of each line, as determined from the Census of Distribution for 1929. The old index was not so weighted and was thus defective, owing largely to varying sizes of the sample, a fact which tended to introduce a bias whenever a sample was relatively large in one line and small in another. The new index overcomes this difficulty, and therefore gives a better cross-section of retail trade sales and stocks than did the old index. Because of the insistent demand from various sources, retail trade indexes of sales, with and without adjustment for seasonal changes, were also computed for eleven city areas and for all other cities. These indexes have not been subdivided by type of stores as is the case in the district indexes. In addition, new indicators have been computed to show the rate of stock turnover and the ratio of collections during the month to accounts receivable at the beginning of the month. Data on retail collections are proving to be quite valuable, since it seems that there has been a tendency in this section for the ordinary charge accounts to run longer than 30 days, which had been the custom for many years. Estimates for Philadelphia indicate that the average life of a charge account has been running upward of 60 days, based on the figures for the past three years. Such a 44 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia development in liquidating customers' accounts is naturally of interest to banks as well as retail stores. The character of the revision of our wholesale trade indexes was similar to that of the retail trade indexes. The fundamental change consisted in the fact that an index number for each of the eight reporting lines was constructed, and then these individual indexes were combined into a general index according to the relative importance of each line as shown by the Census of Distribution for 1929. The new general index of wholesale trade sales is therefore superior to the old one which was made up by adding the figures of all lines together, regardless of the size of the representation. Other business indicators Since 1931 revisions have been made of local indexes showing changes in freight car loadings, check payments, real estate conditions, sales of new passenger automobiles, and insurance sales. In each case, the revision consisted chiefly of reducing the original figures to daily averages and in adjusting them for the usual seasonal fluctuations. A number of new series of figures are now being added to the production and distribution data in order to have thoroughly representative up-to-date information. Banking The department has continued to collect figures on loans, investments, and deposits from a group of member banks that report weekly and also to obtain weekly figures on debits to individual accounts from eighteen clearing house associations located in this district. These figures have been useful to those who desire to study district changes and have furnished part of the information needed by the Federal Reserve Board to prepare national totals which are carefully watched by business and financial observers. Data on money rates in the city of Philadelphia also are assembled each month from the reports of some of the larger member banks. In summarized form these rates are published each month in the Bulletin of the Federal Reserve Board together with information furnished by other districts. In addition to tabulating currently the statistics of federal reserve operations, study has been given to those factors which affect the volume of federal reserve credit in use within the district. Chief among these factors have been changes in the demand for 45 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia currency, the movement of funds into or out of the district, and the influence of Treasury operations; these factors have been outlined in greater detail on page 23 of this report. Current changes are published in the monthly business review. No special studies of the earnings and expenses of member banks have been published since that which covered the year 1929. These studies were especially useful to the banks as they afforded a basis for comparison of their own operating ratios. It was felt that conditions affecting banks during the past few years have been so abnormal that such tabulations would be of rather doubtful value as a guide to operations. Indexes of the velocity of bank deposits, based on the figures of a group of large Philadelphia banks, were computed for the years 1930 through 1932. Although the actual rates of turnover could not be taken as indicative of the turnover at all banks, the changes in the ratios pointed out clearly the diminished activity which resulted from the decline in business operations. The Business Review and other reports Current information on business and banking conditions of this district is conveyed to the co-operating concerns and to the business world in general through the monthly bulletin, The Business Review, as well as through various releases which are issued in advance of the bulletin. Largely because of the recent improvement made in the statistical data, it has been possible to make the substance of the bulletin more comprehensive and authoritative, especially since most of the figures are secured from the original or official sources. By means of personal contact and correspondence, the information in the bulletin is kept up to date as much as possible in order to supplement the statistical data which are unavoidably a few weeks old by the time the bulletin is published. Comprehensive releases on factory employment, and retail and wholesale trade are prepared and mailed to the Federal Reserve Board, the press and to the co-operating concerns from ten days to two wreeks in advance of the Review. Survey of industrial, mercantile and agricultural credit conditions At the request of the Federal Reserve Board in July, 1932, a comprehensive survey was made in order: To ascertain whether or not business concerns and farmers of this district experienced unusual difficulties in obtaining 46 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia sufficient funds for ordinary business needs, arising mainly from the production and distribution of goods; To determine the extent of a possible demand upon the Philadelphia Federal Reserve Bank for discounts, under Section 13 of the Federal Reserve Act as amended July 21, 1932; To determine the condition and character of the existing productive equipment which may have deteriorated or become obsolete but cannot be repaired or replaced because of the lack of capital or credit such as is available under normal conditions; and To provide this information for the Committee on Banking and Industry which was appointed to consider methods of improving the economic situation of this district. Over 5,500 questionnaires were sent out to various business establishments and, through the County Agents of the Department of Agriculture, to a selected group of individual farmers. More than 50 per cent of these questionnaires were returned with answers to all or to some of the questions asked. Based on the 1930 census, over 70 per cent of all occupations in this district was represented by these answers. The most important branches of production and distribution were thus covered—manufacturing, building and contracting, coal mining, retail and wholesale trade, services such as hotels, restaurants, and laundries, and agriculture. Every reply was carefully analyzed and classified according to type of business, net worth, rating and location of the concern. As each questionnaire asked seven main questions and six subquestions, the replies to all or some of these had to be properly appraised and classified so as to give the desired information as accurately as possible. As the returns began to come in, weekly summaries were prepared for the Banking and Industrial Committee and for the Federal Reserve Board. This was continued through August, September and the first two weeks of October, when the tabulation was closed. The final report, which was submitted to the Banking and Industrial Committee and to the Federal Reserve Board for their confidential use, was a detailed statistical summary of 66 pages, divided into four parts as follows: Part 1—Dealing with personal experiences of reporting concerns in borrowing funds for working capital and for productive equipment needs; Part 2—Giving information by reporting concerns based on knowledge, observation, and opinion regarding the experiences of other companies in obtaining credit; 47 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Part 3—Personal experiences of reporting concerns classified by twenty-one industrial areas of this district in order to determine the extent of credit difficulties in different localities, particularly those where bank suspensions were prevalent; and Part 4—Dealing exclusively with personal experiences of farmers, classified by counties of this district. A brief description of the membership and the character of activity of the Banking and Industrial Committee for this District follows. Committee on banking and industry In an effort to find ways and means of improving the existing business situation, a group of representative business men were called to a meeting at the Reserve Bank on June 2, 1932. The following resolution was adopted at this meeting: RESOLVED: That the chairman of this meeting be empowered to appoint a committee of twelve to consider methods of improving the present economic situation, and that the Federal Reserve Bank place its board room at the disposal of that committee for such meeting's as may be held. The members of this committee were as follows: George W. Houston, Chairman President of the Baldwin Locomotive Works General W. W. Atterbury President of the Pennsylvania Railroad Arthur C. Dorrance President of the Campbell Soup Company Irenee du Pont du Pont de Nemours Company Edward Hopkinson, Jr. Partner of Drexel and Company William A. Law President of the Penn Mutual Life Insurance Company Howard A. Loeb Chairman of the Board of the Tradesmens National Bank and Trust Company George Horace Lorimer Editor of the Saturday Evening Post Benjamin Rush President of the Insurance Company of North America Burton C. Simon Operative builder Dr. Herbert J. Tily President of Straivbridge and Clothier John E. Zimmermann President of the United Gas Improvement Company 48 Eighteenth Annual Report, Federal Reserve Bank of Philadelphia Similar committees were established in other federal reserve districts so that there was national co-operation in exchanging findings and plans. After a general survey of economic conditions of this district was made, a local committee delegated the consideration of some of the most pressing problems to various sub-committees. Among these the most important ones were: Trade acceptances, securities, and credit Howard A. Loeb, Chairman This sub-committee endeavored to sponsor a more extensive use of trade acceptances; it also dealt with matters pertaining to the security market and commercial banking, particularly that phase which related to the availability of funds for working capital as well as for capital equipment. Housing and mortgage financing William A. Law, Chairman The function of this sub-committee was to deal with all construction and modernization of dwellings, and with slum reclamation including the financing of such undertakings. Consideration of the Home Loan Bank Bill and its application in this district also was assigned to this committee. Railroad and industrial financing John E. Zimmermann, Chairman It was the function of this committee to stimulate employment through railroad and industrial buying of capital goods and to devise ways and means of financing such purchases. Public works Arthur C. Dorrance, Chairman It was the aim of this committee to investigate and consider the possibility of enlarging public works in this district, other than Federal construction, whether of self-liquidating or non-liquidating character. Its purpose was to stimulate industrial employment. Share-the-work committee Herbert J. Tily, Chairman The efforts of this sub-committee were to induce commercial and industrial concerns to spread the work among their employees in order to supplement the various relief measures for those who had been unemployed for a long period of time. Members of the general committee and of sub-committees served without compensation. 49 Federal Reserve Bank of Philadelphia Directors and Officers Appointed and Elected for the Year 1933 DIRECTORS Class A John C. Cosgrove, Johnstown, Pa. George W. Reily, Harrisburg, Pa. Joseph Wayne, Jr., Philadelphia, Pa. Class B J. Carl De La Cour, Camden, N. J. Arthur W. Sewall, Philadelphia, Pa. C. Frederick C. Stout, Philadelphia, Pa. Class C Richard L. Austin, Philadelphia, Pa. Harry L. Cannon, Bridgeville, Del. Alba B. Johnson, Philadelphia, Pa. Member of Federal Advisory Council Howard A. Loeb, Philadelphia, Pa. OFFICERS Richard L. Austin, Chairman and Federal Reserve Agent Alba B. Johnson, Deputy Chairman Arthur E. Post, Assistant Federal Reserve Agent Ernest C. Hill, Assistant Federal Reserve Agent George W. Norris, Governor William H. Hutt, Deputy Governor C. A. Mcllhenny, Cashier and Secretary W. J. Davis, Assistant Cashier J. M. Toy, Assistant Cashier R. M. Miller, Jr., Assistant Cashier S. R. Earl, Assistant Cashier William G. McCreedy, Comptroller