Full text of Bank Suspensions, 1921-1936, (December 1937)
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1204 FEDERAL RESERVE BULLETIN DECEMBER 1937 BANK SUSPENSIONS, 1921-1936 In the past forty-five years there have been TABLE 1.—NUMBER OF BANK SUSPENSIONS AND N U M OF SUSPENSIONS PER 100 ACTIVE BANKS, BY nearly 18,000 bank suspensions2 in the BER YEARS, 1892-1936 x United States. These years may be divided SuspenSuspeninto four periods. In the period 1892-1920, sions per sions per 100 b a n k s Number 100 banks 2,926 suspensions occurred, an annual aver- Year Number in operaYear in operaof susof sustion on tion on pensions pensions age of 100; in 1921-1929 there were 5,712, an J u n e 30 June 30 each year each year annual average of 'slightly less than 650; during the four years 1930-1933 there were 1892... 1914 149 80 .7 .5 1915 152 491 .5 4.1 9,096 suspensions, of which 4,000 occurred 1893 1894 1916 52 83 .2 .7 1917 49 110 .2 .9 in 1933 ;3 and in the 1934-1936 period there 1895 47 141 1918 .2 1896 . . . 1.2 were 135 suspensions, or an average of 45 1897 1919 62 .2 1.2 139 5 1920 167 .6 1898 63 per year. 1921 505 32 1.7 1899 .3 3 1922 366 1900 35 1.2 Table 1 shows the annual figures from 1901 1923 _ 2.2 .4 646 65 which these totals were computed, together 1902 1924 lib 2.7 54 .3 2.2 1925 618 ._ 52 .3 with the ratio of the number of suspensions 1903 1904 1926 976 3.5 125 .7 669 2.5 1927 1905 . 4 80 in each year to the number of active banks in 1906 1928 498 1.9 .3 53 that year. It may be noted that during the 1907 1929 659 2.6 .4 90 1930 1,350 5.7 153 .6 29 years prior to 1921 the annual rate of sus- 1908 3 1931 10.6 2,293 1909 78 1932 1,453 7.8 . 2 1910 58 pensions was less than one bank per 100 in 1911 1933 2 28.3 4,000 .3 85 operation in every year except 1893, 1896,1912 .4 1934 57 78 .3 4 .2 34 1935 103 and 1897. During the period from 1921 1913 44 .3 1936 through 1929 the ratios were substantially Exclusive of mutual savings banks, figures for which have been higher, and in each of the years 1930-1933 the omitted from all data presented in this analysis. For information concerning twelve mutual savings banks which suspended during rate was considerably in excess of that re- the periodthe1921-1936, see the September 1937 issue of the FEDERAL R E SERVE BULLETIN, 910. ported for any year prior to 1930. The two See explanatorypage statement relative to bank suspension statistics in 1933, page 1208. peak years were 1931 and 1933, when the number of suspensions per 100 active banks prices, with a rapid acceleration during the was 10.6 and 28.3, respectively. war years. In such a period banking losses The large number of bank suspensions are easily avoided and the misjudgments of during 1921-1933 was preceded by a rapid bankers are not challenged as they are in a expansion in the number and resources of period of falling prices. The conditions banks during the two decades between 1900 which existed encouraged the chartering of and 1920. This period was in general char- new banks, often where there was no real acterized by rising commodity and land need for them. By the middle of 1920 the This analysis is based largely on detailed statistics published number of national, State, and private banks in the Bulletin for September 1937, pages 866-910. Bank suspensions comprise all banks closed to the public, in operation was 30,235, or more than twice either temporarily or permanently, by supervisory authorities or by the banks' boards of directors on account of financial difficul- as many as were in operation in 1900. ties, whether on a so-called moratorium basis or otherwise, unless the closing was under a special bank holiday declared by civil au1921-1929.—The decade of the 1920's may thorities. If a bank closed under a special holiday declared by civil authorities and remained closed only during such holiday or be regarded as a generally prosperous one. part thereof, it has not been counted as a bank suspension. Banks which, without actually closing, obtained agreements from de- The depression which occurred at the beginpositors to waive a portion of their deposits or to defer the withdrawal of a portion of their deposits have not been classed as sus- ning of the period, though severe, was of pensions. Banks which were reopened or taken over by other institutions after suspension have been included as suspensions. short duration, and from 1922 on the general The figures for 1933 include all banks not granted licenses following the banking holiday in March 1933 which were subsequently tendency of business activity was upward placed in liquidation or receivership (including unlicensed banks absorbed or succeeded by other banks), and all other unlicensed with only minor setbacks in 1924 and 1927. banks which were not granted licenses to reopen by June 30, 1933. See explanatory statement relative to bank suspension sta- Despite the expanding activity in industry tistics in 1933, page 1208. 1 2 1 2 3 DECEMBER 1937 FEDERAL RESERVE BULLETIN and commerce, the general level of commodity prices was stabilized for a number of years much below the peak reached in war years. Agriculture, in particular, was passing through a period of readjustment incidental to the reduction of the prices of farm commodities and land after the war. The balance of payments of agricultural regions in the United States was unfavorable, and banks serving agricultural communities were under pressure. Suspensions among such banks were numerous throughout the 1921-1929 period. Near the end of 1923 and in 1924 suspensions increased in the West North Central States, particularly in North Dakota during the latter part of 1923 and in South Dakota and Iowa in 1924. The number of suspensions in that region declined moderately in the following year but increased again in 1926, when prices of agricultural products were lower. In the South Atlantic States there was also a marked rise in 1926 in the number of suspended banks, reflecting in part the collapse of the Florida real estate boom. The number of suspensions in the United States decreased in 1927 and again in 1928, but in 1929 there was an increase in the number of suspensions in nearly every section of the country. 1930-1932.—During the depression years following 1929 there was a rapid decline in the income of customers of banks and in the values underlying the loans and investments of banks. The general fall in prices caused widespread difficulties among banks serving all classes of activity—commercial, industrial, and agricultural. Bank suspensions became widespread and many banks were under pressure'because of the withdrawal of funds by depositors for hoarding. As economic conditions grew steadily worse suspensions increased, and as suspensions increased depositors became alarmed and withdrew funds, causing additional suspensions and adding to the depth of the economic depression. 1205 Suspensions during 1930 involved 1,350 banks, with deposits of $837,000,000, compared with the highest previous figure of 976 banks, with deposits of $260,000,000, in 1926. From January through October, 1930, the rate of suspensions reported for each month was not far above the monthly average for the previous 9-year period, but there were 256 suspensions in November and 352 in December of that year. In these months 9 large banks in different sections of the country suspended. The closing of these large banks resulted in the closing of many other banks, partly because of affiliate and correspondent relationships, and partly because of the spread of fear among depositors, particularly in territory near the location of the banks. Following January 1931, when about 200 suspensions were reported, the number declined to less than 100 each month until June, when 167 banks suspended. While suspensions during the two succeeding months were less numerous than in June, a sharp increase occurred in September. During the last four months of 1931, 1,360 banks suspended —more than in any previous full year. The peak of this period was in October, after the suspension of the gold standard in England, when 522 banks closed. By the end of the year a total of 2,293 banks had suspended. In 1931, as in 1930, the East North Central and West North Central groups of States accounted for the largest proportion of suspensions—610 and 717, respectively, or more than half of all the banks that closed during the year. Illinois and Iowa each reported more than 200 suspensions during the year. The New England States, which had previously been comparatively free from suspensions, reported 11 suspensions in 1930 and 33 in 1931, compared with a yearly average of 2 for the 9-year period 1921-1929. The Middle Atlantic States also were seriously affected in 1931; 230 banks suspended in that region during the year, compared with 30 in 1930 and a yearly average of 8 during 1921-1929. 1206 FEDERAL RESERVE BULLETIN While the number of suspensions in 1931 was nearly 4 times greater than the annual average for the 9-year period 1921-1929, the deposits of banks suspending during this year were proportionately even larger—about 9 times the yearly average for the 9-year period. The placing of restrictions on deposit withdrawals, a practice that had been used in 1931 in the East North Central States, became more prevalent in 1932 as a measure to cope with the steady withdrawal of funds. These restrictions on deposit withdrawals were usually imposed through "depositors' agreements" deferring withdrawal of varying percentages of deposits over periods of time ranging up to five years, certain percentages of deposits to be released at the end of the first year and additional percentages at the end of the succeeding years. New business was conducted on an unrestricted basis. Unfortunately, comprehensive figures are not available to show the number of banks that obtained deposit deferment agreements, or the amount of deposits involved in such deferment agreements, but from what information is available it appears that the practice was followed in a number of States during 1931 and 1932. Another type of bank moratoria that became common during this period, particularly in the East North Central States, was the reorganization of banks through the waiver or surrender of a portion of deposits by the depositors. This was accomplished in some cases through outright contributions by certain of the depositors, but usually there was a segregation of assets for the benefit of waiving depositors under a trust agreement, with a right in the bank to substitute assets during a period of time running generally from two to five years. Figures are not available at present to show the losses sustained by depositors through this type of reorganization of distressed banks. The National Credit Corporation was formed in October 1931 by banks at the suggestion of the President to relieve the situa- DECEMBER 1937 tion by making loans to banks on sound but not readily marketable assets, and the Reconstruction Finance Corporation was created by Congress in January 1932 to make loans to banks and other institutions. Member banks were granted additional assistance through the provisions of the Glass-Steagall Act adopted in February. The Act gave the Federal Reserve Board power to permit the use of United States Government securities as collateral against Federal Reserve notes. This made it possible for the Federal Reserve banks to increase their purchases of United States Government securities, thereby providing member banks with funds to meet additional demands for currency and gold and at the same time to reduce their indebtedness at the Reserve banks. The Glass-Steagall Act also contained provisions under which member banks that were without adequate amounts of eligible and acceptable assets could under certain conditions receive assistance on the basis of other security satisfactory to the Reserve banks. The number of suspensions had decreased from 522 in October 1931 to 175 in November, increasing to 358 in December. During the spring, summer, and autumn of 1932 the number of bank suspensions declined to less than 100 per month, with the exception of the months of June when 151 banks suspended and July when 132 banks suspended. Near the end of the year suspensions again increased in number, mainly in the Mid-Western and Far Western States. A total of 1,453 banks suspended in 1932, involving deposits aggregating $706,000,000. Fewer large banks suspended, however, during the year than in either 1930 or 1931. During the first two months of 1933, 386 banks with deposits of nearly $195,000,000 suspended. Many banks in a number of places had closed temporarily in 1932 under special "banking holidays" declared by civil authorities. The first of a series of State-wide banking holidays was declared in Nevada at the beginning of November, 1932. Though origi- DECEMBER 1937 FEDERAL RESERVE BULLETIN nally for a 12-day period, it was subsequently extended. Early in 1933 more local bank holidays were declared by city authorities and many existing ones were' extended, in order to permit banks to obtain deposit deferment or waiver agreements and to afford banks an opportunity to raise funds and make adjustments necessary to enable them to continue to meet their obligations. The banking crisis of 1933.—On February 4 a one-day holiday was declared in Louisiana because of difficulties in New Orleans. On February 14 an 8-day banking holiday was declared in Michigan because of difficulties centering in Detroit. While the Michigan holiday arrested withdrawals of deposits from banks in that State, outside Michigan there was an increase in the movement of funds from weaker to stronger banks and in currency withdrawals. Funds were withdrawn from banks in other States to send to Michigan or to meet payments that otherwise would have been met from deposits in Michigan banks. Developments of this nature were partly responsible for the rapid spread of the banking holiday movement among other States. In a number of States new laws were passed to provide for safeguarding of bank deposits and for readjusting the liabilities of banks without establishing receiverships. With a view to enabling the banking situation in any particular State to be better handled as a whole, a joint resolution was adopted on February 25 by the Congress of the United States authorizing the Comptroller of the Currency to exercise with respect to national banks such powers as State officials might have with respect to State banks. The Governor of Maryland declared a banking holiday on February 25, chiefly on account of conditions in Baltimore, and at about the same time restrictions were authorized on withdrawals of bank deposits in Indiana, Arkansas, and Ohio. On March 1 bank holidays were declared in Alabama, Kentucky, Tennessee, and Nevada, and simi- 1207 lar action was taken in six other States on March 2 and in seven others on March 3. On the morning of March 4, the Governor of the State of New York issued a proclamation declaring that day, which was a Saturday, and the following Monday to be bank holidays. Similar action was taken in Illinois, Massachusetts, New Jersey, Pennsylvania, and elsewhere. These declarations of State holidays in the various States had by March 4 closed or placed restrictions on practically all banks in the country. Federal Reserve banks also observed State holidays and closed on March 4. All leading exchanges ceased operations and business in general was practically at a standstill. On March 6 the President issued a proclamation declaring a nation-wide bank holiday to continue through the four days ending Thursday, March 9. During the holiday the banks were not to pay out any coin, bullion, or currency or to transact any other banking business whatever, except as might be permitted by the Secretary of the Treasury. On March 9 the Emergency Banking Act was passed by Congress and signed by the President. On this day also the President issued a proclamation extending the bank holiday indefinitely, and on March 10 by Executive Order he conferred power on the Secretary of the Treasury to license member banks of the Federal Reserve System, found to be in satisfactory condition, to conduct a usual banking business with exceptions as to paying out of gold and the furnishing of currency for hoarding purposes. Similar powers were granted authorities of the various States with respect to banks not members of the Federal Reserve System. On Saturday, March 11, the Reserve banks were authorized by the Secretary of the Treasury to reopen on the following Monday. It was announced the same day that on March 13 banks in the 12 Federal Reserve bank cities would be reopened; on March 14, banks in approximately 250 other cities having recognized 1208 FEDERAL RESERVE BULLETIN clearing houses; and on March 15, banks in other places. By March 15, 4,507 national banks and 567 State bank members of the Federal Reserve System, with deposits (on December 31, 1932) of $16,195,000,000 and $9,358,000,000, respectively, had been licensed to reopen; 1,400 national banks and 225 State bank members, with deposits of $1,943,000,000 and $926,000,000, respectively, had not been granted licenses to reopen. Correspondingfigures with respect to banks not members of the Federal Reserve System were not available prior to April 12, 1933 by which date 7,394 nonmember banks (exclusive of mutual savings banks) with deposits of $4,946,000,000 had been authorized to reopen, and 2,938 such banks with deposits of $1,318,000,000 had not been granted authority to reopen. On December 30, 1933, there were still 512 member banks with deposits of $528,000,000, and 1,257 nonmember banks with deposits of $497,000,000, which had not been granted licenses to reopen and had not been placed in liquidation or receivership. By December 31, 1934, however, all but 11 of the member banks and 149 of the nonmember banks not licensed following the banking holiday either had been granted licenses to reopen or had been placed in liquidation or receivership. At the end of December 1936 there remained only 3 member banks and 7 nonmember banks which had not been granted licenses to reopen and had not been placed in liquidation or receivership. Bank suspensions in 1933.—Because of restrictions imposed on deposit withdrawals, the reorganization of banks through deposit waivers during local and State bank holidays, changes in status of banks incident to the national banking holiday, and the amount of time required in many cases to determine whether banks should be licensed or should be placed in liquidation or receivership, statistics of bank suspensions for 1933 are not wholly comparable with those for previous years. The figures used in the present analy- DECEMBER 1937 sis are, however, thought to be reasonably comparable with statistics of suspensions in former years. They comprise banks suspended before the banking holiday, licensed banks suspended or placed on a restricted basis following the banking holiday, unlicensed banks placed in liquidation or reTABLE 2.—SUMMARY CLASSIFICATION OF BANKS S U S PENDED IN 1933, BEFORE AND AFTER THE BANKING HOLIDAY X Nonmember State banks State member banks National banks Total Private banks N u m b e r of banks Banks suspended Jan. 1 to Mar. 4 Banks placed in receivership during the banking holiday (March 6 to March 15) Licensed banks suspended March 16 to December 31 Banks not licensed following the banking holiday and later placed in liquidation or receivership (March 16, 1933 to Dec. 31, 1936) Banks granted licenses (July 1,1933 to Dec. 31, 1936) Banks neither granted licenses to reopen nor placed in liquidation or receivership by Dec. 31, 1936 TotaL. 408 64 22 302 20 39 2 1 34 2 179 9 2 158 10 2,122 865 74 1,113 70 1,242 161 72 1,002 7 4,000 1,101 2 174 3 7 2,616 109 Deposits (in thousands of dollars) Banks suspended Jan. 1 to Mar. 4 198, 417 71, 802 Banks placed in receivership during the bank r ing holiday (March 6 15,080 1,381 to March 15) Licensed banks suspended March 16 to 17,322 145, 072 December 31 Banks not licensed following the banking holiday and later placed in liquidation or receivership (Mar. 16, 1933 to Dec. 31, 2, 519, 958 1, 361, 607 1936) Banks granted licenses (Julyl, 1933 to Dec. 31, 716, 423 158, 437 1936) Banks neither granted licenses to reopen nor placed in liquidation or receivership by Dec. 1,748 31, 1936 Total 3, 596, € 21, 633 102, 115 2,867 109 12, 732 858 1,927 124,920 903 672, 260 477, 954 8,137 470, 482 516 1,266 1, 610, 549 '• 783, 3991, 189, 469 13, 281 1 Exclusive of mutual savings banks. 2 Includes 56 banks with deposits of $118,479,000 which did not receive licenses (as member banks) following the banking holiday and later withdrew from the Federal Reserve System. Of these, 28 were subsequently granted licenses as nonmembers. DECEMBER 1937 1209 FEDERAL RESERVE BULLETIN NUMBER OF BANK SUSPENSIONS ceivership, and all other unlicensed banks which were not granted licenses to reopen by By classes of banks.—Of the 14,943 banks June 30, 1933. Supervisory authorities had that suspended in the 16-year period 1921by that date completed their examination of 1936, 2,719 were national banks, 592 were all or nearly all the banks not granted licenses State member banks, 11,033 were nonmemimmediately following the banking holiday ber State banks, and 599 were private banks. and had authorized such of the banks to re- The number of suspensions during this peopen as could then qualify for licenses. There riod, by years and by classes of banks, appear remained, however, on June 30, 1933, 985in table 3. unlicensed national banks with deposits of $1,028,347,000, 114 unlicensed State member TABLE 3.—NUMBER OF BANK SUSPENSIONS, BY CLASSES OF BANKS AND BY YEARS, 1921-1936 * banks with deposits of $239,268,000, and 1,983 unlicensed nonmember banks with deNonmeml ber banks Membe r banks Year Total posits of $1,063,984,000, to be rehabilitated Private State State National and reopened or to be placed in liquidation or receivership. All such banks are treated 1921 44 19 390 505 52 13 23 281 366 49 as suspensions. A summary classification of 1922 32 23 1923 501 646 90 suspensions in 1933 is shown in table 2. 37 1924 38 578 775 122 39 433 1925 618 28 118 52 766 35 976 Bank suspensions in 1934-1936.—With 1926 123 33 514 31 669 the closing of the weak banks and strengthen- 1927 91 19 406 16 1928 . . __. 498 57 31 547 17 ing of the banking structure generally, fol- 1929 659 64 58 1,104 27 lowing the banking holiday in March 1933, 1930 1,350 161 80 107 1,697 2, 293 409 1931 37 1,085 and the stability brought about by deposit 1932 55 1,453 276 109 174 2,616 insurance and other Government measures 1933 4,000 1,101 1 13 43 1934 57 30 designed to ease the burdens of banks, sus- 1935 34 4 1 42 1 44 1936 pensions decreased in number to 57 in 1934, 599 11,033 592 14, 943 2,719 Total. 34 in 1935, and 44 in 1936. s 1 Exclusive of mutual savings banks. ANALYSIS OF BANK SUSPENSIONS, 1921-1936 In the discussions which follow, the numIn the following pages bank suspensions ber of banks suspended during the 16-year are analyzed by years and periods, by classes period is compared with the number in operaand sizes of banks, by geographic areas, and tion on June 30, 1920, with certain excepby sizes of communities. The analysis re- tions.1 This date was chosen as the basis of lates to the period beginning with 1921, that comparison because it marked approximately year having been selected as a starting point the beginning of the banking difficulties exbecause sufficiently reliable data are not avail- perienced during the years 1921-1933 and able to permit of a detailed analysis of sus- also because the number of active banks in pensions in earlier years. It was in 1921 also the United States was near its peak at that that the number and rate of suspensions time. moved noticeably upward toward the high 1 order to test the reliability of using active banks as of levels which were reached in subsequent JuneIn30, 1920 as a general base for comparison with suspended banks, an average of the number of banks in operation, by years, particularly 1930-1933. Detailed fig- classes, on June 30 in each of the years 1920-1935 was computed, and averages of the mid-year figures for 1920, 1925, ures on which the analysis is based, covering and 1930 were also obtained, by size of loans and investments, capital stock, and population of towns and cities. While the the years 1921-1936, may be found in the distribution of banks using the averages thus computed differed from the 1920 figures, the conclusions drawn from series of statistical tables which appeared on somewhat the use of 1920 figures as a base were for the most part supby the average figures. In only a few cases, where the pages 868-910 of the September 1937 issue ported number of banks in a given classification changed substantially of the FEDERAL RESERVE BULLETIN. during the period, were any important differences in the distribution shown. 1210 FEDERAL RESERVE BULLETIN DECEMBER 1937 As is indicated in table 4, the 2,719 national cent—were reported in the West North Cenbanks suspended during 1921-1936 repre- tral States, comprising Minnesota, Iowa, sented a total of 34 suspensions for every 100 Missouri, North Dakota, South Dakota, Nenational banks in operation on June 30, 1920. braska, and Kansas. For this group of States The 592 State member bank suspensions rep- the number of suspensions during the period resented a suspension rate 1 of 43 per 100per 100 active banks on June 30, 1920 State member banks active on the same date, amounted to 58, the second highest suspenand the corresponding rate for nonmember sion rate shown for any geographic division. State banks was 57. In relation to the aver- The areas for which the first and third highest age number of banks in operation during the rates were recorded—the South Atlantic period (based on June 30 figures, 1920-1935) States with a rate of 59 suspensions per 100 the rates of suspension per 100 active banks active banks and the East North Central were 38 for national banks, 48 for State mem- States with a rate of 55—together accounted ber banks, and 72 for nonmember State for 4,809 suspensions, or 34 percent of the total. Both these areas are largely agriculbanks. tural. TABLE 4.—NUMBER OF BANKS IN OPERATION, NUMBER The three groups of States having the OF BANK SUSPENSIONS, AND SUSPENSION RATE, 1921-1936, BY CLASSES OF B A N K S lowest suspension rates were the New England, Middle Atlantic, and Pacific States. In Number of banks Suspension rate, 1921-1936 in operation these States there were 1,323 suspensions, or Number of bank 9 percent of the total, and the number of Per 100 Per 100 Class of bank suspenbanks in banks in Average On sions, banks suspended per 100 in operation in each operation during operaJune 30, 1921-1936 (average) 1920tion on 1920 group on June 30, 1920 was 20, 29, and 31, during 19352 June 30, 1920-1935 2 1920 respectively. In table 5 are presented both a numerical National b a n k s . _ . 8,024 7,232 2,719 • 33.9 37.6 State member and a percentage distribution, by geographic banks 1,374 1,247 592 43.1 47.5 Nonmember State divisions, of the 14,344 banks (exclusive of 11,033 72.1 banks... _. 19,487 15, 303 56.6 mutual savings and private banks) which 14, 344 23, 782 60.3 Total 28, 885 49.7 suspended during the period 1921-1936, toExclusive of mutual savings and private banks. gether with the number of suspensions per Based on the number as of June 30 each year. 100 banks in operation on June 30, 1920. By geographic divisions.2—While all parts of the country suffered from the numerous TABLE 5.—NUMBER AND PERCENTAGE DISTRIBUTION OF bank suspensions which occurred during the BANK SUSPENSIONS BY GEOGRAPHIC DIVISIONS, 1921-1936, AND RATE OF SUSPENSION PER 100 16 years ended in 1936, the agricultural sec- BANKS IN OPERATION ON J U N E 30« 1920 * tions were particularly affected. Of the total of 14,344 suspensions (exclusive of mutual Suspension rate Number of Percent 1921-1936, per 100 savings and private banks) 5,255—or 37 per- Geographic division suspensions, of total banks in operation 1921-1936 1 1 2 on June 30, 1920 1 Except where otherwise stated, the term "suspension rate" as used here and in subsequent pages means the number of suspensions per 100 banks in operation on June 30, 1920. 2 New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut. Middle Atlantic: New York, New Jersey, Pennsylvania. East North Central: Ohio, Indiana, Illinois, Michigan, Wisconsin. West North Central: Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas. South Atlantic: Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida. East South Central: Kentucky, Tennessee, Alabama, Mississippi. West South Central: Arkansas, Louisiana, Oklahoma, Texas. Mountain: Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada. Pacific: Washington, Oregon, California. New England __. Middle Atlantic __ _ __ East North Central 142 748 2,938 1.0 5.2 20.5 19.5 28.8 54.7 West North Central South Atlantic . . . East South Central 5,255 1,871 759 36.6 13.1 5.3 58.4 59.0 41.8 1,367 831 433 9.5 5.8 3.0 42.0 52.8 31.3 14, 344 100.0 49.7 West South Central Mountain Pacific Total 1 ... Exclusive of mutual savings and private banks. 1211 FEDERAL RESERVE BULLETIN DECEMBER 1937 Table 6 shows the geographic distribution, try's total, in the 1921-1929 period. The by areas, of banks (other than mutual sav- West North Central States had a larger numings and private banks) which suspended ber of suspended banks in both periods than during the 1921-1929 and 1930-1933 periods, any other group of States, but the increase respectively, and the percentage ratios of in the later period was small compared with suspensions during each period to the num- that in some of the other geographic diviber of active banks at or near the beginning sions. While more than 47 percent of the of the period. These figures indicate that the country's total suspensions during the years New England and Middle Atlantic States 1921-1929 occurred in this group of States, were comparatively free from bank suspen- only 30 percent of the total for the 1930-1933 sions until the depression years of 1930-1933. period was accounted for by these States. During the 1930-1933 period 131 suspensions It will also be observed from table 6 that occurred in the New England States, com- while only the South Atlantic, West North pared with but 10 in the 1921-1929 period; Central, and Mountain States had an annual in the Middle Atlantic States 692 suspensions rate of suspension during the period 1921were reported during the four depression 1929 of 3 or more banks per 100 active banks years, compared with only 41 in the previous on June 30, 1920, all geographic divisions had 9 years. Nevertheless, even for the 4-year a suspension rate in the 1930-1933 period of period these two groups of States together more than 4 banks per annum, based on the were responsible for less than 10 percent of number of banks in operation on January 1, 1930. The highest annual rates shown in the country's total. The largest increase in the volume of sus- the period 1930-1933 were in the East North pensions during the later period as compared Central, West North Central, and South with the earlier one occurred in the East Atlantic States, respectively. North Central States. There were 2,533 sus- By States.—The number of suspensions in pensions in this area during the years 1930- the 10 States with the largest number of sus1933, or 29 percent of the United States total, pended banks is shown in table 7 for each of as against only 375, or 7 percent of the coun- the periods 1921-1936, 1921-1929, and 1930TABLE 6.—NUMBER AND PERCENTAGE DISTRIBUTION, BY GEOGRAPHIC DIVISIONS, OF BANK SUSPENSIONS DURING THE PERIODS 1921-1929 AND 1930-1933, AND RATES OF SUSPENSION PER 100 ACTIVE BANKS AT OR NEAR THE BEGINNING OF EACH PERIOD 1 1930-1933 1921-1929 Geographic divisions New England Middle Atlantic__ . East North Central West North Central... South Atlantic East South Central West South Central Mountain Pacific . Total 1 Number of suspensions Annual rate of suspension per 100 banks in operation on June 30, 1920 Number of suspensions Percent of total Suspension rate per 100 banks in operation on Jan. 1, 1930 Annual rate of suspension per 100 banks in operation on Jan. 1, 1930 10 41 375 .2 .8 6.9 1.4 1.6 7.0 .2 .2 .8 131 692 2,533 1.5 7.9 28.8 19.0 23.3 48.1 4.8 5.8 12.0 2,567 944 200 47.4 17.4 3.7 28.5 29.8 11.0 3.2 3.3 1.2 2,647 917 549 30.0 10.4 6.2 42.5 39.8 32.2 10.6 10.0 8.1 614 530 130 11.4 9.8 2.4 18.9 33.7 9.4 2.1 3.7 1.0 741 300 302 8.4 3.4 3.4 29.0 32.2 30.7 7.3 8.1 5,411 100.0 18.7 2.1 8,812 100.0 37.3 9.3 Exclusive of mutual savings and private banks. Percent of total Suspension rate per 100 banks in operation on June 30, 1920 7.7 1212 FEDERAL RESERVE BULLETIN DECEMBER 1937 TABLE 7.—NUMBER OF BANK SUSPENSIONS IN THE T E N STATES W I T H THE LARGEST NUMBER OF SUSPENSIONS DURING THE PERIODS 1921-1936, 1921-1929, AND 1930-1933 X State Number of suspensions 1921-1936 Number of suspensions 1921-1929 State Number of suspensions 1930-1933 State 1 238 952 879 Iowa North Dakota Minnesota 452 427 419 Illinois Iowa Missouri 817 785 560 Nebraska Minnesota North Dakota 779 726 611 South Dakota Nebraska Georgia 392 366 322 Wisconsin Michigan Nebraska 505 470 409 Wisconsin South Dakota Indiana 593 520 Missouri Oklahoma South Carolina 293 264 225 Indiana Pennsylvania Ohio 407 401 331 486 Texas . Iowa Illinois Missouri Michigan Total 10 States Total, 38 other States and Dist. of Columbia United States, total 1 7,356 6,988 14, 344 . . . . ______ ___ _ 219 . * _ 306 2,032 3,818 5,411 United States, total _ 8,812 3,379 United States, total _ Minnesota, Total, 10 States Total, 38-other States and Dist. of Columbia Total, 10 States Total, 38 other States and Dist. of Columbia _ _ __ 4,994 Exclusive of mutual savings and private banks. 1933. The 10 States having the largest num- TABLE 8.—NUMBER OF BANK SUSPENSIONS, 1921-1936, SUSPENSIONS PER 100 BANKS I N OPERATION ON ber of suspensions during 1921-1936 were AND J U N E 30, 1920, IN THE 21 STATES HAVING A S U S located in the East North Central and West PENSION RATE OF MORE T H A N 50 North Central regions, and included all the Number Suspension rate, of 1921-1936, per 100 State States comprising the East North Central suspensions, banks in operation 1921-1936 on J u n e 30, 1920 group except Ohio, and all those comprising the West North Central group except Kansas. Florida 291 2 112.8 Dakota 83.1 572 A total of 7,356 banks suspended in these 10 ASouth 76.3 rkansas.. 368 74.4 Michigan 486 States, compared with a total of 6,988 in the South Carolina- _ __ 74.4 337 other 38 States and the District of Columbia. Iowa _ _ - _ , _ _ 72.3 1, 238 23 69.7 When the two periods 1921-1929 and 1930- NNevada o r t h Dakota 611 68.0 1933 are compared, it appears that only 4 Nebraska ____ ,__ _ _ _ 65.1 779 Carolina 374 64.7 States—Iowa, Minnesota, Missouri, and Ne- North 212 Mississippi.___ _ _ _ _ _ 63.1 593 __ 61.3 braska—were included in both periods among Wisconsin 60.4 436 Georgia the 10 States having the largest number of Indiana 59.2 _ _ _ _ _ _ _ 520 59.1 Montana 250 57.4 suspensions. North Dakota, which had the New Mexico __ _ _ _ 70 second largest number of suspensions in the Arizona 56.3 49 122 55. 0 daho. _ _ _ __ 879 1921-1929 period, was not among the 10 IMissouri 53.4 137 Louisiana 51.3 952 States in the 1930-1933 period. While Illinois Illinois .__ _ _ _ _ 50.6 _ _ _ 64.1 Total, 21 States . _ . had more suspensions during the later period 9,299 Total, 27 other States and than any other State, it was not one of the 35.1 District of Columbia .__ 5,045 10 in which the largest number of banks United States, total 14, 344 49.7 suspended during the earlier period. Exclusive of mutual savings and private banks. Florida, and to a lesser extent in some other States, the use of Table 8 shows the 21 States in which there JuneIn1920 figures of active banks as a base for comparison of suspension figures a somewhat distorted picture because the number of banks were more than 50 suspensions during the in the gives State reached its peak some years later, in contrast with most States where the peak was reached in 1920-1921. period 1921-1936 per 100 active banks on June 30, 1920. The suspension rate was ranging from 113 suspensions during the 16highest in Florida, South Dakota, Arkansas, year period per 100 active banks in the case Michigan, South Carolina, Iowa, Nevada, of Florida to 65 in the case of Nebraska and North Dakota, Nebraska, and North Carolina, North Carolina. Although the absolute num- x 1 2 DECEMBER 1937 1213 FEDERAL RESERVE BULLETIN ber of suspensions during the period was not large in such States as Nevada, New Mexico, Arizona, Idaho, and Louisiana, the number of suspensions expressed as a ratio to the number of banks in operation on June 30, 1920 was high because of the relatively small number of banks in operation in those States. DEPOSITS OF SUSPENDED BANKS TABLE 9.—DEPOSITS OF SUSPENDED BANKS, 1921-1936, BY CLASSES OF BANKS AND BY YEARS 1 (In thousands of dollars) Member banks Year National 1921 1922 1923 1924 1925 1926 Nonmember banks Total __. State State Private2 172,188 91,182 149, 601 20, 777 20,197 34, 244 17, 363 7,113 12, 559 125,159 61, 964 101, 025 8,889 1,908 1,773 210,151 167, 555 260, 378 64, 890 55, 574 43, 998 13, 645 9,883 23, 466 123, 888 94, 547 183, 517 7,728 7,551 9,397 The deposits of the 14,943 banks which 199, 329 45, 547 17, 942 4,337 131, 503 suspended in the 16 years from 1921 through 1927 142, 386 1928 36, 483 10, 247 2,946 92, 710 230, 643 7,712 1929 41, 614 16, 459 164, 858 1936 aggregated over $8,500,000,000. Dur837, 096 202, 399 ... _ 15, 262 170, 446 448, 989 ing the 9-year period ended with 1929 the de- 1930 1, 690, 232 1931 293, 957 21,157 439,171 935, 947 1932 706,188 214,150 7,806 55,153 429,079 posits of suspended banks averaged less than 1933 .. 3, 596, 698 1, 610, 549 783, 399 1,189,469 13, 281 $200,000,000 per year, but in 1930 the amount 1934 36, 937 1,441 40 35, 456 10,015 4,702 5,313 of deposits involved in suspensions rose to 1935 11, 306 71 507 10,728 $837,000,000, or more than 4 times the aver- 1936 Total 111,259 8, 511, 885 2, 803, 500 1, 463, 585 4,133, 541 age for the previous 9 years. In 1931 the Exclusive of the deposits of the 12 mutual savings banks which sustotal deposits of suspended banks amounted pended during the period, aggregating $30,474,000. Deposit for 115 of the 599 private banks which suspended durto $1,690,000,000, exceeding the aggregate ing 1921-1936figures are not available. amount involved in the period 1921-1929. A decline was shown in 1932, when the total 1936. It also shows the percentage ratios of amounted to $706,000,000, but in 1933 the deposits involved in suspensions to those of amount of deposits involved in bank suspen- active banks, based both on deposits of banks sions reached its peak, approximately $3,600,- in operation on June 30, 1920 and on average 000,000. deposits of banks in operation during 1920By classes of banks.—The deposits of sus- 1935. It will be observed that on the basis pended banks, by classes of banks and by of June 1920 figures this ratio was 23 percent years, during the period 1921-1936 are shown and on the average basis it was 20 percent. in table 9. Total deposits of national banks Total deposits of national banks which which suspended during the period amounted suspended during the 16-year period repreto $2,803,500,000, and those of State member sented 16 percent of the deposits of national banks to $1,463,585,000. In both of these banks in operation in June 1920. The correclasses of banks more than half of the total sponding ratio for State member banks was for the entire period was accounted for by 18 percent and for nonmember banks 39 persuspensions which occurred in 1933. Non- cent. The ratio of deposits of national banks member State banks which suspended during which suspended during 1921-1936 to averthe 16-year period involved deposits aggre- age deposits of national banks in operation gating $4,133,541,000. Complete figures for during 1920-1935 was 14 percent, and the private banks are not available, but the de- corresponding ratio for State member banks posits of 484 of the 599 private banks which was 13 percent and for nonmember banks 41 suspended in 1921-1936 aggregated $111,- percent. A comparison of the latter percent259,000. ages with the suspension rates presented in Table 10 shows, by classes of banks (ex- table 4 (which were based on the number of cluding mutual savings and private banks), banks in operation) shows that, while nathe deposits of active banks and the deposits tional banks had the lowest rate of suspenof banks suspended during the period 1921- sions per 100 active banks, State member 1 2 1214 FEDERAL RESERVE BULLETIN DECEMBER 1937 TABLE 10.—DEPOSITS OF ACTIVE BANKS, DEPOSITS OF BANKS SUSPENDED DURING 1921-1936, AND PERCENTAGE RATIOS OF DEPOSITS OF SUSPENDED BANKS TO THOSE OF ACTIVE BANKS, BY CLASSES OF BANKS X [Amounts in thousands of dollars] Deposits of banks in operation Deposits of suspended banks, Class of bank National banks , State member banks Nonmember State banks.. Total 1 2 Percentage ratio of deposits of suspended banks, 1921-1936 . To deposits of banks in operation on June 30, 1920 To deposits of banks in On June 30, 1920 Average during 1920-19352 1921-1936 17,159,371 8, 241, 861 10, 703, 018 19, 540, 488 11,666,723 10, 048, 802 2, 803, 500 1, 463, 585 4, 133, 541 16.3 17.8 38.6 14.3 12.5 41. 1 36,104, 250 41,256,013 8, 400, 626 23.3 20. 4 (average) during 1920-19352 Exclusive of mutual savings and private banks. Based on the deposits as of June 30 each year. banks had a slightly lower ratio of deposits of the total number of suspensions. This is involved in suspensions to average deposits attributable to the fact that the average size of banks in operation. This is attributable of banks in these regions was larger than in part to the fact that average deposits of that of banks in other areas. In contrast, State member banks during 1920-1935 were the West North Central States, where the 42 percent above their deposits in 1920, while average size of banks was relatively small, average deposits of national banks during accounted for only 16 percent of the total 1920-1935 were only 14 percent above de- deposits of suspended banks, although 37 perposits of national banks at the beginning of cent of the country's suspensions occurred the period. The number 'of banks, on the in those States. other hand, showed about the same propor11.—DEPOSITS OP SUSPENDED BANKS, 1921tionate decline—9 percent in the case of State TABLE 1936, AND PERCENTAGE DISTRIBUTION OF THE D E member banks and 10 percent in the case of POSITS AND NUMBER OF SUSPENDED BANKS, BY national banks. The increase in deposits of GEOGRAPHIC DIVISIONS State member banks was partly a result of Deposits of Percent of suspended Percent total dethe fact that a number of large national banks banks, of total posits of Geographic division 1921-1936 number of were converted into or absorbed by State (in thousands suspended suspensions banks of dollars) member banks in the 1920's. 418,646 By geographic divisions.—The distribu- New England _ 5.0 1.0 1. 464, 285 Middle Atlantic _ 17.4 5.2 2, 792, 559 33.2 tion, by geographic divisions, of deposits in- East North Central 20.5 North Central 1, 324, 431 15.8 36.6 volved in bank suspensions (other than West South Atlantic 995, 044 11.9 13.1 328, 682 3.9 5.3 mutual savings and private banks) during East South Central 6.4 537, 703 9.5 South Central the 16-year period 1921-1936 is shown in West 254, 275 3.0 Mountain 5.8 285,001 3.4 table 11. The East North Central States Pacific.._ . 3.0 ._ accounted for 33 percent of the deposits of 8, 400, 626 100.0 100.0 Total all suspended banks, although only 21 percent of the number of bank suspensions oc- Exclusive of mutual savings and private banks. curred in these States. The New England Differences in the geographic distribution and Middle Atlantic States combined, while of the number of bank suspensions and of the accounting for 22 percent of the total de- amount of deposits involved, during the peposits involved in suspensions in the United riods 1921-1929 and 1930-1933, respectively, States, were responsible for only 6 percent are shown in table 12. In the period 1921- X 1 1929 suspensions in the West North Central States accounted for 47 percent of the total number and 39 percent of the total deposits of suspended banks, while the corresponding figures for the East North Central States were 7 percent as to number and 9 percent as to deposits. In the 1930-1933 period, due to the failure of large banks in the eastern section of the country, the East North Central States with 29 percent of the total number of suspensions accounted for 39 percent of the aggregate deposits of suspended banks, while the West North Central States with 30 percent of the total number of bank suspensions accounted for only 10 percent of the total deposits involved. among the States with the largest amount of deposits involved in suspended banks, were not included among the 10 States having the most suspensions. These differences are attributable, of course, to the existence of substantial variations from one State to another in the average size of suspended banks. TABLE 13.—NUMBER AND DEPOSITS OF BANKS W H I C H SUSPENDED DURING THE PERIOD 1921-1936 IN THE T E N STATES HAVING THE LARGEST AMOUNT OF DEPOSITS INVOLVED IN SUSPENSIONS X State Michigan Ohio Pennsylvania.. Illinois New York_ TABLE 12.—PERCENTAGE DISTRIBUTION OF THE N U M - Iowa BER AND DEPOSITS OF SUSPENDED BANKS, 1921Indiana 1929 AND 1930-1933, BY GEOGRAPHIC DIVISIONS X New Jersey. Missouri 1921-1929 Geographic division 1215 FEDERAL RESERVE BULLETIN DECEMBER 1937 Percent of total suspensions Percent of total deposits of suspended banks 1930 Percent of total suspensions Florida. Total, 10 States Total, 38 other States and District of Columbia Percent of total deposits of suspended banks United States, total 1 New England Middle Atlantic East North Central .2 .8 6.9 1.4 4.1 8.7 West North Central South Atlantic East South Central 47.4 17.4 3.7 39.2 19.6 3.3 30.0 10.4 6.2 10.4 10. 1 4.1 West South Central Mountain Pacific J 11.4 9.8 2.4 9.9 9.1 4.7 8.4 3.4 3.4 5.6 1.7 3.1 1.5 7.9 28.8 5.8 20.1 39.1 N u m b e r of suspensions, 1921-1936 Deposits of suspended banks, 1921-1936 (in thousands of dollars) 486 387 434 929, 245 813, 562 746, 531 952 181 1.238 577, 840 479.157 460, 525 520 133 279,534 238, 597 232, 056 879 291 5, 501 8,843 14, 344 202, 353 4, 959, 400 3, 441, 226 8, 400, 626 Exclusive of mutual savings and private banks. SIZE OF SUSPENDED BANKS, MEASURED BY LOANS AND INVESTMENTS1 Of the 14,344 banks (exclusive of mutual savings and private banks) which suspended during the 16-year period 1921-1936, 5,287 100.0 Total 100.0 100.0 had loans and investments of less than i Exclusive of mutual savings and private banks. $150,000 each, aggregating $451,742,000, as By States.—In table 13 the 10 States with shown in tables 14 and 15; 2,666 had loans the largest amount of deposits involved in and investments of $150,000-$249,999, totalsuspensions during the period 1921-1936 are ing $517,159,000; and 2,966 were in the listed, and the number and deposits of sus- $250,000-$499,999 class, their total loans and pended banks for these States are shown. investments amounting to $1,043,182,000. There appears to have been little correlation These three size groups comprise 10,919 susbetween the number of suspensions and the pended banks, each with loans and investamount of deposits involved in the various ments of less than $500,000, or 76 percent of States. Michigan, for example, which had all the national and State banks that susthe largest amount of deposits involved in pended during the 16-year period. The agsuspensions, was tenth on the list of States gregate loans and investments of these banks having the largest number of suspensions 1 Loans and investments, rather than deposits, were used as measure for this purpose since there was readily available a (shown in table 7). Ohio and Pennsylvania, aclassification of active banks by size on June 30, 1920, on the of loans and investments. A similar classification on the which were second and third, respectively, basis basis of deposits has not been made. 1216 FEDERAL RESERVE BULLETIN DECEMBER 1937 amounted to $2,012,083,000, or 20 percent of the total loans and investments of all banks suspended during 1921-1936. Corresponding figures for large banks, also shown in tables 14 and 15, indicate that those with loans and investments of $10,000,000 and over numbered 101, accounting for 0.7 percent of the total number of suspensions, and that their loans and investments aggregated $2,963,660,000, or nearly 30 percent of total loans and investments of all suspended banks. Banks reporting loans and investments of $2,000,000 or more accounted for TABLE 14.—NUMBER AND PERCENTAGE DISTRIBUTION, BY SIZE OF LOANS AND INVESTMENTS, OF BANKS IN only 5 percent of the number of suspensions OPERATION ON J U N E 30, 1920 AND OF BANKS SUS- during the period, but the ratio of their aggrePENDED DURING THE PERIOD 1921-1936, TOGETHER WITH THE SUSPENSION RATE PER 100 BANKS I N gate loans and investments to the total for EACH GROUP 1 suspended banks of all sizes was 55 percent. The rate of suspension, as measured by the Bank Banks in Suspension operation on suspensions, ratio of the number and loans and investrate, 1921June 30, 1920 1921-19362 Size group— 1936, per 100 ments of banks suspended in 1921-1936 to loans and investments banks in (in thousands of dollars) operation PerPerthe number and loans and investments of Num- cent of NumJune cent of on ber ber 30, 1920 total total banks in operation on June 30, 1920, was considerably greater for the groups of small 6,548 22.7 36.9 Under 150.. 80.7 5,287 5,114 17.7 150-249 18.6 52.1 2,666 banks than for the groups of large banks. 6,977 24.2 42.5 250-499 2,966 20.7 Almost without exception the proportion was 4,991 17.3 500-999 12.4 35.8 1,787 9.5 2,733 6.1 1,000-1,999. 31.8 870 smaller in each successively larger size 5.4 3.5 2,000-4,999 _ 32.1 505 1,573 1 group. Tables 14 and 15 show that the ratio 5,000-9,999 508 1.8 151 29.7 1.0 369 1.2 .6 10,000-49,999. ___ 24.9 92 of suspensions to banks in operation on the .1 72 .2 12.5 50,000 and over.. 9 base date, in the case of banks with loans and Total 49.7 28, 885 100.0 214, 344 100.0 investments of less than $150,000, was 81 1 Exclusive of mutual savings and private banks. percent as to number and 75 percent as to 2 Eleven banks, the classification of which is unknown, are omitted from the individual groupfiguresbut included in the total. loans and investments. In the case of the largest size group, comprised of banks having TABLE 15.—TOTAL LOANS AND INVESTMENTS OF BANKS IN OPERATION ON J U N E 30, 1920 AND OFloans and investments of $50,000,000 and BANKS SUSPENDED DURING THE PERIOD 1921-1936, over, the corresponding ratios were 13 perCLASSIFIED ACCORDING TO SIZE OF LOANS AND I N VESTMENTS, TOGETHER WITH PERCENTAGE RATIOS cent as to number and 14 percent as to loans OF THE LOANS AND INVESTMENTS OF SUSPENDED and investments. BANKS TO THOSE OF ACTIVE BANKS X By periods.—In the 4-year period 1930Loans and mvest- Loans and mvest- Percentage 1933, the distribution of suspended banks by ratio, loans ments of b£mks in ments of susoperation on pended banks, and investsize of loans and investments was considerSize group— 1921-19362 June 30, 1920 ments of susloans and pended banks ably different from that shown for banks investments to those of (in thousands Perbanks in PerAmount Amount which suspended in the period 1921-1929. operation (in (in cent cent on June 30, thousands of thousands of The suspension of a proportionately greater 1920 of dollars) total of dollars) total number of large and medium-sized banks 1.7 451,742 4.5 75.1 601, 524 Under 150 during the years 1930-1933 than during the 1,010,745 2.8 517,159 5.2 51.2 150-249 . _ 10.4 2 493 982 69 1,043 182 41.8 250 499 1921-1929 period accounted for the differ35.6 1, 245, 212 12.5 9.6 3, 501, 210 500-999 ence. Table 16 shows that the proportion 3, 778, 474 10.5 1, 213, 082 12.2 32. 1 1,000-1,999 15.3 31.9 4,771,143 13.2 1, 521, 145 2,000-4,999 of suspended banks in the size groups with 10.1 29.1 1,010,072 9.6 3, 471, 381 5,000-9,999 loans and investments under $500,000 de10,000-49,999... _ 7, 365, 583 20.4 1, 712, 239 17.2 23.2 50,000 and over.- 9,155, 889 25.3 1, 251, 421 12.6 13.7 36,149,931 100.0 2 9, 965, 254 100.0 27.6 1 This variation in the suspension rates existed to about an equal degree when average figures for active banks on June 30 in the years 1920, 1925, and 1930 were used as a basis of comparison rather than the June 1920 figures. On this aver1 age base the ratios in the last column of table 14 are 87.2, Exclusive of mutual savings and private banks. 2 Excluding thefiguresof eleven banks, whose loans and investments 60.0, 49.8, 40.4, 32.6, 28.7, 26.5, 22.0, 10.2, and 54.4 percent, respectively. are unavailable. Total 1217 FEDERAL RESERVE BULLETIN DECEMBER 1937 creased from the 9-year period to the 4-year TABLE 17.—NUMBER OF BANK SUSPENSIONS, 19211936, BY CLASSES OF B A N K S (NATIONAL AND period, a corresponding increase being re- STATE) , AND SUSPENSION RATE PER 100 B A N K S I N flected in the case of banks in size groups of OPERATION ON J U N E 30, 1920, CLASSIFIED ACCORD$500,000 and over. During the 1921-1929 ING TO SIZE OF LOANS AND INVESTMENTS period 85 percent of the banks which susSuspension rate, 1921N u m b e r of suspensions, 1936, per 100 b a n k s in 1921-1936 group—loans pended had loans and investments under Size operation on J u n e 30,1920 and investments 1 (in thousands of dollars) National3 TotaP National State* Under 150 150-249 250-499 5,287 2,666 2,966 278 424 742 5,009 2,242 2,224 80.7 52.1 42.5 80.6 55.9 36.6 51.5 44.9 500-999 1,000-1,999 2,000-4,999 1,787 870 505 606 367 205 1,181 503 300 35.8 31.8 32.1 27.8 25.8 25.3 42.0 38.4 39.4 151 92 65 29 3 63 29.7 24.9 12.5 25.0 15.8 8.1 34.7 34.1 17.1 TABLE 16.—NUMBER AND PERCENTAGE DISTRIBUTION OF B A N K SUSPENSIONS, GROUPED BY SIZE OF LOANS Total State 3 AND INVESTMENTS, 1921-1929 AND 1930-1933x 1921-1929 Size group— loans a n d investments (in thousands of dollars) 1930-1933 Number of suspensions 2 Percent of total Number of suspensions Percent of total Under 160. 150-249.__. 250-499 2,313 1,123 1,151 42.7 20.8 21.3 1,526 1,797 500-999 1,000-1,999.. 2,000-4,999_ 532 201 74 9.8 3.7 1.4 1,245 665 427 14.1 13 4 ' 136 88 9 1.5 1.0 .1 5,411 2 8, 812 100.0 5,000-9,999 10,000-49,999 50,000 a n d o v e r . Total 33.0 17.3 20.4 5,000-9,999 10,000-49,999 50,000 a n d over Total... n4,344 2,719 211,625 1 Exclusive of m u t u a l savings and private banks. 2 Eleven banks, t h e classification of which is u n k n o w n , are omitted from t h e individual group figures b u t included in t h e totals. 3 T h e ratios of b a n k suspensions during 1921-1936 to t h e average of t h e n u m b e r of b a n k s in operation in June 1920, 1925, a n d 1930, distributed according to t h e size groups shown in table 17, are as follows: national banks—70.0, 53.3, 40.6, 31.2, 26.8, 22.2, 22.3,14.9, 7.9, and 35.0, respectively; State banks—88.4, 61.5, 53.9, 47.5, 38.7, 36.0, 30.8, 28.1, 12.0, a n d 62.5, respectively. 1 Exclusive of mutual savings and private banks. Ten banks, the classification of which is unknown, are omitted from the individual group figures but included in the total. sion was much higher at small banks than at large banks. The rates for national banks $500,000, while only 71 percent of those sus- and for State banks did not differ materially pending in the 1930-1933 period were in- in the case of banks with loans and investcluded in this class. Conversely, banks with ments under $250,000. In the medium and loans and investments of $1,000,000 and over larger size groups, however, the number of accounted for only 5 percent of the suspen- suspensions during 1921-1936 per 100 banks sions in 1921-1929 and for 15 percent of those in operation on June 30, 1920, was materially higher for State banks than for national in 1930-1933. By classes of banks.—The analysis of sus- banks. By geographic divisions.—Corresponding pensions by size and classes of banks, given in table 17, indicates that in the case of both information by geographic divisions shown national and State banks the rate of suspen- in table 18 indicates that with the exception 2 TABLE 18.—NUMBER OF SUSPENSIONS, 1921-1936, PER 100 B A N K S I N OPERATION ON J U N E 30, GRAPHIC DIVISIONS AND BY SIZE OF LOANS AND INVESTMENTS X Size group—loans a n d investments (in thousands of dollars) Under 150 150-249 . . 250-499 500-999 1,000-1,999 2,000-4,999_ . . 5,000-9,999 10,000 a n d over Total Middle Atlantic East North Central 80 7 52.1 42.5 6.7 5.7 27.4 32.8 30.8 88.9 61.1 48.2 91.5 58.2 44.2 35.8 31.8 32.1 19.0 19.9 26.8 30.9 26.9 28.4 46.5 42.0 48.3 29.7 22.9 28.3 25.6 31.3 19.2 49.7 19.5 28.8 '• Exclusive of mutual savings and private banks. West North New England Total 1920, BY GEO- Pacific East South Central West South Central Mountain 91.0 56.3 52.5 56.3 34.2 40.1 64.6 34.1 30.9 74.3 52.9 44.7 63.4 42.7 35.4 33.6 27.3 26.2 41.9 43.5 46.0 32.3 31.9 31.0 28.8 29.7 23.1 46.6 31.9 18.5 17.9 18.9 14.4 39.6 30.0 20.9 10.8 29.3 36.8 23.5 46.2 25.0 20.8 29.4 14.3 13.3 54.7 58.4 59.0 41.8 42.0 52.8 31.3 Central South Atlantic 1218 FEDERAL RESERVE BULLETIN of the New England and Middle Atlantic regions the highest rate of suspension was among the banks with loans and investments under $150,000, and that in general the rate declined as the size of banks increased. In the New England States the suspension rate was highest among banks with loans and investments of $500,000 and over; in the Middle Atlantic States the suspension rate differed relatively little among the size groups, ranging from 27 to 33 suspensions during the 1921-1936 period per 100 active banks in June 1920 in the size groups with loans and investments under $10,000,000. The contrast in the rate of bank suspensions by size of banks, as between Northeastern States (New England and Middle Atlantic) and the other geographic regions suggests that the size of suspended banks depends, in part at least, on the type of community in which the bank is located and by economic factors within the region. In the New England and Middle Atlantic sections agricultural activities differ from those in most other sections. There is a different type of agriculture, with big markets nearby for the products, and outlying agricultural communities in the East were not forced to undergo the same readjustment as agriculture in other sections of the country. The resulting higher degree of stability has aided the small banks in outlying agricultural communities. On the other hand, in the large industrial and financial centers in the East which suffered from severe business depression beginning in 1929 and 1930, the larger banks were called upon to meet a constant and prolonged strain which proved too great for many of them, resulting in the later years in a high suspension rate among the larger banks. Suspension of large banks.—Of the banks which suspended in the period 1921-1936 the 30 largest had loans and investments aggregating $1,912,000,000. All 30 of these banks suspended in the years 1930-1933, and their combined loans and investments repre- DECEMBER 1937 sented 23 percent of the total loans and investments of all banks suspended during this period. The individual bank figures ranged from $22,000,000 to $380,000,000, five of the banks having held loans and investments in excess of $100,000,000. The suspension of these large banks had a direct effect on other banks whose correspondent accounts were deposited with them and a profound psychological effect on bank depositors generally, and doubtless contributed in an important degree to the closing of many banks in various parts of the country. SIZE OF SUSPENDED BANKS, MEASURED BY CAPITAL STOCK Capital stock is not as good a measure of size of banks as loans and investments, or deposits, because it is determined in part by requirements of law and because of the practice of some banks of building up large surpluses rather than increasing capital stock. However, there appears to be some relation between the size of banks, measured in this way, and the rate at which suspensions occurred. Table 19 gives a distribution of suspended banks (exclusive of mutual savings and private banks) during the period 19211936, classified by size of capital stock, and the suspension rate per 100 active banks in June 1920 for banks in each size group. While there was a smaller degree of variation in the suspension rates of banks measured by amounts of capital stock than in the corresponding distribution by size of loans and investments, the figures in table 19 support in a general way the conclusions which were reached in the analysis of suspended banks by size of loans and investments. It will be seen that 4,341 banks, representing 30 percent of the 14,344 suspensions during 1921-1936, had capital stock of less than $25,000; and that 4,755 suspended banks, or 33 percent of the total, had capital stock of $25,000-$49,999. About 83 percent of the banks which suspended during 1921-1936 had a capital of less than $100,000. DECEMBER 1937 FEDERAL RESERVE BULLETIN 1219 ference between the percentage of national bank suspensions in small places and that of State banks follows from the fact that relatively fewer national than State banks are Suspension rate, located in small towns and villages, due to 1921-1936, Number Percent per 100 of susthe higher minimum capital requirements for Size group—capital stock of banks in pensions, total operation national banks than for State banks in many 1921-1936 2 on June 30, 1920 States. In table 20 are shown the number of bank Under $25,000 4,341 52.7 30.3 $25,000-$49,999 33.2 54.1 suspensions that occurred during 1921-1936, 4,755 $50,000-$99,999 19.3 48.3 2,767 grouped according to class of bank and also 15.2 2,185 41.3 $100,000-$499,Q99__._ 174 42.9 according to the population of the town or $500,000-$999,999__.. 1.2 120 27.6 $1,000,000 and over. city in which the banks were situated. The 214, 344 Total 100.0 rates of suspension per 100 banks in each 1 Exclusive of mutual savings and private banks. class in operation on June 30, 1920 are also 2 Two banks, the classification of which is unknown, are omitted from the individual groupfiguresbut included in the total. indicated. Although there were many more bank suspensions in small than in large The number of suspensions during the pe- places, the differences in the rates of suspenriod for every 100 banks in operation on sion were not nearly so marked because such June 30, 1920, was 53 in the case of banks a large number of banks (particularly State with capital stock of less than $25,000, and banks) operate in small cities, towns, and 54 in the case of those with capital stock of villages. $25,000-$49,999. For banks with a capital In the case of national and State banks stock of $100,000-$499,999 the suspension combined, 56 suspensions per 100 active rate per 100 active banks was 41, and in the banks occurred during the 16-year period in case of those whose capital amounted to communities of less than 500; in places with $1,000,000 or more it was only 28, indicating a population of 500-999 the rate was 54 per that suspensions were less numerous among 100 active banks; and in those with a populalarge banks than among small banks. tion of 1,000-2,499 it was 50. An appreTABLE 19.—NUMBER AND PERCENTAGE DISTRIBUTION OF BANK SUSPENSIONS, 1921-1936, AND SUSPENSION RATE PER 100 BANKS I N OPERATION ON J U N E 30, 1920, BY SIZE OF CAPITAL STOCK X BANK SUSPENSIONS DISTRIBUTED BY POPULATION OF CITIES TABLE 20.—NUMBER OF BANK SUSPENSIONS, 19211936, AND SUSPENSION RATE PER 100 BANKS I N OPERATION ON J U N E 30, 1920, GROUPED ACCORDING TO POPULATION OF TOWNS AND CITIES, AND BY CLASSES OF B A N K S 1 Of the 14,344 bank suspensions during 1921-1936 (excluding mutual savings and private banks), 4,652 or 32 percent occurred rate per 100 Number of suspensions, Suspension banks in operation on in. towns of less than 500 population, and 1921-1936 June 30, 1920 of 10,277 or 72 percent in towns of less than Population town or city NaNa2,500 population. Only 710 banks, or 5 perTotal tional State Total tional State cent of those suspended, were located in cities 4,652 56.3 4,373 41.7 Under 500 279 57.6 with a population of 100,000 and over. 2,801 2,316 41.7 500-999 485 54.4 58.1 2,824 2,074 35.2 1,000-2,499 750 49.7 58.4 Corresponding figures by classes of banks 43.0 31.8 1,303 52.0 878 425 show a much smaller percentage of national 2,500-4,999 39.7 45.8 32.5 798 497 5,000-9,999 301 40.9 50.4 709 29.9 469 240 10,000-24,999 banks than of State banks suspended in places 38.2 46.6 26.3 282 81 201 25,000-49,999 of small population. Only 10 percent of the 50,000-99,999 41.1 21.3 52.2 265 49 216 43.4 50.8 601 24.0 710 109 national bank suspensions were in places of 100,000 and over 14, 344 Total 2,719 11, 625 33.9 55.7 less than 500 population, compared with 38 percent in the case of State banks. This dif- 1 Exclusive of mutual savings and private banks. 1220 FEDERAL RESERVE BULLETIN DECEMBER 1937 ciably smaller ratio was shown for banks 67 percent in places of less than 2,500 popusituated in towns and cities with a population lation, compared with 39 percent and 79 perof 2,500 and over. There was not so much cent, respectively, during the period 1921contrast, however, between the rates of bank 1929. Cities with a population of 100,000 suspensions in small places and large places, and over, on the other hand, contributed 6 respectively, as there was between small percent of the total suspensions in 1930-1933, banks and large banks. This is accounted for compared with only 3 percent in 1921-1929. in part by the fact that quite a number of small banks located in the larger towns and BANK SUSPENSIONS IN RELATION TO NUMBER OF BANKS PER CAPITA cities suspended during the period. There was a considerable difference be- With some exceptions, suspensions during* tween national banks and State banks in the 1921-1936 were most numerous in States rate of suspension according to the size of where the number of banks increased rapidly community in which the suspensions occurred. prior to 1920 and in those which had a low While the suspension rates were higher for population per bank in 1920. In the majority State banks than for national banks in all of States with a high population per bank, sizes of communities, the differences were suspension rates were substantially below the particularly noticeable in the larger cities, average for the country as a whole. Table 22 where the rate of suspension of national gives (1) the percentage change in the numbanks per 100 active banks was much below ber of banks from 1900 to 1920, (2) the poputhe suspension rate of State banks. The rate lation per bank in 1920, and (3) the suspenof suspension of State banks was nearly as sion rate, for the ten States with the highest high in large cities as in small cities. 22.—PERCENTAGE CHANGE I N THE NUMBER OF In the 1930-1933 period there was a pro- TABLE BANKS FROM 1900 TO 1920, POPULATION PER BANK nounced spread of suspensions into the larger IN 1920, AND SUSPENSION RATE 1921-1936 PER 100 I N OPERATION ON J U N E 30, 1920, FOR T H E centers. This may be seen from table 21, BT AE NN K SSTATES WITH THE HIGHEST AND T H E T E N which compares the number of suspensions STATES WITH THE LOWEST SUSPENSION RATE by size of community for the two periods Percentage Suspension 1921-1929 and 1930-1933. During 1930-1933, change in Popula- rate, 19211936, per 100 number of tion per 28 percent of the suspensions occurred in States banks be- banki in banks in operation on 1920 tween 1900 places with a population of less than 500 and June 30, 1920? and 1920 1 TABLE 21.—NUMBER AND PERCENTAGE DISTRIBUTION 10 States with highest suspension rate: OF BANK SUSPENSIONS BY POPULATION OF TOWNS Florida AND CITIES, 1921-1929 AND 1930-19331 South Dakota Arkansas South Carolina Michigan 1921-1929 1930-1933 Iowa Nevada Population of North Dakota Number Percent Number Percent town or city Nebraska of susof of susof North Carolina pensions total pensions total 10 States with lowest suspension rate: Pennsylvania Under 500 28.3 2,108 39.0 2,496 Texas 500-999 . -. . 1,089 20.1 1,690 19.2 Vermont 1,080 20.0 1,725 1,000-2,499 19.6 New York California 9.7 2,500-4,999 437 8.1 858 Connecticut 6.4 224 4.1 5,000-9,999 567 Massachusetts 200 3.7 504 5.7 10,000-24,999 . Delaware Rhode Island 1.0 2.6 57 225 25,000-49,999 2.2 New Hampshire 1.2 65 195 50,000-99,999 6. 3 151 2.8 552 100,000 and over United States, total.... 8,812 5,411 100.0 100.0 TotaL 1 Exclusive of mutual savings and private banks. +403. 8 +266. 5 +667. 2 +477. 5 + 64.0 + 67.4 +371. 4 +464. 8 +103. 4 +404. 0 3,725 917 3,605 3,709 4,236 1,242 2,346 720 1,084 4,412 112.8 83.1 76.3 74.4 74.4 72.3 69.7 68.0 65.1 64.7 + 59.5 +332.1 + 79.6 + 66.7 - 50.7 + 21.2 5,722 2,705 4,005 10, 795 4,760 8,522 14, 215 5,718 18, 315 5,539 30.8 27.9 22.7 22.2 19.3 18.7 17.0 15.4 12.1 11.3 + 118.3 3,496 49.7 - 42.7 +148. 5 + 37.0 - 54.1 1 Exclusive of mutual savings banks. 2 Exclusive of mutual savings and private banks. DECEMBER 1937 1221 FEDERAL RESERVE BULLETIN and the ten States with the lowest suspension table 24. It appears, however, that there was little, if any, relationship between the average rate. age of suspended banks and the rate of susTHE AGE OF SUSPENDED BANKS pensions per 100 active banks in the respecData regarding the charter age of banks tive geographic divisions. Banks which susat time of suspension are available at present pended in the West North Central States durfor national banks and for State banks during ing the 10-year period 1921-1930 were in a period of 10 years only, 1921-1930. From existence prior to suspension for an average table 23 it will be seen that 25 percent of the period of 18 years and 9 months, the longest banks which suspended in this period were for any region, whereas in the Mountain less than 10 years old at time of closing and States the average time of existence prior to suspension was only 11 years and 7 months, TABLE 23.—DISTRIBUTION OF SUSPENSIONS ACCORD- the shortest for any region. In both these ING TO THE CHARTER AGE OF THE BANKS, 1921-1930 geographic divisions the suspension rate durNumber of ing the period was very high. bank sus- Percent x Years in operation prior to suspension pensions, 1921-1930 of total Less than 5 5-9 10-14 735 925 1,266 11.1 14.0 19.1 15-19 20-24 25-29 1,283 1,213 561 19.4 18.3 8.5 30-34 35-39 40-44 272 180 100 45-49 50 and over Total 43 40 6,618 TABLE 24.—AVERAGE CHARTER AGE OF SUSPENDED BANKS, BY GEOGRAPHIC DIVISIONS, 1921-1930 * 4.1 2.7 New England 1.5 Middle Atlantic East N o r t h Central .7 .6 N u m b e r of b a n k suspensions, 1921-1930 Geographic division West N o r t h Central South Atlantic 100.0 East South Central __ West South Central 1 Covers national and State bank suspensions only and excludes 85 M o u n t a i n Pacific. such banks for which data are not available. Total _ _ _ . . _ . . . Average age Years Months 18 64 631 17 17 16 10 2 5 2,965 1,165 352 18 15 17 9 4 5 811 470 142 14 11 14 1 7 11 6,618 16 8 64 percent were less than 20 years old; 36 i Covers national and State banks only and excludes 85 such banks in percent, on the other hand, had been in opera- Montana for which data are not available. tion for 20 years or more. This clearly indicates that, although many of the suspensions A somewhat greater variation in the age occurred among recently organized banks, of suspended banks was shown in the case of long established institutions were by no individual States. As was indicated in the means immune to the difficulties which pre- analysis by geographic divisions, the sections vailed. Due, however, to such factors as con- of the country which had experienced the versions, mergers, absorptions, and reorgan- longest period of development were in general izations, the "charter age" of some banks is those in which the average age of suspended not a good measure of their span of existence; banks was high, and the States most recently technically, some banks that resulted from settled and developed were included among mergers or conversions have been in existence those with a low average age of suspended only a few years, while as a practical matter banks. For example, in Connecticut, Iowa, they or their predecessors have been operat- Kentucky, Michigan, Nebraska, and West ing without interruption for a long time. Virginia, the average age of banks which Considerable variation among the various suspended in the period 1921-1930 was appresections of the country obtained with respect ciably above the average for the United States to the age of suspended banks, as indicated in as a whole, while in Arizona, California, Colo- 1222 FEDERAL RESERVE BULLETIN DECEMBER 1937 rado, Florida, Texas, and Wyoming, it was cumulative figures of the amount of authormaterially below the average for the country. ized loans to open banks and the amount disbursed by the Reconstruction Finance CorAID TO BANKS FROM EXTERNAL SOURCES poration, together with the amount of such Prior to 1932.—During the early 1920's loans outstanding at the close of each quarter many banks facing financial difficulties were from 1932 through 1936. aided through the extension of loans for agricultural and livestock purposes by the War TABLE 25.—LOANS BY THE RECONSTRUCTION FINANCE CORPORATION TO OPEN BANKS, BY QUARTERS, IN THE Finance Corporation. These advances were YEARS 1932-1936 made for the most part upon assets which (Cumulative figures at end of quarter, in thousands of dollars) though non-liquid were believed fundamenAmount Amount Amount tally sound. They aggregated $172,114,000, Quarter authorized disbursed outstanding and were extended to 4,317 banks located in 37 States. Of these, 674 were national banks 1932First quarter 124,107 156,009 117,886 Second quarter. 487, 062 615, 391 419, 965 and 3,643 were State banks. By November Third quarter__. 675, 254 525, 537 809, 318 Fourth quarter. 576,178 810.110 893, 745 30, 1929, the loans made to 4,136 banks, total1933 ing $164,051,000, had been completely repaid, First quarter 987, 445 677, 611 1,172,520 Second quarter^. 1,038,930 614,467 1,234,058 and partial repayments amounting to $6,782,Third q u a r t e r . . . 1, 077,094 532, 953 1,268,023 F o u r t h quarter1,091,785 462, 950 1, 290, 700 000 had been made on other advances. Only 0.7 percent of the total originally advanced First quarter 1, 309, 442 1, 103,080 353, 066 Second quarter. 1, 322,062 1,122,110 290,110 had not been repaid. Third q u a r t e r . . . 1, 326, 733 1,130, 377 259, 949 F o u r t h quarter. 1, 329, 239 1, 133,063 229, 184 In the autumn of 1931 the National Credit 1935 Corporation, a private organization, was First quarter 204, 785 1, 334, 436 1,135,083 1,141, 923 194, 741 Second quarter. 1,337,310 formed at the suggestion of the President to 180, 611 Third quarter. _. 1, 339, 386 1, 142, 290 167,003 F o u r t h quarter. 1, 339. 835 1, 142, 590 bolster the financial structure of the weaker 1936 banks through the aid of the stronger institu153, 984 First quarter 1,142,993 1,339,811 143,132 1, 339, 556 1, 143,167 Second quarter.. tions. 1 This Corporation made more than 132, 305 1, 339, 556 1,143, 206 Third q u a r t e r . . . 121,503 1, 339, 628 1,143. 206 Fourth quarter_ 1,200 loans to banks in 31 States. At the peak reached in February 1932, these loans Loans by the Reconstruction Finance Corand commitments totaled $188,000,000. Despite this assistance, however, an increasing poration to closed banks.—Partly in response number of banks were meeting with difficul- to a developing sentiment that recovery was ties, and near the end of 1931 there was a being retarded by the fact that a huge volume noticeable rise in the rate of bank suspen- of deposits, a large part of which would ultimately become available, remained tied up in sions. Loans by the Reconstruction Finance Cor- unliquidated banks which had suspended in poration to open banks.—The Reconstruction 1931, 1932, and particularly 1933, the ReconFinance Corporation was organized in Jan- struction Finance Corporation established a uary 1932 and within a short time this organ- Deposit Liquidation Division for the purpose ization began to make loans to banks. By of stimulating and encouraging the extension the middle of 1932 loans to 3,284 open banks, of additional loans to closed banks. The aggregating $615,391,000, had been author- Division was established following a stateized. At the end of June 1933, loans to 5,584 ment issued by the President on October 15, open banks had been authorized, totaling 1933. Some loans to closed banks, for the $1,234,058,000. Table 25 shows, by quarters, purpose of aiding in the reorganization or liquidation of such banks, had been made by 1 For statements of purpose of the Corporation and for general plan of organization and operation, see FEDERAL RESERVE the Reconstruction Finance Corporation from BULLETIN for October 1931, pages 551-557. FEDERAL RESERVE BULLETIN DECEMBER 1937 1223 the time it was organized, but at the begin- length of time. Loans on the assets of many closed banks provided the means for the ning they were in limited amounts. Banks that closed after January 1, 1933,prompt opening of successor banks, at which were given first attention by the Deposit time a substantial part of the funds of the Liquidation Division; loans were made later closed banks became immediately available. to banks that closed prior to January 1933. Such loans also obviated the necessity of the By June 30, 1934, loans amounting to $802,- dumping of large blocks of securities and 713,000 had been authorized to closed banks, mortgages by the receivers of closed banks of which amount $544,060,000 had been dis- on an abnormally low market in an effort to bursed. On June 30, 1935, the amount of such make depositors' claims available. loans that had been authorized was $1,117,In a few instances loans on the assets of 928,000, of which $822,557,000 had been dis- closed banks have since been transferred by bursed. Table 26 gives cumulative figures of the Reconstruction Finance Corporation to the amount of loans to closed banks authorized operating banks, the outstanding example of and disbursed by the Reconstruction Finance this being the'transfer of $35,000,000 in such Corporation, and the amount outstanding, by manner at Detroit in the spring of 1935. In quarters, from 1932 through 1936. other cases new advances to receivers of closed banks, secured by the unpledged assets TABLE 26.—LOANS BY THE RECONSTRUCTION FINANCE of these banks, have been made directly by CORPORATION TO CLOSED B A N K S , BY QUARTERS, I N operating banks. THE YEARS 1932-1936 (Cumulative figures at end of quarter, in thousands of dollars) Strengthening of the capital structure of banks following the banking holiday.—Many Amount Amount Amount Quarter authorized disbursed outstanding of the banks that did not reopen immediately following the banking holiday needed addi1932 First quarter____ 1,310 2,173 1,281 tional capital. Existing stockholders and Second quarter__ 11.776 28, 848 10,499 Third quarter. __ 32, 788 45, 628 19, 788 the public in general were not in a position Fourth quarter^. 42, 572 57, 913 20, 220 to provide much of the additional capital 1933 First quarter. 48, 292 necessary, and the Government, through the 78, 251 97, 535 Second quarter 99.918 150,663 193,112 Third quarter 181,397 Reconstruction Finance Corporation, made 249, 958 321, 260 Fourth quarter 291.604 383, 377 572, 230 extensive purchases of preferred stock and 349, 059 capital 477, 836 713,037 First quarter notes and debentures of banks. 361.296 544, 060 Second quarter 802, 713 367, 114 Banks that had been licensed immediately 622,138 Third quarter 961, 429 443, 343 761, 704 Fourth quarter 1, 035, 733 following the banking holiday without re372,065 organization were invited to cooperate in the 795, 632 First quarter 1,069, 976 Second quarter,. 320, 135 822, 557 1,117,928 Third quarter... 1,140,972 287. 3 850, 551 program for strengthening the capital strucFourth quarter.. 1.170,157 245. 725 876, 125 ture of banks, and as a result many of the First quarter 890.479 162,698 larger metropolitan banks also sold capital 1, 206, 027 901,630 Second quarter.. 141,631 1, 224, 886 914,331 Third quarter... 120. 721 stock to the Reconstruction Finance Corpora1, 232, 462 Fourth quarter. 930, 223 108, 574 1, 248, 077 tion. A large number of banks were required Includes loans to receivers, conservators, and liquidating agents, to obtain additional capital funds before loans through mortgage loan companies to aid closed banks, and loans on assets of closed banks under Section 5e of the Reconstruction Finance being admitted to membership in the Federal Corporation Act. Deposit Insurance Corporation. Loans to closed banks by the Reconstruc- By the end of June 1934 the program of tion Finance Corporation provided immediate capital rehabilitation was well under way, the cash which, in the ordinary liquidation proc- Reconstruction Finance Corporation having ess, would not have been available for dis-outstanding on that date a total of $814,679,tribution to depositors for a considerable 000 invested in the capital stock of banks. 1 1 1224 FEDERAL RESERVE BULLETIN DECEMBER 1937 Finance Corporation, shown in the last column of table 25, and the amount of the Corporation's outstanding investment in preferred stock, capital notes, and debentures of banks, shown in table 27. As the investment in capital stock of banks increased, the amount of outstanding loans declined. Loans made by the Reconstruction Finance Corporation to other types of financial institutions (such as mortgage loan companies, insurance companies, and building and loan associations) also assisted the banks indirectly in liquidating their assets. While TABLE 27.—PURCHASES BY THE RECONSTRUCTION figures on the total advances to such organFINANCE CORPORATION OF PREFERRED STOCK AND CAPITAL NOTES OR DEBENTURES OF BANKS, AND izations are available, there is no measure of LOANS ON PREFERRED STOCK OF BANKS, BY QUAR- the extent to which such funds were used in TERS, I N THE YEARS 1933-1936 repaying bank loans. [Cumulative figures at end of quarter, in thousands of dollars] Other aid to banks.—Certain organizations other than those already mentioned also Amount Amount Quarter authorized disbursed outstanding assisted in the liquidation of bank assets, thereby strengthening the position of open 1933 First quarter 14,933 12, 750 12, 750 the liquidation of Second quarter.. 43, 463 banks and facilitating 47,318 43, 468 Third quarter__. 63,102 69, 972 63,107 It is estimated that about a Fourth quarter. 264, 200 closed banks. 496, 556 264, 346 half a billion dollars of the proceeds of Fed1934 593, 052 932,003 First quarter 593, 578 Second quarter.. 814, 679 eral Land Bank and Federal Farm Mortgage 1,046, 946 817, 303 Third quarter.-. 827, 374 1,103, 596 890, 775 Fourth quarter. 863, 984 Corporation loans during the years 19331,153, 497 938,004 1936 were used to refinance mortgage in1935 902, 834 1,174,135 First quarter 989, 756 1,186, 972 904, 666 debtedness and other debts of farmers to com1, 006, 895 Second quarter.. 1, 214, 593 1, 026, 070 904, 030 Third quarter. _. 1, 235, 678 1, 040, 973 Fourth quarter. 897, 016 mercial banks, open and closed. It is roughly estimated also that approxiFirst quarter 1, 239, 077 1, 056, 768 877, 327 1. 242, 462 1.066,016 Second quarter.. 819, 993 mately a half a billion dollars of home mort1, 242, 553 1,071,576 Third quarter.... 701, 385 1, 244, 468 1, 073, 267 Fourth quarter. i 654, 619 gage loans held by commercial banks and receivers were taken over by the Home OwnOutstanding on October 31, 1937—$594,275,000. ers' Loan Corporation up to the time it ceased lending, on June 12, 1936. For the The supplying of capital funds by the most part these loans were exchanged for Reconstruction Finance Corporation was reguaranteed bonds of the Home Owners' Loan sponsible in part for the repayment by the Corporation. Closed banks which received banks of funds previously borrowed. Some the bonds were able to borrow 80 percent of indication of this fact is found in the comtheir par value from the Reconstruction parison between the amount of outstanding Finance Corporation. loans to open banks by the Reconstruction At the end of June 1935, which marked the approximate peak, the Reconstruction Finance Corporation's investment in preferred stock, capital notes, and debentures of 5,752 banks amounted to $904,666,000. On December 31, 1935/it amounted to $897,016,000. By June 30, 1936 it had declined to $819,993,000, and on December 31, 1936 the total outstanding was $654,619,000. These and other related figures, as reported at the end of each quarter during the years 1933-1936, are shown in table 27. 1