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MONTHLY REVIEW
O f Credit and Business Conditions

FEDERAL
V o l u m e 29

RESERVE
JUNE

BANK

OF

NEW

YORK

1947

No. 6

MONEY MARKET IN MAY
During the past month, the Treasury continued the partial
retirement of maturing bill issues which it began with the
issue expiring on April 17. There were retirements of
200 million dollars a week during the last two weeks of April
and the first two weeks of May and 100 million a week for
the issues of May 15 and 22. Thus, a total of 1 billion dollars
of Treasury bills was retired between April 17 and May 22.
No reduction was made in the bill offering of May 29 and
none was announced for June 5, but the Treasury announced
that it would redeem 1 billion out of a 2 % billion dollar
issue of certificates of indebtedness maturing on June 1.

expenditures were not returned directly to the commercial
banks (most of the funds used to redeem Treasury bills went
to the Federal Reserve Banks, and Britain drew another
200 million dollars on its credit) the margin of Treasury
cash receipts over disbursements to the market was actually
quite large. However, substantial payments out of foreign
accounts with the Federal Reserve Banks in this period pro­
vided a partial offset to the large volume of funds drawn from
the market by the Treasury.

Since the bulk of the maturing bills were held by the
Federal Reserve Banks and were redeemed principally with
funds withdrawn from Treasury War Loan deposit accounts
with commercial banks, the redemption of Treasury bills
involved a considerable drain on bank reserves. The extent
of this drain was evident in the fact that although most of

Pressure on the reserves of member banks was particularly
pronounced in New York City, except during the third week
of May when the New York money market situation was
fairly easy. Although payments out of foreign deposit accounts
with the Reserve Bank were large, the City institutions experi­
enced the combined drains of persistent Treasury net cash
receipts and substantial transfers of business and financial
funds to other parts of the country. To meet these demands,

the 700 million dollars of maturing bills retired in the four
weeks ended May 21 came out of the portfolios of the Reserve

the New York banks sold substantial amounts of short
term Treasury securities directly to the Reserve Bank and

Banks, actual bill holdings of the Reserve System fell only
280 million dollars while certificates rose 145 million dollars.
The recourse to Federal Reserve credit during this period,
by banks in need of reserves, was sufficient not only to offset

in the open market.

current losses of funds, but also to correct an initial reserve
deficiency at the New York City banks. Consequently, there
was a net increase of about 100 million dollars in excess
reserves of all member banks.
In addition to the Treasury withdrawals from War Loan

There was renewed pressure on bank reserves both in
New York City and elsewhere during the week ended May 28,
as the Treasury made further withdrawals from depositary
banks, partly to redeem another 100 million dollars of bills
early in the week (May 2 2 ). In addition, there were indica­
tions that the banks were beginning their preparations for
meeting the Treasury’s call for repayment on June 2 of
1.3 billion dollars of the remaining War Loan account balances,

accounts to cover the redemption of Treasury bills, further

in connection with the redemption of the 1 billion of certifi­

withdrawals were made to meet payments called for under

cates previously mentioned.

foreign credit agreements and for other disbursements.

On

the surface, it appeared that the Treasury’s net cash receipts

M e m b e r B a n k D e po s it s

(including War Loan withdrawals) exceeded disbursements

The redemption of 1 billion dollars of certificates on

by a narrow margin, since Treasury balances with the Reserve

June 1 will not ease the money market, since this transaction

Banks rose only 57 million dollars between April 23 and
May 21. But because a very large part of the Treasury’s

will be effected with funds withdrawn from War Loan




accounts in the commercial banks. In fact, it will undoubtedly

54

M ONTHLY REVIEW, JUNE 1947

require substantial adjustments in the reserve positions of
many banks, because of the size of the War Loan withdrawal,
the fact that some of the certificates to be redeemed are held
by the Reserve System, and the increase in the banks’ reserve

Adjusted Demand Deposits of Member Banks*
BIL L IO N S
OF D O L L A R S

requirements which will result. It will tend to increase the
volume of private deposits to the extent that certificates held
by nonbank investors are redeemed. Thus, this operation,
like the debt retirement transactions of 1946, which were
also effected with funds previously accumulated in War Loan
accounts, will to some extent have the effect of increasing
deposits of private investors, thus making funds available for
reinvestment or other uses.
In contrast, the debt retirement transactions of the first
quarter of 1947 and early April, coming chiefly from an excess
of Treasury cash receipts from taxes over current expenses,
were accompanied by a decline in private deposits to the
extent that bank-held debt was reduced, as illustrated in the
accompanying chart. Cash retirement of nonbank-held securi­
ties with surplus tax receipts merely resulted in a shift of
private deposits from taxpayers to nonbank investors. (The
sharp decline in demand deposits adjusted of the weekly
reporting member banks in 100 centers outside New York
City and subsequent recovery early in April resulted from
temporary purchases of Government securities from the
Chicago banks by their customers in order to avoid the April 1,
personal property tax in Cook County, Illinois.) Since the
first quarter, private demand deposits have shown irregular
fluctuations and, on the whole, some increase, as net Govern­
ment and foreign expenditures have been only partly offset
by repayments of business loans.
As indicated in the accompanying chart, there has been
considerable divergence, during the postwar period, in the
trends of private demand deposits of the larger member banks
from which reports are collected weekly and the same kind
of deposits in the smaller, nonreporting member banks.
Demand deposits adjusted have shown practically no net
growth at weekly reporting banks outside New York City
since the wartime peak in early June 1945, and private
demand balances in the New York banks have actually declined
since then.

At the nonreporting banks, however, vigorous

* For the weekly reporting member banks the figures are for Wednesday
dates, the latest being May 21 ; for nonreporting banks the figures are for
call dates through 1946, and for month ends in 1947.

portation companies. During the postwar period, these enter­
prises used their own cash resources and funds borrowed from
the banks and others to make large expenditures for recon­
version purposes and for expansion of plant, equipment,
inventories, and receivables, so that their bank deposits have
been reduced. On the other hand, there has been continued
growth in personal accounts (including those of farmers)
and, in the early postwar period, in the accounts of wholesale
and retail trade concerns which together comprise the bulk
of deposits in the smaller, nonreporting member banks.
In addition, there were two other influences which tended,
particularly in 1946, to limit the growth of private deposits
at the weekly reporting banks but were largely inoperative
at the nonreporting banks. The first was the heavy liquida­
tion of loans on Government securities, which were incurred
during the Victory Loan and which were concentrated chiefly
in the larger banks. The second was the large-scale purchase
of short term Government securities from the larger banks by
institutional and other nonbank investors seeking to reinvest
the proceeds of their redeemed securities.

deposit growth has continued, although the postwar expansion
has not been as rapid as the expansion in war years.

SE C U R IT Y M A R K E TS

To a large extent, the divergence in the deposit trends

Fresh liquidation appeared in the stock market during

between the weekly reporting and nonreporting member

the past month, carrying average prices to new low levels

banks can be attributed largely to differences in the composi­
tion of their private deposit accounts. As shown by the

since April 1945. A moderate recovery toward the end of
May canceled most of the losses of the first part of the month,

Federal Reserve System surveys of the ownership of private

but only a small part of the decline since May 1946 was

demand deposits, a very substantial part of the deposits of

retraced. Railroad issues were particularly weak. The decline

the larger banks, such as the weekly reporting member banks,

came in the face of especially favorable corporate earnings

consists of accounts of manufacturing and mining and trans-

reports and substantial increases in dividend payments by




55

FEDERAL RESERVE BANK OF NEW YORK

many companies, and evidently reflected the prevalent uncer­
tainty concerning business prospects over the coming year.
Prices of medium and lower grade corporate bonds also sagged
to lower levels than in a number of months, paced by the
railroad issues. Treasury and high grade corporate bonds

the tax exemption feature of municipal bonds, have been
major factors in this decline in the prices of such bonds,
although the prospect of a substantial increase in the volume
of new issues, especially State bonus issues, has also been
a factor of some importance. Recent firmness in "gilt-edge”

remained firm at levels not far from the peaks of April 1946.

bond prices apparently reflects the failure of the new supply
of such securities to equal demand.

Municipal bonds recovered slightly during April and May
from the substantial slump of the preceding 11 months, but
remained considerably below the April 1946 peak. The
volume of new corporate security offerings during the first

As the accompanying chart shows, the spread between
yields of the various classes of securities has widened con­
siderably during the past year. The differential between yields

five months of 1947 was off sharply from the high levels of

of the highest grade bonds and yields of medium grade bonds

the last half of 1946, but new State and municipal financing
so far this year has almost equaled the amount offered in the

and high grade preferred stocks has increased only moderately.

whole of 1946, chiefly because of large issues of State bonds
to finance bonus payments to veterans.
The stock market decline carried Standard and Poor’s index
of 402 stock prices to new low levels for the past two years
around the middle of May, approximately 4 per cent below

But the spread between yields of high grade bonds and yields
of common stocks has widened substantially, partly because
of the fall in stock prices and partly because of the increase
in dividend payments. It is now the greatest since early in
1943, and, except for war and depression periods, has never
been so wide during the past thirty years at least.

the previous postwar low point in October 1946 and 29 per
cent below the postwar peak. All major groups— industrials,
rails, and utilities— reached new postwar lows, with railroad
share values 11 per cent below the October 1946 level.
Shares of distilleries, textiles (including apparel), and retail
trade concerns were below their October 1946 low points,
while automobile, chemical, copper, and oil shares remained
above the October lows. The industrial group of the DowJones stock price averages, however, failed to pierce its pre­
vious low point, indicating that the comparatively few stocks
included in that average, largely "blue chips,” fared somewhat
better than the rank and file of industrial securities.

N

ew

Se c u r it y I ssues

In the first five months of 1947, new corporate security
issues totaled not quite 2 billion dollars, representing an aver­
age monthly volume approximately 35 per cent below that
which prevailed during the latter half of 1946. This decline
apparently is not more than partially connected with the
recent unsettlement in the securities markets, since the markets
were anything but settled during most of the second half
of last year. The principal decrease came in the volume of
Yields on Long Term Bonds and Stocks

Prices of lower grade railroad and other junior bonds also
declined during May, in sympathy with the decline in stock

PERCENT

prices, but high grade issues, including municipal and cor­
porate bonds as well as Government bonds, remained firm.
The decline in lower grade bond prices had been in progress
since March 1946. Higher grade issues, on the other hand,
have risen in price this year following their decline in 1946.
The average yield on long term taxable Treasury bonds rose
from 2.08 per cent in April 1946 to 2.28 in September, while
Moody’s Aaa corporate bond yield rose from 2.46 per cent
in April 1946 to 2.61 in December. By the third week of
May 1947, the Government bond yield had fallen to 2.19 per
cent and the high grade corporate bond yield to 2.53. The
"municipals” have been an exception among the better grades
of bonds; Standard and Poor’s average yield on municipals
advanced from a low point of 1.45 per cent in April 1946
to a high of 2.02 in March of this year and has declined only
slightly since then. The elimination of the excess profits tax
and actual and potential decreases in surtax rates on indi­
vidual incomes, and consequent reduction in the value of




Source: U. S. Government bonds, Treasury Department; 35 high grade
noncallable preferred stocks, Standard & Poor’s Corporation; 20 Aaa corporate
bonds, 30 Baa corporate bonds, and 200 common stocks, Moody’s Investors
Service.

MONTHLY REVIEW, JUNE 1947

56

new offerings for capital expansion, but new money issues
in 1947, nevertheless, have been more than twice the volume
of the corresponding months of 1946. Refundings continued

TABLE II
Half-Year Changes in Total Loans of Insured Banks by Type of Bank
June 1945-December 1946
(Amounts in millions of dollars)

at the low levels obtaining in the later months of last
year. Public utility issues accounted for a growing proportion

Member banks

of total new financing this year, and it is in this sector that
large-scale offerings of new money issues are anticipated, in

Weekly
reporting*
Period

view of announced plans for further extensive capital expendi­

Amount

tures by electric utility and communications companies.
July-December 1945. ..

The volume of new municipal securities offered in the
capital markets in the first five months of this year amounted to
1.1 billion dollars, an amount less than 100 million dollars
short of the total of such issues floated in the entire year 1946.
Practically all of the issues sold in 1947 were ‘ new capital”
issues, but the concept of new money issues as applied to
municipal securities does not always have the same meaning
as in the case of new corporate flotations. For example, among
the new capital "municipal” securities offered were two large
issues of the States of Michigan (200 million dollars) and

Per
cent

Nonmember

Nonreporting

Amount

Per
cent

Amount

Per
cent

+1,679

+11.8

+

509

+ 8.0

+

202

+ 7.2

January-June 1946. . . . — 887

— 5.6

+1,414

+20.5

+

499

+16.7

July-December 1946...

+1,691

+11.3

+1,703

+ 20.5

+

549

+15.7

Total— 18 months.

+2,483

+17.5

+3,626

+56.9

+1,250

+ 44 .8

* End-of-month data estimated from Wednesday figures.

As might have been expected, the increase during the first
three months of this year in loans of member banks outside
the principal cities was larger than the increase in loans of
weekly reporting banks, on both a dollar and a percentage

Illinois (300 million), respectively, the proceeds of which

basis. The smaller drop in security loans (in both absolute

are to be used for the payment of bonuses to veterans. Further

and relative terms) and their lesser importance in the total

substantial State and municipal financing is anticipated in the

loans of the former largely accounted for the difference.

market, despite the fact that many planned public works

Furthermore, the increase in all other loans, as is shown in

projects have been postponed owing to high costs.

Table I, was proportionately slightly greater at those banks.
This was probably because of the greater importance of real
estate loans, which apparently were rising at a faster rate

B A N K LOANS SINCE T H E END OF T H E W A R
In the last issue of this Review it was pointed out that

than commercial and industrial loans.

between the end of 1946 and March 26, 1947, total loans of
the weekly reporting banks in 101 centers showed a modest

Since the end of March (through May 21) total loans of
the weekly reporting banks in 101 cities have declined 74

increase which was accompanied by a notable shift from low
yielding security loans to higher yielding business financing.
The inauguration of a new series on the principal assets
and liabilities of all member banks as of the last Wednesday
of each month makes it possible to compare the loan experience
during the first quarter of 1947 of the weekly reporting banks,
whose operations are more largely of a money market char­
acter, with that of the remaining member banks, whose busi­

million dollars. While several similar reductions since the end
of the war reflected a decrease in security loans, this time the
drop in total loans resulted from a contraction of 308 million
dollars in loans to business. No data later than the first quarter
are yet available for the remaining banks, but apparently the
rising tide of business loans has slackened to a point where
normal seasonal influences may cause at least a temporary
decline.

ness is of a more local nature.
Differences in the changes in loans of banks in leading cities
TABLE I
Changes in Member Bank Loans in the First Quarter of 1947
Classified by Type of Loan and Bank
(Amounts in millions of dollars)
Loans on
securities
Type of bank
Amount

Per
cent

Other loans

and of other member banks similar to those observed in the
first quarter of 1947 have in fact prevailed during most of the
period since the end of the war. In the 18 months from June
30, 1945— a point about midway between V-E Day and V-J
Day— to the end of 1946, total loans of weekly reporting

Total

Amount

Per
cent

Amount

Per
cent

member banks expanded by 2,483 million dollars or 17.5 per
cent, while loans of the other member banks rose 3,626 million

— 816

— 32.8

+1,043

+ 7 .3

+227

+ 1 .4

or 56.9 per cent. Loans in a third group of banks— nonmember

Nonreporting banks----

— 97e

— 20.1

+

788e

+ 8 .3

+691

+ 6 .9

Total......................

— 913e

— 30.7

+l,831e

+ 7 .7

+918

+ 3 .4

insured banks— increased by 1 V a billion dollars, or 44.8 per
cent, almost as high a rate as at the nonreporting member

Weekly reporting banks

e Estimated.




banks.

FEDERAL RESERVE BANK OF NEW YORK

The similarities and differences in the behavior of loans of
these three groups of banks are brought out in Table II. In
the last half of 1945, total loans of weekly reporting banks
rose faster than those of the other two groups. During the
following half year loans of reporting banks declined while

TABLE III
Half-Year Changes in Commercial, Industrial, and Agricultural
Loans of Insured Banks by Type of Bank
June 1945-December 1946
(Amounts in millions of dollars)
Member banks

loans of the other two groups expanded at a sharply acceler­
ated pace. Reporting banks’ loans resumed their expansion in
the last half of 1946, but the percentage rate of increase fell

57

Weekly
reporting*
Period

short of that for the other two classes of banks.

Amount

Per
cent

Nonmember

Nonreporting

Amount

Per
cent

Amount

Per
cent

Some, but not all, of the disparity in growth of loans of the
three groups of banks can be attributed to differences between

July-December 1945. ..

+1,315

+22.2

+

269

+11.8

+ 59

+ 6.5

January-June 1946.......

+

321

+ 4.4

+

437

+17.1

+166

+17.1

the groups in the relative volume of loans for purchasing or
carrying securities. Such loans did not show much net change

July-December 1946...

+2,681

+ 35.4

+

795

+26.6

+199

+17.5

Total— 18 months. +4,317

+ 72.8

+1,501

+65.7

+424

+46.5

in the last six months of 1945 because both June and Decem­
ber totals were affected by War Loan drives and Government
security loans were at their peak. The differences in total
loan expansion during the last half of 1945 must, therefore,

* End-of-month data estimated from Wednesday figures.

Inventories on all levels advanced sharply in the final
half of 1946 as prices rose substantially. Business credit at

be accounted for by movements in other kinds of bank credit.

all classes of banks increased by a third or more, but, because

In the first half of 1946, however, Government security loans

agricultural loans declined, combined business and agricul­
tural loan expansion in the nonreporting member and non­

dropped sharply, and, since such loans were concentrated to
a considerable degree at the weekly reporting banks in the
principal cities, total loans of this group showed a decline.
The reporting banks’ loans on securities were reduced by about
the same amount in the ensuing six months, but in this latter
period their other loans increased fast enough to produce an
increase in total loans.
As indicated in Table III, loans to business and agriculture
expanded at widely varying rates in these 18 months and most
of the divergencies between the groups of banks, in so far as
they are not attributable to security loans, may be accounted
for by these differences. In the last half of 1945, business
loans rose considerably at all three groups of banks as industry
rapidly shifted from a wartime to a peacetime basis. Inven­
tories in the aggregate declined somewhat, but their character
drastically changed from war goods, carried in large part by
advance and progress payments from the Government, to
peacetime goods which had to be financed by other means.
Agricultural loans in the meantime declined noticeably and,
since such loans are largely concentrated in the nonreporting
member banks and nonmember banks, the rate of increase in
the two types of loans combined was notably less in those two
groups of banks than in the reporting banks.
In the first half of 1946, business loans continued to expand

member banks was less rapid than in the reporting banks.
Real estate loan expansion, after a slow start in the last half
of 1945, moved up rapidly in the following half year and main­
tained the rate of increase in the six months thereafter. Loans
of this type at all groups of banks showed similar increases,
although the greatest growth was at nonreporting member
banks. Lifting of controls on nonresidential building, and
then the housing program, contributed to the outpouring of
credit in this field. Reimposition of controls over nonresi­
dential construction after the first four months of 1946 had
little effect because construction was largely limited by
materials rather than demand.
After rising moderately in the last six months of 1945, all
other bank loans— mainly consumer credit— increased at a
much accelerated pace in 1946, as a large volume of durable
goods became available.
Nonreporting and nonmember
banks showed the greatest percentage gains in both halves of
the year, perhaps because more and more banks outside the
large centers have been entering the consumer credit field.
The over-all growth of loans in the 18-month period,
coupled with the Treasury’s debt retirement program, has
markedly increased the ratios of loans to total assets in the
various groups. Because of the relatively greater reduction in

rapidly at nonreporting member banks and nonmember banks,

their holdings of Government securities through redemptions

while agricultural loans at the same banks increased seasonally.

and sales, the weekly reporting banks showed a greater

At the reporting banks in the 101 cities, both business and

increase in this ratio than did the other two groups. Thus,

agricultural loans rose only modestly, apparently because the

for the weekly reporting member banks the proportion was

increase in civilian manufacturing inventories was financed

raised from a little over one sixth in June 1945 to somewhat

through sales and redemptions of Government securities.

less than a fourth by December 1946, only a little lower than




MONTHLY REVIEW, JUNE 1947

58

the ratio that prevailed in June 1939. Although the ratio
was also raised for the other two groups of banks, in neither
case did it approach the prewar proportion. Nonreporting
member banks raised their loan ratio from about one seventh to

Consumer loans in the Second District member banks totaled
757 million dollars on December 31, 1946, compared with
422 million on June 30, 1945, just prior to the end of the
war, and made up slightly less than one quarter of the volume

about one fifth, which is still significantly lower than the prewar

of such loans by all member banks in the United States.

fraction of approximately one third.

may readily be seen in Table I, the 37 central reserve New
York City banks and the 74 largest banks outside New York
City, which together constitute only about one seventh of the
member banks in the District, held 80 per cent of the total

Nonmember insured

banks, which had the highest prewar proportion (nearly 40
per cent), showed an increase from almost one sixth in
June 1945 to one fifth in December 1946. The continued
rise in loans and the further retirement of Federal debt

As

dollar volume of loans to individuals in the District on Decem­

in the first quarter of 1947 have undoubtedly resulted in a
further increase in the ratios of loans to total assets. The
restoration of the prewar importance of loans in the banks’
assets will depend on the effects on bank holdings of Treasury
securities of the future tax, expenditure, and public debt poli­

ber 31, 1946. Among the various classes of consumer loans,
they held about 60 per cent of both retail automobile loans
and repair and modernization loans, 89 per cent of retail loans

cies of the Government, as well as on the public’s demands for

The total volume of consumer loans made by individual
banks is important primarily in relation to the volume of their
total loans. Table II shows, by size of bank, the average dollar

bank credit.
CONSUM ER LEN D IN G B Y SECOND DISTR ICT

other than automobile, 86 per cent of single-payment loans,
and 72 per cent of instalment cash loans.

volume of the various types of consumer loans, and also the

M EM BER BANKS

percentage of each type of consumer loan to the average vol­

The large-scale growth in consumer lending since the end
of the war has carried the total of such credit to record levels,
and has prompted the following analysis of the extent to

ume of total loans. Among the large central reserve New
York City banks, which carry the bulk of the District volume,
consumer loans account for only 8 per cent of total loans, in

which the member banks in this District, both in number and

contrast to a range of 14.4 per cent to 20.3 per cent in the
four size-groups in the remainder of the District. Commercial
and industrial loans and loans for purchasing and carrying
securities represent such a large part of the aggregate loan
portfolios of the New York City banks (87 per cent on Decem­

in dollar amount, are now participating in this field of credit.
In general, the analysis indicates that almost all of the Dis­
trict’s member banks had consumer loans of some sort at the
close of 1946, although the average volume was small in most
banks, the bulk of the District’s volume being held by the
larger banks. The analysis also indicates, however, that con­
sumer loans, relative to total loans, were much more important
for the up-State banks than for the central reserve New York
City banks.

ber 31, 1946) that they tend to relegate the substantial volume
of consumer loans to a comparatively minor position. In the
up-State banks, on the other hand, the large proportionate
volume of consumer loans, coupled with the fact that such
loans carry relatively high interest rates, emphasizes the impor­

TABLE I
Distribution of Loans to Individuals among the Different Sized Member Banks in the
Second Federal Reserve District as of December 31, 1946
(Dollar volume in millions)

Retail auto
instalm
ent
paper
Size of bank as m
easured by total deposits
O
utside central reserve New York City
Under $2 million........................................
(150 banks)
$2 to $5 million..................................................
(264 banks)
$5 to $20 million........................................
(276 banks)
$20 m
illion and over...................................
(74 banks)
Central reserve New York City banks................
(37 banks)
Total Second District........................................
(801 banks)




Other retail
instalm
ent
paper

Repair and
m
odernization
instalm
ent
loans

_P
ersonal
instalm
ent
cash loans

D
ollar
volum
e

Per cent

D
ollar
volum
e

Per cent

D
ollar
volum
e

Per cent

0.9

2.7

0.3

0.5

0.4

0.7

1.3

3.0

8.9

0.9

1.6

3.4

5.6

8.0

10.1

29.9

5.1

9.0

20.8

34.1

27.3

21.0

13.5

39.9

12.6

22.2

16.3

26.7

26.7

6.3

18.6

37.8

66.7

20.1

32.9

67.0

33.8

100.0

56.7

100.0

61.0

100.0

130.3

D
ollar
volum
e

Single­
paym
ent
loans

Total loans
to
individuals

Dollar
volum
e

P cent
er

1.0

2.2

6.1

12.3

Dollar
volum
e

Per cent

0.5

5.1

0.7

2.6

27.6

3.6

51.0

10.7

114.3

15.1

20.5

85.6

18.0

154.7

20.4

51.4

324.0

68.2

455.2

60.2

100.0

475.1

100.0

756.9

100.0

Per cent

FEDERAL RESERVE BANK OF NEW YORK

59

TABLE II
Average Volume* of Loans to Individuals in Different Sized Member Banks in the Second Federal Reserve District and
the Proportion of Each Type to Average Total Loans as of December 31, 1946
(Dollar volume in thousands)

O
ther retail
instalm
ent
paper

Retail auto
instalm
ent
paper

Size of bank as m
easured by total deposits

Average
dollar
volum
e

Repair and
m
odernization
instalm
ent
loans

Personal
instalm
ent
cash loans

Single­
paym
ent
loans

Total loans
to
individuals

Per cent of
P cent of
er
Per cent of
Per cent of
Per cent of
Per cent of
Average
average
Average
Average
average
Average
average
average
Average
average
average
dollar
dollar
total
total
dollar
dollar
total
total
dollar
total
total
volum
e
loans
volum
e
volum
e
volum
e
loans
loans
loans
loans
volum
e
loans

O
utside central reserve New York City
Under $2 m
illion................................ ........

9

3.4

5

1.9

8

3.0

14

5.3

23

8.7

38

$2 to $5 m
illion..........................................

15

2.2

7

1.0

22

3.3

35

5.2

59

8.8

107

16.0

$5 to $20 m
illion........................................

44

2.1

31

1.5

89

4.3

105

5.1

222

10.8

416

20.3
16.0

14.4

$20 m
illion and over...................................

204

1.6

209

1.6

240

1.8

359

2.8

1,205

9.3

2,088

Central reserve New York City banks................

450

0.3

2,522

1.5

1,340

0.8

2,575

1.5

10,452

6.1

13,388

7.8

Total..................................................

55

0.5

129

1.3

117

1.2

191

1.9

747

7.4

979

9.7

* Only those banks reporting consum loans w used in com
er
ere
puting average dollar volum in each classification.
e

tance of consumer credit for these banks from an incomeproducing standpoint. Despite the high proportion of con­

and the proportion became progressively smaller as the size
of the bank increased.

Retail loans other than automobile

sumer loans to total loans in most Second District banks, the
low average volume, especially for the smaller banks, indicates

loans varied irregularly among the various sized banks of the

that many of the banks of the District have refrained from

loans.

aggressive expansion in this field. The policy which they have
followed obviates the necessity of setting up specialized con­
sumer loan or personal loan departments, and utilizes existing
personnel with no great increase in over-all expense.

loans both were largest relative to total loans in the medium

Among the different types of consumer loans, single-pay­
ment loans amounted to five eighths of all consumer loans
carried by Second District member banks at the end of 1946
and, relative to total loans, were the most important consumer
credit component in all size-classes of banks.

The largest

fraction of total loans represented by either retail automobile
loans or instalment cash loans was in the smallest sized banks
TABLE III
Percentage of the Total Number of Member Banks in Different Sized
Groups in the Second Federal Reserve District Having Consumer
Loans of Various Types on December 31, 1946
Banks outside New York City
with deposits
Type of loan

Under $2 $2-$5
million million

Central
reserve
New
$20
All
York
$5-$20 million
City member
million and over banks
banks

Retail auto instalment.

66.7

76.9

83.3

89.2

37.8

76.5

Other retail instalment.

40.0

53.8

59.4

81.1

40.5

55.1

District and ranged from 1.0 per cent to 1.9 per cent of total
Repair and modernization loans and single-payment

sized up-State banks (those with total deposits of 5 to 20
million dollars).
The proportionate number of member banks, in various
sized groups, holding consumer loans of different kinds at
the close of 1946 is shown in Table III. The table reveals
that % V2 per cent of the District’s members were participating
to some extent in some segment of the consumer loan field.
Participation was not so widespread among all the different
types of loans, however. Only 55 per cent of all member
banks held retail instalment loans other than automobile loans,
and only 65 per cent carried repair and modernization loans;
participation in the remaining categories ranged from 76 per
cent to not quite 85 per cent of the banks. A relatively small
proportion of the central reserve New York City banks held
consumer loans other than cash instalment loans and singlepayment loans. In fact, the proportion of New York City
banks having consumer loans of any type was smaller than
among other groups of banks in the District except the smallest
banks.

Outside New York City, the proportion of banks

engaged in consumer lending varied directly with the size
of the banks.

Repair and moderniza­
tion instalment.........

32.0

59.1

84.8

91.9

40.5

65.0

The number of member banks making consumer instalment

Personal instalment.. . .

62.0

86.4

93.8

100.0

70.3

84.9

loans is available for December 31, 1940, when outstanding

Single-payment.............

64.0

78.8

83.3

95.9

83.8

79.4

consumer credit was near its prewar peak. A comparison of

Consumer loans of any
or all types...............

87.3

98.1

99.6

100.0

91.9

96.5




those figures with the December 31, 1946 data gives a good
indication of the extent of member bank entry into the con­

60

MONTHLY REVIEW, JUNE 1947

sumer loan field as a whole, and of the growth of average
instalment loan holdings in particular, during the intervening
period. Between the two dates, the number of member banks
having no instalment loans declined from 153 to 46 or from
more than one fifth of the total number to less than 6 per cent.
The number of banks carrying an instalment loan volume of
more than $100,000 increased from 181 to 278.

ECO N O M IC R E H A B IL IT A T IO N OF GREECE

Government of heavy fiscal burdens. Prewar expenditure of the
Greek Government on behalf of its military and security forces
had accounted for roughly 33 per cent of total budgetary out­
lay. Of much greater significance on the economic side, how­
ever, have been huge foreign grants and credits for relief and
reconstruction, primarily supplied (directly or indirectly) by
the United States. UN RRA shipments have exceeded 400 mil­
lion dollars,1 of which the United States contributed roughly
72 per cent, while other official American grants and credits
have amounted to a further 196 million dollars. Great Britain

Official and public discussion of the Greek-Turkish aid

waived repayment of its 1940 loan to Greece, of which a bal­

bill, which was signed by President Truman on May 22, has
thrown much new light upon the current economic and finan­

ance of approximately 20 million pounds remained as of
January 1946. Private relief shipments to Greece from various
sources have probably exceeded 15 million dollars. Repara­
tions of 150 million dollars from Italy and Bulgaria, although

cial position of Greece, and upon the serious delays in the
progress of recovery in that unfortunate country.
Greece emerged from the German occupation on October

of uncertain ultimate value, were granted to Greece by the

18, 1944 in a gravely weakened economic condition. A hyper­
inflation generated by Axis occupation charges had virtually

Paris Peace Conference.
Charitable remittances, a normal
credit item in the prewar balance of payments, probably

annihilated the value of the old drachma note circulation,
which was converted into a new drachma currency on Novem­
ber 10, 1944 at a rate of 50 billion old to one new drachma.

approached 50 million dollars during 1945-46, while service
of the externally held public debt, a normal debit item, has

Acute shortages of seed, farm equipment, and other agricultural
supplies had reduced cultivated acreage by roughly 25 per
cent below prewar levels, while harvests had fallen off even
more disastrously. Although industrial installations had suf­
fered comparatively little wartime damage, production had
gradually ground to a complete standstill as a result of infla­
tionary destruction of business confidence and banking credit,
unavailability of fuel and other raw material imports, and
nonreplacement of depreciated capital equipment. Railway
communications had been thoroughly disrupted by the retreat­
ing Germans and roads rendered hardly passable by lack of
maintenance. Thousands of peasants had been made homeless
by German reprisals against their villages, while widespread
starvation in the cities was being averted only through regu­
lar relief distributions by the International Red Cross. Public
health had been seriously undermined.
The acute economic hardships inflicted by the occupation
had fostered a growth of extremist political groups, particu­
larly among the resistance forces of the Left.

been entirely suspended.

The magnitude of the foreign eco­

nomic and military assistance supplied to date attains greater
significance if compared with a prewar national income of
Greece approximating 500 million dollars and an import level
of 130 million dollars in 1938.
Provision of foreign assistance on such a scale has in fact
resulted in extensive recovery of certain sectors of the Greek
economy. Aided by huge UNRRA imports of agricultural sup­
plies and equipment and by favorable weather, agricultural
food production recovered in 1946 almost to prewar levels.2
Wheat output, for example, approximated 98 per cent of the
1935-38 average. Industrial production of certain major con­
sumers’ goods has also shown considerable recovery; thus, out­
put of cotton and wool textiles rose to roughly 70 per cent
of prewar levels during the closing months of 1946. In other
major sectors of the economy, however, the rate of progress
has been most discouraging and, according to the American
Economic Mission recently returned from Greece, has not been
’ commensurate with the foreign aid given.”

An attempted

Particularly unfortunate has been the absence of any mobi­

Leftist coup d'etat in December 1944 was only narrowly averted

lization of internal Greek resources for the reconstruction of

through intervention by the British military forces in Athens.

communications and rural housing.

Subsequent maintenance of British troops in Greece, together

for nonmilitary reconstruction in the 1946-47 budget amounted

Drachma appropriations

with British subsidization of the Greek security forces, safe­

to less than 4 per cent of total anticipated government outlay.

guarded a series of interim governments from renewed extrem­

Although the importation of nearly 7,000 trucks by UN RRA

ist attack and permitted restoration of democratic government

considerably relieved the initial transport deficiency, the normal

by elections held in March 1946 in the presence of American,

interregional exchange of goods remains severely handicapped,
with a consequent drag upon the recovery of real income.

British, and French observers.
British subsidization of the Greek security forces also con­
tributed strongly to economic recovery by relieving the Greek




1 Including freight and related charges.
2 The lack of rainfall in recent months may, however, result in seri­
ous reductions of 1947 crop yields below 1946 levels.

61

FEDERAL RESERVE BANK OF NEW YORK

Even more unfortunate has been the severe delay which has
occurred in the recovery of the export crops upon which the
Greek economy so strongly depends for payment of its normal
imports. Tobacco and currant harvests, together providing
roughly 60 per cent of prewar foreign exchange receipts,
recovered in 1946 to no more than 51 and 28 per cent, respec­
tively, of their 1935-38 averages. The slowness with which
tobacco output is recovering is attributable in part to pessi­
mistic expectations created by wartime destruction of the Ger­
man market, which absorbed no less than 50 per cent of the
total tobacco export volume in 1938. Wartime destruction
of currant vines has retarded the revival of harvest yields.
Perhaps most important of all, the acute difficulties encoun­
tered by growers in disposing of even existing stocks of
tobacco and other export products at official exchange levels
has seriously discouraged new plantings, thereby unneces­
sarily lengthening the period of dependence upon foreign
aid.
On the fiscal and monetary side, the record of the past two
years is hardly better. Conversion of the virtually worthless
old drachma circulation into a new drachma issue in November

tributed UNRRA supplies, to set against a prospective foreign
exchange deficit of approximately 300 million dollars. To
close the remaining gap of approximately 240 million dollars,
the Mission has recommended allocation of 190 million dollars
from the Greek-Turkish aid bill together with 50 million dol­
lars from the post-UNRRA relief bill.
While the required distribution of American assistance
among various uses cannot be precisely anticipated at the
moment, it is of the utmost importance that American financial
aid should be employed, so far as possible, to restore productive
and export capacity rather than to finance current consumption
in excess of basic requirements.

Effective implementation of

such a policy will probably demand, on a temporary basis,
efficient exchange and import controls designed to prevent
wastage of exchange on luxury imports as well as on capital
flight. Drastic fiscal reforms must also be undertaken before
imports of essential consumption items can be reduced to basic
requirement levels, thereby releasing exchange for capital goods
imports. According to budgetary estimates reported by the
American Mission to Greece, nearly 50 per cent of total antici­
pated budgetary expenditure in drachmas during the current

1944, together with the prospective arrival of heavy relief

fiscal year must be financed through governmental sale of con­

shipments, secured a striking revival of confidence which sur­

sumption imports provided free of charge by the United States.
The volume of free consumption imports required for this
fiscal purpose will exceed, perhaps substantially, the volume
of relief supplies required to close the gap between basic
import requirements and exchange availabilities from exports,

vived even the shock of the December revolution. Over suc­
ceeding months, however, continuing inflationary financing
of huge governmental deficits by note issue expansion rapidly
undermined faith in the new drachma; a renewed burst of
hyperinflation in the closing months of 1945 reduced the new
currency unit to less than 4 per cent of its initial value. A
second major stabilization operation undertaken in January
1946 halted the inflation by authorizing unlimited sales of
gold by the Bank of Greece at the market price and by revok­
ing virtually all restrictions on private commodity imports.
Over the remainder of the year, heavy net sales of gold and
foreign exchange, coupled with large net receipts from the sale
of UN RRA supplies, effectively offset the inflationary pressures
generated by continuing budgetary deficits, credit expansion,
and speculation. At the cost of virtually exhausting the avail­
able gold and exchange reserves of the Bank of Greece, average
retail price increases during 1946 were limited to hardly more
than 6 per cent. Unfortunately the breathing space thus pur­
chased at such heavy cost could not be, or at any rate was
not, put to effective use, with the result that, since early 1947,

remittances, etc. Immediate and drastic fiscal reforms designed
to expand drachma revenues and curtail all unnecessary
drachma outlay would thus appear to be a major prerequisite
of maximum allocation of American financial aid to capital
goods imports. Numerous reports from Greece suggest that
the scope for such fiscal reforms is considerable.
D E P A R T M E N T STORE TR A D E
The dollar volume of department store sales in the Second
Federal Reserve District during May is estimated at about 10
per cent above the level of May 1946. The seasonally adjusted
index of sales for May 1947 is about 7 per cent higher than
for April and only about 3 per cent below the all-time high
reached in August 1946; it has been rising in each month since
February.
However, when price increases are taken into
account, it is probable that the physical volume of sales is

the prospect of further substantial foreign assistance has con­
stituted the only barrier to renewed inflation.

below the level of a year ago. The Bureau of Labor Statistics

The American Mission which recently returned from Greece

York City during the first four months of 1947 averaged 20

estimated that over the current year ending on March 31,

per cent higher than a year ago. Moreover, the rise of about

1948, Greece would have available roughly 55-60 million dol­

30 per cent in retail food prices which occurred during the

estimates that clothing and housefurnishings prices in New

lars from unused Surplus Property credits, the residual of an

same interval has left a smaller proportion of consumers’

Export-Import Bank loan granted in January 1942, and undis­

incomes available for the purchase of department store type




62

MONTHLY REVIEW, JUNE 1947

Indexes of Department Store Sales and Stocks,
Second Federal Reserve District*
(Adjusted for seasonal variation, 1935-39 average— 100 per cent)

were beginning to be affected by the reduction which has been
taking place for the past eight months in the volume of the
stores’ outstanding orders. Although the retail value of stocks
at the end of April was 28 per cent greater than at the same
date a year ago, the seasonally adjusted index of stocks declined
for the second consecutive month, and on April 30 was about
8 per cent below the peak reached at the end of February of
this year. Receipts of merchandise by the stores for March
and April combined were about 7 per cent below the same
two months of 1946, and this probably accounted for most of
the decline in the index of stocks. It is true that larger than
usual markdowns have been taken in some lines, particularly
women’s apparel and off-brand appliances, but these have been
offset to some degree by rising prices in other types of mer­
chandise, so that the net effect of price changes upon the total
value of store stocks is uncertain.

1945

1946

1947

* M ay 1947 sales estimated.

merchandise.

It is significant that basement store sales for

the first four months of 1947 were 22 per cent greater in dollar
volume than last year, whereas main store sales for the same
period increased in dollar volume by only 6 per cent.
By the end of April department store stocks in this District

Following their continued decline during April, outstanding
orders at the end of the month were 60 per cent lower than a
year previous. Stores have been reverting to the prewar prac­
tice of placing initial orders for only a part of the expected
seasons requirements, planning to reorder if the goods sell
well. They are insisting upon much shorter deliveries than
prevailed during the war and immediate postwar period. Selec­
tive cancellations of overdue orders have also been made.

Department and Apparel Store Sales and Stocks, Second Federal
Reserve District, Percentage Change from the Preceding Year

Indexes of Business

Net sales
Locality

April 1947

1946

Stocks on
Jan.through
hand
April 1947 April 30, 1947

Department stores, Second District___

+ 2

+10

+28

New York City...................................
Northern New Jersey.........................
Newark............................................
Westchester and Fairfield Counties. .
Bridgeport.......................................
Lower Hudson River Valley..............
Poughkeepsie...................................
Upper Hudson River Valley..............
Albany.............................................
Schenectady.....................................
Central New York State...................
Mohawk River Valley....................
Utica............................................
Syracuse...........................................
Northern New York State.................
Southern New York State.................
Binghamton.....................................
Elmira..............................................
Western New York State..................
Buffalo.............................................
Niagara Falls.................................
Rochester.........................................

— 1
+ 3
0
+ 1
+ 1
+11
+ 2
+ 6
+ 10
— 2
+ 8
+ 6
+ 2
+ 9
+24
+13
+ 9
+11
+ 9
+ 9
+ 3
+ 8

+ 9
+ 8
+ 6
+10
+ 8
+12
+ 6
+10
+10
+ 9
+ 13
+ 8
+ 7
+ 15
+15
+15
+11
+12
+ 9
+ 8
+11
+ 12

+25
+17
+14
+37
+34
+51
+42
+34
+37
+29
+38
+26
+21
+45
+48
+48
+42
+41
+41
+34
+42

Apparel stores (chiefly]NewYork City).

— 14

— 4

+36

—

Index
Industrial production*, 1935-39 = 100........

1946
Item

April

190

187p

Electric power output*, 1935-39 = 100.......
(Federal Reserve Bank of New York)

191

224

227

224p

Ton-miles of railway freight*, 1935-39 = 100

203p

145

202

213p

236

281

278p

139

154

154

153p

124

133

133

130p

255

311

314p

245

283

286

236

264

263p

155

169

170p

131

153

156

156p

100
80

86
90

85
93

82
88

(Federal Reserve Bank of New York)

Sales of all retail stores*, 1935-39 = 100.......
(Department of Commerce)

Factory employment
United States, 1939 = 100J......................
(Bureau of Labor Statistics)

New York State, 1935-39 = 100...............
(New York State Dept, of Labor)

Factory payrolls
United States, 1939 = 100J......................
(Bureau of Labor Statistics)

New York State, 1935-39 = 100...............
(New York State Dept, of Labor)

Income payments*, 1935-39 = 100..............
(Department of Commerce)

Composite index of wages and salaries*#
1939 = 100..................................................
(Federal Reserve Bank of New York)

271p

(.Bureau of Labor Statistics)
(Federal Reserve Bank of New York)

New York City........................ .................
Outside New York City...........................
April

Sales (average daily), unadjusted................
Sales (average daily), seasonally adjusted..

219
221

188
224

229
229

223
235

Stocks, unadjusted........................................
Stocks, seasonally adjusted..........................

182
180

231
249

241
242

233
230




April

189

Velocity of demand deposits*, 1935-39 = 100

1947
February March

February March

165

(Board of Governors, Federal Reserve
System)

Consumers’ prices, 1935-39 = 100................
Indexes of Department Store Sales and Stocks
Second Federal Reserve District
(1935-39 average —100 per cent)

April

1947

* Adjusted for seasonal variation.
p Preliminary.
% Series revised beginning January 1945.
# A special monthly release tabulating the complete set of 15 indexes of hourly
and weekly earnings computed by this bank will be sent upon request. A gen­
eral discussion of the new indexes appeared in the November 1946 issue of this
Review. Tabulations of the monthly indexes, 1938 to date, and description of
component series, sources, and weights may be procured from the Research De­
partment, Federal Reserve Bank of New York. A mimeographed article dis­
cussing some of the technical problems involved is also available on request.

FEDERAL RESERVE BANK OF NEW YORK
INDUSTRIAL PRODUCTION

63

National Summary of Business Conditions
(Summarized by the Board of Governors of the Federal Reserve System May 28, 1947)
in
Value
department store
INDUSTRIAL outputto and employment declined slightlyApril,April. increasedofsomewhat in May.
sales continued
show usual seasonal changes in
but
The general level of wholesale commodity prices declined somewhat in April and showed little
change in the first three weeks of May.
In d u s t r i a l P r o d u c t i o n

Federal Reserve index. Monthly figures; latest
figure shown is for April.
CONSTRUCTION CONTRACTS AWARDED

Industrial production declined slightly in April according to the Board’s seasonally
adjusted index, which was at a level of 187 per cent of the 1935-39 average for April as com­
pared with 190 in March. Output of both durable and nondurable manufactures and of minerals
was below the March rate.
A slight decrease in activity in the durable goods industries in April reflected mainly
work stoppages at plants producing communication equipment and small declines in output
of building materials after allowance for usual seasonal changes. Output of nonferrous metals
and products declined slightly in April as decreases in some fabricating industries offset further
gains in activity at smelters and refineries. Steel production was at 94 per cent of capacity
in April, as in March, and scheduled operations at steel mills during May have been maintained
at this rate. Automobile output in April continued at an annual rate of about five million cars
and trucks; and activity in other transportation equipment industries increased somewhat.
A decline in automobile production is indicated for May, largely as a result of shortages of
steel sheets.
Production of nondurable manufactures was in somewhat smaller volume in April owing
mainly to a decrease in output of textiles. Activity in the rubber products industry was slightly
below the exceptionally high first quarter levels when tires for passenger cars, trucks, and busses
were being produced at an annual rate of 100 million as compared with about 60 million in
1940. Production of most other nondurable goods in April showed little change from the
March rate.
Output of coal declined 20 per cent from March to April, reflecting work stoppages at
bituminous coal mines in the early part of the month. Production of crude petroleum and of
metals continued to advance. Crude petroleum output rose further in the early part of May to
a new record rate.
Em p l o y m e n t

F. W . Dodge Corporation data for 37 Eastern States.
Nonresidential includes awards, for buildings
and public works and utilities. Monthly
figures; latest shown are for April.
WHOLESALE PRICES

Nonagricultural employment decreased by about 450,000 workers in April, according to
Bureau of Labor Statistics figures as adjusted for seasonal variation by Federal Reserve. This
decline was due chiefly to work stoppages in the telephone, bituminous coal, and electrical
machinery industries. Employment in industries manufacturing nondurable goods, chiefly
textiles and apparel, also declined. The number of persons unemployed increased slightly
in April.
Co n s t r u c t io n

Total value of construction contracts awarded, as reported by the F. W . Dodge Corpora­
tion, showed little change from March to April and was about one-fifth smaller than in April
1946. Private residential and nonresidential awards declined, although awards usually show
a seasonal increase in April. Awards for publicly-financed construction expanded further,
reflecting chiefly a large increase in the volume of contracts for streets and highways.
D is t r ib u t io n

Bureau of Labor Statistics* indexes. Weekly figures;
latest shown are for week ended May 17.

Department store sales continued to show little change in April, after allowance for
usual seasonal changes. The Board’s adjusted index was 275 per cent of the 1935-39 average
in April, compared with 277 in March and an average of 271 in the first four months of this
year. In May dollar volume of sales showed less than the usual seasonal decline and in the first
half of the month was 12 per cent larger than in the corresponding period of 1946.
Freight carloadings declined in April largely because of a sharp drop in coal shipments
early in the month. Loadings of coal increased and shipments of most other classes of freight
were maintained in large volume in the early part of May.
C o m m o d i t y P r ic e s

MEMBER BANKS IN LEADING CITIES

ir»
f\j s

r

UCRIE /V1
. . IT S v
SSGV « 1
EUOT
K
r* >
f
thM
I1 *
NUT:dI
E
P
1 /dMDSESS V/1 eAJD(DT
A
D

1 J
J
-_ on5 A
vl a:
!\
i /n ij
w.E(3ITTk
-uSGV \
. S3
D O
P
r j
|
14 14 14 14 14 14 14 14
90 91 92 93 94 95 96 97
Demand deposits (adjusted) exclude U . S. Gov­
ernment and interbank deposits and collection
items. Government securities include direct
and guaranteed issues. Wednesday fig­
ures; latest shown are for May 21.




Prices of most basic commodities showed little change in the early part of May, follow­
ing declines in April. Prices of feed grains and copper advanced, while prices of rubber, wool
tops, paint materials, and lumber declined. The general level of wholesale prices, according
to the Bureau of Labor Statistics weekly index, has been at 147 per cent of the 1926 average
since the middle of April as compared to an average level of 149 per cent in March.
T r e a s u r y Fi n a n c e

and

B a n k C r e d it

Treasury redemption for cash of part of the weekly maturing bill issues continued into
May. Between April 17, when the program began, and May 22 one billion dollars of Treasury
bills were retired. Largely as a result of these retirements Treasury War Loan deposits at com­
mercial banks were reduced by about 800 million dollars in the five weeks ended May 21.
Although Federal Reserve Banks held most of the retired securities, their holdings of
Treasury bills declined by considerably less than the amount retired, as some commercial banks
sold bills to maintain their reserve positions. A further increase in monetary gold stock of 300
million dollars during the five weeks and a small inflow of currency from circulation supplied
member banks with reserve funds and thereby reduced the need for additional sales of securities
to the Reserve System.
Commercial and industrial loans, which had expanded rapidly from the middle of 1946
until March 1947, declined somewhat during April and the first half of May at banks in lead­
ing cities. Real estate and consumer loans continued to increase. Government security holdings
declined between the middle of April and the middle of May.