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M O NTHLY

R E V IE W

of Credit and Business Conditions
S e c o n d

F e d e r a l

R e s e r v e

D is tr ic t
Septem ber 1, 1934

F ederal R eserve Bank, New York

Federal Reserve A gen t
M o n e y M a rk e t in A u g u st

During the past month bank loans other than security
loans, which presumably represent largely commercial
borrowing, have shown their first substantial increase
since the autumn of 1933. This increase amounted to
approximately $100,000,000 in the four weeks ended
August 22, and apparently reflects a fairly early begin­
ning of the financing of seasonal business activity. Of
the total increase during this period, $22,000,000 was in
New York City and the remainder was widely distri­
buted among the other cities throughout the country
which are covered by the weekly member bank reports.
Notwithstanding the recent increase, the total volume
of these loans remained $225,000,000, or about 5 per
cent, below the volume of a year ago, but it is probable
that at least a part of this reduction represents the charg­
ing off of old loans classified by examiners as being of
doubtful value.
The weekly member bank reports also showed an
increase of $141,000,000 in holdings of securities other
than Government obligations during the four week
period. Although detailed data are not available as to
the character of these investments, it is probable that
the principal factor in the increase was the purchase by
these banks of Government guaranteed bonds of the
BILLIONS
OF DOLLARS

O T l ars
S

/

I

1

7r

Federal Farm Mortgage Corporation and the Home
Owners’ Loan Corporation which were issued during the
first half of August. Holdings of United States Govern­
ment issues showed a small net decline during the past
month, probably due to the fact that maturities of
Treasury bills exceeded new issues of such bills during
the period.
The total loans and investments of the reporting banks
have shown no increase during the past month, however,
due to a substantial liquidation of security loans accom­
panying weakness in the security markets during a con­
siderable part of this period. The reduction amounted
to $222,000,000 in the four weeks ended August 22,
which, following some reduction in the preceding month,
carried the volume of security loans in the reporting
banks to a new low level for at least the past ten years.
The reduction in deposits caused by the liquidation
of security loans largely offset the increase in deposits
caused by the increases in commercial loans and in
investments, but a further moderate increase in the
deposits of reporting banks, exclusive of Government
deposits, again occurred, apparently due largely to
Government expenditures. Government deposits in these
banks declined during the four week period by about
the same amount as other demand deposits increased.
The further moderate increase of the past month carried
glU OLLARS
^O S
N

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D M N • E O IT

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\

\ '^ E A D D P S sy
D M N > E O IT
\\
\

*

sT E D P S S
IM E O IT
\

T E D P S s\
IM : E O IT

Y

\
\
V

V

—•

..
..

,

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i
i\
\

i

D MN DP S *
E A D E O IT

M D P !S S
E E O IT

1931




i

1930

I
i
i

i
•

t—
N
EW Y )RK CITY
C
BA;NKS
j

^

1932

1933

1934

E R
OTHER R SE \fZ CITY
(BANKS 1
1930

1931

1932

COUNTIR
Y
b a n k :3

1933

1934

1930

13
91

D em and and T im e D eposits o f A ll M em b er B anks in. the U nited S ta te s on Call D ates
(In terba n k and G overn m ent deposits excluded; last date June 3 0 , 1 9 3 4 )

1932

1933

1934

66

MONTHLY REVIEW, SEPTEMBER 1, 1934

net demand and time deposits of weekly reporting banks
to a level at least $2,000,000,000 higher than at the begin­
ning of the year. This increase includes a substantial
expansion of interbank deposits, but in addition there
has been a large increase in individual deposits subject
to check which are available for personal and business
uses.
Data on the character and distribution of the increase
in bank deposits are contained in the detailed report of
the condition of all member banks on June 30, recently
issued, and are shown in the preceding diagram. The
demand deposits shown in this diagram consist largely
of individual deposits subject to check, and exclude inter­
bank deposits representing largely secondary reserves
and excess funds deposited by the smaller banks with
their city correspondents. The data after the beginning
of 1933 include only deposits in licensed banks, and a
considerable part of the drop in deposits in the first
half of that year is due to the exclusion of deposits in
unlicensed banks.
The first increase in deposits following the substantial
shrinkage in the early years of the depression occurred
in New York, as the first section of the diagram indicates.
The elimination of interest payments on demand deposits
was followed by some withdrawal of deposits from the
New York banks during the latter half of 1933, however,
and the greatest expansion in both demand and time
deposits during the past year has occurred in other
reserve city banks and in the so-called 4‘ country banks.’ ’
For the country as a whole the increase in demand
deposits amounted to $1,271,000,000, or more than 9 per
cent, between March 5 and June 30 of this year, and was
more than $2,000,000,000, or about 16 per cent, during
the year ended June 30. At the same time there was
a substantial rise in time deposits, chiefly in the form
of deposits evidenced by savings pass books, which in­
creased more than $1,000,000,000, or approximately 17
per cent, during the year.
E

xcess

R eserves

and

M o n e y R ates

Excess reserves of member banks for the country as a
whole remained during most of August around the level
of $1,900,000,000 reached near the end of July. A fur­
ther net increase in the monetary gold stock, due to an
excess of imports during the first half of the month over
the exports of the latter half, contributed some addi­
tional funds, as did also an increase of smaller propor­
tions in Treasury currency consisting chiefly of new
silver certificates. On the other hand, there was an
increase in the amount of currency in circulation which
presumably represents the beginning of the usual sea­
sonal increase. In New York City excess reserves rose
to new high levels, at times exceeding $675,000,000. This
increase was attributable partly to gold imports and
partly to an inflow of funds from other parts of the
country.
Reflecting the large supply of funds available in the
money market, money rates remained at very low levels
throughout the month. The only noteworthy change
was a slight increase in yields on short term Govern­
ment securities which accompanied some recession in the
prices of longer term Government obligations during
the month.




Money Rates at New York

Aug. 31, 1933 July 31, 1934 Aug. 31, 1934
Stock Exchange call loans.....................
Stock Exchange 90 day loans...............
Prime commercial paper—4 to 6 months
Bills—90 day unindorsed......................
Customers’ rates on commercial loans. .
Treasury securities
Maturing December (yield)..............
Maturing March (yield)....................
Maturing December 1935 (yield). . . .
Average rate on latest Treasury bill sales
91 day issue.......................................
182 dav issue.......................................
Federal Reserve Bank of New York
rediscount rate....................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills
* Nominal

H
*H
ix
H

1

1

H-l
Vs-H

H-l

y8- n

f 3 .19

f 2 .10

f2.25

No yield

No yield
No yield
0.22

No yield
No yield
0.37

0.07

0.22

IX

IX

X

X

0.11

0.14
2X

1

t Average rate of leading banks at middle of month

B ill M arket

The bill dealers transacted a somewhat larger volume
of business during the first part of August due to a
moderate increase in the supply of bills coming into the
market. These new bills represented to a considerable
extent drawings arising from cotton transactions. The
continued active investment demand for acceptances
quickly absorbed these new offerings and dealers’ port­
folios remained at a minimum. Subsequently, conditions
in the discount market again became extremely quiet.
Most of the bills sold by the dealers were at a rate of
Ys per cent, and their purchases were made largely at
3/16 per cent.
During July a further decline of 3 per cent occurred
in the volume of bankers acceptances outstanding. The
total of $516,000,000 at the end of the month was $255,000,000 below the January figure and $222,000,000 lower
than a year ago. The principal decline for the month
was in export bills, but other types of bills generally
showed some reduction. The amount of bills held by the
accepting banks and bankers increased further in July
to 92 per cent of the total then outstanding.
C o m m e r c ia l P a p e r M a r k e t

The volume of new commercial paper entering the
open market during the first part of August showed a
moderate increase, reflecting to some extent borrowings
by milling concerns, but subsequently there was a de­
cline in the amount of business notes drawn. Banking
investors continued throughout the month to inquire
actively for commercial paper, and current offerings by
dealers of high grade paper were readily absorbed at
rates ranging from % to 1 per cent for the four to six
month maturities. Although the % per cent rate con­
tinued to be quoted more frequently than the 1 per cent
rate, the range of rates remained the same as that which
has prevailed since the first part of June.
In July the volume of commercial paper outstanding
showed a further increase of 11 per cent. This is the
sixth consecutive increase, and the volume outstanding
reached $168,000,000, which is 74 per cent above a year
ago and is the largest amount since November 1931.
Foreign E x ch a n g e
During August, the position of the dollar
foreign exchange market shifted from the gold
point to the export point. Nearly all the major
exchanges advanced steadily against the dollar

in the
import
foreign
during

FEDERAL RESERVE AGENT AT NEW YORK

67

G o ld M o v e m e n t

D aily Q uotations for the French Franc a t N ew Y o rk (L a te s t rate
is for A u g u s t 2 9 )

the first two weeks of August, in several cases to the
highest quotations since the new parity rates were estab­
lished. As the accompanying diagram indicates, the
French franc rose sharply from below the estimated gold
import point on August 1 to above the export point from
New York on the 11th, and then, coincident with some
export of gold, declined through the 15th. On August
22 to 25 and again on August 29 to 31 the franc re­
attained the export point from New York and in each
case gold shipments resulted. Belgas, Swiss francs, and
guilders moved with the French franc; in fact the Bel­
gian and Swiss exchanges were frequently stronger than
the French currency. Reichsmarks gained fairly steadily
during the first three weeks of August to a high of
$0.4021 on the 20th, which was closer to their new parity
than at any time since its establishment, but later quota­
tions were somewhat lower. Lire advanced to $0.08721/2
on the 13th and were quoted only slightly below that
level thereafter.
The course of sterling was an exception to the general
tendency of the principal foreign exchanges in the second
half of the month. After advancing from $5.03% on
August 1 to $5.11% on the 11th, along with a rise in
other currencies, the pound declined to $5.011 on the
/2
30th and was below $5.00 on the 31st for the first time
since early February.
Closing Cable'Rates at'New York

Exchange on

Par of
Exchange

Belgium...........................
Denmark.........................
England...........................
France.............................
Germany.........................
Holland...........................
Italy.................................
Norway...........................
Spain...............................
Sweden ............................
Switzerland.....................

$ .2354

Canada............................
Argentina........................
Brazil...............................
Uruguay..........................

1.6931
.7187
.2026
1.7511

Japan...............................
India................................
Shanghai.........................

.8440
.6180




.4537
8.2397
.0663
.4033
.6806
.0891
.4537
.3267
.4537
.3267

Aug 31, 1933 July 31, 1934 Aug. 30, 1934
$ .1990
.2025
4.5275
.05578
.3395
.5730
.0748
.2275
.1190
.2335
.2748

$ .2346
.2251
5.0350
.06591
.3875
.6762
.0857
.2532
.1367
.2598
.3260

$ .2380
.2242
5.0150
.06694
.3995
.6869
.0870
.2520
.1388
.2586
.3314

.9500
.3605
.0839
.6600

1.0169
.3357
.0850
.8000

1.0225
.3343
.0850
.8000

.2681
.3410
.2875

.2991
.3790
.3388

.2998
.3789
.3431

The gold import movement to this country which began
last February continued to about the middle of August,
and the receipts for the month totaled $44,500,000, in­
cluding $20,000,000 from England, $9,300,000 from
India, $6,700,000 from Canada, $6,300,000 from France,
and $1,800,000 from China. After the middle of August
gold imports largely ceased, owing to the decline in dollar
exchange to the gold export point, and between August
15 and the end of the month a total of $13,700,000 of
gold was exported, of which $11,700,000 went to France
T
and $2,000,000 to Belgium.
Other transactions during the month affecting the
monetary gold stock included the release of $1,100,000
of gold previously earmarked at this bank for foreign
account, and receipts by the mints and assay offices of
newly mined domestic gold and of scrap gold averaging
about $1,700,000 and $1,600,000, respectively, a week.
There was also an import of $2,100,000 of gold from
Colombia which was immediately earmarked and conse­
quently had no effect on the monetary stock of the
country. In the aggregate, this country’s gold stock
showed a net rise of about $50,000,000 for the month.
Central B a n k R a te C h anges
Effective August 28 the National Bank of Belgium
reduced its rate of discount for acceptances from 3 to
2y 2 per cent. The previous rate had been in effect since
April 26 when it was lowered from 3y 2 per cent.
Security M a rk e ts
Some recovery in stock prices has occurred since the
latter part of July, although trading on the Exchange
has been very inactive. The advance in August was
highly irregular but nevertheless was of sufficient pro­
portions so that near the end of the month about one-half
of the sharp decline in average prices that occurred
toward the end of July had been canceled. In the closing
days, however, a declining tendency prevailed. Industrial
shares showed the greatest recovery in August. Railroad
stocks remained close to the lowest levels since the spring
of 1933 and utility stocks rose only slightly above the
lowest levels in recent years. Bank stocks showed a
further net decline in August.
High grade investment bonds declined further in the
first part of August; domestic corporation issues dropped
1 to 2y 2 points between the 1st and 13th of the month
and United States Treasury bonds showed an average
decline of about 1 y 2 points through August 11. Lower
grade corporate issues also receded during this period,
accompanying the issuance of unfavorable reports on
important lines of business activity. As a result, the
currently available daily averages of corporate bond
prices reached the lowest levels since the first quarter
of this year. Subsequently, lower and medium grade
bonds recovered coincident with a net advance in stock
prices, and toward the end of the month were at about
the same levels as at the beginning of August. The
recovery in high grade bonds, however, was of smaller
proportions and these issues remained at lower levels
than at the beginning of August. For high grade cor-

68

MONTHLY REVIEW, SEPTEMBER 1, 1934

porate issues the net decline for the month was around
to 1 y 2 points, and in Treasury bonds the net reces­
sion was about 1 point.
N e w F inancing
Accompanying some unsettlement in the prices of out­
standing bonds, public offerings of new securities pro­
ceeded in August at a slower rate than during July. A
large part of the month’s total was represented by an
offering by the Secretary of the Treasury of $150,000,000
of Home Owners’ Loan Corporation bonds, guaranteed
both as to principal and interest by the United States.
Tenders for these bonds were received from the public
in the amount of $233,000,000, but only $127,000,000
were accepted by the Treasury— at prices which gave an
average yield of 1.15 per cent on the 2 year series,
1.77 per cent on the 3 year series, and 2.01 per cent on
the 4 year series. The remainder of the bonds was taken
up by the Treasury for its various investment funds.
The Federal Intermediate Credit Banks also sold an
issue of $15,000,000 of short term debentures, largely to
replace maturities of $11,000,000.
Public offerings of other securities were limited to
a total of about $20,000,000, which comprised a $8,500,000 public utility issue and several small municipal
issues aggregating $11,000,000. In addition a $50,000,000
loan was arranged by a group of New York City banks
for the Dominion of Canada to refund securities which
have been called for payment on September 1, but no
public offering of securities was entailed in this financ­
ing. There was also $10,500,000 of oil company refund­
ing which was arranged through the private placement
of the new securities.
Direct financing by the United States Government in
August was entirely in the form of Treasury bills.
Maturities of 91 and 182 day bills aggregating $451,000,000 were largely replaced by sales of $376,000,000 of
182 day bills. The cost of Treasury bill issues advanced
slightly, the rate on the issue dated August 29 being
0.22 per cent as compared with 0.07 per cent on the
last July issue.
Business Profits
Reflecting the maintenance of a somewhat higher level
of industrial output than in 1933, earnings reports which
have become available from 276 industrial and mercan­
tile companies indicate that aggregate profits during the
second quarter of this year were double those of the
corresponding period of last year, which was the first
quarterly period in nearly two years in which business
generally earned any appreciable amount of net profits.
Profits of these companies were also about 20 per cent
larger than in 1931. These companies represent numer­
ically only a small sampling of all businesses in the coun­
try, and in the main constitute the largest and strongest
concerns. Consequently the comparison is a much more
favorable one than would be shown if interim reports
were available for all concerns.
Despite the large percentage increase in corporate
profits, the return on invested capital remained low
relative to previous years; as compared with the average




for the 1925-1929 period, second quarter profits were
only about one-half as large. The increase in aggregate
profits over 1933 was due in large part to the fact that
the steel and oil companies earned some net profit this
year, whereas their operations last year resulted in siz­
able deficits. The profits of the chemical and electrical
groups of companies also increased considerably over a
year ago. These increases, however, were offset to some
extent by smaller profits reported by the automobile
group, despite a materially larger volume of business.
For the first six months of the year, reports available
for 407 industrial and mercantile companies indicate
that net profits were about five times those of the first
half of 1933, due chiefly to the much larger year to year
increases in the first quarter than occurred in the second
quarter of this year. Virtually all groups of companies
reported better earnings for the half year than in 1933,
the exceptions being the aviation and shipping groups,
which showed deficits this year as against some net profit
last year. The only other group to show a combined
deficit was the railroad equipment companies, but in this
case the deficit was smaller than last year’s. The number
of companies of all kinds reporting deficits through oper­
ations in the first half of the year decreased from 46 per
cent of the total in 1933 to 24 per cent in 1934,
Net operating income of telephone companies, both
for the second quarter and half year, was somewhat
larger than in 1933, but was less than in 1932. Net earn­
ings of other public utility companies, however, declined
further to a new low level for recent years, despite a
generally higher level of business than a year ago. Net
(Net profits in millions of dollars)
Second quarter
Corporation groups

1931

1932

1933

First six months
1934

1931

1932

61.1

1.3

47.7

89.7

3.4

TWoi f276cos. 2ndquar.
lotal\407cos. 1st half.. 152.4

7.3

90.6 180.9 361.0

19.1

102 Telephone cos. (net
operating income) . .
72.3
72 Other public utility
cos. (net earnings).. 101.1

51.2

47.1

85.7

78.0

41.3

1933

1934

45.5

69.9
Automobile parts and
5.2 — 1.8
4.1
8.6
accessories(excl .tires)
9.0 — 6.5 — 0.4
17.2
Aviation......................
1.0 — 1.5
2.9 — 0.4
3.1 — 1.0
1.8 — 1.3
Building supplies........
1.9 — 2.3 — 1.1
0.9
5.5 — 3.6 — 3.7
1.9
11.7
Chemicals and drugs.. 27.1
17.4 25.0 54.8 30.9 30.1 51.6
Clothing and textiles..
0.7
0.1 — 2.2
0.2 — 0.3 — 15.6
0.6
1.6
0 — 1.5 — 1.4
Coal and coke............
0.5
0.6 — 2.2 — 2.4
2.2
Copper........................ — 0.7 — 1.4 — 1.3
0.3 — 1.3 — 3.9 — 4.2
2.2
Electrical equipment..
11.6
0.4
2.1 — 2.2
0.3
7.4
19.8
10.5
Food & food products. 38.2 28.3 29.5 28.6 96.6
71.8 63.9 67.9
Household supplies.. .
2.0 — 0.1
8.2
1.9
2.5
18.3 — 3.1
14.2
Leather and shoes. .. .
2.1
4.3
7.2
6.1
0.6 — *2.3 — * i’ 9
.
*3*0
3.3 — 7.8 — 7.2
3.5
Metals & mining (excl.
copper, coal, & coke)
5.3
9.7
11.2 24.2
2.0
5.9
13.3
7.1
Motion picture........... — 2.1 — 6.8 — 1.3
1.6
3.4 — 10.3 — 2.4
6.0
Office equipment........
3.2
3.2
2.7
0.9
1.6
5.6
2.6
5.9
Oil............................... —28.1
13.8 — 6.7
12.7 —40.6
28.2
12.6 —34.1
Paper...........................
1.1 — 0.2
0.2
0.3
0.8
2.6
3.0 — 0.5
2.2
Printing and publishing
3.7
2.1
0.3
2.3
10.7
5.8
5.1
Railroad equipment.. .
2.1 — 1.7 — 1.7
1.4
4.6 — 4.4 — 5.9 — 0.5
Rubber and tires........
— 1.2 — 5.8 — 4.1
3.5
'6*9
0.3 — 0.6
0.3
0.4
” *o
0.1 — 0.7
Steel.............................
8.0 —36.4 — 14.4 20.3
16.9 —69.2 —51.2
14.6
Stores..........................
5.2
10.5 — 0.4
15.6
Y .2
1.2
2.7
0.5
* i‘.2
1.6
'0 .6
0.5
Miscellaneous.............
9.0
14.7
15.1 30.0
4.1
6.9
9.8 27.9

e50.1 141.8 102.0

75.1 385.0
88.5

e99.3

72.9 212.2 186.0 161.2 155.2

Total public utilities 173.4 136.9 125.1 123.0 354.0 288.0 249.7 254.5
148 Class I railroads
(net operatingincome) 129.2
— Deficit

e Partly estimated

44.2

120.2 113.6 235.4 109.6 154.7 225.8

69

FEDERAL RESERVE AGENT AT NEW YORK

operating income of Class I railroads in the second quar­
ter was somewhat less than a year ago, but the total
for the half year was about 50 per cent higher than in
1933, due to the rather favorable showing made in the
first quarter. It appears that as a result of the decline
in operating income in the second quarter there was a
deficit after payment of interest and other fixed charges
for these railroads as a group.

stock shipped from drought areas, the consumption of
raw cotton by mills showed no further decline although
the seasonal tendency in July is downward, and in a
number of other important industries little variation was
shown after allowance for the usual seasonal changes.
(Adjusted for seasona Ivariations and usual year to year growth)
1933

P rodu ction
Some further recession during August in basic indus­
trial activity is indicated by the preliminary data now
available. Steel mill operations were reported at 19
per cent of capacity in the latter part of the month, the
lowest level since the spring of 1933, and output of the
industry for August as a whole appears to have been
lower than in July. Some further decline was also
reported in the production of automobiles, the output
of bituminous coal showed a moderate contra-seasonal
recession, and the production of electric power showed
a gradual decline after seasonal adjustment. Operations
in the cotton textile industry remained at the curtailed
level of the previous two months.
With the exception of a very sharp decline in the out­
put of iron and steel, there was n pronounced change
o*
other than seasonal during July in the rate of basic
industrial operations. Steel production, which usually
reaches a seasonal peak not later than May, was main­
tained at a comparatively high level this year until the
last week of June, owing largely to accumulation of
inventories by steel consuming industries which had
placed orders in advance of price increases. The sharp
decline in steel mill operations during July reflected to
a large extent the use of accumulated stocks, although
there was also some recession in the actual steel require­
ments of consuming industries. As is indicated in the
accompanying diagram, the level of basic industrial out­
put, apart from iron and steel production, showed little
change other than seasonal from June to July, following
a moderate decline in the previous three months. Auto­
mobile production receded slightly more than seasonally,
but operations in the meat packing industry were substan­
tially increased to take care of the processing of liveP £R CEN T

Indexes o f Iron and Steel Production and o f O th er Industrial
Production (B a sed on Federal R eserve B oard's seasonally
ad ju sted in dexes; 1 9 2 3 -2 5 a v e r a g e s IOO per cen t)




1934

July

May

June

July

59
85
32
61
98

55
68
56
56
55

59
73
50
48
54

39
38
46
49

50
70

47
79

56
72

54p
74p

82
68
65
80
71
72

75
85
69
71
66
67

71
78
68
73
66

70 j)
66p
55
72p

67 p

66p

118
150
79
139
126

82
85
62
76
116

64
77
56

68
77p
53

113
94
79
79

110
86
95
81

48
92
51
64
76
30

48
70
37
66
77
39

Metals

Steel ingots................................................
Zinc............................................................
Tin deliveries.............................................
Automobiles

Passenger cars...........................................
Motor trucks.............................................
Fuels

Bituminous coal.........................................
Anthracite coal..........................................
Coke...........................................................
Petroleum, crude.......................................
Petroleum products...................................
Electric power...........................................
Textiles and Leather Products

Cotton consumption.................................
Wool mill activity.....................................
Silk consumption.......................................
Rayon deliveries.......................................

85p

99p

lOlp

Foods and Tobacco Products

Livestock slaughtered...............................
Wheat flour................................................
Sugar deliveries.........................................
Tobacco products......................................

107
86
87
83

126
79
62
83

Miscellaneous

Cement.......................................................
Printing activity.......................................
Newsprint paper........................................
Machine tools............................................
p Preliminary

46
67
34
67
74r
30

43
32
74
33

r Revised

In dexes of Business A c tiv ity
During the first half of August, no consistent tendency
was apparent in the available measures of general busi­
ness activity. Sales of department stores in the Metro­
politan area of New York appear to have shown more
than the usual seasonal increase from the July level,
and the dollar volume of sales was not materially differ­
ent than in the first half of August last year, when con­
sumer buying in anticipation of price increases reached
its peak. Following a substantial decline in July, car
loadings of merchandise and miscellaneous freight were
little changed after seasonal adjustment, but the move­
ment of bulk freight over the railroads showed a moder­
ate contra-seasonal decline.
From June to July declines occurred in most of this
bank’s seasonally adjusted indexes of distribution and
general business activity. After maintaining a nearly
constant level since the beginning of the year, the index
of car loadings of merchandise and miscellaneous freight
declined 5 per cent, apparently reflecting to a consider­
able extent the sharp drop in shipments of steel. Fur­
thermore, some recession occurred in sales of department
stores, chain stores, and mail order houses, partly as a
result of labor disturbances and intense heat in certain
sections. The volume of bulk freight was maintained,
however, by exceptionally heavy shipments of livestock

MONTHLY REVIEW, SEPTEMBER 1, 1934

70

from drought areas, and no pronounced changes were
apparent in this bank’s indexes of new passenger auto­
mobile registrations and the volume of check transactions.
(Adjusted for seasonal variations, for usual year to year growth,
and where necessary for price changes)
1934

1933
July

May

June

60
63
56
75
59
112

60
60
51
62
67
94

60
61
56
64
67
88

77
77
78
77
67
53
69
50

75
74
68
75
72
63
74
48

72
69
68
78
67
60
72
57p

71
67
66
73
62
58

67
64

62
47

64
47

62p
48

Primary Distribution

Car loadings, merchandise and misc.......
Car loadings, other....................................
Exports.......................................................
Imports......................................................
Waterways traffic......................................
Wholesale trade.........................................
Distribution to Consumer

Department store sales, U. S...................
Department store sales, 2nd Dist............
Chain grocery sales...................................
Other chain store sales.............................
Mail order house sales..............................
Advertising.................................................
Gasoline consumption...............................
Passenger automobile registrations..........
General Business Activity

July
57
60
55p
64p
91

56p

Bank debits, outside New York City.. ..
Bank debits, New York City...................
Velocity of demand deposits, outside New
York City...............................................
Velocity of demand deposits, New York
City........................................................
Shares sold on N. Y. Stock Exchange. . .
Life insurance paid for r...........................
Employment in the United States..........
Business failures........................................
Building contracts.....................................
New corporations formed in N. Y. State.
Real estate transfers.................................

90

72

73

72

75
375
63r
74
71
17
83
44

51
54
65r
84
42
23
57
44

53
41
61r
83
47
20
60
49

52
62
63r
81
45
21
66

General price level*...................................
Composite index of wages*......................
Cost of living*...........................................

132
176
132

p Preliminary

r Revised

136
183
136

137
183
136

138p
182p
137

* 1913 average=100

E m p lo y m e n t and P ayrolls
Private employment continued to recede during the
period from the midde of June to the middle of July.
The unseasonal extent of the decline is indicated by a
decrease of 2.5 per cent in the seasonally adjusted index
of factory employment computed by the Federal Reserve
Board. The declines in factory employment were
especially pronounced in the iron and steel, textile, auto­
mobile, and building material industries, while the food
products group showed a substantial increase owing in
part to seasonal activity in the canning and preserving
industry. The principal change in employment among
the non-manufacturing groups was a larger than seasonal
decline at retail establishments. A reduction was also
reported in anthracite mining, while small increases
occurred in private building construction and crude
petroleum production. Agricultural employment declined
during July in spite of harvesting operations.
The net reduction in employment in all industries
reporting to the Bureau of Labor Statistics was estimated
at 359,000 workers. However, during the month more
than 335,000 persons were added to those employed by
virtue of Federal emergency outlays. Over 200,000 were
engaged by the Federal Emergency Relief Administra­
tion, about 35,000 were added to those employed on pro­
jects financed by the Public Works Administration, and
there was an increase of more than 100,000 in the number
of men in the Civilian Conservation Corps.
Factory payrolls showed a somewhat larger decrease
than employment, this bank’s seasonally adjusted index




C ost of L iv in g in the U nited S ta tes (B a sed on B ureau of
Labor S ta tistic s data and Federal R eserve B ank o f N ew
Y o rk co s t o f livin g index converted to a 1 9 2 9 base)

indicating a reduction of 3.2 per cent from the middle
of June to the middle of July. In spite of the decline
in payrolls during the past two months, the current
position of factory workers as a group is much better
than in the early months of 1933, even after allowing for
the increase in cost of living during the period. As is
indicated in the accompanying diagram, factory payrolls
at the 1933 low were 67 per cent below the 1929 level
while the cost of living had declined only 26 per cent.
The spread between the two figures reflected, in addi­
tion to the effects of the reduction in the number of
workers employed, a more rapid decline in per capita
earnings than in the cost of living, due to the combined
effects of part time work and wage rate reductions. Dur­
ing the past year, however, wage rate advances have
raised the average individual income of factory workers,
which is also shown in the diagram, to such an extent that
the index of average individual earnings is at virtually
the same level relative to 1929 as the cost of living index,
indicating that the purchasing power of the income re­
ceived by employed workers is now close to that of 1929.
The number of factory workers employed, however, is
approximately 2,500,000 or 25 per cent smaller than in
1929, and this is now the principal factor restricting the
aggregate purchasing power of factory workers.
C o m m o d ity Prices
The average level of commodity prices advanced con­
siderably during August, and the Bureau of Labor
Statistics wholesale price index for the week ended
August 25 stood at 76.9 per cent of the 1926 average,
the highest since January 1931. This was entirely due
to the continued rise in prices of farm products. From
the beginning of July to the latter part of August, the
farm products group in the Bureau of Labor Statistics
index rose 12 per cent as a result of the effects of adverse
weather conditions on agricultural production. Prices of
commodities other than farm products and foods re­
mained generally steady or showed a slight downward
tendency during August. The metal products and build­
ing materials groups have receded gradually during the
past two or three months, while the textile products group
has been declining slowly since the end of February.

FEDERAL RESERVE AGENT AT NEW YORK

Among the principal commodities, livestock prices have
shown the most rapid rise recently. An average of hog
prices at Chicago, which was $4.50 a hundredweight in
the latter part of July, has risen $3.37 to $7.87 a hun­
dredweight, the highest since 1931, and steers have ad­
vanced $1.33 to $8.75 a hundredweight. Corn at Chicago
rose 12*4 cents further to a new high since 1930 at 81%
cents a bushel, and cash wheat at Minneapolis showed
a net gain of 4 % cents to $1.15% a bushel. The price of
hides, which had declined 2 cents to 8 cents a pound
during July and the first half of August owing to excep­
tionally heavy cattle slaughterings, recovered 1 cent dur­
ing the latter part of the month. Rubber touched a new
high since 1930 at 15 13/16 cents a pound, and silk
recovered moderately following the decline of the previ­
ous month. On the other hand, domestic wool prices
receded to the lowest level in over a year, and scrap steel
declined 75 cents further to $11.00 a ton, as compared
with $14.75 last spring.
F a rm P rodu ction and In co m e
According to the August 1 Government report, crop
prospects as a whole declined nearly 11 per cent further
during July as a result of continued drought and extreme
heat, and on the basis of present indications yields per
acre of principal crops will be about 22 per cent below
the average of the last thirteen years. Since cultivated
acreage also has been considerably reduced under the
program of the Agricultural Adjustment Administra­
tion, the estimated production of a number of important
crops, such as wheat, corn, oats, and hay, is the smallest
in forty years or more. The indicated production of ten
major crops, expressed as percentages of last year’s har­
vest and of the average harvest of the past ten years,
is shown in the table below. Because of a large carryover,
the supply of wheat will be quite adequate for normal
domestic requirements. An acute shortage of feed crops,
together with extremely poor pasturage in many areas,
however, accelerated the marketing of livestock and
poultry, and it is expected that supplies of meat, dairy
products, poultry, and eggs coming into the market dur­
ing the months ahead will be smaller than for several
years past, according to the Department of Agriculture
report.
August 1 Indicated Production of Principal Crops
As percentage of
1933
Harvest
Cotton................................................................
Wheat................................................................
Corn....................................................................
Hay (tame)........................................................
Barley................................................................
Potatoes............................................................
Tobacco..............................................................
Apples................................................................
Peaches ..............................................................

1924-33
Av. Harvest

70
93
69
74
74
76
102
75
77
101

63
61
63
46
69
52
94
77
69
84

From the point of view of aggregate farm income, the
sharp advance in prices of farm products which has
occurred in recent months will tend to offset the pro­
nounced falling off in agricultural production. Farmers’
cash income during 1934 is estimated by the Department
of Agriculture at $6,000,000,000, which is nearly $1,000,-




71

B L N
IL IO S
O DLAS
F OLR
12
incom
e

M

F O F R M R E IN S
RM AM A KT G

A A A PY ET
. . . A MN S

i
1929

II IT
1930

1931

1932

1933

1934-

Cash Incom e o f Farm ers from A g ricu ltu ral M ark etin gs and P a y ­
m ents b y A gricu ltu ral A d ju s tm e n t A d m in istra tion (D e p art­
m ent o f A gricu ltu re data for all yea rs— 1 9 3 4
p a rtly estim ated )

000,000, or 19 per cent, higher than in 1933; about onehalf of the increase is due to income from farm market­
ings and the other half to payments by the Agricultural
Adjustment Administration. As the accompanying dia­
gram shows, farmers ’ cash income including Agricultural
Adjustment Administration payments will be the largest
in four years, according to present estimates. In the first
seven months of the current year farmers’ receipts from
marketings were about $380,000,000 larger than in the
corresponding period of 1933, and an additional $183,000,000 was received this year from the Agricultural
Adjustment Administration. During the remainder of
the year, Government estimates indicate that farmers’
income from marketings will be slightly higher than in
the corresponding months of last year and that rental
and benefit payments and livestock purchases by the
Agricultural Adjustment Administration will total
$440,000,000.
F oreign T ra d e
The foreign merchandise trade of the United States
showed slightly more than the customary recession dur­
ing July, which month usually marks the seasonal low
point of the year. Exports valued at $162,000,000 were
12 per cent above a year ago, while imports amounting
to $127,000,000 were 11 per cent below the relatively
high figure for July 1933, despite increases during this
period in the prices of imported goods and materials.
This was the first decrease from a year previous in im­
port values since May 1933, and the increase in exports
was considerably smaller than in preceding months.
Exports of finished manufactures continued to gain
substantially over a year ago, showing a 43 per cent
increase in July. Shipments abroad of passenger auto­
mobiles and trucks, a considerable factor in this group
of exports, were somewhat less than in June, but
remained almost three times the small number of last
year. The value of exports of semi-manufactures, chiefly
copper and iron and steel mill products, increased 35 per
cent over July 1933. Meanwhile, exports of crude
materials declined sharply from the preceding month and

72

MONTHLY REVIEW, SEPTEMBER 1, 1934

wr 2 prcn lesinvlu t a aya aodelagly
ee 8 e et s a e hn er g, u r e
t a5 prcn do ineprso rwcto fr mh
o 6 e et rp xot f a ot n o t e
s bt nia vlu eo latya.
usa t l o m f s er
TeJ lydc einimot wsdelaglyt ardc
h u elin prs a u r e o e u­
t no a poimt ly$4 0 ,0 0fr mlat ya int e
io f pr x ae 1,0 0 0 o s er h
vlu o imot o s gr t eblko wic rcnlyhs
a e f prs f ua, h u f h h ee t a
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o e o t e h p e n h ir in s ns h
ecpio a dces, wic rdcdimot o s grt
xe t nl erae T h e ue prs f ua o
h
a ng ib a on in J ly ws at ibt d b t e
elig le mut u , a tr ue y h
Dprmn o Cmec t t eehut no t es gr
e at e t f o m e o h x a sio f h ua
r
qoa fo t e Pilipins I q a t y anme o
ut r h h p e. n unit , u br f
ohr led g imot cmoit s s o e s bt nia
t e a in pr o md ie hwd usa t l
dc e fr mt ecmaaivlyh hvlu eo aya
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qa t ie o bs mt r ls in a t ipt n o pic
unit s f aic aeia
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avne adinrae cnu pio.
dacs n cesd os mt n
B uilding

I J ly t ea on o cnt ut nwr f acdb
n u , h mut f osr cio ok inne y
pivt fud s o e as aleinraeada pb ly
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f acd b ild g rcdd fut e, pivt ly f acd
inne u in ee e rhr r ae inne
cnr cs wr o lagr vlu t a p b ly f acd
ot at ee f r e a e hn ulic inne
cnr cs fo t e f s t e sne Ag s o lat ya.
ot at r h irt im i c uut f s er
Telagr a o n o pivt cnr csws e t e in
h r e mut f r ae ot at a nirly
nn eidnia wr , rpee t ginrae cnt ut n
o -rs e t l ok e rs nin cesd osr cio
o c e icl adt xilep ns Rs e t l b ild gd­
f hma n et la t . eidnia u in e
c e cnidr b fr m uet J lyadwst eo ly
lind o s ealy o Jn o u n a h n
mjo c sif aio t a wsins a r a on t a a
a r las ict n ht a mlle mut hn
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er g. h grgt a e f u in n nine­
in cnr csrpre b t eF W DdeCr oaio
g ot at e ot d y h . . o g opr t n
ws 6prcn blo Jn, bt t is dc ewsprly
a e e t e w ue u h elin r at
a
det adf rneinnme o bs esdy adt e
u o ifee c u br f uins as n h
rdcio int eaeaedilyvlu eo cnr csws
e ut n h vr g a o m f ot at a
lest a saoa s t a t isbn ’sine rs 1pin
s hn es nl, o ht h a k dx oe o t
inJ lyt 2 prcn o t et e do ps yas
u o 1 e e t f h rn f at er.
Dr g t e f s hlf o Ag s, pivt ly f acd
uin h irt a f uut r ae inne
b ild grcddfr mt eh hr lee t moailya­
u in ee e o h ig e vl e pr r t
t indinJ ly wilepb lyf acdcnt ut nin
a e u , h ulic inne osr cio ­
cesd
rae.

Sae Suhr NwYr Sae Hdo R e Vlle
t t , o t en e ok t t , us n ivr a y
D t ic, adt eCp a D t ic. TeRc et rsoe
isr t n h a it l isr t h ohse t rs
rpre ar t e s bt nia ginins le, bt int e
e ot d ahr usa t l a
as u h
rmin gloa ie s le wr nt a lag a lat ya.
e a in clit s a s ee o s r e s s er
Sle o t eled gaprl soe int is d t ic cn
a s f h a in pae t rs h isr t o­
t udcnidr b aoeaya ao
ine os ealy bv er g.

Locality

Percentage
change
July 1934
compared with
July 1933

Net

Stock
end of
month

Per cent of
accounts
outstanding
June 30
collected in
July

1933

1934

+ 5.0
— 3.8

45.4
39.6
39.2
25.0
38.0
36.4
30.0

47.7
41.8
42.3
33.3
40.1
37.6
29.3

+ 0.4

+ 3.8

41.1

43.7

+ 9.0

+33.4

41.6

41.9

New York...................................
Buffalo........................................
Rochester...................................
Syracuse.....................................
Northern New Jersey................
Bridgeport..................................
Elsewhere...................................
Northern New York State. . .
Southern New York State. . .
Hudson River Valley District
Capital District......................
Westchester District..............

+ 0.4
— 4.8

All department stores........
Apparel stores....................

+11.6 + 0.1
— 2.1 — 3.3
— 0.8 + 6.6
+ 2.9 — 4.8
+ 2.0 — 2.1
+ 4.4
+ 2.0
+ 2.0
+ 1.0
— 1.5

W h olesale T ra d e

J ly s le o t e r prin wo s le f m in t is
u a s f h e ot g hlea ir s h
d t ic aeae 9 prcn blo aya ao bt in
isr t vr gd % e et e w er g, u
t is cnet nit s o ldb nt dt a wo s let ae
h oncio hu e oe ht hlea r d
inJ lyo lat ya wsa t eh hs pin insvrl
u f s er a t h iget o t eea
yas Mn lins inluin hr wr, dus s os
er. a y e c d g ad ae r g, he,
ppr cto gos a dje e ys o e t eles fa o­
ae, ot n od, n wlr hwd h at v r
alecmais n insle inoe ay a; innalya
b o pr os a s vr e r er ll
css hwvr t eJ ly 13 s le wr fa aoet e
ae, o ee, h u 93 a s ee r bv h
s le o aya peios Goeys le ec s eo liqo
a s f er rv u. r cr a s xluiv f ur
dc e 6 pr cn fr ma ya ao fo w g m e
elind e et o
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r
t a aya o uiner pe inrae. Sle o s
hn er f n t rut d cess a s f ilk
gos rpre o ayr aebs b t eNt nl Fd
od, e ot d n adg ais y h aio a e ­
eaio o Txile, ad sle o mn c t in ad
r t n f et s n a s f e ’s loh g n
D ep a rtm e n t Store T ra d e
d mns c nr r t t e gnr l t ne c, s o e
ia od, o t ay o h e ea e dny hwd
s a r rdcio s fr maya aot a inJn, ad
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Dr g t e f s hlf o Ag s t t l sle o t e a o s
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t
rprin dprmn soe int eMt o o a ae o sysrfgaio eycnen rg t rda avneoe
e ot g e at e t t rs h er plit n ra f alea aot nr ocr s eisee n dac vr
NwYr s o e a i ces o aot 1prcn oe e .
e ok hwd n nrae f bu e et vr
t e crepnin pr daya ao Ec d g sle
h ors o d g eio er g. xluin a s
o liqo fr mh y a’sf ue, adces o aot1
f ur o t is e r igrs erae f bu %
pr cn int evlu e o bs es ws inict d bt
e e t h o m f uins a d ae , u,
saoa f cos cnidrd Ag s 13 ws t e bs
es nl at r os ee , uut 93 a h et
mnho t a ya fo rt il t aeint isd t ic.
ot f ht er r ea r d h isr t
Fr t e mnho J ly t t l sle o t e r prin
o h o t f u , oa a s f h e ot g
dprmn soe in t is d t ic wr o ly a t if
e at e t t rs h isr t ee n r le
aoeaya ao adwe liqo bs esisec dd
bv er g, n hn ur uins xlue
fr mt is y a’s f ue sle wr a poimt ly 1
o h e r igrs a s ee pr x ae %
prcn blo lat ya. Teya t ya cmais n
e e t e w s er h er o er o pr o,
hwvr bcm sm ht mr f vr b we a w
o ee, eo e o e a oe aoale hn llo ­
s w
ac i md fo df rne int enme o bs es
ne s ae r ifee cs h u br f uins
dy; soe int eMt o o a ae o NwYr wr
a s t rs h er plit n ra f e ok ee
gnr llyc sdo t efo rSt r ast isya, btwr
e ea loe n h u audy h er u ee
oe o t eSt r a bf r I dpne c Dyin13,
pn n h audy eoe ne e dne a 93
rmin gc sdo t eohrfo rSt r as D t ics
e a in loe n h t e u audy. isr t
wic s o e sle a les s hlyh hrt a aya
h h hwd a s t at lig t ig e hn er
aoinlue Nw ok Bide ot Nrhr Nw ok
g c dd e Yr , r gpr, ot en e Yr




Commodity

Percentage
change
July 1934
compared with
July 1933

Net
sales

Groceries........................................................
Men’s clothing..............................................
Cotton goods.................................................
Silk goods......................................................
Shoes..............................................................
Drugs.............................................................

Stock
end of
month

+ 3.8
+ 7.2
— 12.3
— 30.8
—43.7* +22.7*
—40.7
— 16.2
+ 2 8 '.i
— 3.8 — 0.5
+14.4
Paper.............................................................. — 0.5
— 4.9
+14.1
Jewelrv........................................................... — 11.9 — 2.2 {
Weighted average..................................

— 9.6

Per cent of
charge accounts
outstanding
June 30
collected in
July

1933

1934

84.3
31.7
32.4
64.8
37.4
20.3
40.7
62.3
39.3
21.0

90.4
37.2
37.9
63.8
39.6
18.1
45.9
59.0
45.2
{ 27.9

50.5

54.5

* Quantity figures reported by the National Federation of Textiles, Incorporated,
not included in weighted average for total wholesale trade.

FEDERAL RESERVE BANK OF NEW YORK
M ONTHLY REVIEW, SEPTEMBER 1, 1934
PR C N
E ET

Business Conditions in the United States
(Summarized by the Federal Reserve Board)
NDUSTRIAL production declined in July. Factory employment and pay­
rolls also decreased. Diminished output of steel was the chief factor in the
decline of industrial activity which was larger than is usual at this season
of the year. The general level of wholesale commodity prices showed little net
change for July and advanced in the first three weeks of August.

I

P r o d u c t io n a n d E m p l o y m e n t

Index N u m ber o f Production o f M an u factu res
and
M inerals
Com bined,
A d ju sted
for
Seasonal V ariation ( 1 9 2 3 - 2 5 avera g e =
1 0 0 per cen t)

Index of Fa ctory E m p loym ent w ith A d ju s tm e n t
for Seasonal V ariation ( 1 9 2 3 -2 5 a v e r a g e s
1 00 per cen t)

Volume of industrial output, as measured by the Board’s seasonally
adjusted index, decreased from 83 per cent of the 1923-25 average in June
to 76 per cent in July. This decline reflected chiefly a sharp reduction in the
output of steel, due in part to previous accumulation of stocks by consumers;
and there was a further decline in steel operations during tlie first three weeks
in August. Activity in the automobile industry decreased and there were
considerable reductions in the output of pig iron and anthracite. At textile
mills, where operations had been at a low level in June, activity showed little
change in July Output of shoes showed a seasonal increase. Accompanying
heavy marketings of cattle from drought areas there was a considerable
increase in activity at meatpacking establishments.
Factory employment decreased between the middle of June and the middle
of July by 3 per cent, an amount larger than is usual at this season. There
were reductions in many industries producing durable manufactures, such as
iron and steel products and building materials, and also at establishments
producing knit goods and women’s clothing. At canning establishments the
number of employees increased by less than the usual seasonal amount.
Employment on public projects increased further in July.
Value of construction contracts awarded, as reported by the F. W. Dodge
Corporation, was about the same in July as in June.
Department of Agriculture estimates, based on August 1 conditions, indi­
cate that yields per acre for principal crops are 22 per cent smaller than
the ten year average, reflecting the effects of the drought. The wheat crop
is estimated at 491,000,000 bushels, 37,000,000 bushels less than last year’s
small harvest, and the corn crop at 1,607,000,000 bushels, as compared with
a five year average of 2,516,000,000 bushels. The cotton crop estimate is
9,195,000 bales, about 4,000,000 bales less than last season and smaller than
in any other year since 1921.
D is t r ib u t io n

Total volume of freight car loadings declined in July, reflecting chiefly
a reduction in miscellaneous freight, including steel shipments, offset in part
by an increase in shipments of livestock. Department store sales showed a
decrease of somewhat more than the estimated seasonal amount.
C o m m o d it y P r ic e s

Wholesale prices of farm products, after fluctuating widely in July,
advanced considerably in the first three weeks of August. Between the be­
ginning of July and the third week of August, cotton, wheat, and hog
prices showed substantial increases while cattle prices declined somewhat.
During this period prices of commodities other than farm products and foods
as a group showed little change.
Group Price Indexes o f the Bureau o f L a bor
S ta tistic s ( 1 9 2 6 a v e r a g e s 100 per cen t)
B fL L fO N S

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V VL T E O N

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Wednesday Figures for Reporting Member
Banks (Latest figures are for August 15)




B ank

Cr e d it

Member bank reserve balances increased further between the middle of
July and the middle of August and on August 15 were about $1,900,000,000
in excess of legal requirements. The increase in reserve balances reflected
principally a further growth in monetary gold stock offset in part during the
first half of August by a seasonal increase in the total volume of money in
circulation. The volume of Reserve Bank credit showed little change.
In the four weeks ended August 15, loans and investments of New York
City banks decreased by $141,000,000, while those of weekly reporting banks
in other leading cities increased by $116,000,000. The decrease at New York
banks reflected a reduction of nearly $200,000,000 in loans to brokers and
dealers in securities, following a sharp decline in security prices in the latter
part of July, and a decline of $52,000,000 in holdings of United States Gov­
ernment securities. All other loans and holdings of securities other than
United States Government obligations increased substantially at New York
banks and at banks outside New York City. At outside banks holdings of
United States Government securities also increased.
Average rates of discount on United States Treasury bills issued rose
from .07 per cent in July to .23 per cent on August 22. Other open market
money rates remained unchanged at low levels.