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x BARKING AKD MONETARY IEVELOPMENTS IN FEBKUABY 1957 : L:3uKSV, Summary. Total loans and investments at all commercial banks declined somewhat further in February reflecting reductions in holdings of U. S, Government securities offset'in part by increases in loans and holdings of other securities. Demand deposit and currency holdings of businesses and individuals probably declined by about the usual seasonal amount. Member bank reserve positions tightened and banks moved from'a position of free reserves to one of net borrowed reserves. Bank credit. Preliminary estimates indicate that total loans and investments at all commercial banks, as shown In Table 1, declined about $400 million in February# the smallest reduction in recent years. U. S. Government security holdings declined $800 million# with about half the decline assumed to be outside large city banks. Banks purchased about half of the newly offered $1.8 billion of Treasury tax anticipation bills on February 15 but sold securities heavily at other times. Loans, principally those to business'and agriculture, and holdings of other securities increased somewhat. Last year in February the total credit decline was three times as large due principally to a much larger reduction in holdings of U, S. Government securities. Total loans and holdings of other securities generally show small increases in February. Business loans at all commercial banks increased about $100 million, slightly less than last year, although these loans usually show only small changes in February* In January 1957 the reduction in business loans had been larger than in any other year, but the end-of-the-year rise in these loans had also been of record volume. On balance, so far this year, business loans have declined around $1 billion, about three times as much as last year. In February, loans to metals manufacturers increased considerably after declining in the early weeks of the year. Loans to textile manufacturers and trade concerns also rose as is usual in February, Loans to petroleum producers, which generally had been increasing since the first of the year, declined sharply in the last week of February, Also, loans to public utilities, which had increased in January, declined early in February and showed only small growth thereafter. Seasonal loan repayments by food processors and commodity dealers were at a more normal rate in February following unusually large repayments in January. Loans to sales finance companies Increased in1 February whereas last year they had declined substantially. Not for publication L w -2Table 1 Estimated Changes in Loans and Investments at All Commercial Banks , of dollars) Item Total loans (excluding interbank Business Real estate Security Agricultural Consumer All other Jan* 31# 1957 Feb. 27, 1957 Jan* t>6,Dec. 27, Jan. 1, Year ending: 1956 1956 1956 Feb. 29, Feb. 27, Feb. 29, Feb, 27, Feb. 29, 1956 1956 1957 1957 1956 + 0*2 + 0*3 «• 1*9 «• 0.8 + 6*8 + 0.1 1/— + 0*2 + 0*1 - 0.1 + 0.1 l/— • lei — 0.3 + 0*2 — o.5 — Ool + + m + + y — + 0*1 l/— - 0,1 y ~ l/— - 0.6 + 0*2 •» 0*1 - 0*3 X . 1 Uo8 1*6 0*8 0.1 1*3 0*1 +11*0 2 A 6*1 2/+ ~ + + + 2*2 0.6 0.7 2.3 0*7 U, St> Government securities - 0*8 - 1*7 " 1*6 - 2.lt - 2*5 - 7*6 Other securities + 0*2 + 0.1 + 0.2 . 0.1 * 0*2 - 0.2 - o*L * 1.2 - 3*3 - 3*2 + U.o + 3*3 Total loans and investments (less interbank) "5/ Level of business loans increased by# and real estate loans decreased by# " $300 million at end of October 1955 to correct classification errors* No back figures revised; most of the misclassification probably occurred during Note; Data for February 1957 are estimates and subject to change* Preliminary *~~~ data for February will be shown in the Board's statement, "Assets and Liabilities of All Banks in the United States" available at the end of March* So far this year, about 70 per cent of the reduction in business loans at city banks has represented net repayments by seasonal borrowers—food processors, commodity dealers, and trade concerns—as shown in Table 2. The decline in these loans was larger than in any other year, but these1 industries also had shown unusually large increases in late 1956. Loans to sales finance companies declined somewhat, but much less than last year when the reduction was unusually sharp. Growth in borrowing by other industry groups, however, totaled only about $25 million this year compared with $500 million last year. Loans to metals manufacturers increased about a third as much as last year when borrowing was unusually large, mainly for inventory accumulation in anticipation of a steel strike. Loans to public utilities also rose less and those to petroleum concerns declined whereas last year they had increased. Differences in loan volume between the two years probably reflected in part heavy capital market financing in 1957 by some of these companies. http://fraser.stlouisfed.org/ Not for publication Federal Reserve Bank of St. Louis « 3 Table 2 Changes in Commercial and Industrial Loans (In millions of dollars) Business of Borrower Jan.31, "Feb* 2," 19561957Feb.27, Febc29, 1957 1956 2/ 1957 Food processors Commodity dealers Trade concerns Total - 86 - 70 +27 3R9 -100 + U +71 Sales finance + 33 All other - total Metals and products Textiles, apparel and leather Petroleum, coal, etc* Other manufacturing and mining Public utilities Construction All other types of business Classified Unclassified Total change y First nine weeks 1956 1955 1951 1953 1952 -20b *200 + 1 *&1 -Slit - 86 -379 +166 +70U -3h0 -137 -206 -233 - 30 - 11 -2l|6 -157 - 8ii =%%7 —216 -105 -126 -255 -153 -U78 +103 -229 +118 +3W 7517 Tin 7315 +U97 +259 -328 + 83 - U5 + 31 + 1*8 + 60 - 28 + 5U + 93 +139 +112 + 59 - 87 + 87 + 7 + 9 +113 + ia - 53 - 9 + 58 3/ * 23 + 20 + h7 - hi + 69 + 78 - 33 - 2 • 10 + 2 - 35 - 55 - 8 - 16 — 62 - 10 + 22 - 63 ~ 31 + 13 -139 m 80 - 31 - 52 - 9 - 31 + 23 + 32 + 12 + 6k *810 -167 -126 -i,ooU -255 - 95 U/- 56 5/+ 31 - 322 -278 - 1U6 + 8 + 55 + 76 -977 - 350 y - 1 8 2 - U68 -270 ^583 + 25 5/-973 o m 715? —i.60 - 37 y Four weeks are included in this comparison whereas five weeks are included in data in Table 1, Less than $500 thousand* $ CCC certificates of interest* which are included in data, may have declined $115 million# 5/ CCC certificates of interest, which are included in data, may have increased $175 million# Note* Classified data are for a sample of about 210 banks reporting changes in their larger loans, these banks hold over 90 per cent of total commercial and industrial loans of all weekly reporting banks and nearly 70 per cent of those of all commercial banks* Data are preliminary for week of February 27, 1957* Wot for publication Eeal estate loans at all commercial banks probably showed little further change in February, Reductions at banks in leading cities, which were more moderate than in January, probably were about offset by continued growth at smaller banks. Consumer loans are estimated to have been about unchanged in February following a small decline in January, So far this year, the reduction in these loans has been less than seasonal. Agricultural loans increased slightly in both January and February reflecting growth in CCC loans. Security loans, which had declined seasonally in January, showed little further change in February. So far this year, total credit at all commercial banks has declined $3.3 billion, about the same as in the comparable period last year. In January and February 1957> loans declined about $2 billion and holdings of XJ, S. Government securities about $l*l/2 billion, but holdings of other securities increased slightly. While the reduction in loans appeared to be due largely to seasonal influences, it was over twice as large as in the same period last year. The reduction in holdings of U. S. Government securities, however, was considerably less than last year. The rise in holdings of other securities was in contrast with a decline last year. The appended table, "Loans and Investments at All Commercial Banks" shows types of outstanding loans and investments monthly for recent years, and quarterly or annually for previous years. Deposits and Currency. Preliminary estimates indicate that demand deposits and currency held by businesses and individuals declined by about the usual seasonal amount in February, as shown In Table 3. At the end of February 1957# the seasonally adjusted money supply was about 3 A per cent higher than a year ago, but the money supply at the end of February last year was relatively low following a more than seasonal decline during the month. At the end of January 1957 (the latest month for which adequate data are available) the money supply was slightly less than l/2 per cent above its year-ago level. Time deposits at commercial and mutual savings banks may have increased about $800 million further in February, not as sharply as in January, but much more than usual. The unprecidented January rise of almost $1 billion at all commercial banks presumably was associated to some extent with increases in rates paid on such deposits. At mutual savings banks, however, the growth in January was $ X 0 0 mlljiSm# only half as much as in January 1956, l»o s& increases at mutual savings banks were also somewhat smaller in December and January than in previous months. Not for publication m $m LJU3 Table 3 Estimated Changes In Deposits and Currency (In billions of dollars) Item Jan# 31j "3an» *2£"," Dec. 27, 1956 m 1956 1957 Feb. 27$ Feb. 29, Feb. 2f, 1956 1957 1927 Seasonally adjusted data 1/ Demand deposits adjusted "" Currency outside banks Total Unadjusted data 1/ Demand deposits adjusted Currency outside banks Total Time deposits U« S. Government deposits Total + 0.8 + 0.6 ="13 - 3.3 + 0.1 + o.U m + 1.7 — O.U - 0.2 * U*3 • 0.9 + 0*2 + 1.1 + 0*9 + 1.1 TTJ «• 1.1 + 0.1 + O.U + 0.1 TTZ5 + U.9 *" lqlt + O.U TT3 + 3.1 m 0.6 run (signs indicate effect on deposits and currency) + 0.5 +TO + 0.6 + 0.1 + 0.2 — l.U - 1.8 •» 0.8 - 1.7 + 0.1 — 0.5 y - 1.5 rirf + 0.3 *» 0e6 - 3.7 - 2.1 — 1.6 1/ • o.U • 0*1 - + o.U + 8,9 + 6*6 + 2.U +13.3 7EO + 2.U - 3.7 * 3.8 - 2.U 1/ - 2.5 - 0.7 - 0.2 - 7*6 * 0.5 1/f + 0.7 - 1.2 - 0.1 - 0.7 - 0.6 # V" -2.7 0.3 o.U TO Year ending* CO « Factors affecting deposits and currency Bank loans and investments other than U. S. Govt. sec. Commercial Mutual savings Bank holdings of U. S. Government securities* Federal Reserve Commercial Mutual saving and other Gold stock and foreign deposits at F. R. Banks Other factors w 0.6 2/ — Jan. I/" 1956 Feb. 29fl 1956 for last Wednesday except in case of June and December call dates, when available* Less than $50 million* Changes between December 26,and December 31, 1956, are estimated as follows* Demand deposits adjusted, + # 0 0 million; currency outside banks, no change; time deposits, +#200 million; and U. S. Government deposits, -$500 million. Total includes foreign loans on gold, holdings of bankers' acceptances at the Federal Reserve, and loans to foreign banks; changes in these items are generally relatively small. In addition even if there were no changes in these items, changes at commercial and mutual savings banks would not add to total change which is "net" because commercial banks exclude all interbank loans, domestic and foreign; in addition, there are probably some bookkeeping discrepancies among various banking records. Note* Data for February 1957 are estimates and subject to change. Preliminary data for February will be shown in the Board's statement, "Assets and liabilities of All Banks in the United States" available at the end of March* Hi v Digitized forNot FRASER for publication L.U.3 Central reserve city banks in New York and Chicago participated only slightly in the January time deposit rise, although the December increase at these banks had been unusually large* At reserve city and country banks, these deposits rose about 2 per cent. The largest increase in any geographic area was a 6 per cent rise in the Atlanta District$ where nearly all large banks are reported to have raised their rates following the increase in the interest rate ceiling# Growth was also substantial in the Dallas and Minneapolis Districts, where increases in rates paid were also quite general. In the Chicago and Cleveland Districts, where rates paid on time deposits have shown little change recently, these deposits rose only about 1 per cent in January* The major factors underlying the $1*3 billion decline in total deposits and currency in February were the reduction in total credit at commercial banks, noted above, a $600 million decline in Federal Reserve System holdings of U* S, Government securities, and changes in miscellaneous factors totaling about $lt00 million* The February growth in U. S. Government deposits was somewhat smaller than usual, reflecting recent pressure on the Treasury cash position from such factors as increased defense expenditures, net redemptions of savings bonds, and heavy withdrawals by the International Monetary Fund* So far this year, seasonally adjusted demand deposits and currency have declined by about the same amount as last year# Also, changes in total deposits and currency generally have been comparable. While the loan decline at commercial banks was much larger this year than last, reductions in holdings of U« S. Government securities were smaller. Reductions in Federal Reserve System holdings of U» S* Government securities were considerably larger this year than last, but increases in gold, stock added to deposits and reserves and in addition, drains from other miscellaneous factors were smaller this year than last* Bank reserves* Member bank reserve positions tightened in late January and February and banks moved from a position of free reserves to one of net borrowed reserves, as shown in Table U* Net borrowed reserves averaged $1U0 million in February compared with free reserves of $120 million in January* Borrowings from the Federal Reserve increased to a level of $6U0 million and excess reserves declined to about $$00 million* The effective trading rate on Federal funds was always at 3 per cent in February whereas in January it had frequently been below the discount rate. All classes of banks increased their borrowings in February and country banks reduced their excess reserves as well* Not for publication L.lu3 - 7" Table 1* Free Reserves (Excess reserves minus member bank borrowings} based on average of daily figures} in millions of dollars) Period All member 550 3 2 - 127 - 161 - 13U • 1*3 - Ill* - 83 - 151 167 1*09 338 l*ol* 377 365 338 - 198 - 138 - 17U - 167 •» 88 83 103 256 262 153 Ill 18 72 93 lilt il*o 86 «• 353 - 336 • 298 - 1*29 - U68 • 356 - 3UU ~ 382 379 310 319 321* 108 158 20l* 192 21l* 91 — - — 296 - 216 - 193 - 203 360 271* 380 358 393 31*1* 117 - 11*1 — Ill - 12lt - 1*0 53 - 172 - 253 369 289 251* 158 • 127 - 365 - 29 1 - 112 - 192 — - 75 61* 67 95 - 99 - 150 - 323 - 118 1*57 371* 375 31*1 — 310 Ill 230 128 - 170 - 96 - 157 • 166 - 11*7 - 175 - 71 - 113 - 336 278 338 365 • 135 - 139 - 173 20 - 261* - 302 - 12 - 110 - 161* 95 - 117 - 121 - 17 - 1U - 39 - 57 - 90 - 127 • 266 March June September December 121 168 - 285 - 2U5 1956$ January February March April May June July August September October November December - 255 *• 266 «• 1*08 - 533 January February Quarterly averages 1955* First Second Third Fourth ~ 5olt - 195 139 339 213 195 151* 36 — - m » • - 50 33 * 329 1*18 31*1 211* 1957* Jan. 30 Feb, 6 13 20 27 March 6 Notel Data for second half of February and March are preliminary. Not for publication Country 26 1955* First Second Third Fourth Reserve City - December 1956* Chicago 16 1*59 19 5U* 1957* New York - 26!* 21*7 210 301* 278 205 305 160 21*9 277 381 21*7 221* Reserve positions by class of bank have shifted somevhat compared with late last fall when net borrowed'reserves of all member banks were about the same as in February. At central reserve city banks in New York and Chicago, net borrowed reserves were lower in February than in the earlier period but they were higher at reserve city banks and free reserves were lower at country banks. Over February, as • shown in Table 5, more reserves were absorbed through sales of U. S. Government securities, reductions in Reserve Bank float, and changes in other factors tending to drain reserves than were supplied through reductions in1 required reserves, currency inflows, and increases in gold stock. Reserves eased considerably at the mid-month, with excess reserves temporarily exceeding borrowings, when float rose and Treasury deposits declined. Subsequently, however, reserve positions tightened again. System holdings of U. S. Government securities were reduced about $530 million between the end of January and the end of February following a decline of almost $1.5 billion in January. At the end of February, these holdings were lower than at any time since mid-1952. In January last year, holdings declined $1.3 billion and then increased slightly in February. So far this year, reserves supplied through currency inflows, reductions in required reserves, increases in gold stock, and Treasury operations have exceeded in substantial volume the amounts supplied in January and February last year. However, reductions in System holdings of U. S. Government securities have been much larger this year than last > float has declined more, and other miscellaneous factors have tended to drain reserves rather than to supply them. On balance, net borrowed reserves have increased about $100 million this year whereas last year they increased only slightly. Not for publication L.U.3 - 9 Table 5 Changes in Member Bank Reserves, with Relevant Factors (Monthly average of daily figures; in millions of dollars) Year ending Feb* "Jan« « Feb» "February Item 1957 1956 1957 1956 1957 1956 - k79 - U29 ~ 719 - 531 + 107 . 110 - 23 - U56 - - 153 - 62 - - Member bank reserve balances Total Excess reserves 1/ Required reserves T/ Federal Reserve loans and investments* U* So Govt* securities Outright Repurchase agreements Acceptances Discounts and advances* To member banks To others - l|09 + UU5 + 1*06 + 278 - 20 - 237 - 193 + - 981 - 973 8 9 + 23U 1 U2 - 130 - 187 - h9 - U96 rrn - U7 5 - 1/ Data for February 1957 are preliminary* Not for publication - 566 - U69 33 + lUo 92 - 18 (signs indicate effect on reserves) Principal factors Currency in circulation Gold stock and foreign accounts Treasury operations Federal Reserve float Other factors 20 8 +1,180 +1,051 - 381 - U30 + 37U + 89 # 527 + 100 — 62 + 61U + 35 + L8 + 255 + 76 - 120 m -1,201 - 239 - 22 + - lt2U + 53 U8 7 - 9U3 - 258 3 - ho + 183 + 111 # Ul - 290 -~292 + 2 + 13 ZT3I - 25 - 159 + 2U - 118 + 16 + UU5 L.lw3 Loans and Investments 1% All Commercial Banks (In billions of d6Hars) y* s; * Other Loans Real SecuCon- All Gov't, secur- Total and Farhi Business estate rity sumed other invest- secur- ities loans ments ities Date 116*2 69,2 62.6 lilt* 2 120.1 67*0 126*6 62,0 132*5 , 61*5 63*3 111*5 63*14 1U5.5 69*0 155*7 9*0 9*2 10*2 12.lt 13*3 llt.l Ut.7 16*3 37*9 lt2*lt lt2.9 52.2 57*6 61t.O 67.lt 70.lt 18.3 18*9 17*1 21.9 25.9 27.9 27*2 26.9 9*lt 10*8 11*5 13*5 llt.6 15*7 16*7 I8.lt 2al 2*3 2*6 2.9 2.6 3*2 3*6 lt*5 3*8 1*7 2*9 lt*9 3.1 5.8 2,9 7*it 3*lt 7,5 9olt 3.9 5*0 10,9 5,2 10*9 2*9 3*1 3*lt lt*2 U*5 lt*9 5,1 5,6 155*5 153*8 152.a i51t.lt 151*5 151*8 155*8 155*6 156.1* 158.1 69.0 66.8 6U*2 65*6 65.0 63*3 63*7 62*5 62,0 62*9 16*7 16.8 17.0 17*0 16.7 16.8 16.7 16.9 16.9 16.8 69*8 70.2 71*2 71.8 72*8 71*8 75*lt 76.2 77*5 78.lt 26*6 26*8 27.lt 27*6 28*0 28.9 29.1 29.9 30*5 18.6 18.8 19.0 19*2 19.5 19.8 20,0 20,3 20,6 lt*0 3*9 lt*l lt.3 lt*3 lt*5 lt*5 lt*2 it* 2 lt.lt 5,2 5*2 It.9 lt*lt lt.it lt»lt lt.2 3*9 3*9 lt.0 id. 9 11.0 11,2 11.5 11*7 12*1 12*3 12*5 12.7 12.9 5,6 5.7 5*8 5.9 6*1 6*2 6.3 6,it 6*6 6,5 Nov. 30 Dec. 31 158.2 160.3 6l.lt 61.6 16.6 16.7 19561 Jan. 25 Feb. 29 Mar* 28 Apr. 25 May 30 June 30 July 25p Aug. 29p Sept.26p Oct. 31p Nov* 28p Dec* 26p Dec. 31e 158.3 157.1 158.5 158.7 l58.it 159.3 158.3 159.8 160.7 161.3 162.6 I61t*lt I6lt*6 60.9 59*2 58.6 58.2 57.3 56.6 56.2 57*2 57*0 57.lt 58*1 58*3 58*6 1957* Jan. 30p Feb. 27e 161*5 161.1 57*5 56*7 19lt7< 191*8* 19lt9* 1950* 19511 1952$ 1953* 1951% Dec* Dec* Dec* Dec. Dec. Dec* Dec, Dec. 31 31 31 31 31 31 31 31 1955* Jan. 26 Feb. 23 Mar. 30 Apr. 27 May 25 June 30 July 27 Aug. 31 Sept.28 Oct. 26 V&3. H & l . 80.2 82.0 32*3 33*2 20.7 20,8 lt,5 5,0 lt.3 13,0 lt,5 13.2 6.5 6*5 16*5 16.6 16.6 16.6 l6.lt 16.5 16.3 16.lt 16.5 16*3 16*3 16*2 16.2 80.9 81.2 83.3 83.9 814*7 86*2 85.8 86.3 87.2 87,6 88.3 89.9 89*8 32*7 32*9 31*5 3U.8 31.8 36.1 35*8 36.lt 36.9 37*2 37*8 38*8 38*7 20.9 21.0 21.2 21.lt 21.6 21.8 21,9 22.1 22.3 22.lt 22.5 22.6 22.6 lt,6 lt.5 lt.5 lt,lt lt.5 lt.lt lt.3 It.o It.l It.l lt.0 lt.3 lt,3 lt.lt it, 5 lt.lt lt,3 lt.it lt.3 It,2 lt.0 lt.2 lt.0 It.l lt.2 It,2 13*3 13.3 13.5 13,7 13.9 lit,3 llt.lt llt*U lit.5 llt.5 llt.5 lit. 7 lit*7 6.1t 6*lt 6*5 6.6 6.7 6.7 6.6 6.7 6*6 6*7 6*8 6*8 6*9 16.2 I6.lt 87*8 88.0 37*6 37*7 22*6 22.6 3*7 3.7 It,3 llt.6 lt.lt llt.6 6.6 6.5 \j Level of business loans increased by, and real estate loans decreased by $300 million at the end of October 1955 to correct classification errors. No back figures revisedj most of the misclassification probably occurred during 1955* Note* Data exclude interbank loans. Total loans are after and types of loans before deductions for valuation reserves. Consumer and "other loans" are partly estimated for all dates. Other data are partly estimated on all but June and December dates. Data for December 31 > 1956* and February 27# 1957* are estimates and subject to change. Loan data for December 31* 1956 are based on preliminary member bank call report data. Banking Section* Board of Governors http://fraser.stlouisfed.org/ Nat for publication March 12* 1957 Federal Reserve Bank of St. Louis
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