Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1921-07-31
Eastern Banks Flooded
With Unused Surplus
Due to Small Demand.
Federal Banks in Four
Districts Report They
Are Loaned to Limit.
BY HARDEN coLFAx,
Special Cores pondent Of The Tribune

opee'o' Correspondent OF The Tribune
Copyright 1921 by The Tribune.
Washington. July 3O.-Locked and
idle in the Golfers of the four eastern
reserve banks at Boston. New York
| I,hliadelphia and Cleveland is more
than $500. O.OOOO in unused gold re-
serves. This money is potentially
capable of furnishing credit tosthe e1-
tent OF ten billions of dollars. hut
there is SO little demand for Il in the
east that rediscount rates have dron-
pea twice within q few weeks.
Loaned up OF capacity-and in one
case beyond it-are the four federal
reserve banks in the agricultural cen
ters Of Richmond, Atlanta, Minneapolis
and Dallas. The farmers in that great
territory find the money market 80
tight that it is extremely difficult to
get credit on any reasonable terms.
Plenty Of Money Available.
The 'east, with it's great industrial
centers. still travelling at a conserra- 4
tive pace, has more money than it can
lend; the west and south, needing mon
eey as seldom they have needed it be-
fore can hardly get it at any figure.
Some way should be found, many
bankers believe. whereby eastern cold
can supply western and southern wants.
The federal reserve board is studying
the situation and remedial steps NAV
be proposed.
True. the reserve banks at Rich
mond, Atlanta, Minneapolis and Dallas
could borrow gold from their vealthv
colleagues, the reserve banks at New
York, Boston. Philadelphia and Chve-
land but the interest rate CHARGED by
the four banks with surpiusases are
such that there would be virtually no
profit IN the transaction for the bor-
rowing banks. This, too, is recognised
as sound banking practice on the part
OF the lending bank-to charge reas-
enable interest rate, which in this case
happens to be what the borrowing bank
would have to charge their customefs-
but it doesn't lend itself to correcting
the condition in the agricultural COM
munities.
Banks Borrow Little.
Notwithstanding the lack of profit,
there have been such borrowings re-
Gently, Atlanta and Dallas. needing
funds. have borrowed about $23.O 3.OOO.-
coo from Boston and Cleveland. there
" making available minimum of about
$115. 100000 in credit for borrowers
in the Atlanta and Dallas districts.
Richmond and Minneapolis went to
New York and borrowed sos. COO, 900,
enough for them to pass on to the farm
ers in their sections about $oOO. O.OOO, 900
in loans.H The total borrowings Of the
south and west from the east. the
statement shows, is about S61 .000. 600
Or less than onefourtefnth part Of
what is available to lend.
study of the reserve boards state
kaf %hA k~ T.
the following amounts of so-called free
yold-gold not working-which could
be loaned to the agricultural banks
10 help out the farmers. If such a pol
cy were deemed desirable
Boston S130667, 600; New York
s465. .96s.0O0; Philadelphia S93. .43a.-
100: and Cleveland $1O4,9S9, 600. The
otal is $SO3 .983, 900. The reserve
'ank at San Francisco also has money
o lend
This free gold is expanded about
-welve times in actual practice when
t is converted into credit to the man
who goes to his bank to borrow money.
Thus, the federal reserve hank expands
t two and one half times in redis-
counting the paper of the member
'ank borrowing from it. On that
'asis. the gold would provide from re-
discounts totalling more than $2,0W,-
10000.
The member bank borrowing from
he federal reserve hank theoretically
ould expand the rediscount value Of
he free gold ten times. In actual
'ractice it is generally expanded five
ines. Thus the two billions Of retiis-
cunts could be expanded to ten bill
ions in loans through member banks.
Seek New Method.
All national banks and a great many
tate institutions and trust companies
re members Of the federal reserve
ystem Theoretically all the surplus
eserves of the federal reserve system
re available to borrowers. regardless
geographical location. 5lt actually
doesn't work out that way. When
ne federal reserve bank in Dallas, for
lstance. is loaned up to capacity, the
'exas farmer simply can't borrow re-
ardless of whether there 10 an enor-
lous surplus in the federal reserve
ank at New York or not, unless the
'allas bank borrovs from the New
ork bank and that nets no profit 70 the
lallas bank under existing practices.
The advisability of changing the SIT
alton so that Dallas could borrow
.eely from New York and at Z reas-
nablee profit ID one of the problems
the bankers concerned and
receiving their attention.