New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-09-11
Nelus in Bank Statements
Some of the Important
Items That Are Watched
Keep Business Men In
formed ON Trade Trend

formed on Trade Trend
.---------------------
so as to indicate what amount member
banks are borrowing on Liberty bonds
and what amount ON Treasury certifi-
Gates. Those who defend the present
system assert that this information
may be gained from supplemental re-
ports issued by the Reserve Board,
but this is only partly true, and even
II 1t were entirely trus it would not
be an answer to the problem, for IL
the general public Is to follow the
statistical information should be dis
seminated in as simple manner as is
possible and the fewest possible num-
Der of statements. In brief, the whole
story ought to be told in ono report.
Another addition which might well
be made to the present form of report
would be the inclusion Of rediscount
rates. 1t might be impracticable to in
clude this In the consolidated report
when the individual Reserve Banks are
not operating on uniform rates, but 1t
would be the inclusion Of Yediscount
dividual banks to include their redis-
count charges in their statements. At
least the ninety-day commercial paper
rate should be given. In most pub
lished statements Of the condition of
the Bank Of England the minimum
rate of discount" is included and has
been found very valuable by most stu
dents.
In making deductions from the state
ment, increases and decreases In the
various items are, of course, carefully
watched. Naturally, an increase in re-
sources and decrease In liabilities is
xIn 70 rro1d hold
ings rise and deposit and note liabil-
ties fall, the reserve percentage must,
OF course, go up. However. this is the
most fundamental of comparisons, and
is so patent as not to require COM
ment.
A comparison which Is all too infre-
quently made is that between member
banks rediscounts and their reserve
DEPOSITS. Under the operation of the
Federal Reserve act it is possible for
Reserve banks to build up their legal
reserves entirely out OF their borrow
ings from the central institution, and,
serve deposits do at the present time
represent. rediscounts. In the state
ment of August 81 reserve deposits of
all member banks were placed at ST.
618.901 600, while their total redis-
counts, exclusive of bills sold to the
Reserve banks, totaled ST. ,491 1886, 900.
or $126,966,000 less than their deposits.
With rediscounts less than reserve de-
pcsits it is obvious that member banks
are keeping some of their actual cash,
as distinguished from the credits OBJ
the Reserve banks. On November 5,
1920, when rediscounts reached their
peak for all time, rediscounts, exclu-
sive of bills sold. totaled 81 $685. 1926 900,
against reserve deposits of 81, III, 229,-
COO. Then, In a time Of great expan-
sion, the member banks were borrow
ing l,049,576,000 more than they
needed for their reserve, and the plain
deduction from this is that this huge
excess was being borrowed by member
banks For the purpose Of relending to
their private clients. Further, it
should be noted that last November
the Federal Reserve banks were carry
ing $299, $4,000 in bills bought, while
on August 81 last they showed only
$4,000 of bill holdings. In other
words, the mount of aid rendered by
the Reserve banks to the financial com
munity has declined $1,599.294, 900,
while member banks reserve deposits
have declined only $15S, $4,000. Here
is real indication Of the contraction
in business.
The statements Of the individual Re-
serve banks are worthy of more care
full scrutiny than they are receiving
and, In the opinions of many, OF more
space than is being devoted to them
in the press. For instance, it would
be valuable contribution to financial
knowledge If the so-called naked re-
serve" Of each of the twelve banks
was presented. This naked reserve
would represent the exact condition of
each Reserve bank without considers
ton being given to the assistance that
one Reserve bank or group of Reserve
banks is rendering to other Reserve
banks. AS ali borrowings and lend;ngs
between Reserve banks are cleared
through the gold settlement fund, as
are all other intra- Reserve system bal
snces, the naked reserve" position of
each Reserve bank may be determined
by adding to or subtracting from total
reserves, of which the gold settlement
fund is part, sum equal to the amount
borrowed or loaned. In this way total
reserves Of each of the Reserve banks
would be increased or diminished end
the reserve ratio would expand or con-
tract accordingly. Such a statement
would show exactly the flow of strength
or weakness in all parts of the system.
1oiii0 AioHohS ago Cne teQeTal Re-
serve agent at the New York Reserve
Bank, in his monthly report on bust
ness conditions, published a chart
showing this naked reserve, but, 80 far
as the writer is aware. no attempt has
been made to present this Information
regularly or periodically. It could be
obtained, but it would require vast
amount of calculation and research
work by the student, and MOI infre-
quently he would experience considera-
Bile difficulty in obtaining the neces-
sary data.
1t is contended against this that the
position of the individual Reserve
bank is of but minor mportance-that
the position of the system as whole
Is all that matters. This argument is
based on the theory that all reserves
are highly mobile, which is true, and
that the Reserve Board has abundant
power to order reserves from
strong" district into "weak" dis
trict, and that the operation can be
accomplished within very short tins.
which also is true. Nevertheless. the
TACT remains that loans do have to b.
made from time to time by one Re-
serve bank to another. and when this