New-York tribune., 1921-02-28
Credit Defation
And Price Decline
Growing, Says Bank
Readtustment Continued i'm
February, Leans Show.
ing lib p. c. Drop From
Peak, NY. Reserve Shows

Pierre jay, Federal Reserve agent
OF the Federal Reserve Bank Of New
York, emphasizes the fact In his
monthly review Of credit and business
conditions IN this district, out to-day.
that commodity prices. bank loans and
bank deposits have oil continued to
decline during February, carrying
further the process Of readjustment
that has been going on for several
months,
Regarding the credit and price Sit
uation the bank has prepared special
compilation showing that:
/. The Department of Labor index
of wholesale prices for the month of
January showed decline from the
high point reached in May, 1920, of 35
per cent. The Reserve Banks index
of wholesale prices of twelve basic
commodities showed decline on Feb
ruary 19 from the high point reached
On May II, 1920, of 48 per cent.
2. Total loans of all Federal Reserve
banks showed on February 18 a de-
cline from the high point reached on
October IS, 1920, of 18 per cent.
3. Total loans of the Federal Reserve
Bank of New York showed on Feb
ruarY 18 decline from the high point
reached on February 27, 1920, of 18
per cent.
4. Total loans of 829 member banks
in pricipal cities throughout the coun-
try showed on February II decline
from the high point reached on Oc-
tober Is, 1920, of per cent.
s. Total loans of seventy-two mem
ber banks in New Yorl, City showed
on February II decline from the high
point reached on October 10, 1919, of
II per cent.
6. Total deposits of S29 member
banks throughout the country showed
on February II a decline from the high
point reached on January 16, 1920, of
Z per cent.
7. Total deposits of seventy-two
member banks in New York CITY
showed on February II a decline from
the high point reached on September
19, 1919, of 18 per cent.
The rapidity of the fall of prices dur
ing the last three months of 1920 par
tlcuIarly, the Reserve agent says, has
required the continued use of credit for
the protection of farmers, manufactur-
ers and merchants. If they had been
forced for purposes Of liquidation to
throw their stocks on the market at
one time they would have been obliged
to face situation far more serious
than any that developed, and the prices
which they would have realized would
have been far lower than the prices
which actually prevailed.
1T Is entirely natural that Federal
Reserve Bank loans at this time should
show a greater percentage decline than
do those of member banks" he con-
tlnues. Bankers have found it advan-
tageous to use surplus funds to pay off
loans at the Federal Reserve Bank as
funds became available, and such slack
as has developed in the volume of
the Federal Reserve system.
"The deposits of member banks.
taken the country over, have declined
in much the same proportion as their
loans, thereby conforming to the GEN
eral banking principle that loans and
deposits tend to rise and fall together.
But, the loans and deposits of New
York City banks at this time show no
such close relation. This is due in
great measure to the fact that there
mas been marked tendency for loans
~ S4Ai- - OAIi OIIiC1 EJdILS OIL the cOQ0-
try to New York, the financial center.
AS pressure to liquidate has increased
IN other Federal Reserve districts upon
banks, corporations and individuals. a
growing demand for loans has been
manifested in New York from those
districts. Much of this demand has
oeen upon banks of large resources in
New York City doing a nationwide
business. Not only have they gwen
accommodations in large amounts to
banks and corporations in other parts
of the country, but the balances which
banks ordinarily keep with them have
been drawn down. From January l to
February 10 the deposits of the lead
ing New York City banks declined
$4,000, 900, of which about $11OO0O,
600 represents the drawing down of
deposits in New York City by out-of
town bank sk1ndents, and is in
addition to the accommodation New
York City banks have given to banks
and corporations in the interior.
AN important factor in the decline
in loans both in New York CITY and in
the country as whole is found in the
reduction of loans secured by United
States war obligations. Such loans In
New York City banks declined from
$500 oO0 600 on January 2, 1920, to
S336,0O0,Ooo on February Il, 1921, and
IN the banks of principal cities
throughout the country declined from
SI,323, 100000 on January 2. 1920. to
Sl96,0O0,OO0 on February II, 1921"