The Washington times., 1928-12-20
Reserve Boards Survey

Calling attention to the situation
OF a reduction Of bank credit at a
season of high business activity
as an unusual occurrance," the
Federal Reserve Boards analysis of
finances for November was made
public today.
Condition reports for all member
banks of the Reserve System rs
of October 3, show a decrease in
loans and investments of about
$3.50, ,000, 900 during the third quarter
of 1925" the board said.
For the year ended October 3.
the growth in member bank credit
amounted to $1,744 900 900, or SD
however, there was a decrease IF
$132 100000, entirely in banks in
vestments.
Net demand deposits decrease
for the year, while time deposits
increased by $3.50, 900 900. During
the last quarter there were de-
creases both in demand and time
deposits. Owing to the decline in
demand deposits, which carry
higher reserve requirements, re-
serve balances of member banks
Notwithstanding the large growth
IN total deposits, showed little
SIldHSS LOT the year.
The much larger growth of loans
and investments than of deposits
for the year, which reflected chiefly
the withdrawal of gold for export,
accounted for the large increase in
member bank indebtedness at the
reserve banks.
"A reduction in bank credit, par
ticularly at this season Of the year,
as an unusual occurrence -
According TO the board, declines
in the volume of credit have been
1nfrequent during the last nine
years. Ordinarily bank credit has
expanded from quarter to quarter
in conjunction with the growth of
the countrys business. and occa-
sIonal declines have occurred as a
rule only from seasonal high peaks
reached at the end of q calendar
or fiscal year.
The board pointed out that the
reduction in the volume of mem
Der bank credit during the quarter
was entirely at banks in New York
city, while the combined total for the
other banks, and particularly for the
so-called country banks located out.
side reserve cities. increased for the
period.
AT banks in New York there
was a decrease both in loans and
investments, while outside of New
York city the banks increased their
loans. but reduced their holdings of
Investments the analysis said.
Holdings of United States
securities showed considerable in.
creases in all classes of member
= banks, while holdings of other in.
vestnents declined throughout the
system, the aggregate decline being
in excess of $500, 900. 900.
"The figures indicate that the
pressure of higher money rates
which have been in effect during
the quarter, has been an influence
in inducing member banks through
out the country to dispose of a par
of their holdings of municipal anc
corporate securities and that bank,
in New York city, where rates have
shown the greatest advance, have
reduced both their investments anC
loans"
Loans Reviewed
It was explained that the decline
In loans at New York banks wa
accompanies by a growth of loan
extended through these banks b.
corporations and individuals. Dur
ing the period of low money ratei
from 1922 to 1927 securities wer
floated by corporations in excep
tionally large volume, and the pro
ceeds of these flotations not onl
strengthened the cash position o
the corporations and enabled then
to reddce their bank loans, but ais
placed at their disposal funds Il
excess Of their current require
1aenta.