Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-15
LOANS BY RESERVE
INCREASED |NPAN|C
Member Banks Reported Gain
in Borrowings as Security
Prices Dropped.

The six days from October % to
october 20 covered q period of more
pressing liquidation in securities than
has ever been witnessed in American
financial history, says an article by
Norman Merriman In the current issue
time the New York Times index of in
dustrial stock prices dropped from a
high of 400 to a low of 247la, or ap-
proXimately 20 per cent. Total trans
actions on the New York Stock Ex-
change on October 90 amounted to 49,
388. TOO shares. and on the New York
Curb to 1906, 800. The total shrinkage
Of values on the New York Stock Ex-
change for that one day was estimated
at about $4,000 ,O0O
In spite of the avalanche of selling
which took place that week. which, ac-
cording to all precedent, should have
been reflected by an enormous drop in
the security loans of the member banks
OF the Federal Reserve system which
make weekly reports (these banks have
about two-thirds Of the resources of all
Federal Reserve member banks), total
security loans of these banks increased
during that week from $500, 600, 900 to
SO, 179 ,0000 900, a gain of ST. ,259, 000, 900.
and total loans and investments Of
these banks rose from $22, 895. 900 900 to
$24, All 900, 000-an increase Of 1885,
100000.
New York Report.
In this same period New York City
brokerage loans, as reported by the
Federal Reserve Board, declined 1885,
100000, but total loans and invest
mentS of the New York City member
banks increased 1891 900 900. Nearly
all of the increase in outstanding men,
Der bank credit which occurred in the
week is thus shown to have taken place
in the New York City member banks,
the increase in security loans in that
center having been about 95 per cent
of the increase reported for all member
banks in l01 leading cities of the
country.
Beginning the first week in No
vember, these collateral loans began to
decline, and the last available weekly
report of the New York City member
banks showed them to be at practi-
cally the same level as at the beginning
of the october break in the stock mar
ket. The table shows the fluctuations
from October Is to December IL, of the
three itemS-total loans and invest
ments, total security loans, and total of
all other loans Chiefly commercial
loans), of all weekly reporting member
banks, and Of all New York City mem
Der banks.
From october is to December 4 the
Federal Reserve Boards figures of loans
to New York brokers. made by New
York City member banks, declined from
of SO, 409, 100000. This decline was
made up as follows:
Loans for own account. $303,000, 900
Loans for account Of out
of-toWn banks. ......... Idol ,OOU,OO0
Loans for account of 9th
erS observation-disclosures. A,Soo,uou,ouu
Total reduction ...... SIS, 4O9, OOO,O 900
Effect of Figures.
These figures appear to contradict |
the statement that there has apparently
been no liquidation of bank credit dur
ing the period of stock market liquida-
ton, especially since brokers' loans |
made by New York banks for the ac-
count of out-of-town banks declined |
81, ISL 900 900 in these eight weeks. 1t |
should be noted, however, that this
total includes an indeterminate amount
of loans made for the account of Gus
toners of out-of-town banks. and that |
the only comprehensive statistical figure |
indicating the amount OF credit, based |
on security collateral, put out by the |
banks of the United States, Is the inquire |
published weekly by the Federal Re
serve Board, showing the total OF such |
loans made by the reporting member |
banks in 101 leading cities OF the
United States. The resources OF these
banks are equal to about one-half Of
the commercial bank resources of all |
of the banks of the United States. so
that 1t is fair to consider that they |
represent reasonably satisfactory |
cross-section of the banking situation
Of the whole country. The question
as to what the remaining banks of the |
country did, during this particular
period, will probably never be answered,
for these banks make reports only at
comparatively long intervals. Further
more. the majority of these banks when
making reports to the controller of
the currency, do not Segregate their
commercial loans from their security
loans-merely reporting the grand total
Of their loans and discounts as one item.