Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-10-13
EASY MONEY RATES
NOTED IN REVIEW
Federal Reserve Board Com
ments on Drop in Rural
Bank Deposits.
By EDWARD C. STONE.

In its important review of conditions
in the money market through Septem-
Der. made public today, the Federal Re-
serve Board states that the easy con-
ditions at the present time are general
throughout the country as indicated by
the small volume of indebtedness OF
member banks to the Reserve banks in
all Federal Reserve districts.
The growth of deposits however.
which has occurred during the year
has not been felt by rural communities,
statistics of net demand and time de-
posts OF country banks in 81 agricul-
tural States show. Net demand de-
positS in these banks have declined
from $1,200,000 900 at the beginning of
the year to approximately ST $50 900 900
az the present time. Time deposits in
these institutions show drop from
about SIS, 900, 900 from the first of 1890,
statistics show.
This low level of deposits of country
banks is related to the fact that the
income of farmers in these States has
peen diminished by the decline in the
value of products marketed.
smaller crops at lower prices the
bulletin states, have reduced the farm
ers' return for the years operation and
indirectly, the income of those engaged
In the sale of commodities to the farm
er. This decline in income is presum-
ably the principal cause of the relatively
low level of deposits in agricultural
banks, which in turn indicates a re-
duced purchasing power of rural COM
munitieS.
Reserve Position Remains Easy.
There was little change in the de-
mand for Reserve bank credit during
September. Holdings of acceptances by
the Reserve banks were reflected in a
further decline of accounts for member
banks. Ease of the reserve position of
member banks was indicated by the
prevailing low rate on Federal funds,
that is, on balances with the Reserve
banks in excess of Reserve requirements,
which were traded in at rates subStan-
tally below the official discount rate
Some increase in the volume of mem
Der bank credit was indicated by re-
ports from member banks in leading
cities, but this increase consisted en-
tirely of a growth in investments and
in loans on securities, while all other
loans, which include loans for COM
mercial purposes and agricultural pur-
poses, remained practically unchanged
at the lowest level in four years
The growth in demand and time de-
poSitS combined of all reporting mem
Der banks on September rs, 1880, were
given at $1,120,000, 900, and the growth
IN loans on investments $615, 000, 900,
compared with a year ago. 1t was
shown that the growth in deposits was
nearly twice as large during the year
as the growth in loans and invest
mentS.
Rapid Growth in Deposits.
The more rapid growth of deposits
than Of loans and investments during
NH ic sfrI
of business recession, reflected in part
in inflow into the banks OF gold from
abroad and of currency from circula-
ton. The country'S stock of monetary
gold increased during the year by about
$3.50, 900, and the outstanding VOL
ume of money in circulation diminished
by 100000, 900 owing to decreased de-
mand caused by reduced pay rolls,
small volume of retail trade, and a
lower level of commodity prices, the
board states. Both the inflow Of gold
and of currency tended to increase the
volume of bank deposits relative to the
amount of loans and investments.
All the factors In the situation, which
have Just been discussed, the board
states, have exerted an influence in the
direction of monetary ease, and money
rates have consequently been lower this
Autumn than at any time in more than
10 years.
Call Rates Under 1922 or 1924.
The decline in the rates Of call money
during the past year. the board con-
tinues, has been much more rapid than
in 1920-2l, and rates are lower than
in 1922 or 1924. The more rapid easing
of money conditions during the past
year constitutes an important difference
between the two periods The extended
condition Of the banks and of many
borrowers in 1890 and the heavy in
debtedness of the Federal Reserve Banks
made the decline in money rates lower
in l920-21, while during the past year
the strong reserve position of the mem
Der banks as well as the Reserve Banks
and the strong cash position of many
enterprises, together with Federal Re-
serve policy of reducing rates and pur-
chasing securities, was reflected in q
much more rapid decline in money
rates.
In the earlier period the oyerexpan-
sion OF credit was based largely on COM
modities and was reflected. in g high
level of commercial loans, while last
year it was based on securities and was
reelected in an expansion OF security
loans. Liquidation of this class of
loans Is usually more rapid and during
the past year has proceeded faster than
the liquidation of commercial loans
during the earlier period, the board
states.