Evening star. [volume] (Washington, D.C.) 1854-1972, 1932-12-04
CONTRASTS Barred
IN BANK POLICIES
Closed Institutions Funds
Handled Differently Than
Others.
BY the Associated Press.

BY the Associated Press
CHICAGO. December s.-Contrasts
in fund management policies by two
classihcations OF banks-thoee closed
and those still open-are outlined In 0
new analysis Of bank statements.
This study, published yesterday in the
Bankers Monthly, draws its conclusions
from "all figures available from 249
banks IN an !, area where conditions are
Briefly. leading differences noted were
these:
Banks which stayed open carried so
per cent more Government securities
than those which closed, increasing such
holdings during adverse times, while
other banks reduced theirs.
Banks still open invested 30 per cent
less secondary reserves during good
times. and decreased loans in less pros
porous years, while closed banks showed
an increase Of loans.
Open banks invested 10 per cant Of
capital funds in building. against 80 per
cent for the other banks.
OF the 249 banks studied 66 are still
open. 40 merged or were taken over by
other banks. and 1874 are closed. In the
analysis the merged group was con-
sidered as closed banks.
Two Periods Compared.
Divided into two periods, i've pros-
porous years from 1924 to 1928, inclu-
slye, and three depression years, 1929 to
1881, inclusive, the survey brings out
these conclusions:
Banks which closed showed $3.50
more in capital stock, surplus and un-
divided profits for each 500 Of deposits
than those still omen.
Banks which remained open showed
q much greater 31s nifty" In deposits
per dollar OF net worth during the good
years than banks which later closed.
Institutions which did not close" the
analysis says. kept IN cash sass more
per 500 in deposits than they felt was
necessary when times were good.
which remained open had $20.36 In
cash, whereas banks which later failed
carried only s17.84.
Furthermore, the closed banks had
decreased the amount, Of cash on hand
during l929-31, policy directly oppo-
site to that of the open banks"
Closed banks covered In the survey
are listed as having spent $3.50 for
Government bonds for every 500 in de-
posits in the five previous years, and
only SAT- In the later three-year period.
Earnings Sacrificed.
But the open banks, In contrast,
sacrificed earnings Of principal for Sc
curity and purchased $500 worth of
Government bonds for the first period
and S8.96 for every 500 Of their de.
posits in the latter period"
Closed banks, the survey points out,
increased the proportion Of their loans
to total resources from s4274 In the
first period to SIS for every 500 Of
total resources In the second period.
Open banks, on the other hand, re-
duced their ratio of loans to total re-
sources from S54.51 TO s50.55 per 500
OF total resources, decrease Of about z
per cent. -
Since q later study Of this same
survey shows that the better banks
loaned about the same amount of the
money on deposit In the less prosper
Gus years as they did in good times"
the analysis says, 1T Is clearly evident
the strength of the open banks was in
creased by adding Government bonds
and other securities to their reserves Of
cash. p"
1.-The failed banks did try TO retrench
in depression years by 1oaning about IL
per cent less CO the depositors' dollars.
But the ratio of loans TO resources In
creased by nearly 80 per cent.
"Of course, this change has but enc
meaning-that the total resources slip
ped away from them much faster than
the cutting down Of the. loans"