FEDERAL RESERVE BULLETIN AUGUST, 1929 ISSUED BY THE FEDERAL RESERVE BOARI AT WASHINGTON Recent Banking Developments Court Decision on System's Discretion in Credit Policy UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON : 1929 I. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BOARD Ex officio members: ROY A. YOUNG, Governor. A. W. MELLON, EDMUND PLATT, Vice Governor. Secretary of the Treasury, Chairman. ADOLPH C. MILLER. CHARLES S. HAMLIN. J. W. POLE, GEORGE R. JAMES. Comptroller of the Currency, EDWARD H. CUNNINGHAM. WALTER L. EDDY, Secretary. WALTER WYATT, General Counsel. J. C. NOELL, Assistant Secretary. E. A. GOLDENWEISER, Director, Division of Research E. M. MCCLELLAND, Assistant Secretary. and Statistics. W. M. IMLAY, Fiscal Agent. J. F. HERSON, CARL E. PARRY, Assistant Director, Division of Re*> Chief, Division of Examination, and Chief Federal search and Statistics. Reserve Examiner. E. L. SMEAD, Chief, Division of Bank Operations. FEDERAL ADVISORY COUNCIL District No. 1 (BOSTON) ARTHUR M. HEARD. District No. 2 (NEW YORK)... WM. C. POTTER. District No. 3 (PHILADELPHIA) L. L. RUE. District No. 4 (CLEVELAND) HARRIS CREECH. District No. 5 (RICHMOND) JOHN POOLE. District No. 6 (ATLANTA) J. P. BUTLER, Jr. District No. 7 (CHICAGO) FRANK O. WETMORE, President. District No. 8 (ST. LOUIS) . W. W. SMITH. District No. 9 (MINNEAPOLIS) THEODORE WOLD. District No. 10 (KANSAS CITY) P. W. GOEBEL. District No. 11 (DALLAS) B. A. MCKINNEY, Vice President. District No. 12 (SAN FRANCISCO).. F. L. LIPMAN. WALTER LICHTENSTEIN, Secretary II Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis OFFICERS OF FEDERAL RESERVE BANKS Federal Reserve Bank of— Chairman Governor Deputy governor Cashier Boston Frederic H. Curtiss. W. P. G. Harding... W. W. Paddock W. Willett. Q. W. McQarrah... Geo. L. Harrison J. H. Case. J. W. Jones.* New York.. L. F. Sailer Ray M. Gidney.1 E. R. Kenzel J. E. Crane.i A. W. Gilbart- W. B. Matteson.i L. R. Rounds.. C. H. Coe.i Philadelphia R. L. Austin Geo. W. Norris... Wm. H. Hutt C. A. Mcllhenny. W. G. McCreedy.* Cleveland George DeCamp.. E. R. Fancher M. J. Fleming H. F. Strater. Frank J. Zurlinden.. Richmond Wm. W. Hoxton.. George J. Seay C. A. Peple Geo. H. Keesee. R. H. Broaddus John S. Walden, jr.« Atlanta Oscar Newton Eugene R. Black.. Hugh Foster M. W. Bell. Creed Taylor Chicago _ .- Wm. A. Heath.... J. B. McDougal— C. R. McKay W. C. Bachman.* John H. Blair K. C. Childs.* J. H. Dillard.* D. A. Jones.' O. J. Netterstrom.* St. Louis Rolla Wells Wm. McC. Martin. O. M. Attebery. A. H. Haill.« F. N. Hall.8 S. F. Gilmore.* G. 0. Hollocher.* C. A. Schacht.* Minneapolis John R. Mitchell W. B.Geery Harry Yaeger Gray Warren. H. I. Ziemer Frank C. Dunlop.1 Kansas City.. M. L. McClure... W.J. Bailey C. A. Worthington.. J. W. Helm. Dallas C.C.Walsh R. R. Gilbert Fred Harris. Lynn P. Talley R. B. Coleman W. D. Gentry.1 San Francisco. Isaac B. Newton Jno. U. Calkins Wm. A. Day Wm. M. Hale. Ira Clerk I i Assistant deputy governor. 2 Controller. MANAGING DIRECTORS OF BRANCHES OF FEDERAL RESERVE BANKS Federal Reserve Bank of— Managing director Federal Reserve Bank of— Managing director New York: Minneapolis: Buffalo branch R. M. O'Hara. Helena branch R. E. Towle. C incinnati branch C. F. McCombs. Omaha branch. L. H. Earhart. Pittsburgh branch J. C. Nevin. Denver branch... J. E. Olson. Richmond: Oklahoma City branch _ C. E. Daniel. Baltimore branch A. H. Dudley. Dallas: Charlotte branch Hugh Leach. El Paso branch W. 0. Ford. Atlanta: Houston branch D. P. Reordan. New Orleans branch Marcus Walker. San Antonio branch M. Crump. Jacksonville branch W. S. McLarin, jr. San Francisco: Birmingham branch A. E. Walker. Los Angeles branch W. N. Ambrose Nashville branch J. B. Fort, jr. Portland branch R. B. West. Chicago: Salt Lake City branch W. L. Partner. Detroit branch W. R. Cation. Seattle branch C. R. Shaw. St. Louis: Spokane branch D. L. Davis. Louisville branch W. P. Kincheloe. Memphis branch W. H. Glasgow. Little Rock branch A. F. Bailey. SUBSCRIPTION PRICti OF BULLETIN The FEDERAL RESERVE BULLETIN is the board's medium of communication with member banks of the Federal reserve system and is the only official organ or periodical publication of the board. The BULLETIN will be sent to all member banks without charge. To others the subscription price, which covers the cost of paper and printing, is $2. Single copies will be sold at 20 cents. Outside of the United States, Canada, Mexico, and the insular possessions, $2.60; single copies, 25 cents. in Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis TABLE OF CONTENTS Page Review of the month—Recent banking developments 525 Recent growth of credit—Growth of security loans—Commercial loans—Bank investments— Decline in time deposits—Demand deposits—Effect of new currency—Reserve bank credit. Earnings and expenses of Federal reserve banks 586 Earnings and expenses of member banks 530, 587-592 Settlement of the Belgian mark claim 548 Annual report of the Bank of Norway 549 Annual report of the National Bank of Czechoslovakia 550 Annual report of the Bank of Brazil 553 Annual report of the National Bank of Albania 555 National summary of business conditions 533 Financial, industrial, and commercial statistics: Reserve bank credit, gold stock, money in circulation, and member bank reserve balances 534-536 Analysis of changes in monetary gold stock 535 Discount rates and money rates 537, 538 Member bank credit 539 Bankers' balances. 540 Bankers' acceptances and commercial paper outstanding 540 Brokers' loans 540 Commodity prices, security prices, and security issues 541 Production, employment, and trade 542 Industrial production 543 Factory employment and pay rolls 544 Building . 545 Trade and distribution 546 July crop report . 547 Bank suspensions 585 Financial statistics for foreign countries: Gold holdings of central banks and Governments 557 Gold exports and imports 557 Condition of central banks «. 558 Condition of commercial banks 560 Discount rates of central banks 560 Money rates 561 Foreign exchange rates. 562 Price movements 563-565 Law department: Decision of Circuit Court of Appeals re discretion of Federal reserve system in matters relating to credit policies 566 Changes in National and State bank: membership .__ 572-575 Fiduciary powers granted to national banks 575 Detailed banking statistics for the United States 576-585 IV Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BULLETIN VOL. 15 AUGUST, 1929 No. 8 REVIEW OF THE MONTH beginning of June of this year there has been a rapid increase which has carried the total Member-bank credit has increased rapidly since the beginning of June. At the end of volume from below the 1928 level to considera- May the volume of credit ex- bly above that level. tended b y reporting member BILLIONS OF DOLLARS BILLIONS OF DOLLARS 24 24 banks in leading cities was LOA NSA ND INVE5>TME:NTS below the level of a year ago, while at the end of 0 FRE POR1"ING MEMBER BANKS July it was considerably above that level. This rapid change in two months in the relative 23 23 level of credit this year compared with a year ago reflects the fact that in June, 1928, bank 9 credit, which had been increasing rapidly, s began to decrease and continued to decline 22 JL A . ./ 22 \ r\ V until the latter part of August, while this year V there was a decrease of member-bank credit \ / until the end of May and a rapid increase since N 21 / 21 that time. The growth of credit in June and / July, and particularly of loans on securities, has been due in part to end-of-fiscal year opera- 1927 . V. tions and to the issuance of a large volume of 20 20 securities, in many instances with privileges to holders of stock to subscribe to the new issues \ J on preferential terms. There is usually a 19 19 temporary peak in bank credit at the end of Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. June, but this year, in contrast to 1928 and other previous years, the seasonal expansion in Based on weekly figures for Wednesday dates bank credit has not been followed by the usual Analysis of the increase in credit since the seasonal contraction in July. The course of beginning of June shows that it has been in loans and investments of reporting member loans on securities as well as banks in leading cities for the three years curity loans. Se" ^n an otner loans, while invest- 1927, 1928, and 1929 is indicated in the chart, ments continued to decline. which shows that a rapid growth of bank credit The growth in security loans between the last through 1927 and the early part of 1928 was report date in May and July 31 amounted to followed by a year when there were fluctuations $675,000,000 and the growth in all other loans in volume without growth, and that since the to $180,000,000, while investments declined 525 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 526 FEDERAL RESERVE BULLETIN AUGUST, 1929 further by $250,000,000. Growth in security Throughout this year loans other than loans loans since the end of May has reflected an on securities have been above the level of a increase in loans to brokers and dealers in se- year ago, and the margin be- Commercial curities, chiefly by banks in New York City loans.