federal reserve bulletin may 1938 - st. louis fed · 2018. 11. 6. · federal reserve bulletin vol....

FEDERAL RESERVEBULLETIN

MAY 1938

Reduction in Reserve Requirements

Recent Credit and Business Developments

Annual Reports of Central Banks—Switzerland and Germany

********

BOARD OF GOVERNORS

OF THE FEDERAL RESERVE SYSTEMCONSTITUTION AVENUE AT 20TH STREET

WASHINGTON

Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

TABLE OF CONTENTS

PageReview of the month—Action to increase excess reserves—Recent credit and business developments 343-348National summary of business conditions 349-350Summary of financial and business statistics 352Law Department:

Supplement to Regulation D—Decreasing reserve requirements 353Rulings of the Board:

Pledged bank deposits as balances due from other banks in computing reserves 353Sale of securities held in account but not delivered against sale 353-354Effect of purchase and sale of same securities on given day 354-355

Condition of insured banks in the latter half of 1937 356-357Condition of all member banks on March, 7 1938 (from Member Bank Call Report No. 75) 358-359Earnings and expenses of State member banks 360Balance of International Payments of the United States 360Annual Report of the Swiss National Bank 361-365Annual Report of the German Reichsbank 366-370Financial, industrial, and commercial statistics, United States:

Member bank reserves, Reserve bank credit, and related items 372Federal Reserve bank statistics 373-377Reserve position of member banks; deposits in larger and smaller centers 378Currency in circulation 379Gold stock and gold movements; bank suspensions; bank debits 380All banks in the United States 381All member banks 382-383Reporting member banks in leading cities 384-387Acceptances, commercial paper, and brokers' balances 388Federal Reserve bank discount rates 389Money rates and bond yields. 390Security markets 391Treasury finance 392-393Governmental corporations and credit agencies; Postal Savings System 394-395Production, employment, and trade 396-404Wholesale prices 405

International financial statistics:Gold reserves of central banks and governments 408Gold production 409Gold movements 409-410Central banks 411-414Bank for International Settlements 415Commercial banks 415-416Discount rates of central banks 417Money rates 417Foreign exchange rates 418Price movements:

Wholesale prices 419Retail food prices and cost of living 420Security prices 420

Federal Reserve directory:Board of Governors and staff; Open Market Committee and staff; Federal Advisory Council 422Senior officers of Federal Reserve banks; managing directors of branches 423

II


FEDERAL RESERVE BULLETINVOL. 24 MAY, 1938 No. 5

Action to increaseexcess reserves

REVIEW OF THE MONTHAs a part of the Government's recovery

program outlined by the President in hismessage * to Congress onApril 14, the Treasury andthe Board of Governors

took immediate action to expand the volumeof member bank excess reserves. The Treas-ury discontinued the inactive gold accountand deposited with the Federal Reservebanks $1,392,000,000 of gold previously heldin that account and in the working balance,and the Board of Governors reduced mem-ber bank reserve requirements by approxi-mately $750,000,000, effective April 16.

In announcing the reduction in reserve re-quirements the Board issued the followingstatement to the press:

"As a part of the Government's programfor encouragement of business recovery, theBoard of Governors has reduced reserve re-quirements on all classes of deposits for allmember banks, effective at the opening ofbusiness on April 16, 1938. By this actionexcess reserves of member banks will be in-creased by about $750,000,000.

"Reserve requirements in effect prior toApril 16, 1938, and thereafter are shown inthe following table:

Classes of member banks and of deposits

Demand deposits:Central reserve city banks...Reserve city banksCountry banks

Time deposits:All classes of member banks.

Prior to BeginningApril 16 | April 16

% | %

* This message included the following as one of the measures proposed:"the Administration proposes immediately to make additional bankresources available for the credit needs of the country. This can be donewithout legislation. It will be done through the de-sterilization of ap-proximately one billion four hundred million dollars of Treasury gold,accompanied by action on the part of the Federal Reserve Board to re-duce reserve requirements by about three-quarters of a billion dollars.

The effect of the reduction in reserve re-quirements, as shown in the following table,was an immediate increase in excess reservesof all member banks, raising the total toabout $2,500,000,000. This is the largestvolume of excess reserves held by memberbanks since before the first increase in re-quirements on August 16, 1936, and com-pares with an average level of $1,500,000,000maintained during March of this year. Re-quired and excess reserves for the weeks end-ing April 15 and April 22 by classes of banksare shown in the following table. At NewYork and Chicago banks the increase in ex-cess reserves was larger than the reductionin required reserves and at country banks itwas smaller, reflecting principally an in-crease in balances held by country banks withcity correspondents.

EXCESS AND REQUIRED RESERVES OF MEMBER BANKS[Daily averages for weeks ending Friday. In millions of dollars]

Class of bank

Central reserve city banks:New YorkChicago

Reserve city banks .Country banks..

All member banks

Requiredreserves

April8-15

2,385509

1,8621,000

5,756

April16-22

2,121453

1,619P849

P5, 042

Excessreserves

April8-15

67877

499413

1,666

April16-22

1,058199756

P477

v2, 491

p Preliminary. Figures for country banks and all member banks areestimates.

On April 14 the Treasury transferred tothe gold certificate fund of the Federal Re-serve System $1,183,000,000 of gold from itsinactive gold account and $209,000,000 ofgold held in its working balance and therebyincreased its balance with the Federal Re-

The Federal Reserve Board informs me that they are willing to do so.These measures will make more abundant the supply of funds for com-merce, industry and agriculture. By themselves, however, monetarymeasures are insufficient to start us on a sustained upward movement."

343


344 FEDERAL RESERVE BULLETIN MAY 1938

serve banks to $1,500,000,000. As the newdeposits with the Reserve banks are drawnupon to meet the excess of Treasury cashdisbursements ove receipts, including dis-bursements for retirement of debt, they willadd to bank reserves. On April 22 the Treas-ury announced that until further notice, ofthe $100,000,000 of Treasury bills maturingweekly, $50,000,000 would be redeemed incash. This will have the effect of reducingTreasury deposits at the Reserve banks andthereby increasing member bank reservesmore rapidly than would otherwise be thecase.

The chart on page 351 shows weekly fluctu-ations since the beginning of 1934 in mone-tary gold stock and in Treasury cash hold-ings, both of which include inactive gold, inTreasury deposits at Federal Reserve banks,and in member bank reserve balances. Asshown in this chart the increase in memberbank reserve balances from the end of Jan-uary 1934, when the dollar was revalued, tothe end of 1936 corresponded roughly to thegrowth in monetary gold stock, which duringthis period amounted to about $4,000,000,000.Toward the end of 1936 member bank reservebalances rose to about $6,800,000,000, andexcess reserves increased to $2,200,000,000,notwithstanding an increase of 50 percentin reserve requirements in August 1936. Dur-ing the late 1920's member bank reserves hadaveraged about $2,300,000,000. These re-serves corresponded closely to required re-serves, and many banks, in fact, were bor-rowing from the Reserve banks to maintaintheir reserves at that level.

The Treasury's "gold sterilization" pro-gram, adopted at the end of 1936, had theeffect of preventing further gold imports,which were continuing at a rapid rate atthat time, from resulting in an additional ex-pansion of bank reserves, and provided forthe setting aside of a supply of gold whichwas available for export without reducingbank reserves or for other uses by the Treas-ury. Between December 24, 1936, and Sep-

tember 11, 1937, the inactive gold stock wasbuilt up to about $1,400,000,000. This isshown on the chart in an increase in Treas-ury cash holdings. In this period there waslittle change in the general level of memberbank reserve balances.

In September 1937 the Secretary of theTreasury at the request of the Board of Gov-ernors released $300,000,000 of gold from itsinactive account. This additional gold wasimmediately added to member bank reservebalances, and excess reserves, which had de-clined in August to $700,000,000, were in-creased to more than $1,000,000,000, at whichlevel they continued for the rest of the year.In January 1938, excess reserves increasedto $1,400,000,000 chiefly as a result of theseasonal return flow of currency.

On February 14 of this year the Secretaryof the Treasury announced a change in pro-cedure to be followed with respect to pur-chases of gold, whereby gold acquired bymints and assay offices after January 1, 1938,would be included in the inactive gold ac-count only to the extent that such acquisitionsin any one quarter exceed $100,000,000. Asa result in part of this policy and in part ofother factors, excess reserves of memberbanks increased further to $1,720,000,000 onApril 15.

As previously pointed out, the reduction inreserve requirements by the Board on April16 raised excess reserves to about $2,500,-000,000. In addition as the result of the re-lease of gold, funds in the amount of about$1,400,000,000 were added to Treasury de-posits at the Federal Reserve banks, and asthese funds are expended by the Treasurythey will correspondingly increase memberbank reserves.

Currency in circulation showed a some-what greater than seasonal decrease in the

early weeks of this year, follow-Currency in jng a much ie s s than seasonal in-circulation °

crease last autumn, reflecting thedecline in trade and employment. The amountin circulation during February and March


MAY 1938 FEDERAL RESERVE BULLETIN 345

was about $50,000,000 less than in the corre-sponding months of last year. In the weekending April 6, however, currency increasedrapidly to practically the same level as a yearago, reflecting in part a pre-Easter increasein retail sales this year compared with a post-Easter decline in sales in the same week lastyear. Subsequently circulation declined againto somewhat below the level of last April.

At the end of March the amount of cur-rency in circulation was about $100,000,000less than at the end of July of last year,whereas ordinarily some increase is to beexpected on the basis of seasonal factors. Thedecline from last July occurred entirely incurrency of small denominations. Coin andcurrency of under $50 decreased by $160,-000,000, while bills of $50 and over increasedby more than $50,000,000. During the cor-responding period last year, coin and smalldenomination bills increased by about $140,-000,000 and large bills by $70,000,000. Thechart shows the amount of currency in circu-lation of large and small denomination at the

CURRENCY IN CIRCULATIONBY LARGE AND SMALL DENOMINATIONS

BILLIONS OF DOLLARS BILLIONS OF DOLLARS

1934 1935 1936 1937 1938

Member bankcredit

end of each month since December 1933. Itwill be noted that large denomination cur-rency in circulation has shown a gradual in-crease since the beginning of 1935. Part ofthe increase shown in March of this year re-flected additions to vault cash holdings ofmember banks, whereas the decline in thespring of 1937 had reflected a return of cur-rency from bank holdings, which had in-creased with the growth in excess reservesand were reduced with the raising of reserverequirements.

In the first four months of this year loansat member banks in leading cities decreased

substantially while investmentholdings increased somewhat.The decline in loans, which be-

gan last October, reflected a reduction in com-mercial loans and a substantial liquidationof loans to brokers and dealers in securities.On April 13, loans to brokers and dealers byreporting member banks amounted to $570,-000,000, which was close to the lowest levelsof 1932 and 1933, and was about $800,000,-000 below the recent peak of last September.The increase in investments was in New YorkCity and mostly in securities other thanthose of the United States Government. Hold-ings of United States Government obligationsincreased somewhat in the early weeks of theyear but were substantially reduced in March,reflecting partly retirement of Treasury billsheld by banks. They increased again inApril.

The volume of deposits at member banksshowed little net change during the first fourmonths of 1938. Adjusted demand depositsincreased at banks in New York City butdeclined at banks in other leading cities andat country banks.

Call report figures for March 7 show thatboth loans and investments of country mem-ber banks declined somewhat during the firsttwo months of 1938. The decline in loans waslargely in so-called "all other" loans, whichinclude loans for commercial, industrial, andagricultural purposes. These loans declined


346 FEDERAL RESERVE BULLETIN M A Y 1938

at country banks in each Federal Reservedistrict except Dallas. Loans on securities tocustomers also declined, while real estateloans increased further following two yearsof steady growth. The decline in the invest-ment portfolio of country member banks,amounting to $90,000,000, was equally di-vided between holdings of United States Gov-ernment obligations and other securities. Thetable shows changes in loans and investmentsat city member banks, as well as at countrybanks, between the call report dates Decem-ber 31,1937, and March 7,1938.

LOANS AND INVESTMENTS OF MEMBER BANKS

[In millions of dollars]

Total loans and investments-

Total loans..

Loans to brokers anddealers

Loans to others on se-curities

Real estate loansPurchased paperLoans to banksOther loans

Total investments

United States Govern-ment, direct and guar-anteed obligations

Other securities

March 7,1938

31, 521

13, 546

878

2,6652,556

48996

6,863

17,975

12,4525,523

Change since Dec. 31, 1937

Allmemberbanks

- 2 3 1

- 4 1 2

- 7 2

- 8 7+9

- 2 4+26

- 2 6 2

+181

+81+101

Centralreserve

andreserve

citybanks

- 6 5

- 3 3 4

- 7 2

- 6 7- 6

- 2 1+28

- 1 9 7

+269

+125+145

Country-banks

- 1 6 6

- 7 7

i

- 2 0+14

o- 2

- 6 5

- 8 8

- 4 3- 4 5

Following a period of advancing prices, inwhich average yields on long-term United

States Government bondsGovernment reached a low of 2.41 percent,market** the Government security market

was somewhat irregular in thelatter part of March and the first half ofApril and yields rose to 2.52 percent. Afterthe President's message on April 14, the re-lease of inactive gold by the Treasury, andthe reduction in reserve requirements, pricesof Treasury bonds increased sharply. In thelatter part of April yields on long-term bondsdeclined to 2.32 percent, compared with the

low of 2.22 percent in December 1936 andthe high of 2.78 percent on April 1, 1937.

Prices of 3- to 5-year Treasury notes and3-month Treasury bills followed movementssimilar to Treasury bonds. At the high pricesreached in December 1936, the average yieldon Treasury notes was 0.92 percent. The yieldthen rose to 1.70 percent in April 1937. Inthe latter part of April 1938 yields on Treas-ury notes declined to 0.81 percent, the lowestyield ever reached. The average rate on3-month Treasury bills toward the close ofApril was about 0.03 percent, compared withan average level of 0.08 percent in Marchand with last year's high of % of 1 percentin April.

Following sharp declines during the latterpart of March, prices of common stocks and

medium- and lower-gradeOther securities corporate bonds showed amarkets ^

moderate recovery duringthe first three weeks of April. Among thehighest-grade corporate bonds, industrial andpublic utility issues continued during Marchand April close to their all-time highs. Rail-road bonds of the highest rating, however,declined during the two months, showing thesharpest departure of these issues from thetrend of other high-grade bonds since 1932.This weakness was largely responsible for arise of average yields on all high-grade issues,as shown by Moody's Aaa bond average, from3.23 percent in February to 3.38 percent aboutthe middle of April. During the last ten daysof the month prices of corporate bonds rose,while prices of common stocks declined. Theaverage yield on Moody's Aaa bonds declinedto 3.30 percent.

The volume of credit extended by memberfirms of the New York Stock Exchange totheir customers decreased by about $100,-000,000 during March, and at the end of themonth was about $830,000,000, as comparedwith a maximum for last year of $1,560,000,-000 at the end of April 1937 and a low levelin the summer of 1932 of less than $700,-000,000. During March total borrowings of



these firms decreased by about $60,000,000and credit balances in the accounts of theircustomers were reduced by $40,000,000.

Industrial activity continued at a low levelin April, and the Board's index of production

for the month is estimated atRecent business 7 8 percent of the 1923-1925developments ^ , . - , ! ,

average, slightly lower thanthe average for the first quarter of this yearand in sharp contrast with the level of 116 forthe first eight months of last year. Changesin manufacturing output recently have beensmall both in industries producing durablegoods, such as steel and automobiles, and inthose manufacturing less durable products,such as textiles and foods. Mineral outputhas also shown little change.

Factory employment declined in Marchand was about 20 percent lower than a yearearlier. The number employed on the rail-roads and in public utilities also decreasedfurther, while most other nonmanufacturingindustries showed little change in employ-ment.

Residential building contracts, which inMarch had increased sharply, declined in thefirst half of April but were nevertheless con-siderably above the low levels of January andFebruary. Awards for other private workshowed a similar decline, while public proj-ects continued in substantial volume.

Distribution of commodities to consumershas continued considerably above production,although it has been at a level somewhat lowerthan last year. At department stores, salesin April showed a smaller increase overMarch than would be expected in view of thelate date of Easter, and the Board's seasonallyadjusted index for April is estimated at 83percent of the 1923-1925 average, as com-pared with 86 in March and a level of about93 for most of last year.

The general level of wholesale commodity

prices continued to decline in the latter partof March and the first three weeks of April,following a small advance which reflectedchiefly seasonal increases in prices of live-stock and meats. For the week ending April23 the Bureau of Labor Statistics index ofall commodities was at 78.6 percent of the1926 average compared with a level of about88 in the spring and summer of last yearand around 80 during most of 1935 and1936. Currently, prices of agricultural com-modities generally are lower than in 1935 and1936 by more than 10 percent, while prices ofindustrial commodities, as a group, are 5percent higher.

Prices of wheat, hogs, and dairy productsshowed some decline from the middle ofMarch to the third week of April and therewere further decreases in prices of such in-dustrial materials as steel scrap, tin, rubber,hides, and textile goods. In the middle ofApril buying of some commodities increasedand prices of print cloths, hides, rubber, andzinc advanced slightly from the lows reachedearlier in the month. Finished industrialproducts declined further in April, as is

WHOLESALE PRICES OF INDUSTRIAL COMMODITIES

Monthly figures; Federal Reserve classification of Bureau ofLabor Statistics' data; all foods and feeds, both raw and

processed, are omitted. April 1938 figures estimated.

shown on the accompanying chart, but by asmaller amount than prices of raw and semi-finished materials.



Death of Charles S. Hamlin

Mr. Charles S. Hamlin, Special Counsel tothe Board of Governors, died on April 24,1938. Mr. Hamlin was designated as the firstGovernor of the Federal Reserve Board at thetime of the establishment of the Federal Re-serve System in 1914 and served in that posi-tion until August 9, 1916. Effective August10, 1916, he was reappointed a member of theFederal Reserve Board and served continu-ously in that capacity until February 3, 1936.On February 4, 1936, Mr. Hamlin was ap-pointed by the Board of Governors as SpecialCounsel to the Board in which position he wasserving at the time of his death.

Appointment of Class C Directors at FederalReserve Banks

On April 5, 1938, Francis Biddle, a mem-ber of the law firm of Barnes, Biddle & Myers,Philadelphia, Pennsylvania, was appointed aClass C director of the Federal Reserve Bankof Philadelphia for the unexpired portion ofthe term ending December 31, 1940.

On April 5,1938, St. George Holden, Presi-dent, St. George Holden Realty Company,San Francisco, California, was appointed aClass C director of the Federal Reserve Bankof San Francisco for the unexpired portionof the term ending December 31, 1940.



NATIONAL SUMMARY OF BUSINESS CONDITIONS

[Compiled April 25 and released for publication April 27]

In March and the first three weeks of Aprilindustrial activity continued at about thesame rate as in January and February. Dis-tribution of commodities to consumersshowed less than the usual seasonal increaseand wholesale commodity prices declinedfurther.

Production.—Volume of industrial produc-tion showed little change from February toMarch and the Board's index, which is ad-justed for the number of working days andfor usual seasonal variations, remained at79 percent of the 1923-1925 average. In thesteel industry, output of ingots averaged 33percent of capacity in March and continuedat about this level in the first three weeks ofApril. Shipments of finished steel in March,as in other recent months, were at a some-

1NDUSTRIAL PRODUCTION

130

120

110

/ \ // V-v /

/

s\J

\\\

iywv

140

130

120

110

Monthly index of physical volume of production, adjusted forseasonal variation, 1923-1925 average = 100.

what higher rate than output. Automobileproduction, which usually expands sharplyat this time of the year, showed little changefrom the low level of January and February,and output of tires and plate glass likewiseremained at a low rate. In the lumber andcement industries there were considerableincreases in output in March. At cotton andsilk textile mills and shoe factories activityrose somewhat, while production at woolenmills declined following a rise in February.

Declines were reported also for meat packingand sugar refining. At mines, where produc-tion decreased generally in February, outputof bituminous coal and nonferrous metalscontinued to decline in March, while produc-tion of anthracite and crude petroleum in-creased somewhat.

Value of construction contracts awardedshowed a considerable increase in March, ac-cording to figures of the F. W. Dodge Corpo-ration. Awards for residential work, whichhad advanced moderately in February, in-creased sharply in March but were still 12percent less than in March 1937. Contractsfor other private work also increased inMarch, but remained considerably smallerthan a year ago. The value of public projectsshowed an increase and was higher than lastyear.

Employment.—Factory employment de-clined somewhat and payrolls showed littlechange from the middle of February to themiddle of March, although increases are usualat this season. The number employed in themachinery industries decreased considerablyfurther and at woolen mills there was also asubstantial decline, while most other manu-facturing industries showed moderate de-clines or little change. Employment on therailroads and in the public utilities declinedsomewhat further in March, while in othernonmanufacturing lines there was littlechange in the number employed.

Distribution.—Sales at variety stores andby mail order houses increased seasonally inMarch, while sales at department storesshowed less than the usual rise. The Board'sseasonally adjusted index of department storesales declined from 88 in February to 86 inMarch and figures for the first three weeksof April indicate some further decline.Freight-car loadings showed little changefrom February to March, although a rise isusual at this time of the year. Shipments



of coal declined substantially and miscellane-ous loadings increased by less than the usualseasonal amount.

Commodity prices.—Wholesale commodityprices generally declined from the middle ofMarch to the third week of April. There

WHOLESALE PRICES

Indexes compiled by United States Bureau of Labor Statistics,1926 = 100. By weeks, January 6, 1934, to April 16, 1938.

were further decreases in prices of a numberof raw and semifinished industrial commodi-ties, and prices of some leading agriculturalproducts also declined, reflecting in part sea-sonal influences. In the middle of Aprilprices of some industrial materials advancedslightly from the lows reached earlier in themonth.

Bank credit.—During March and the firstthree weeks of April, total loans at reportingmember banks in 101 leading cities declinedfurther, reflecting a substantial reduction inloans to brokers and dealers in securities andalso declines in commercial loans. Holdingsof investments showed little net change, de-clining in March and increasing in April.

As a part of the Government's programfor encouragement of business recovery, theBoard of Governors reduced reserve require-ments of member banks by about $750,-000,000, effective April 16, and excess re-serves correspondingly increased. As a partof the same program the Treasury discon-tinued the inactive gold account and de-posited about $1,400,000,000 of gold certifi-cates with the Federal Reserve banks. Ad-ditions to excess reserves from this source

MEMBER BANK RESERVESBILLIONS OF DOLLARS BILLIONS OF DOLLARS

1937

Wednesday figures of total member bank reserve balances atFederal Reserve banks, with estimates of required and excess

reserves, January 3, 1934, to April 20, 1938.

will occur as the Treasury draws upon thesedeposits to meet current expenditures andthe retirement of Treasury bills.

Money rates and bond yields.—Yields onTreasury bonds declined from a level of 2.50percent in the first half of April to 2.32 per-cent on April 22. The average yield on 3-5year Treasury notes declined to a new low of0.81 percent, which compares with the pre-

MONEY RATES IN NEW YORK CITY

Minimum rate on rediscounts for and advances to member banksby Federal Reserve Bank; weekly averages of daily yields on3 to 5 year Treasury notes and Treasury bonds callable after8 years, and weekly average of daily quotations on 90-dayTreasury bills. For weeks ending January 6, 1934, to April 23,

1938.

vious low of 0.92 percent in December 1936.The rate on three-month Treasury bills de-clined to virtually a no-yield basis. Othershort-term open-market money rates re-mained unchanged in the first three weeksof April.


M A Y 1938 FEDERAL RESERVE BULLETIN 351

MEMBER BANK RESERVES AND RELATED ITEMSBILLIONS OF DOLLARS

14

13

12

11

10

9

8

6 -v

5 -

4 V

3

2

1

o bL~1934

WEDNESDAY FIGURES BILLIONS OF DOLLARS

-

-

i

/—

GOLD*

MONEY I

TREASURY CA

RESERVE BANKCREDIT

I

3 T 0 C K ^ — ^

M CIRCULATION,

SH

* TREASLAt ft A T F

JRY DEPOSITS- D DAM1/C

— - ^ *

— . . . . :

:

•

1935 1936 1937 1938

1934 1935 1936 1937 1938

14

13

12

11

10

8

6

2

1

MEMBER BANKRESERVE BALANCES

Latest figures for April 20. See table on page 372.



SUMMARY OF FINANCIAL AND BUSINESS STATISTICS

1938

Mar. Feb. Jan

1937

Mar. Feb. Jan,

Annual averages

1937 1936 1935 1934 1933 1929

RESERVE BANK CREDIT, MEMBER BANK RESERVES,AND RELATED ITEMS

Reserve bank credit outstanding—totalBills discountedBillsbought _U. S. Government securities

Monetary gold stockTreasury currency outstandingCurrency in circulation _Treasury cash holdings.. _Treasury deposits with F. R. banksNonmember deposits and other accountsMember bank reserve balances:

TotalExcess _

Averages of daily figures; in millions of dollars

2,597inlv1

2,56512, 7782,6736,3383, 558221605

7,3261,524

2,598

12,56412, 7682,6626,3193,630164685

7,2301,406

2,603

12,56412,7562,6436,3973,630127664

7,1831,353

2,472aO

32,43211, 5032,5376,3912,682205530

6,7041,371

2,475oo

32,43111, 3992,5316,3692,569167554

6,7472,152

2,485qO

32,43011, 3102,5316,4002,450200561

6,7162,093

2,5541 1lit3

2,54012,1622,5676,4753,225158595

6,8301,220

2,481

42,43010, 5782,5036,1012,474446551

5,9892,512

2,475

/52,431

9,0592,4785,5852,791128507

5,0012,469

2,502oaoD

252,4327,5122,3815,4032,798

81438

3,6761,564

2,429Zoo

832,0524,0592,2715,57628855497

2,343528

1,459952241208

3,9962,0154,476

20722

406

2,35843

REPORTING MEMBER BANKS Averages of Wednesday figures; in millions of dollars

Total loans and investmentsLoans to brokers and dealers in securitiesLoans on securities to others (except banks)1All other loansU. S. Government obligations:

DirectFully guaranteed

Other securitiesReserve with Federal Reserve banksCash in vaultBalances with domestic banksDemand deposits—adjustedTime deposits (excluding interbank)3Deposits of domestic banks4Borrowings _ __

21,072762

1,8896,233

7,9921,1593,0375,724302

1,99214, 3605,2395,280

7

21, 214738

1,8906,308

8,1681,1472,9635,646294

2,01614, 5095,2375,286

3

21, 285825

1,9106,402

8,1181,1312,8995,614315

1,98614,4385,2105,286

4

22, 6101,3182,0305,938

8,8021,2063,3165,205359

1,99815,4295,1425,679

3

22, 6001,2172,0215,744

9,1181,2123,2885,326387

2,25215, 5725,0945,988

1

22, 7341,2282,0075,763

9,2631,2303,2435,292401

2,30715, 5165,0526,085

3

22,1981,2262,0066,314

8,3941,1643,0945,307337

1,88415,0975,2025,298

12

22,0641,1812,0555, 226

9,0801,2503,2724,799383

2,35814, 6194,9995,810

5

19, 997990

2,1314,907

7,989928

3,0524,024326

2,11212, 7294,8834,938

6

18, 672981

2,5454,965

6,856«325

'3,0002,875271

1,688(2)4,9373,814

8

17, 505111

3,1575,222

5,228

3,1211,822240

1,322(2)

4,9462,822115

22, 599• 2, 208e 5,4489,231

2,865

MONEY RATES AND BOND YIELDS

Commercial paperStock exchange call loansU. S. Treasury bills (91 days)U. S. Treasury bonds, long termCorporate high grade bonds (Moody's Aaa).

Averages of weekly figures; percent per annum

1.00

2.453.26

1.001.00.082.463.23

1.001.00.102.473.20

.881.00.382.503.32

.751.00.152.313.22

.751.00.172.293.10

.951.00.282.573.27

.75

.91

.172.473.24

.76

.56

.172.703.60

1.021.00.283.104.00

1.72]1.16$•52*

3. 31$4.49

CAPITAL ISSUES Amounts per month; in millions of dollars

All issues—totalNewRefunding _._

Domestic corporate issues—total..New _Refunding

245126119822458

199821171034162

121922949464

382185197319138181

511190321377152225

60324436030096204

3231731501989999

51816435438299282

39212127018934155

18011664411526

896029321318

PRICES

Common stocks (1926=100)Wholesale commodity prices (1926=100):

All commoditiesFarm products _FoodsOther commodities

Retail food prices (1923-25=100)

Index numbers

81

8070748378

'82

8172768480

130

8894888685

130

8691878485

126

8691878385

112

8686868585

111

8181828082

78

8079847880

72

7565717874

63

6651617166

BUSINESS INDEXES Index numbers, adjusted for seasonal variation, 1923-25=100

Industrial productionManufacturesMinerals

Construction—totalResidentialAllother

Factory employmentFactory payrolls (unadjusted).Freight-car loadingsDepartment store sales _._

MERCHANDISE EXPORTS AND IMPORTS Amounts per month; in millions of dollars

Exports, including re-exports.General imports

P276P173

263163

289171

257307

233278

223240

279257

205202

190171

178138

140121

437367

2,8471,725248

1,142(J)6,7882,787674

5.857.61

3.604.73

959841118781667115

190

9510510092

105

P79P75

P103P46P34P57P82P736086

797510251326683736288

80761085226'7384726590

1181171285645641011018393

116116

••116624775100968295

11411511063457799918093

11010911559417499987892

10510510455377092827588

90909137215086716479

79788632124883636275

76758225113772495867

11911911511787142105109107111

r Revised.p Preliminary. • Partly estimated.1 Includes loans on securities to banks, 1929-1934.2 Figures not available.* Includes time deposits of banks, domestic and foreign, 1929-1934.4 Does not include time deposits 1929-1934.



LAW DEPARTMENT

Supplement to Regulation D.—Decreasing ReserveRequirements

There is set forth below the text of a sup-plement to its Regulation D which wasadopted by the Board of Governors of theFederal Reserve System on April 15, 1938:

SUPPLEMENT TO REGULATION DEffective as to Each Member Bank at the Opening of

Business on April 16, 1938

RESERVES REQUIRED TO BE MAINTAINED BY MEMBERBANKS WITH FEDERAL RESERVE BANKS

Pursuant to the provisions of section 19 of theFederal Reserve Act and section 2 (a) of its Regula-tion D, the Board of Governors of the Federal Re-serve System hereby prescribes the following reservebalances which each member bank of the FederalReserve System is required to maintain on depositwith the Federal Reserve Bank of its district:

5 per cent of its time deposits plus—12 per cent of its net demand deposits if not in

a reserve or central reserve city;17"V2 per cent of its net demand deposits if in a

reserve city, except that if located in an outlyingdistrict of a reserve city or in territory addedto such city by the extension of the city's cor-porate limits such bank may, upon the affirmativevote of five members of the Board of Governorsof the Federal Reserve System, be permitted tomaintain 12 per cent reserves against its netdemand deposits;

22% per cent of its net demand deposits iflocated in a central reserve city, except that iflocated in an outlying district of a central reservecity or in territory added to such city by theextension of the city's corporate limits, suchbank may, upon the affirmative vote of fivemembers of the Board of Governors of theFederal Reserve System, be permitted to main-tain 12 per cent or 17 Y2 per cent reserves againstits net demand deposits.

The supplements to Regulation D which have pre-viously been issued are hereby revoked and super-seded.

Pledged Bank Deposits as Balances Due From OtherBanks in Computing Reserves

The Board of Governors recently had occa-sion to rule upon the question whether a de-posit of a member bank in another bankwhich had been pledged by the member bankto secure a deposit with it by a municipalityshould be considered as "balances due fromother banks" which could be deducted fromgross demand deposits in computing reserves,pursuant to the provisions of section 19 ofthe Federal Reserve Act and section 2(b) ofRegulation D.

It was understood that, under an arrange-ment between the banks and the municipality,the member bank had certain funds on de-posit with another bank which the memberbank did not have the right to withdraw with-out the consent of the municipality. On thebasis of these facts, the Board of Governorsexpressed the view that the funds on depositunder this arrangement did not constitute"balances due from other banks" within themeaning of the tenth paragraph of section19 of the Federal Reserve Act. In this con-nection it should be observed that section2 (b) of Regulation D provides for the deduc-tion from gross demand deposits of "balancessubject to immediate withdrawal due fromother banks."

The Board of Governors also stated thatpledged bank balances of the type describedabove should not be reported by the deposit-ing bank in its condition reports as "balancesdue from other banks" but instead should beincluded in the schedule of "other assets."

Sale of Securities Held in Account But Not DeliveredAgainst Sale

In a case recently considered by the Boardunder Regulation T, the adjusted debit bal-ance of a customer's general account exceededthe maximum loan value of the securitiestherein, and the account was "long" 100shares of XYZ, a registered nonexempt se-curity. On the day in question the customersold 100 XYZ and instructed the broker notto deliver his "long" stock against the sale.This was the only transaction in the cus-tomer's account on that day. The questionpresented was whether any margin must beobtained because of the transaction.

The sale of XYZ stock with instructionsnot to deliver the stock held "long" in theaccount constitutes a short sale of the XYZstock within the meaning of section 3(d) (3)of the regulation which provides that theadjusted debit balance of the account shallinclude:

"the current market value of any securities(other than unissued securities) sold short in theaccount plus, for each such security (other thanan exempted security), such amount as theBoard shall prescribe from time to time in the



supplement to this regulation as the margin re-quired for such short sales, except that suchamount so prescribed in the supplement neednot be included when there are held in theaccount securities exchangeable or convertiblewithin a reasonable time, without restrictionother than the payment of money, into suchsecurities sold short."

In view of this provision, the current mar-ket value of the securities sold short shouldbe added to the adjusted debit balance. Sincethe XYZ stock held in the account could bedelivered at any time against the short posi-tion, however, "there are held in the accountsecurities exchangeable or convertible * * *into such securities sold short." Therefore,it would not be necessary to add any "margin* * * for such short sales."

Section 3 (d) (7) of the regulation providesthat there shall be deducted from the ad-justed debit balance:

"the net proceeds of sale of any securities (otherthan unissued securities) sold for the accountbut for which payment has not yet been creditedthereto."

The deduction made pursuant to section3(d) (7) would, on the day of the short sale,exactly equal and offset the addition madepursuant to section 3(d) (3).

Accordingly, there would be no change inthe adjusted debit balance of the account and,since there also would be no change in themaximum loan value of the securities in theaccount, the transaction would neither re-lease margin nor require that margin beobtained.

Effect of Purchase and Sale of Same Securities onGiven Day

The Board recently considered a case underRegulation T in which transactions effectedon Monday in a general account resulted in arequirement of $100 margin, and on the dayfollowing, Tuesday, a certain quantity of aparticular stock was purchased and later inthe day the same quantity of the same secu-rity was sold, resulting in a net profit of $150.There were no other transactions in the ac-count on Tuesday.

The question presented was whether this

purchase and sale could be treated, to theextent of $100, as a liquidation pursuant tosection 3(e) of the regulation in lieu of adeposit of that amount of margin, and asalso permitting a withdrawal of $50 on Tues-day pursuant to the second paragraph ofsection 3(b).

Sections 3(b) and 3(e) of the regulationread in part as follows:

" (b) General rule.—A creditor shall not effectfor or with any customer in a general accountany transaction which, in combination with theother transactions effected in the account onthe same day, creates an excess of the adjusteddebit balance of the account over the maximumloan value of the securities in the account, orincreases any such excess, unless in connectiontherewith the creditor obtains, as promptly aspossible and in any event before the expirationof three full business days following the date ofsuch transaction, the deposit into the account ofcash or securities in such amount that the cashdeposited plus the maximum loan value of thesecurities deposited equals or exceeds the excessso created or the increase so caused.

"A transaction consisting of a withdrawal ofcash or registered or exempted securities froma general account shall be permissible only oncondition that no cash or securities need be de-posited in the account in connection with a trans-action on a previous day and that, in addition,the transactions (including such withdrawal) onthe day of such withdrawal would not create anexcess of the adjusted debit balance of the ac-count over the maximum loan value of the securi-ties in the account or increase any such excess.

* * * * *"(e) Liquidation in lieu of deposit*—In any

case in which the deposit required by section3(b), or any portion thereof, is not obtained bythe creditor within the three-day period speci-fied in that section, securities shall be sold orcovering or other liquidating transactions shallbe effected in the account, prior to the expira-tion of such three-day period, in such amountthat the resulting decrease in the adjusted debitbalance of the account exceeds, by an amountat least as great as such required deposit orthe undeposited portion thereof, any resultingdecrease in the maximum loan value of thesecurities in the account.

The Board expressed the view that the pur-chase and sale of the same securities onTuesday could be so treated. This followsfrom the fact that such purchase and salewould reduce by $150 any excess of the ad-

* "This requirement relates to the action to be taken whena customer fails to make the deposit required by section 3(b),and it is not intended to countenance on the part of customersthe practice commonly known as 'free-riding' or 'three-dayriding', to prevent which the principal national securities ex-changes have adopted certain rules. See the rules of such ex-changes and section 7s(e) of this regulation."



justed debit balance of the account over themaximum loan value of the securities in theaccount. It seems proper to treat such re-duction as consisting of two portions in themanner suggested.

As indicated in the footnote to section3(e), that provision was not intended tocountenance on the part of customers the

practice commonly known as "free-riding"or "three-day riding", to prevent which theprincipal national securities exchanges haveadopted certain rules. If the transactionson Tuesday were treated as indicated above,the liquidation in lieu of a deposit of marginwould, of course, have to be considered inconnection with such exchange rules.



CONDITION OF INSURED BANKS IN THE LATTER HALF OF 1937

According to the consolidated statement ofcondition of insured banks in the UnitedStates as of December 31, 1937, which hasjust been published by the Federal DepositInsurance Corporation, total loans and in-vestments and deposits at insured banks notmembers of the Federal Reserve showed littlechange during the latter half of 1937. Asshown in the following table, the changes

CHANGES IN CONDITION OF INSURED COMMERCIALBANKS, LAST HALF OF 1937

[In millions of dollars]

Total loans and investments

LoansU.S. Government secur-

itiesOther securities

Due from banks .Deposits:

Adjusted demand de-posits1 ._

Time depositsU. S. Government de-

posits. _ ..Interbank deposits:

Banks in UnitedStates

Banks in foreigncountries

Allinsuredbanks

-998

-297

-295-406

+266

-1,0734-263

+150

+148

-166

Member banks ofthe Federal Reserve

System

Centralreserve

andreserve

citybanks

-976

-433

-330-213

+133

-955+59

+144

+136

-166

Countrybanks

- 1 0

+106

+13-129

+91

-59+114

+9

+9

(2)

Non-memberinsuredbanks

- 1 2

+30

+22- 6 4

+41

- 6 0+90

- 3

+4

(2)

1 Demand deposits other than interbank and U. S. Government, lesscash items in process of collection.

» Less than 500,000.

that occurred were generally similar to thosereported by country member banks. A de-tailed statement of condition appears on thefollowing page.

Total loans at both nonmember insuredbanks and country member banks increasedduring the period, in contrast to substantialdeclines at city banks. These increases weremostly in real estate loans and in commercial,industrial, and agricultural loans. Such loansalso increased at city banks but their totalloans declined as a result of a sharp liquida-tion in brokers' loans in New York City. Citybanks, mostly outside New York, also re-duced their holdings of United States Gov-ernment obligations, while holdings at non-member insured and country member banksincreased slightly. Holdings of other securi-ties declined at all classes of insured banks.

Balances of nonmember insured bankswith correspondents, which were reduced byabout $230,000,000 during the first half of1937, showed a moderate increase during thelatter half of the year. Although deposits de-clined considerably at city banks, reflectingprincipally the sale of securities and liquida-tion of brokers' loans, there was little changein deposits outside the large cities, a moderatedecrease in demand deposits being offset by afurther increase in time deposits.



FEDERAL DEPOSIT INSURANCE CORPORATION

CONDITION OF INSURED COMMERCIAL BANKS IN UNITED STATES AND POSSESSIONS,DECEMBER 31, 1937 AND JUNE 30, 1937

[Amounts in thousands of dollars]

December 31, 1937

All banks

Nationalbanks

membersFederalReserveSystem

Statebanks


Banksnot


June 30, 1937

All banks

Nationalbanks


Statebanks


Banksnot


Number of banksASSETS

Loans, discounts, and overdrafts (includingrediscounts)

United States Government obligations,direct and fully guaranteed

Other bonds, stocks and securities

Total loans and securitiesCustomers' liability on account of accept-

ancesBanking house, furniture, and fixturesOther real estate ownedReserve with Federal Reserve banksCoin and currency..Balances with other banksCash items in process of collectionSecurities borrowedOther assets

Total assets

LIABILITIES

Demand deposits of individuals, partner-ships, or corporations

Time deposits of individuals, partnerships,or corporations

Public funds of states and political sub-divisions.

U. S. Gov't and postal savings depositsDeposits of other banks; cash letters of

credit; certified, officers, and travelers'checks outstanding

Total deposits

Mortgage bonds and participation certifi-cates outstanding ._

Bills payable, rediscounts, and other liabili-ties for borrowed money

Securities borrowedAcceptances outstanding executed by or for

the account of reporting banksDividends declared but not yet payableOther liabilities

Total liabilities, excluding capital ac-count

Capital stock and capital notes and de-bentures ._

SurplusUndivided profits—netReserve for contingencies and undeclaredf dividendsRetirement fund for preferred stock or cap-ital notes and debentures

Total liabilities, including capitalaccount

13,795 5,260 1,081 7,454 13, 885 5,293 1,064 7,528

16, 717,467

13, 669, 3526,807, 420

8, 796, 207

8,059,3463, 678, 705

5,161, 616

4,312, 2041, 743, 677

2, 759, 644

1,297,8021, 385,038

17,014, 623

13,964, 7127,213,851

8, 796, 477

8, 206,4233,890, 571

5, 488, 398

4,482,5111,874,181

37,194, 239

157,1411,160, 501519, 572

7,005,209789, 519

4, 817,0352,319,081

1,162257,910

20, 534,258

77,087630, 518155, 580

4,172,915418,483

2, 623, 7201,319, 976

188130,790

11, 217,497

77, 417340, 947187,114

2,832, 294170,974860,393939,375

70795, 279

5,442,484

2,637189,036176, 878

200,0621,332,922

59, 730267

31,841

38,193,186

190, 7451,172,617537, 430

6,896,663844,197

4, 550, 5552,248,736

818256,629

20,893, 471

96,409633,923162,353

4,152, 889440,696

2,487,6431, 284,067

229128, 345

11,845,090

90, 734346,452191, 361

2, 743, 774188,609771, 308916,762

11694, 382

54, 221, 369 30,063, 515 16,721, 997 7,435,857 54,891, 576 30, 280,025 17,188, 588

22,106, 285

13,959, 543

3, 256,196927, 269

6,942,122

12,150, 449

7, 476,823

2,014,488584, 653

4, 260,356

7, 597,001

3, 329, 223

599, 217291, 034

2, 535, 412

2, 358,835

3,153,497

642,49151, 582

146,354

22,624, 279

13, 932, 794

3, 511,114783,091

6,948, 614

12,412, 525

7, 446, 341

2,198, 662464,922

4,193,106

7,859,907

3, 371, 541

671,063262,939

2,609,040

47,191,415 26,486, 769 14,351,887 6, 352, 759 47, 799,892 26,715, 556 14,774,490

18,924

30,0821,162

176,12846, 301353,315

10,839

88,12327, 401

212, 664

15,080

3,811707

85, 48816,022115,358

3,844

15, 432267

2,5172,878

25, 293

21,823

35, 425818

215, 26746, 599

375, 694

9,216229

113, 37827, 696208,373

16,969

8,218116

98,42116,403

140, 753

47,817,327

3,030,1462,268,179

711,186

366,868

27, 663

26, 825,984

1, 574,0561,098, 204

399,757

153, 664

11,850

14, 588,353

856, 550912, 217202, 673

157, 691

4,513

6,402,990

599, 540257, 758108, 756

55, 513

11,300

48, 495, 518

3,053,9702, 225,180

707, 589

384,103

25, 216

27,074,448

1, 578, 3561,071,102

389,035

155,065

12,019

15,055, 370

865,893900; 362198, 460

164, 583

3,920

54, 221, 3 30, 063, 515 16,721,997 7,435,857 54,891, 576 30, 280,025 17,188, 588

2, 729, 748

1, 275, 7781,449,099

5,454,625

3,602192, 242183, 716

214, 8921, 291, 604

47,907473

33, 902

7, 422,963

2,351,847

3,114, 912

641,38955, 230

146,468

4,854

17,991473

3,4682,500

26, 568

86, 365, 700

609,721253, 716120, 094

64, 455

89, 277

7,422,963



ALL MEMBER BANKS—CONDITION ON SELECTED CALL DATES, JUNE 30, 1933 TOMARCH 7, 1938

[Amounts in thousands of dollars]

19331June 30

1934March 5

1935March 4

1936March 4

1937March 31

1937Dec. 31

1938March 7

Loans (including overdrafts)United States Government direct obligationsSecurities fully guaranteed by United States GovernmentOther securitiesTotal loans and investmentsCustomers' liability on account of acceptancesBanking house, furniture, and fixturesOther real estate ownedReserve with Federal Reserve banks. ._Cash in vaultBalances with private banks and American branches of

foreign banksDemand balances with banks in New York CityDemand balances with other domestic banksTime balances with other domestic banksBalances with banks in foreign countriesDue from own foreign branchesCash items in process of collection...Cash items not in process of collectionRedemption fund and due from United States Treasurer..Acceptances of other banks and bills sold with endorse-

mentSecurities borrowedOther assets

Total assets..

LIABILITIES

Demand deposits—Total.Individuals, partnerships, and corporationsUnited States GovernmentStates, counties, and municipalitiesBanks in United StatesBanks in foreign countriesCertified and officers' checks, cash letters of credit and

travelers' checks, etcTime deposits—Total

Individuals, partnerships, and corporations:Evidenced by savings pass booksCertificates of depositOpen accountsChristmas savings and similar accounts

Postal savingsStates, counties, and municipalitiesBanks in United States —Banks in foreign countries

Total depositsSecured by pledge of loans and/or investmentsNot secured by pledge of loans and/or investments. _.

Due to own foreign branchesNational bank notes outstanding.Agreements to repurchase securities soldBills payable and rediscountsAcceptances of other banks and bills sold with endorse-

mentAcceptances executed for customersAcceptances executed by other banks for reporting banks..Securities borrowedInterest, taxes, and other expenses accrued and unpaid...Dividends declared but not yet payable and amounts set

aside for undeclared dividends and for accrued intereston capital notes and debentures

Other liabilitiesCapital notes and debenturesCapital stockSurplusUndivided profits—netReserves for contingencies.._Retirement fund for preferred stock and capital notes and

debentures

12,858,0996,887,123

5,041,14924, 786,371

424, 263982,036227,074

2, 235,179404, 502

()826,636

1,181, 582(?)

108, 070106,041

1,485,34337, 261

7,9486,654

227,820

12, 705,7598, 667,064

180,8884,994, 50026,548,211

395, 503982, 606290,329

3,148,124486,086

()954,090

1,349, 35972, 520

111, 28298,053

1,158, 99540, 674

24, 7416,099

258, 612

11,953,1529,820, 9931,199,6645,297,641

28,271,450217, 545

1,003, 788324, 369

4, 517, 625534, 293

()1,416, 7911,849, 269120,334135,190

38,0831,474, 792

32, 6202,6022,009

327,397

12,098, 51610, 564,4001,879, 7225, 745,350

30,287, 988167, 534998, 653371, 344

5, 784,077623, 518

38,0701, 676, 6702,136, 395

119,03356,4293,000

I 1,718,3061 10,052

13, 699, 29410,856,3511, 861, 3366,108, 022

32,525,003202,067981, 712

6, 613, 340662, 310

27, 3141, 263, 0802,049, 439

105, 53952, 6413,787

1, 973, 6219,857

13, 957,82310, 574,1431, 797, 4075, 422, 382

31, 751, 755154, 504971, 465342, 694

7,005, 209589,457

24, 7871, 289, 3102, 030, 475

69,81869, 7233,578

2,259, 3518,869

13, 546, 24510, 625, 2211, 826,9665, 522, 737

31,521,169134,473971, 875341,875

7, 248,811603,541

29,1101,377, 4252,084,157

70,41681, 7372,326

1, 406, 7107,179

7,221720

241, 688

11, 0871,065

215,834

41, 226895

172,396

39, 036943

244,090

33,046, 780 35,925,284 40,268,157 44,240,698 47,066,564 46,785,512 46,164,873

17,583,06711,830, 246

806, 2971,087, 3293, 056, 527

145, 750

656,9188,980,860

6,127, 4121,037, 7473 578, 812

58, 656788, 492299, 65989,084

19, 864, 01312, 251,8631, 790,4011, 424, 7313, 675, 699

172, 768

548, 5519,416,145

6,746, 532879,665

3 595, 24936,162754, 595304,92691, 8467,170

24,008,37614,872,1141, 269, 7131, 861, 4125, 095, 059169,424

740, 65410,045,297

7, 745,809884, 424533,19839, 708399,113290,033145,1057,907

28,021,55417,927,045

599, 5872,173, 4556,148,144

779, 29710, 451, 894

8, 309,030833, 941596,19744, 548167,114343, 873151,8335,358

29, 950,16020,084, 779

414, 7222, 564, 3035, 751, 796457,911

676, 64911,164,318

9,105, 389758, 293712, 38063, 08297, 371268, 739152, 7666,298

29,317,02419, 747, 450

781, 0342,131, 9845,436,442452, 772

767, 34211,521,632

9, 461,126740, 327575, 83228, 76194, 653

481, 721128, 64110, 571

28,652,32119,116, 334

752,1412,236, 5375, 614, 646366, 265

566, 39811,594,357

9, 476, 590739, 211573, 09456, 27889, 588512,129136, 66610,801

26,563,927(4)

29,280,1584,016, 73025, 263, 428

34, 053, 6733,312, 720

30, 740,953

38,473,4482, 773, 520

41,114, 4782, 817, 942

38, 296, 536

40,838, 6562,969,035

37,869, 621

40,246,6782,970, 498

37, 276,180

23, 529727,11014, 244

191, 228

7,948434, 9977,3026,654

67, 111

()165, 648

2, 220, 3301,847,462373, 258396,032

44, 667786, 51410,19390,941

24, 741413, 79410,4416,09988,330

()163, 544125, 673

2, 378,1171, 724,409376, 282401, 381

957623, 5858,13016, 553

2,602225,00010,1662,009

79, 444

12, 674126, 055119, 077

2, 560, 5821, 654, 606419, 272351, 586

2,186

70, 831 84,142 117, 510 129,332

13,49310, 776

7,221164, 30219, 280

72081, 244

16, 830200, 328109, 827

2, 511,8841, 721, 348493,141339, 405

6,620

5,87317, 740

11, 087200, 86425, 2251,065

98, 510

33, 216149, 68971, 057

2,383, 2091,952, 805580, 907325,125

11, 572

2,19512, 426

41, 226157, 59216,019

89576, 306

43,423108, 08952,006

2, 378, 6002, 010, 421

602, 430311,355

16, 363

4,94727, 919

39,036132, 75812, 473

94393,062

17, 762108,11651, 274

2, 375, 7842, 020, 279

611, 508276,927

16, 075

Total liabilities (including capital account)

Net demand depositsDemand deposits—adjusted6Number of banks

33,046, 780 35,925,284 40,268,157 44,240,698 47, 066, 564 46, 785, 512 46,164, 873

14,156, 30412, 089,150

5,606

15, 582, 43413, 066,150

6,206

19, 508, 09815, 999, 388

6,422

22,498, 57819,161,491

6,377

24, 668, 33821, 352,110

6,367

23, 740, 65220, 387, 425

6,341

23, 789, 96820, 512, 559

6,335

1 Beginning with 1933, figures relate to licensed banks only.2 Included in "Other Assets."3 Includes deposits the payment of which was deferred by agreement with depositors or otherwise aggregating $33,418,000 on June 30,1933, and

$34,030,000 on March 5, 1934. Such deposits were reported separately from June 30, 1933, to June 30, 1934, inclusive.4 Not reported separately.6 Included in "Undivided profits."6 Demand deposits other than interbank and U. S. Government, less cash items reported as in process of collection and, prior to Dec. 31, 1935,

less cash items reported on hand but not in process of collection.



ALL MEMBER BANKS—CONDITION ON MARCH 7, 1938, BY CLASSES OF BANKS[Amounts in thousands of dollars]

Allmemberbanks

Allnationalmemberbanks

AllState

memberbanks

Central reserve citymember banks

New York Chicago

Reservecity

memberbanks

Countrymemberbanks

Loans (including overdrafts)United States Government direct obligationsSecurities fully guaranteed by United States Government-Other securitiesTotal loans and investmentsCustomers' liability on account of acceptancesBanking house, furniture, and fixturesOther real estate ownedReserve with Federal Reserve banksCash in vaultBalances with private banks and American branches of

foreign banksDemand balances with banks in New York CityDemand balances with other domestic banksTime balances with other domestic banksBalances witfe banks in foreign countriesDue from own foreign branchesCash items in process of collectionCash items not in process of collectionAcceptances of other banks and bills sold with endorse-

mentSecurities borrowedOther assets

13, 546, 24510, 625, 221

1, 826, 9665, 522, 737

31,531,169134,473971,875341, 875

7, 248, 811603, 541

29,1101,377,4252,084,157

70, 41681, 737

2,3261,406, 710

7,179

39,036943

244,090

8, 614,1216,756, 7291,320, 4093,711, 269

20,402,52867, 301

632, 220155, 488

4, 282, 582426,801

19,0391,029, 4211, 639, 228

55,97943,120

2,326869,169

5,034

19,077178

114, 262

4, 932,1243, 868, 492

506, 5571, 811, 468

11,118, 64167,172

339, 655186, 387

2,966, 229176, 740

10,071348,004444,929

14,43738, 617

3, 531, 7303,179, 528

431, 7591,173, 5318,316,548

97,085224, 52133,038

2,941,07959, 499

2,14147, 35345, 279

3661, 690

614,0821,007, 524

100,146274,795

1,996,5473,429

21,7036,217

566, 39321, 637

3,68798,98630, 984

1,3501,717

537, 5412,145

19,959765

129, 828

604,989519

35, 469660

50, 541

84,082107

164

5,031,0743, 961, 604

648,0481, 608, 981

11,249,70732,177

338, 620126, 699

2, 375,822212, 706

19, 866717, 251871, 852

22, 62315,0952,326

537, 5662,953

3,047

4,369, 3592,476,565

647,0132,465, 4309,958, 367

1,782387,031175,921

1, 365, 517309, 699

3,416513,835

1,136,04246,407

3,235

18,401 19, 727

180,0733,600

356283

105,421

Total assets.. 46,164,873 29,763, 753 16, 401,120 12,520, 447 2,855, 404 16,598,037 14,190,985

LIABILITIES

Demand deposits—TotalIndividuals, partnerships, and corporations __.United States GovernmentStates, counties, and municipalitiesBanks in United StatesBanks in foreign countriesCertified and officers' checks, cash letters of credit and

travelers' checks, etcTime deposits—Total

Individuals, partnerships, and corporations:Evidenced by savings pass booksCertificates of depositOpen accountsChristmas savings and similar accounts

Postal savingsStates, counties, and municipalitiesBanks in United. StatesBanks in foreign countries

28,652,32119,116, 334

752,1412, 236, 5375, 614, 646

366, 265

566, 39811,594,357

9, 476, 590739, 211573,09456, 27889, 588512,129136, 66610,801

18,126,23611,875, 734

492,8331, 677, 7733, 637,936

171,429

270,5318, 059, 647

6,638, 941579,300248, 27240,08678, 650362,080102, 7979,521

10,526,0857, 240, 600

259, 308558, 764

1,976, 710194, 836

295, 8673,534,710

2,837, 649159,911324,82216,19210, 938

150,04933, 8691,280

9,801,1246,429, 246

360, 323184,819

2,173, 381326, 642

326, 713769,199

408, 22830, 227

252, 6122,812

2,132,3841, 269, 724

92, 254169,512576,4857,173

17, 236461, 794

390, 22220,48934,197

380

67,034460

7,826

16, 354152

10,111,5196,454, 763

233, 839809, 405

2,461,46830, 965

121,0794, 619, 406

3, 766, 281187, 393224, 66019, 81133, 247

269, 478115, 5612,975

6,607,2944, 962, 601

65, 7251,072, 801403, 312

1,485

101, 3705, 743, 958

4,911,859501,10261,62533, 27556, 341159,26320,493

Total depositsSecured by pledge of loans and/or investmentsNot secured by pledge of loans and/or investments. _

Due to own foreign branchesAgreements to repurchase securities soldBills payable and rediscountsAcceptances of other banks and bills sold with endorse-

mentAcceptances executed for customersAcceptances executed by other banks for reporting banks..Securities borrowedInterest, taxes, and other expenses accrued and unpaid...Dividends declared but not yet payable and amounts set

aside for undeclared dividends and for accrued intereston capital notes and debentures

Other liabilitiesCapital notes and debenturesCapital stockSurplusUndivided profits—netReserves for contingenciesRetirement fund for preferred stock and capital notes and

debentures

40,246, 6782, 970,498

37, 276,180

26,185,8832,168, 399

24,017, 484

14, 060, 795802,099

13, 258, 696

10,570,323517, 797

10,052, 526

2,594,178225,102

2, 369,076

14, 730, 9251, 304,013

13,426,912

12, 351,252923, 586

11,427, 666

129, 3324,947

27, 919

39,036132, 758

12, 473943

93,062

17, 762108,116

51, 2742, 375, 7842, 020, 279

611, 508276, 927

16,075

112, 598970

13, 266

19,07767, 4256,960

17855, 762

8,27843, 267

1, 572,1231,104, 391

403, 274158, 334

11, 967

16, 7343,977

14,653

19,95965, 333

5,513765

37, 300

9,48464, 84951, 274

803, 661915,888208, 234118, 593

4,108

129, 332

12,000

35, 46997,3617,523

66021, 749

7,94741, 739

558562, 595801,030156,144

75, 903

114

1643,252

4,1774,593

3,04730, 7654,098

9,748

1072,676

126, 40066,14519, 36932, 915

39, 548

7,53137,12526, 946

765, 549615, 284215, 505108, 516

4,428

77011, 326

3561,380

404283

22,017

2,17726, 57623, 770

921, 240537, 820220, 490

59, 593

11, 531

Total liabilities (including capital account)Net demand depositsDemand deposits—adjusted1Number of banks

46,164, 873 29,763,753 16, 401,120 12,520,447 2,855,404 16,598, 037 14,190, 985

23, 789, 96820, 512, 559

6,335

14, 590, 37912, 954, 869

5,250

9,199, 5897, 557, 690

1,085

9,103, 5036, 335, 789

37

1, 918, 6151, 372, 390

13

7,987,1146, 847, 681

340

4, 780, 7365, 956, 699

5,945

1 See footnote 6 on preceding page.



EARNINGS AND EXPENSES OF STATE MEMBER BANKS[In thousands of dollars]

Firsthalf of

1937

Secondhalf of1937^

Year1936

Year1937

Firsthalf of

1937

Secondhalf of1937?

Year1936

Year1937

Earnings:Interest and discount on

loansInterest and dividends on

investmentsInterest on balances with

other banksCollection charges, commis-

sions, fees, etcForeign departmentTrust departmentService charges on deposit

accountsKent receivedOther current earnings

87, 428

80, 413

132

4,9362,148

29, 924

6,42615, 5722,742

92, 362

76, 824

114

4,7843,162

31, 4027,042

15, 8763,078

166,448

161, 329

302

9,2304,508

56, 585

11, 94830, 3036,428

179, 790

157, 237

246

9,7205,310

61, 32613, 46831, 4485,820

Expenses (continued):Real estate taxesOther taxesOther expenses

6,1019,716

48, 726

6,1748,651

47, 030

12, 40919, 23491,916

Total current expenses

Net earnings

159,090

70, 631

158, 467

76,177

307, 783

12, 27518, 36795, 756

317, 557

139, 298 146, 808

Recoveries, profits on securities,etc.:

Recoveries on loansRecoveries on investments..Profits on securities sold._.All other

17,14611,81319,3216,623

8,0544,741

10, 7976,295

24, 73239, 66472, 80710, 621

25, 20016, 55430,11812, 918

Total earnings from cur-rent operations . 229,721 234, 644 447,081 464, 365

TotaL 54, 903 29, 887 147, 824

Expenses:Interest on deposits:

TimeDemandBank

24, 7241,09'

334

24, 904616224

48, 9891,993

750

49, 6281,713

558

Losses and depreciation:On loansOn investmentsOn banking house, furniture

and fixturesAll other

16, 79429, 363

5,36810,518

16, 21926, 460

6,90410, 831

52, 23639,471

12, 30531, 363

84, 790

33, 01355, 82312, 27221, 349

TotalSalaries—officers

Salaries and wages — em-i ployees (other than offi-

cers)Fees paid to directors and

members of executive, dis-count and advisory com-mittees

Interest and discount on bor-l rowed money

26,15523, 393

43,916

1,001

25, 74424, 071

45, 572

1,066

159

51, 73244, 953

85, 320

1,871

348

51, 89947, 464

Total losses and deprecia-tion 62,043 60, 414 135, 375 122, 457

Net profitsi, 488 Cash dividends declared1.

63,49139, 280

45, 65040, 286

151, 74777, 308

109,14179, 566

2,067

241

Capital funds2 3Number of officers3Number of employees (full and

part time)3Number of banks3

2,133, 218 2,133, 644 2,110, 555 2,133,7,837

,133,7,892

'58, 0321,064

57, 4991,081

7, 662

'55, 8571,051

i, 6447,892

57, 4991,081

p Preliminary figures. rRevised.1 Includes interest on capital notes and debentures.2 The aggregate book value of capital stock, capital notes and debentures, surplus, undivided profits, reserves for contingencies, etc.3 At end of period.

BALANCE OF INTERNATIONAL PAYMENTS OF THE UNITED STATESThe Department of Commerce has published a preliminary summary of the international

transactions of the United States in 1937. The summary is given below in substantiallythe same form as that employed by the Department of Commerce.

Items

In millions of dollars

Dollarreceipts

Dollarpayments

Net re-ceipts (+)

or pay-ments (—)

Trade and services:MerchandiseFreight and shippingTourist expendituresRemittances, contributions, etcInterest, dividends, etcOther transactions, adjustments, etc.

Trade and service transactions

3,34510015525620317

4,562

2. Gold and silver:Gold exports and importsGold earmarking operations (net) _Silver exports and imports

Gold and silver movement _

3. Capital:Reported long-term capital movementReported movement of short-term banking and brokerage funds..Paper and currency movementsMiscellaneous capital transactions

Capital movement

4. Residual

3,084210610200275232

+ 261- 110- 455- 175+ 345+ 85

4,611

1,632

92

- 49

-1,586+ 200- 83

-1,4

+ 512+ 290

+ 5

+ 807

+ 711



ANNUAL REPORT OF THE SWISS NATIONAL BANK

The annual report of the Swiss NationalBank for the year ending December 31, 1937,was presented to the annual meeting of share-holders by the President of the Bank, Dr. G.Bachmann, on February 16, 1938. Sectionsof the report are given herewith:1

International monetary developments.—Inthe monetary field primary place belongs tothe course of events in the London gold mar-ket, where large quantities of gold comingfrom Russia (in the first half of April) andfrom private hoards (up to the end of May)made their appearance. As these substantialsupplies of gold came on the market at a timewhen the increasing production of gold hadalready excited comment, and when theUnited States—almost the sole buyer—wasnot obliged under the terms of the tripartiteagreement to hold its gold price unchangedfor more than twenty-four hours, there aroseconsiderable anxiety as to the ultimate priceof gold. The rumor spread that the UnitedStates was about to reduce its gold price.This brought about a sharp recession in priceson the stock exchanges and a heavy declinein prices on the raw material markets, andcontinued until the American Governmentannounced that it would maintain its goldpolicy; in other words, that it would con-tinue to buy gold at the established price of$35 per ounce. Although, in the spring, dis-turbances on the gold market led to a con-siderable dishoarding of gold, several monthslater there was a new wave of hoarding. Theprecious metal, which had fallen into disre-pute almost everywhere, was again soughtas the medium in which values could be mostsafely held. The hoarding movement wascaused by the instability of the French cur-rency, the discussions concerning possible de-valuation of the United States dollar, andfinally by the Sino-Japanese conflict. In spiteof the resumption of hoarding, the gold prob-lem will remain unsolved so long as gold pro-duction continues to increase, and until theeconomic equilibrium which is essential fornormal functioning of the gold standard isreestablished, together with a better distribu-tion of the monetary metal. A prompt stabili-zation of exchange rates would also be in theinterest of world economy.

1 The report, available in French, contains in addition sectionsdealing with the international situation, price indexes, wages,foreign trade, Government finance, personnel, etc., together witha number of tables showing the operations of the Bank in detail.For earlier reports see BULLETIN for April 1937, May 1936,April 1932, 1931, May 1930, April 1929, 1928, etc.

Position of the Swiss franc.—The Swissfranc was notably stable throughout theyear. The enormous receipts of gold result-ing from the decline of hoarding, from therepatriation of Swiss capital and the influxof foreign funds, was checked at the end of1936. In the early months of 1937 a temporaryreversal of the flow of capital was broughtabout by the withdrawal of German balancesand the sale of Swiss securities held by Ger-man nationals, and, later, by the repatriationof French funds for investment in subscrip-tions to the French national defense loan. InApril rumors of a revaluation of the dollarwhich might check the business upturnbrought about a stronger demand for foreignexchange, which added fuel to the flame ofcontroversy over the reduction of the price ofgold on the international market. It was notonly a matter of capital movements but alsoof payment for imports intended to supplyfuture needs. The Bank found it necessaryto make available to the market about 150,-000,000 francs in foreign exchange. In thesecond half of April demands for foreign ex-change came to an end. Later on, monetarydevelopments in France brought about a newinflow of gold into Switzerland. An espe-cially large inflow of capital took place in theautumn, and increased the already consider-able holdings in gold and foreign exchangeof the Bank. Foreign exchange received bythe Bank in the second half year exceeded500,000,000 francs. These movements ofcapital arose out of the unstable political situ-ation abroad, the monetary developments inFrance, and the widespread rumors regard-ing a fresh devaluation of the dollar and theBelgian franc. To the repatriation of a largevolume of Swiss capital, the repayment offoreign loans was added.

Gold and foreign exchange reserve.—Inspite of the outflow of gold which took placeduring the early months of 1937 and the de-liveries of gold abroad as a result of the plac-ing of several foreign loans in the Swiss mar-ket, the reserve of gold and foreign exchangeof the Bank amounted to 3,170,000,000 Swissfrancs at the end of 1937, an increase of408,000,000 francs over 1936. Of this sum,2,679,000,000 francs was in gold (one Swissfranc equals 215 milligrams of fine gold) and491,000,000 francs in foreign exchange. Tothis amount must be added the holdings of theEqualization Fund, the greater part of whichwas in gold.



The influx of gold and foreign exchangewas not caused entirely by capital imports.It is reasonable to suppose that, in spite ofthe large deficit in the balance of foreigntrade, the Swiss balance of revenues for 1937shows an active balance. The entry of goldand foreign exchange resulting from a sur-plus in the balance of revenues differs alto-gether from that arising out of the inflow ofrefugee funds or out of the repatriation ofSwiss capital. By buying and selling goldand foreign exchange, the National Bankmaintained the gold parity of the Swissfranc at the value fixed in the instructions ofthe Federal Council to the Bank on Septem-ber 27, 1936. There has been no reason ofan economic character to alter these instruc-tions, or in other words, to raise or lower therate of devaluation fixed around 30 percent.It is important, however, to remember thatthe monetary measures of September 27,1936, did not include the definite establish-ment of a new parity for the Swiss franc,for it is possible at any time to change therate of devaluation between the legal limits,namely, 25.944 percent and 34.556 percent.In order to maintain the stability of the rateof exchange, the National Bank bought goldbullion from the banks of issue adhering tothe tripartite agreement. In order to pre-vent arbitrage operations in gold, the Bankno longer accepts any gold coins except thoseof Switzerland, from either banks or indi-viduals. It no longer buys gold coins of for-eign minting.

"Gentlemen's agreement" on foreign funds.—It is not desirable that foreign funds shouldflow into Switzerland at the present time.They automatically create a stock of gold andforeign exchange which involves a risk solong as the classic rules of the gold standardcannot have free play, so long as currenciesare not firmly linked to gold and governmentshave recourse to monetary measures to in-fluence economic progress. Furthermore, thepresence of foreign demand deposits is unde-sirable because their total volume is in excessof Swiss business requirements and becausethey seek only a temporary refuge in ourcurrency. They move from place to placefor relatively greater security; when anydoubt arises as to this security, or whenbetter terms are to be found elsewhere, theseliquid funds leave their refuge as rapidly asthey came.

Because of the continuous rise in its hold-ings of gold and foreign exchange, the Na-

tional Bank undertook to make an agreementwith the banks with a view to limiting theirforeign balances. Lengthy negotiations withthe Association of Swiss Banks resulted in a"gentlemen's agreement" between the Na-tional Bank and the banks, designed to reducethe excessive volume of foreign deposits heldby the banks in Swiss currency and to checkhoarding; the agreement became effectiveon November 15, 1937. The administrativecouncil of the Association of Swiss Banks ad-vised banks and bankers to adhere to the"gentlemen's agreement" because it felt thatfor Switzerland the disadvantages arisingfrom restriction of the liberty of the banksin their treatment of foreign deposits wereless than the benefits resulting from the limi-tation of "hot money." In brief, the "gentle-men's agreement" provides that foreign de-mand deposits in Swiss francs should bearno interest and should be converted as soonas possible into time deposits payable on atleast three months notice; that no new for-eign demand deposits should be accepted, butonly such as are subject to the three months'notice just mentioned. Furthermore, bal-ances which are deposited for a period ofless than six months are subject to an annualcommission of 1 percent. There is no deduc-tion unless they have been on deposit for atleast nine months. Exceptions were providedin favor of bank accounts so far as they werein amounts necessary to settle normal busi-ness transactions; accounts of commercialhouses so far as they were for purely com-mercial purposes; foreign deposits designedto cover current interest payments, amortiza-tion, or the repayment of credits and loans inSwitzerland; and finally, under certain con-ditions, in favor of holders of a deposit ofsecurities. The banks agreed to refuse tohold Swiss bank notes deposited for foreignaccount. They required from foreign depos-itors or holders of safety deposit boxes a dec-laration showing that they were not placingSwiss bank notes on deposit or storing themin their safety deposit boxes.

As the "gentlemen's agreement" is appli-cable only to accounts existing since Decem-ber 1, 1937, the short space of a month couldnot furnish enough data for an appraisal ofits results. It is, however, gratifying to findthat the measures for checking the import ofunwanted foreign balances have in generalbeen well received. The effort to bring thisabout by direct agreement among the inter-ested parties was everywhere greeted with



satisfaction. The principle that neither themoney nor the capital market nor monetarypolicy should any longer be subjected to pres-sure from foreign refugee capital was highlyapproved. It is understandable that sometheoretical and some practical objectionsshould have been made to the agreement, andthat other methods should have been pro-posed, for example, putting gold coins intocirculation. Such a measure could not evenbe considered, because at present the nom-inal value of the old gold coins no longer cor-responds to their intrinsic value. As to theminting of new gold coins, that will be impos-sible until the Swiss franc shall be legallydefined by a fixed weight of gold.

The gold increment.—The so-called goldincrement realized by the National Bank hasattracted much attention. As the incrementis purely a bookkeeping account and not acommercial profit, the National Bank fol-lowed the instructions of the Federal Counciland allocated the increase resulting from thedevaluation of the gold reserve held on Sep-tember 26, 1936, to the credit of the Ex-change Equalization Fund, which belongs tothe Bank.

While certain groups would like to use partof the gold increment to finance the execu-tion of programs of work creation or similarprojects, the National Bank can affirm thatit has always made its credit freely availablein the service of Swiss economy. It has co-operated with the cantons and communes inhelping them carry out their work creationprograms. When these programs were eco-nomically sound the Bank extended its creditin collaboration with the banks on a largescale and on favorable terms. The use of thegold increment for economic purposes, or itsdistribution by any means, involves a graverisk of inflation which, especially in existingcircumstances, ought not to be overlooked. Itis necessary to observe the greatest cautionin utilizing the volume of supplementarycredit represented by the Exchange Equali-zation Fund—above all, at a time when pricesmust be kept as low as possible to enableSwitzerland to hold her own with foreigncompetition. There is an essential differencebetween the effect on the price level of creditsgranted by the National Bank on conditionthat they shall be repaid at a fixed maturity,and the influence of disbursements madewithout any such limitation and with fundsarising, so to speak, from nowhere. Everydevaluation holds the possibility of inflation;

in raising the price of gold, devaluationcreates new purchasing power out of nothingand artificially stimulates gold production.The increase in the value of gold alsobroadens the credit base of the bank of issue.

Money market.—The repatriation of Swissfunds and the influx of foreign capitalfurther increased the liquidity of the Swissmoney market during 1937. From the endof 1936 to the end of 1937 demand obliga-tions of the National Bank rose by 352,000,-000 francs to a total of 1,716,000,000 francs.The official rates in force since November 26,1936—the discount rate at IV2 percent andthe rate for advances on collateral at 21/2percent—were unchanged. In spite of thelow level of these rates, the National Banklost all contact with the market. Demand forits credit was almost negligible. As statedbefore, the Bank gave liberal assistance tobusiness and semi-public corporations by ac-cording them opportunities for rediscountand loans on collateral. Because of the liquidposition of the banks, its credit has beendrawn upon only on rare occasions; and,moreover, by standing ready with credit fa-cilities it intervenes more effectively in theeconomic situation than its weekly conditionstatements indicate.

Under pressure of the abundance of funds,the private discount rate was reduced from1*4 percent to 1 percent in the second halfof February and kept at this level until theend of the year by agreement among thebanks.

Capital market.—One of the first and mostimportant results of devaluation was the re-laxation from which the capital market bene-fited. First of all, the long-term rate wassharply reduced. In no other country hasthe rate of interest prevailing on the capitalmarket after the suspension of the gold stand-ard declined so rapidly as in Switzerland; inEngland, Sweden, and the United States theyield of Government securities rose at firstafter the adoption of a similar measure. Theyield of the twelve loans of the Confedera-tion and the Swiss Federal Railways, which

federal reserve bulletin may 1938 - st. louis fed · 2018. 11. 6. · federal reserve bulletin vol....

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