BORROWING BY INTERIOR BANKS IN NEW YORK.

By the autumn of 1920 New York City banks were feeling an unprecedented demand for loans from out-of-town banks. This was described in a letter written by the assistant Federal reserve agent at New York to Gov. Harding under date of November 27, in which the results of inquiries made at nine of the largest banks in New York were given. Five of these banks reported a demand from interior banks above any in their experience, even before the Federal reserve system was established; one bank reported unusually heavy demands but less than before the Federal reserve system was established, and three banks reported demands to be about as usual, though coming, in some instances, from small banks unable to secure accommodation from near-by correspondents. The summary results of the inquiry were as follows: Bank 1.-Loans to interior banks heavier than ever before, larger even than before the Federal reserve was organized. Large number of banks borrowed which had never done so before.

Bank 2.-Demand from interior banks has been extremely heavy, and above previous periods. Requests from both large and small banks. Some banks had never borrowed here before, and felt humiliated, it was said, to be obliged to borrow at this time.

Bank 3.-Loans to banks are almost twice the previous high-were 41.5 millions in September, compared with 22 millions last September. Furthermore, instead of reaching a peak at September, it has been practically a level, and there has been almost no reduction.

Bank 4.-Unprecedented demands from interior banks. Illustration of unusual conditions is shown in the fact that recently a depositing bank which had not borrowed in 40 years asked for money; another which had not borrowed in 26 years came in to-day; banks began borrowing later this year than has been usual.

Bank 5.-Demands heavier than ever before. Many new banks sought to open borrowing accounts, and others who already had accounts but had never used them have asked for money. Lately these loans have tended to decrease.

Bank 6.-Demand from interior banks has been more than usual, but has not been excessive. Was said to be not as heavy as before the Federal reserve was organized. Much of the demand upon this bank has been from the cotton States.

Bank 7.-On the whole demand from interior banks has not been in unusually heavy volume. Occasionally individual banks have requested more than they are entitled to.

Bank 8.-Amount lent to interior banks has been about as usual. In past month, however, there has been an increased demand from small banks in the Northwestmany banks asked which had never borrowed before. Larger banks apparently have borrowed at their Federal reserve banks. Heavier demands from smaller banks indicate that their near-by correspondents, from whom they normally borrow, are filled up. Bank 9.-Loans to interior banks reported not greater than ever before.

In his acknowledgment Gov. Harding said that he would bring the letter "to the attention of the other members of the board," of whom the Comptroller of the Currency was one.

The same situation is referred to in a letter to Gov. Harding from the assistant Federal reserve agent, under date of January 27, in which it was said that "several of the largest banks tell us that they are receiving numerous requests for loans from banks in other districts, particularly in the agricultural sections. It appears from what they tell us that those correspondent banks, feeling the pressure of their local Federal reserve banks, are paying off their loans with them and are transferring those loans to their New York correspondents, in some instances using the same collateral which they had pledged with the Federal reserve banks."

LOANS TO INTERIOR CORPORATIONS, ETC.

On February 15 Mr. Jay sent to Gov. Harding a tabulation of reports received from five of the largest banks in New York City, giving the total of their loans to out-of-town correspondents as of the day previous. Loans to banks outside New York State aggregated $97,000,000, loans to corporations outside New York State aggregated $645,000,000, and loans to railroads $49,000,000, a total of $791,000,000. It appeared also on that date that the total borrowings of these banks at the Federal reserve bank of New York aggregated $511,000,000, some $280,000,000 less than their loans to banks and corporations outside the State. In addition, these banks had suffered a loss of deposits since January 1 amounting to $240,000,000. A copy of this statement follows, with, however, the addition of a column showing the balances on February 14 of out-of-town correspondents and supplementary tables showing the pertinent figures of the same banks since the beginning of 1920.

Out-of-town loans and balances of out-of-town correspondents, five large New York City banks.

Deposits, balances of out-of-town correspondents, total loans and investments, and borrowings of five large New York City banks.

GOV. STRONG. And further-to continue on this same subject-I referred to another study which is being made, and which will not be completed for several days. (It is here inserted as follows:) AGRICULTURAL AND INDUSTRIAL LIQUIDATION MAY 4, 1920, TO APRIL 28, 1921.

The following tables give an analysis of reports to the Comptroller of the Currency and the Federal Reserve Board from about 9,500 banks throughout the country which are members of the Federal reserve system. The purpose of the analysis was to ascertain what changes took place during the year ended April 28, 1921, in the loans of banks in agricultural communities as compared with the loans of banks in nonagri

PER CENT CHANGE BETWEEN MAY 4, 1920, AND APRIL 28, 1921, IN LOANS AND DISCOUNTS, TOTAL DEPOSITS, AND BORROWINGS OF MEMBER BANKS IN AGRICULTURAL, SEMIAGRICULTURAL, AND NONAGRICULTURAL COUNTIES.

Columns above the line show increases and columns below the line decreases.

Source of information: Reports of condition of national bank to the Comptroller of the Currency, and reports of member State banks and trust companies to the Federal Reserve Board.

cultural communities. While loans by country banks are often made for uses other than to finance farmers, and many loans by city banks are made to move crops and for other purposes intimately connected with agriculture, it is felt that the figures compare with fair accuracy the liquidation of industrial and agricultural loans.

All counties in the country were grouped in three classes-agricultural, semiagricultural and nonagricultural. Counties were classified as agricultural when the value of their products according to data obtained from the 1920 census reports, the Geological Survey, the Bureau of Soils, and all other available sources was estimated to be not less than 80 per cent agricultural, as semiagricultural when their products were between 50 and 80 per cent agricultural; and as nonagricultural when their products were less than 50 per cent agriculturál.

The summary table below shows that between May 4, 1920, and April 28, 1921, the loans and discounts of banks in agricultural counties throughout the country declined $36,500,000, or slightly more than 1.2 per cent; the loans and discounts of banks in semiagricultural counties declined $18,700,000, or 1.3 per cent; and the loans and discounts of banks in nonagricultural counties declined $827,100,000, or 5.6 per cent. The borrowings from the Federal reserve banks by banks in agricultural counties increased $127,600,000, or 56.6 per cent; borrowings by banks in semiagricultural counties remained practically stationary; and borrowings by banks in nonagricultural counties declined $629,100,000, or 28.5 per cent.

Increase or decrease in loans, borrowings,1 and deposits of member banks, 1920–21.

In partial explanation of the relatively heavy demand upon the Federal reserve system by banks in agricultural counties, it appears that their loss in total deposits was 11.1 per cent, as against a loss of 4.4 per cent by banks in nonagricultural counties. Between May 4, 1920, and April 28, 1921, member banks show a total liquidation of loans amounting to $882,000,000, of which $827,000,000, or 94 per cent, is shown for banks in nonagricultural counties, while the liquidation in agricultural and semiagricultural counties amounted to only about $55,000,000. An analysis of the changes in loans by Federal reserve districts shows few important reductions for banks in agricultural counties, the largest reduction being reported for banks in the Kansas City district, where loans were reduced by about $53,000,000. On the other hand, banks in the Richmond and Atlanta districts showed somewhat larger loans this year than a year ago. In the semiagricultural counties no important changes are reported for any of the Federal reserve districts. In the nonagricultural counties the volume of liquidation has been material in every Federal reserve district, except Cleveland, which reports a 10 per cent increase in loans.

The contrast between the banks in agricultural and nonagricultural counties is even more pronounced when borrowings from the Federal reserve banks are compared. These borrowings increased for banks in agricultural counties by about 128 millions, or 57 per cent, particularly heavy relative increases being shown for the Atlanta, Dallas, and Minneapolis districts. In the semiagricultural counties the amount of loans from Federal reserve banks shows practically no changes for the year, substantial increases in the Richmond and Atlanta districts being offset by a reduction of 10 millions in the Cleveland district. In nonagricultural counties the reduction of borrowings from Federal reserve banks is universal for all the districts, except Cleveland. For the system as a whole, the reduction in borrowings from Federal reserve banks amounted to about 502 millions; for banks in nonagricultural counties the reduction was 629 millions, which was offset in part by an increase of 128 millions in the borrowings of banks in agricultural counties.

Figures for the several Federal reserve districts are shown in the following table: