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Show New N w Liffht Light on Bank BankLoan BankLoan Loan Actlrity Activity ActlrityBy ActivityBy By OUrlDEN GURDEN EDW EDWARDS ARDB dheotor d1reo dheo direotor tor of the rtesearch Research Council councll Am- Am American Am American Amertcan - erican Banken Bankers AssociationTotal Association As oclatlon oclatlonTotal I Total outttandlni outstanding loana loans of lankon bank banks lank bankson , on a xlven given date aa as compared wi wiU wiUthose ) those of ot &ome ome some & prv prvioU previous pr > \-ioU ioU \ - vlou & date h haw hawlong hayilone ve velong long been widely accep accepted M as th thindex the theIndex Index of banklnr banking s activity In meet meet- meeting meeting - ing ln ( the credit needs of ot businessIObV10USlY buslneaObviously business buslnea businessObviously Obviously they constitute no such suchIndex sue ] IObV10USlY Index at all nil s1nce since sine * they U1ey are Intend Intend- Intendeel intended Intended - ! ed eel merely to show the U1e net chance1 changesI changes change changeswhich changewhich I which result reswt from trom a complei coJJ1plex complex coJJ1plex'Itream complexstream compleistream stream 'Itream Itream ' of credit transaction transactions * flow flow- flowIng flowlog - . Inc Ing log throuih through the banlu banks In the in- in intervening Intervening In - ' . tervenlni tervening period The real pictun picture plctun pictureot pictunof plctunof , of ot the U1e volume and end activity of the theservices thservices thi th , servlcex services and nd cooperation extends extended extender extenderto . to buslnees business on the U1e part of the bank banka bankacan bankcan , can be measured only by figureshowing figures figure figuresshowing ahowinf showing the number and amount amountof amourof amoun amour amounof of loaru loans made and rene renewed renewedHow renewedHow How rreat great is Ls the disparity In the theview thview thi th . . view of a bank benki s lending actlvit aetivit activity activitypresented aetivitpresented : presented by Its periodic outstand outstand- outstandIngs outstandIngs outstandln - . Ings ln a ax as compared with current currenttransactions rumentransactions curren rumen transactions may be simply lllus illus- illus illua illustrllted illuaCrated - trftted trllted Crated by the case ca of a bank whici which whirl whichon whirlon on January I 1 has loans loan * on its It * books booksIn book bookin bookIn , In the amount of ot about $5000000 5000000 $5000000Dwing $5 5 $ 000 00 ( XXDuring ( Dwing Ding the U1e next six lx montha months It ma may maymake m ; ; make new loans loa.I15 loaI15 . In the amount of ofsome osome o some ome ' $5,500 5500 $5,500000 5500000 $ , , 000 to perhaps 4500 4500borro'l 4 450 450borrowers 50 50borroa < ) borro\'l borro 'l l borroa borrowers \ ' era During the ame same periodhowever period periodhowever periodhowever however old and new loan loans * may maybe ma , ; : , be repaid or reduced In the theamount th thamount thiamount , amount of ot say $5 5 $5700000 5700000 $ 700 000 Thresult The Theresult Thi Th result re ult would be that Its lt outstand outstandIng outstandings outstandInis Ing ings & on June 30 would total only onl ; ; $4800000 4800000 $4800000that $4 4 $ $00 00 800 $ 000that 000 -that that - that Is $200 200 $ $200000 200000 $ 000 less lessthan lea leathan le lethan , than those ut Ilt at the outset despite despib despitethe despibthe desplUthe ' , the Intervenliit Intervening period of a.ctivlty activlty a.ctivltyIn . actlvit activit ; ; ? In the bank s lendlni lending operationIn operationsin operations operation in meettnK meeting all the lecttlmate legitimate de demanets demands demanda manets mands for credit made upon tt it ttFurthermore itFurthermore ItFurthermore Furthermore durlni during the same per- per perIod per per.lod perlod - . . . Iod led the th bank might also cooperatea cooperate cooperate9.lth cooperatfwith ' > 9.lth 9lth a . ith Its customers by crantinf granting re re- re - renewals re renewals . newals newats of their loans one or moretimes more moretimes mortimes ' . times showinf showing an aecrecat aggregate * of 3- 3 3000 3 - . 000 or 4000 4 000 separate transacUona transaction transacUonatotal11ng transactiontotalling transaction.totalling transactiontotalling . , total11ng totalling nine to ten million mUlton dol- dol dollars dol dollars - . lars lard While Whlle renewals do not CJ'eate CJeate creatt CJ'eatenew creattnew ' createnew , new credit nevertheless In many manyInstances man ? instances they constitute coMtitute just u uImportant a ; : Important and helpful a . form fonn of ofcontinued of ofcontinued o ; [ continued financial cooperation as asthe a athe luthe the orlslnal orlgtnal original new loan tranaacUonsTrad.1tional transactionsTraditional transactions tranaacUons transactionsTraditional Traditional Trad.1tional Trad1tional . statistics statLsUca on bank bankloaM bankloans bansloans ' loaM loans are manifestly lacklne lacking In the thepower thepower thipower ' power to rive give a true perspectlv perspective perspectlvof perspectiveof of the vital human forces that lie liebehind liebehind 11 11behind < behind them nevertheless nevertheles ! year in inand Inand lrand and year out weekly ficures figures for the theaggregate theaggregate th thauresate < . auresate aggregate outatsjidlnss outstandings cf selet-te selet te selected selectedgroups selet.ted seletted selet.tedgroups . - < ITOUDS groups of f commercial banks and andannual andannual ancannual [ annual ! figures 1gures for all banks hav have have haveI havebeen havebeen havbeen < > been widely puollshed puoUshed puolished and corn- corn com- com commented cornmented - . - I mented on as If It they had hart sucl such auci such1P9 aucip ' " ' p ( " f > 'rs rs ' ri r'l rl ' T T1 ' > e a ! fifures lgllres figures unquestlonabi unquestionably unquestlonabl7 unquestionablyare unquestlonabl7are : ' are true and . ' Informative 1.n1'0nnatlve 1.n10nnatlve 1n10nnatlve Indlcc Ind.1cel Ind1cel tndlce Ind.1celof . : : 1P9 1P9f of certain trends In banking so 50 fat fatas far faras taas as they so go but do not reflect the thefun the thefull thifull fun full iccord t"Cord tCord record I " of benkinx banking ervloe servloe service serviceAs servloeAs ervloeAs As an example one p-oup p oup group - of of offlctal official officlsl flctal ficial figures shows that on JanI Jan 1 I 1939 193 the nation nations s commercial commercia commercialbanks commerciabanks commerciabanlcs banks opened business with loan loans loanson loanon ; on their U1elr books tn In the amount of o ' $16424000000 16424000000 $ SIC $16 16 $ 424 000 000 They also show that thatsix thatsix th thsix six months < .iter iter ater . on June 30 H31 1939 1939their 1939their their loans atXi-etated atXi etated aggregated - only $16 16 $ ! 383 000 000This 000Tints 000 Tills This Tints did not mean tliat that bank bang banklending banglending banilendlne lending had come corn * to a standst1ll standsttl standst1llIn standstllIn . ' In thia thl'i thli this ' ' period pt'riod ptriod It ren reflected ted partha partlva partlya partlv partly ' a slliht slight drop In the number of ofI ofbanks 01 01banks obanks [ I banks but It reflected mainly thefact the thefact th thfact < ' fact that such factors as loan repayment'i repayments re payments payment'i paymenti . ' reductions In princlplior princIpleor principler princIple or ) r amortizations amorUzations of serial rtal or capi caps capital capssal capltal tal sal loans exceeded loans loaM on the thebooks therooks th thbooks < ' books rooks at the outset of the period periodor perlocor periodr or ) r made during ; it In the amount amountof amountf amouniof ' of ) f about $40000000I $40000000Feeling $40000000 40000000 $40000000recline $ I recline Feel1ng Feeling that the story of bank bankending banklending : ! lending ending activity ucUvlty was not being ade adequately adeluately adequatcly quately luately presented to the public the theAmerican thetmerlcan th thAmerican < ' American tmerlcan Bankers Banke-rs Banke rs - Association un on undertook onlertook undcrtook dertook lertook thru its Research Coun Coon Counell Coonit Counell ell it to study the subject 5ubject from a ad1ferent aIlfferent different d1ferent Ilfferent ! point of ot view Question Questionna1re'l Questionraires Questionnalres na1re'l na1rel rair-es rair es - ' were sent to commercial commercialoonks commercialanks commercialbanks oonks anks throuthout throughout the country countryTIlese countryThese countryThese TIlese These banks were asked to furn furnL"h furnslt fumLsli L"h Lh " slt a record of the number and'UI1ount and andmount unount 'UI1ount UI1ount mount ' of new loans other than thanmortgage thanmorti thanmortgage mortgage e loans on realestate real reai estate made madefrom madenom madefrom from nom January 1 to June 30 1939Six 1939Six 1W 1939 1WSix Six thousand banks or 41 peremit per perecnt percent ecnt emit sent replies repJlt's repJlts ' They comprised comprisedla.rge comprisedlar la.rge large . > rge e and small banks of all kinds kindsf'ICt'pt kinds"crept kindsptcept f'ICt'pt fICtpt "crept crept ' " ' ( ' mutual & . savings 9.vlngs 9vlngs banks In Infery invery Inevery f\ery f ery ' very \ state and In every type of ofa.gTlcultural of.gricultural ofstgrlcultural a.gTlcultural agTlcultural .gricultural gricultural . . Industrial 1ndustrlal comnttertel conuJ1ft- conuJ1ft comntter- comntter conuJ1ft'lal conunter-rial conunter rial " - 'lal lal < ' tel and financial community commW1lty and andcOl15tltute andonstitute andconstitute cOl15tltute onstitute a representative repre5entat1ve crossection cross ec : > & ctlon ection ? t10n ctlonDurtni t10nDurtng ectionDuring Durtni Durtng During : the flr.t flrt first flr . t six months of of193 1939 939 these the-se the se - banks msde made 5747976 5 747 976 7 < new newl newans 1 ) a.ns ans . .ns ns . aweiattnt aggregating $10083 10083 $10083449563 10083449563 $10083449563.r $ l0 0 3 449.563 449563 449.563.1 44 . ,5 5 ,53H.I , 3H.I 3HI \\.1 .1 \ . .r r . . averate a\erage a erage average \ of 958 5 ( ' new tl'W tlW loans per perbar perer perb bar er i k The average I > fcize size 17A " was $1 1 $ 754 " They-were They were "n1eWeTe n1eWeTe They.wese Theywese ' : - . also a1ao asked aaked to fiTe It1ve give Vb.record Vbrecord the therecord therecord . record of their loan renewals h 1s 1sthis lithis thb this period . . They The ) ' stated that they the'had thehad ' had renewed 5 8M 056 e3 408 40 loans loan * , . tthe tQ to tothe the amount . of or 7f.si3 7fsi3 1\61.8.543 1618.543 1 61.8.543 618543 $7818,643 7818643 > $ ' \ ' ! . . ( . , 20 520 20 . , an en anaverave enaverage aiaverace averave average ; of 943 43 renewal renewals ! per bank banthe ) , . the average size site beit1 beln & ' $ $1,347The (1,37 137 $1,347 1347 (1,37The ( $ , , * The banks bank3 were also asked toshow toshow tshow show their new mortface mortgage loans an on onreal 01real real estate They made 127 ' 389 389such 3tsuch such loans spans ( ) ans amounting to $412,018 412018 $412,019SS 412019SS $ , . - ' 339 , or an average of 21 new i roortgace gage loans per bank the av aver averge averacsize r tre tresize ge gesize size being $3234It $3234If (3234 3234 $3234 (3234If ( $ If It It can be assumed that the thetigures thefigures thfiguree tigures figures of hase he.se hese her . 6 000 banks banka are aretruly artruly truly ZU2.r ZU2r : . _ representative rpresentative represen a lye of t the e entire entir 1 . J . . o : > u commercial DanltS meanthat meanthat mean I thatThe that The commercial banks of theUnited theUnited the United States made new loansdur loans -dur- dur dur- durII1Ir during - < - II1Ir ing ln the tint ttrat first half halt of 1939 1 3 to t thenumber thenumber the number of ot 14 14000000 Oqo 040 000 and to In the theaggregate theaggregate aggregate amount of $24.G90OOO 24.G90OOO 24G90OOO $24090,000000 24090000000 $24090,000000They ( $ (24 24 . 90,000000 90000000 , , 000 000They They renewed 13 l37i 7V .OOO OOO 7tn5,00O 7tn500O . ' , ,000 000 , loans inthe inthe In Inthe the aggregate amoun amount of ftia $18 18 $18580- $18580 18580 $18580000000 $ 580 s0- s0 s0000000 - 000000They 000000 ' . They made 310,100JAnow 310,700 310700 310,100 310100 310.100 , . JAnow 'new new new mortr- mortr mort- mort mort1 mortgage mortgage mortrcare . - - - care gage loans on teal teat Jstate ; estate state In theamount the amount of more thadl.QOO thadlQOO thadfd1,000 thadfd1000 thaiTd.OOOOOOOOO thaiTdOOOOOOOOO thaiTd.OOOOOOOOOIn " $ , . . 000 ooo 000 0001 000In 0001In In addition addltton ea each h bank bankiwas ba.ntwaa bantwaa . * , , was asked a.sked . a.skedIn askedin In case It kept atx an accurate uocutate aocufate recordof recordof record of confirmed open lines Unes of credit creditto creditto to state the total s stji sum placed at atthe atthe the disposalof disposal of Its customers eudtomers and andthe andthe the amount being uaed used Generallyspeaking OeneraUy General Generally ) ] ! speaking only the larger banks banka bankagran banksgrant banksgrant gran grant t open line Une and only to theirlarger theirlarger their larger customersThe customersThe customers The question was answered by 7tl 761 banks btLnks They stated that theyhad theyhad they theyhad had granted $4 4 $ 402 700 000 In openlines openlines open lines of ot which omy only $1182200000or (11X2200000 11X2200000 $1182200000 1182200000 ( $ or 27 per cent was being usedIt usedIt used It Is felt that the foreolni foregoing ( dataconstitute dataconstitute data constitute a new field tteld for study studyteed . tudy tudyI&hd ahd I&hd Ihd teed & analysis of ot bank lank lendlnr lending activity ac- ac activity ac activity - - tivity They assuredly constitute a anew anew anew new and revealing revenling ' measure mensure of thevolume thevolume the volume and extent of the services serv1cea serv1ceabanking servicesbanking banking Is rendering ; to the publicAs publicAs public As further turther surveys are completededmaking completedmaking completed completeded making possible a & consistent serIes series ser- ser - serles - les Ies of ot figures tigures over a continuousperiod continuousperiod continuous period they should throw newl1ght newlight new light l1ght on the vital economic significance algnificance signl- signl algni- algni signi- signi signlficance - ficance and relationships relatlowahlps relat1ons 1pa of bank bankloans bankloans . loans to other phaeee phases of busdnesa business busdnesaactivity businessactivity activityThe activity The office oroce of or the Research CoWl- CoWl Oman CoWlcU - . ell cU cil Is building the machinery mach1nery for forperfecting forperfecting forperfecting perfecting the systematic gather- gather gathering gathering father'Ing fatherIng ' - ing of this new line Une tine of bank dataand dateand data date and rendering it useful usetul to the max max- mar- mar maximum marImum * - Imum degree both for tor pracUcal practical pracUcalbank practicalbank practicalbank bank operations operaUona and for improved improvedpublic Improvedpublic Improvedpublic public understanding unde1'8tandlng unde18tandlng ' of the economic econ- econ economic - - omic services of banks |