| Show FEDERAL RESERVE BANKS RANKS IN STRAITS TO PAY DIVIDENDS Lowest Interest Rate In History Cuts Into Profits Of Money Lending Vast Volume Of Gold On Hand Is Big Factor I By Br HARDEN HARDEN- Sp Special lal Correspondent Standard Standard- Standard Examiner Examiner b the tha Consor- Consor Copyright 1924 by Press Association WASHINGTON WASHINGTO Aug Lower 9 9 Interest rates forecast by this cor- cor correspondent correspondent cor correspondent respondent three months ago hate hAe rea reached hed a point where ushers here the 12 fed fed- fed federal eral oral reserve banks taken as lIS A AI I whole are barely able to meet cx- cx ex expenses and pay the tho legal rate of ot 6 per cent In dh dividends to their I stockholders In the case of ot the tho thoI federal reserve bank of ot N New I the Iho largest of ot the 12 du Ing du-Ing In ing the first six months of ot the cho ear tailed ta l to moet meet r expenses an dl dl payments by about While the other 11 banks were in 10 better during the past six alx I months of ot 1924 the tho low rates are re cutting into earnings to such ouch oIn an extent as to lea leave but little It If any profit from their 1924 operations The dividends will be bo paid ho hoever how however ever It Is believed leUe Id I'd out of surplus I IY HISTORY New Now Yorks York's rate of ot 3 3 per cent on commercial paper up to 90 ds days maturity adopted this week eek Is the tho lowest ever seen In the tho ten year history of ot the system There Thero have been 3 per cent rediscount rates rat e hilt but they never applied t to paper with Ith a greeter ter maturity than 16 15 days dams The present rate rato of ot the sew ew York bank applies to all 1111 kinds ot of piper per Boston St Louis and San Francisco In 1916 New Now York In 1916 and Philadelphia In 1917 adopted rediscount rates ot of f 3 percent per percent u v cent on day 10 or day 15 paper but adhered to a hl higher her rate on notes ot of longer duration The Tho n rate therefore sets Bets the record It ItIs Itis ItIs Is also the 10 lowest cst rediscount rate In the tho world orld Money Is cheap all over the tle United States at the present time the highest hl-hest rediscount rata late in tile the federal reserve ser system being In tto tJoe case caso of ot the tho Minneapolis bank which charges 4 per cent Every Ewry federal reserve rescue resen e according to tiro tho report this week neck has more moray on Its hands that It can safely lend The chief cause Ct of ot this sit sit- sit situation officials here hero say Is the i great eat quantity of ot gold held by the banks A contributing factor Is Istha the tha t h decrease In in the me volume ot of ui bud bud- us i-us ness HARD BARD OX ON O B KS This situation Is 1 hard on tI tl e federal reserve resen 0 banks but it males makes borrowing easy eno tot for to both men amt I also for tor corporations and will III re- re reduce duce some somewhat hat the amount to ho 10 hopal pal out by the federal treasury federal treasury In Interest on Its short term borrowIngs Ings when they are renew rene d d Shere tJ the e treasury Has as pa paying Ing u up to 4 i per cen cent t not long ago It now can borrow at as low as 3 per pr cent The Tho lower loner r o mate late tops third one ot of othe time the amount of ot the Interest Interest- It will help the taxpayer to that ox tent Interest pa payments menta on Liberty Libert bonds are arc not affected by the pre pre pret- pretest est low rate ver Io and such payments constitute the overwhelming over over- overwhelming whelming bulk bull of ot the gO government s annual outlay for lor Interest the Oho hc relief re- re lIet lief to the taxpayers will be rela- rela relatively lively slight A statement made public by the federal reserve board cov CO n operations of ot the dIe 12 Ced federal lal reserve resene banks bink di the first six months of ot 1924 plat phi es gross ross earnings ot of o those Mona lions at a and ana current expenses e at 14 It H lea ln current net earnings of ot 35 5 i Out of ot that sum dividends dl have been Leen paid as required 1 bv by Ia law lass to tithe the total of ot 3 13 From the remaining the banks are aro required l to charge ore oft dep c- c elation reserve reser e tor for probable ble losses furniture and equipment self In- In Insurance urance ranee and other Items Last year total deductions of ot those kinds amounted to 10 8 LOSING YOn MOM On the assumption that these the do- do e will nill be as great In 1924 as B the they acme ee In 1923 the first halt half of oho the tho current year ear should pro Ido le to meet them In the sum ot of about H In reality tle tl bords report discloses disclose but U 2 2 has been ben provided Apparently Apparently Apparently the tho 12 1 banks taken as ag a whole ha have hate 0 failed to earn arn ox- ox ex ox expenses pense and dh dividends thus thua tar far him 1924 Individual banks hanks here and there thre hAv have made mado expenses and div div- dividends div dividends ho however ever Against current net earnings ot of 5 16 during the first halt half of If 1924 the 12 banks sho showed shored ed net earnings of In 1923 ard and tit 18 In 1922 The dc de- de of ot 1920 21 when hen money was In great demand and interest rates were re at their hl highest het wa was a period of ot tremendous prosperIty for tor the reserve banks Their not In 1920 were here almost COO and In 1921 In 1919 net earnings went to 71 78 H- H and In 1118 1918 to nearly 53 53 During these four tour years tile the 12 banks bank transferred out of ot earnings ta to surplus Dur Dur- DurIng Dur- Dur During During ing the present year ear ar th they will hardly tor II a dollar Indications are aro that they thy will draw I slightly on their surplus to met meet dividends instead In 1920 and 1921 the 12 banks paid Into 1120 the federal treasury more than than n as a franchise tax the sum coming out ot ex e earnings During the present year eor they will null pay Y little It If any tax to the government go Private business conditions are aro good andr and improving ImprovIng improving ing but the tho federal governments government's semiofficial banking business I la at about the Iho lowest point of the ebb tide set et et earnings In the tho case of ot tle be New YOlk Tok federal reserve bank were ere luring during the first bank six Ix t months of ot the seer vear ear and pen e plus dividends were ere New 3 pet pel cent rate probably bly will be toll followed owed b by 10 lower loner er rates else here but It Is not regard regarded d her here as likely that the 3 per cent central ral rate will still be further lower d deither either Ither by New York or other banks |
