Banks, First Half

Every association [national bank] shall make to the Comptroller of the Currency not less than three reports during each year. . . . Each such report shall exhibit in detail under appropriate heads, the resources and liabilities . . . at the close of business on any past day by him specified; and shall be transmitted to the Comptroller within five days after the receipt of a . . . requisition therefor from him . . . and shall be published in a newspaper. . . .--National Bank Act.

After the close of business June 30, officers & clerks of each & every one of the 6,800 national banks began to marshal blunt columns of Arabic numerals for which U. S. Comptroller John William Pole was anxiously waiting in Washington. Though it was the first call he had issued this year, nearly all large banks had voluntarily published statements at the end of March. But no one knew better than Comptroller Pole the limited value of these statements in estimating the soundness of the general banking situation. Of all the assets listed by a bank only the items "Cash" and "U. S. Government Securities" can be taken at face value. The bulk of a bank's assets is in loans, discounts and investments. Whether these are good loans, good notes, or how much the bond account has depreciated, only the officers & directors know. Only a few institutions publish the due date and amount of each loan, list their bond holdings. Since the collapse of the bondmarket Comptroller Pole has allowed bankers to carry bonds at "intrinsic value," an arbitrary figure arranged between the bank and Federal examiners, and most certainly above market price. And nearly all banks indulge in "window dressing" by calling loans and selling bonds to build up cash just before the "close of business."

Cash and Government securities represent the bank's ready money. This expressed as a percentage of deposits is the bank's liquidity. Because U. S. depositors have been on pins & needles, ready to yank out their deposits in cash at a whisper of trouble, U. S. bankers have for months been keeping their banks highly liquid. But a highly liquid bank earns little money for stockholders. Cash earns no keep; Government bonds, particularly Treasury certificates, return a very low yield. Bankers point with pride at their ready money only because it bolsters confidence. Both the bankers and President Hoover would rather see the funds flowing out in good loans.

As every one expected, the big banks reporting last week to Comptroller Pole (and the State chartered banks & trust companies simultaneously reporting to their State officials) were generally more liquid than ever before. The big banks in big cities relaxed a little after National Credit Corp. was initiated by President Hoover last autumn, but with new outcropping of banking troubles they had increased cash since March.

Of leading Manhattan banks, Irving Trust was the most liquid at the half year end--64%. Bankers Trust followed closely with its $345,000,000 cash & Governments (up 46% in the second quarter) providing a ratio of 63%. Public National, with deposits of $85,000,000, warily continues 70% liquid because it was rescued from difficulties just before Bank of United States failed.*

Biggest private pool of liquid capital in the U. S. was in National City bank, still second largest U. S. bank. Guaranty Trust had piled up nearly as much; its $216,000,000 of cash and $320,000,000 of Governments were 57% of deposits. Still No. 1 U. S. bank is Chase National with total resources of $1,731,509,000, but National City is less than $200,000,000 behind. Though each have cash & Governments of over half a billion, Chase was only 40%, National City 44% liquid.

Harvey Dow Gibson's Manufacturers Trust through its merger with Chatham Phenix now has more deposits than New York Trust which he left less than two years ago. New York Trust is now 52% liquid against 70% last autumn. Banker Gibson reported cash & Governments 37% of deposits.

Sharp statisticians pounced on statements from Chicago's big Loop banks to learn the damage done by last month's banking flurry (TIME, July 4). Like nearly every U. S. bank Continental Illinois showed a loss of deposits, but only 10%. It was 38% liquid. Melvin Alvah Traylor's First National, despite a miniature run, had lost less than 1% of its deposits, was 47% liquid.

Quaking depositors had practically gutted Central Republic Bank & Trust, to whose chairmanship Charles Gates Dawes returned from R. F. C. In three months deposits declined from over $160,000,000 to $112,308,000. With the aid of other friendly banks and R. F. C. it was able to show liquid funds 52% of deposits. Listed among liabilities, how ever, was the item "Bills payable" of over $44,000,000, probably representing the funds it had borrowed to stave off catastrophe. Last week Central Republic's stock which slumped from a high of 108 to 2 had recovered to 4 1/4.

As Comptroller Pole must have expected banks in other centres were not so liquid. Boston's First National, whose roster of 82 directors exceeds Chase National's by two, had cash & Governments equal to 43% of deposits. Since it absorbed Atlantic National in May, it ranks 8th in U. S. banks with total resources of $630,000,000, is far & away New England's biggest. Buffalo's Marine Trust Co., king pin in the Marine Midland chain of New York banks, was 27% liquid. First National of St. Louis was 34% liquid.

Security-First National Bank of Los Angeles, chairmanned by President Hoover's great & good friend Henry Mauris Robinson, reported a ratio of cash & Governments to deposits of 26%. San Francisco's Bank of America N. T. & S. A . was slightly higher with 32%. Biggest bank on the Pacific coast with 410 branches throughout California, Bank of America was proud of its $51,000,000 gain in deposits since March. But since the statement showed that 75% of its deposits are savings accounts, much of the gain was presumably savings. Unlike checking accounts, savings accounts have risen steadily throughout the land.

Pittsburgh's Union Trust Co. with resources of $233,709,000 was 68% liquid against 60% at the end of last year. Mellon National Bank, 16 of whose directors are directors of Union Trust, expressed Mellon caution by keeping $120,000,000 in cash & Governments, making it 60% liquid. Among the assets included were "Due from United States Treasurer-- $157,500," "Overdrafts-- $3.35."

* In normal times big Manhattan banks are about 35% liquid, other banks, depending on local or seasonal factors, generally less.

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