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X-9053

F E D E R A L R E S E R V E B O A R D

STATEMENT FOR THE PRESS

For immediate r e l e a s e # December 19, 1934#

A conference of the Chairmen of the I n d u s t r i a l Advisory Commit-

t e e s was held i n Washington on Monday and Tuesday, December 17th and

18 th . The conference was c a l l e d on November 28th f o r the purpose of

reviewing t h e work done by the I n d u s t r i a l Advisory Committees during

the l a s t five months i n making recommendations t o the Federa l Reserve

banks of t h e i r r e s p e c t i v e d i s t r i c t s under Sec t ion 13b of the Federa l

Reserve Act, and a l so f o r the purpose of exchanging views and adopt ing

methods by means of which t o continue t h i s work i n t h e most e f f e c t i v e

manner p o s s i b l e i n accordance with t he p rov i s ions of t h e law.

The fo l lowing Chairmen were p resen ts

Mr# A. M# Creighton - Boston Mr. William H. Pouch - New York Mr# J . E. But terworth - Ph i l ade lph i a Mr# F. A. Smythe - Cleveland Mr# John Sanford - A t l an t a Mr# Max Eps t e in - Chicago Mr. Wm# K# Norr i s - St* Louis Mr * Sheldon V# Wood - Minneapolis Mr# Walter J . Berkowitz - Kansas Ci ty Mr * Clarence Ousley - Dal las Mr# Ralph Burnside - Po r t l and , Oregon.

A f t e r a complete d i s c u s s i o n of the s u b j e c t ma t t e r and adop t ion of

a program f o r t he f u t u r e , t he Chairmen i s sued t h e fo l l owing s t a t emen t :

11 At t h e i r meetings the l a s t two days, the chairmen of the

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I n d u s t r i a l Advisory Committees reviewed the progress made t hus f a r i n

extending c r e d i t t o i n d u s t r y f o r working c a p i t a l purposes and cons idered

means of making b e t t e r known to bankers and bus ines s men g e n e r a l l y the

advantages and b e n e f i t s which the i n d u s t r i a l loan p rov i s ions of the Fed-

e r a l Reserve Act open t o them.

"Under Sec t ion 15b which was added to t h e Federal Reserve Act, on

June 19, 1934, member banks and other f i nanc ing i n s t i t u t i o n s which make

advances maturing i n f i v e years or l e s s t o e s t a b l i s h e d i n d u s t r i a l or

commercial e n t e r p r i s e s f o r the purpose of f u r n i s h i n g working c a p i t a l ,

may procure from the Federa l Reserve banks commitments t o r e d i s c o u n t or

purchase such advances when r e q u e s t e d . I n d u s t r i a l advances, covered by

such commitments, a re among the most l i q u i d a s s e t s t h a t member banks can

ho ld . I t i s a l so provided by the Amendment t h a t i n e x c e p t i o n a l circum-

s tances the Federa l Reserve banks may make d i r e c t advances of c r e d i t t o /

e s t a b l i s h e d i n d u s t r i a l or commercial e n t e r p r i s e s which are unable t o

ob ta in r e q u i s i t e f i n a n c i a l a s s i s t a n c e on a reasonab le b a s i s f rom the

usual s o u r c e s .

"Experience brought out a t y e s t e r d a y ' s conference i n d i c a t e s t h a t

as a r e s u l t of t he r ead ines s of the Federa l Reserve banks t o g ran t com-

mitments t o t ake over such loans , an i nc r ea s ing number of bus ines ses

i n need of working c a p i t a l are f i n d i n g i t p o s s i b l e t o get t h e des i r ed

c r e d i t through t h e i r l o c a l banks• This i s a hopefu l c o n d i t i o n ; and

s ince the p r o v i s i o n of the law au tho r i z ing the Federa l Reserve banks

to make commitments t o banks and o ther f i n a n c i n g i n s t i t u t i o n s l i m i t s

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the r i s k t h a t need be assumed by the l a t t e r and g ives t o the advances

a l i q u i d c h a r a c t e r , i t i s t o be expected t h a t an i n c r e a s i n g number of

a p p l i c a n t s t o whom advances may be made on a sound and reasonab le b a s i s

w i l l be able to ob t a in t h e i r requirements from t h e i r l o c a l i n s t i t u t i o n s •

!!Up t o December 12, 1934, the I n d u s t r i a l Advisory Committees had

recommended approval of 1,055 a p p l i c a t i o n s f o r i n d u s t r i a l advances

amounting t o $51,000,000 most of which have been ac ted on and approved

by the Federa l Reserve banks . The a d d i t i o n a l working c a p i t a l thus p ro-

vided goes t o a v a r i e t y of i n d u s t r i e s , r e p r e s e n t i n g comprehensively the

whole f i e l d of e n t e r p r i s e . S u b s t a n t i a l as t hey a r e , i t i s not be l i eved

t h a t advances thus f a r approved are f u l l y i n d i c a t i v e of the b e n e f i t s

which i n d u s t r y has de r ived from the i n d u s t r i a l loan program of t he

Federa l Reserve System, f o r many of these b e n e f i t s a re no t of a na tu re

t o be d i sc losed by the f i g u r e s of a p p l i c a t i o n s approved. For example,

i n some cases where an a p p l i c a t i o n i s made t o a Federa l Reserve bank i n

the b e l i e f t h a t c r e d i t i s no t a v a i l a b l e e lsewhere , t he Reserve bank has

been able to d i r e c t the app l i can t t o a l o c a l i n s t i t u t i o n w i l l i n g t o

supply h i s needs . In some cases a l so where a d i r e c t advance has been

approved by a Reserve bank and i s about t o be made, a member bank or

o ther f i n a n c i n g i n s t i t u t i o n w i l l decide t o t ake t he loan i t s e l f wi thout

secur ing a commitment. In other cases , the genera l knowledge t h a t i n -

d u s t r i a l loans are being made by t h e Federa l Reserve banks has encouraged

member banks and other f i n a n c i n g i n s t i t u t i o n s t o make advances t o i n -

d u s t r y on t h e i r own i n i t i a t i v e .

"Since the Chairmen of the I n d u s t r i a l Advisory Committees he ld

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t h e i r f i r s t conference i n Washington on September 27, they have cooper-*

a ted wi th the Federa l Reserve banks i n b r ing ing t o t he a t t e n t i o n of

banks and the pub l i c through correspondence, magazine a r t i c l e s , pamphlets,

r a d i o addresses and group meetings the advantages made a v a i l a b l e t o com-

merce and i n d u s t r y by the r e c e n t amendment t o the Fede ra l Reserve Act#

The program adopted by the conference yes t e rday provides f o r a con t inu-

ance of t he se e f f o r t s .

! tAttached i s a summary of the l a t e s t f i g u r e s on i n d u s t r i a l advances

approved by the I n d u s t r i a l Advisory Committees and the Federa l Reserve

banks11.

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INDUSTRIAL ADVANCES AMD COMMITMENTS UNDER SECTION 13-B OF THE FEDERAL RESERVE ACT SUIZ'ARY BY FEDERAL RESERVE BANKS, JUNE 19 TO DECEMBER 12, 1934 B-8I7

i

(Amounts in thousands of d o l l a r s ) (Not f o r p u b l i c a t i o n )

Federa l Reserve

Bank

Appl ica t ions rece ived - ne t

Appl ica t ions .under

cons idera t ion

Tota l a p p l i c a t i o n s recommended f o r approval by I n d u s t r i a l Advisory

Committee*

Total" a p p l i c a t i o n s approved by Federal

Reserve Bank*

Advances made

Corami tments o u t -

s tanding Number Amount Number Amount Number Amount Number Amount

Boston 264 11,324 54 2,420 S3 5,831 52 3,996 1,677 1,244

New York 477 27,230 90 6,639 127 9,031 129 9,393 784 2,364

P h i l a d e l p h i a 32s 15,153 60 2,519 92 5,127 55 4,6o4 1,980 107

Cleveland 4l4 10,890 33 966 108 4,467 90 3,657 595 927

Ri chraond 271 9,922 30 1,551 74 5,148 72 5,046 1,367 204

At lan t a 351 .8 ,406 47 1,220 108 2,835 104 2,621 787 562

Chicago 727 37,227 46 9,309 75 5,288 46 2,754 800

S t . Louis 259 8,911 71 2,166 58 2,679 58 2,680 459 944

Minneapolis 6i4 12,823 112 2,426 137 3,637 120 2,990 1,306

Kansas City- 241 6,920 16 1,136 4 i 2,179 36 1,894 262 192

Dal las 342 9,347 25 1,653 67 2,662 59 2,273 709 —

San Francisco 520 14,971 220 7,255 85 2,503 72 2,216 250 576 TOTAL 4,863 173,754 804 39,260 1,055 51,387 893 44,124 10,976 7,120

FEDEBAL RESERVE BOARD DIVISION OF BANK OPERATIONS *With and without c o n d i t i o n s .

DECEMBER 17, 1934. ^

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