240 



FINANCIAL REVIEW OF 1902. 



000 more was in transit, but the condition of the 

 foreign-exchange market was such as to make 

 entirely improbable the importation of further 

 sums. On Oct. 7 Secretary Shaw was offered 

 a block of $5,000,000 United States 4-per-cent. 

 bonds of 1925 at 138. He declined to accept 

 them, though he expressed a willingness to con- 

 sider the proposal and take an option upon the 

 bonds, provided the bankers making the tender 

 would offer a larger amount at a concession in 

 the price. These bankers thereupon negotiated 

 with holders of United States 4-per-cents. of 1925 

 for their exchange for municipal bonds, which 

 had been accumulated in the course of the busi- 

 ness of these bankers, and having succeeded in 

 effecting such exchange for about $10,000,000 of 

 the above-mentioned United States bonds, they 

 offered them to the Secretary. On Oct. 17 Mr. 

 Shaw announcd that he had accepted the option 

 on the $5,000,000 offered on the 7th, and that 

 he would buy at 137J and interest any United 

 States 4-per-cent. bonds of 1925 that might be 

 offered on that day and until the close of busi- 

 ness on Oct. 20. The offerings on the 17th were 

 $8,253,400, and on the 18th $865,000; the total 

 amount paid for the bonds on the completion of 

 deliveries was $21,885,864. The Secretary also 

 directed the payment of the November interest 

 on the public debt, w T hich interest amounted to 

 about $2,300,000, without rebate. Early in No- 

 vember the Secretary suspended the substitution 

 of State and municipal for United States bonds 

 as security for deposits of public funds; the 

 amount of substitutions then was $20,488,500. 

 Secretary Shaw also announced that no further 

 increase would be made in deposits of public 

 funds in the banks. 



Average cash holdings of the New York as- 

 sociated banks at the beginning of December, 

 1901, were $248,581,700. The maximum for the 

 twelve months ending Nov. 29, 1902, was $270,- 

 622,600 Feb. 1. By May 17 the cash had been 

 reduced to $242,387,000, largely by reason of the 

 suspension, March 15, by Secretary Shaw of bond 

 purchases. There was a recovery by July 26 to 

 $253,526,700, due, in part, to the return move- 

 ment of money to this center from the West. 

 This was followed by a gradual reduction in the 

 cash, caused, at first, by absorption by the Treas- 

 ury and later by the movement of currency to 

 the interior, and by Oct. 11 the cash was reduced 

 to $219,612,500, the minimum of the year. The 

 liberal purchases of bonds by the Treasur}' on 

 the 17th caused a recovery in the cash to $238,- 

 452,800 by Oct. 25, and at the end of November 

 it was $236,745,500. At the beginning of Decem- 

 ber, 1901, the average loans of the associated 

 banks were $876,169,200. After Dec. 21, when the 

 minimum of the twelve months, $857,005,400, was 

 recorded, loans rapidly expanded to $938,191,200 

 by March 1 ; this was not only the maximum of 

 the year, but the highest on record. Then came 

 contraction, influenced by a reduction in bank 

 reserves, and by April 26* the loans had been re- 

 duced to $893,394,100. After a recovery to $904,- 

 162,500 in the following week, loans were again 

 reduced, reaching $881,070,400 by June 14. They 

 were thereafter more or less rapidly expanded to 

 $929,148,000 by Aug. 16 in anticipation of the 

 effects of the abolition of the war-taxes, and 

 then followed gradual reduction, owing to calling 

 of loans and liquidations, to $865,450,800 by Oct. 

 18; at the end of November they were $879,826,- 

 000. Average deposits of the associated banks 

 at the beginning of December, 1901, were $940,- 

 668.500. They fell to $904,096.300 by Dec. 21, 

 and thereafter there was a rapid rise to $1,019,- 



474,200, the highest of the year and on record, by 

 Feb. 21. After irregularly declining to $931,751,- 

 000 by May 24 there was an advance to $960,- 

 246,000 by Aug. 16, followed by a decline to 

 $863,125,800, the lowest of the year, Oct. 18; 

 at the end of November the deposits were $883,- 

 836,800. It should be noted that, beginning with 

 Oct. 4, the amount of public deposits in the 

 banks was separately reported; these, on that 

 date, were $40,769,300, and by the close of Novem- 

 ber they were $40,169,900. The surplus reserve of 

 the banks at the beginning of December, 1901, 

 was $13,414,575. This was reduced to $5,455,025 

 by Dec. 14, recovering to $26,623,350, the maxi- 

 mum of the year, by Feb. 1, 1902. There was a 

 fall to $3,112,900 by March 15, a recovery to 

 $6,965,575 on the 29th, a decline to $2,649,525 

 April 5, and then came an irregular recovery to 

 $15,709,275 by July 19. The effects of the drain 

 of cash into the Treasury and to the interior 

 and also of the expansion of loans and the conse- 

 quent increase of deposits were observable in the 

 decrease in the reserve to $1,642,050 deficiency by 

 Sept. 20, for the first time since Nov. 18, 1899. 

 There was a recovery in the reserve in the fol- 

 lowing week and an improvement in bank con- 

 ditions thereafter; the surplus reserve at the 

 end of November was $15,786,300. Computations 

 of reserve based upon net deposits, less those of 

 the Government, showed a surplus at the close 

 of November of $25,828,775. One feature of the 

 totals of the weekly bank statements, observable 

 in October until the 25th was the increasing ex- 

 cess of loans over deposits beginning with the 

 4th. This was due to the practical transfer of 

 deposits to the capital and net-profit account, 

 and this occurred for the first time since 1896;- 

 on and after Oct. 25 deposits were in excess of 

 loans. Previous to October this year individual 

 banks having large capital loaned in excess of 

 their deposits, but in the above-named month 

 from 20 to 22 banks pursued this course. 



The extreme rates for money on call at the 

 New York Stock Exchange during the twelve 

 months under review were 35 per cent, and 2 per 

 cent. The tone of the money market was firm 

 in December, 1901, the rate gradually advancing 

 after the middle of the month to 15 per cent, 

 on the 31st, influenced by the low bank reserves. 

 In January, 1902, the market grew easier as the 

 result of the return flow of money from the in- 

 terior, the purchases of bonds for the sinking- 

 fund, and the restoration of bank reserves, and 

 in the following month, 2 per cent., the minimum 

 of the year, was recorded. The tone became 

 firmer in March, influenced by gold exports and 

 by the suspension of bond purchases by the Treas- 

 ury, and in April low bank reserves and contin- 

 ued gold exports kept rates comparatively high 

 until the close of the month, when the tone be- 

 came easier, influenced by increased deposits of 

 public funds in depository banks. In May, dur- 

 ing the derangement incident to failures of Stock- 

 Exchange houses, money on call advanced to 25 

 per cent. After the excitement subsided, however, 

 normal conditions were restored, and the market 

 was easy in June and until the middle of Au- 

 gust, when the rate on call rose to 6 per cent., 

 subsequently declining to 3 per cent. In Septem- 

 ber monetary tension developed as the result of 

 a concurrent drain of money to the interior, 

 absorptions by the Treasury through fiscal oper- 

 ations and the expansion of loans, and 35 per 

 cent, was recorded by the end of the month; 

 this rate was the highest of the year. In October 

 tense monetary conditions prevailed until they 

 were relieved through the purchase of $15,584,050 



