HOARDING BANK NOTES

Poverty Bay Herald, Volume LV, Issue 17609, 27 October 1931, Page 5

HOARDING BANK NOTES

UNITED STATES FAILURES NEW YORK, Sept, 12. Americans’ faith in their own banking institutions is at a low level. This is due in a large measure to the failure in the current year of no fewer than 749 banks of varying size. There were 1326 bank failures in the whole of 1930, aiid 6171 in the 10-year period 1921 to 1930. Another causo for uneasiness lias been the heavy fall that has taken place iri. the past year in the shares Of the leading American banking institutions. If the. market value of a group of the leading shaves a year ago .was ICO the value to-day is around 37. A large proportion of the fall is duo to the need for funds by investors who have accordingly sold what they believed to be the most readily marketable securities. Together‘with the fall in bank shares there has been a growing disposition to withdraw money on deposit and to hoard dollar bills. “Dollar bills,” the Americans say, “are exchangeable into gold,” and they accordingly lock them up in safe deposits. , ' s;.! INCREASED CHARGES v Safe deposit charges are among the few things the American , banks are making money on to-day. The charges for them are being constantly increased with the growing demand for accommodation.

An alarming hoarding of banknotes is going on. ■ The present note circulation in America is 'around £1,000,000,000. At least £220,000,000 is estimated to be in excess of normal requirements if allowanc'd for the fall in prices is made. Of the estimated excess £80,000,000 is duo, to the slow circulation of motiey and £140,(XX),000 to hoarding. This latter figure increases week by week. One of the weaknesses of the American banking situation lies in the security companies with which they are associated. These companies have invested large sums and have sustained heavy losses. The parent banks in some instances have made loans to them, I lie extent of which is not shown separately in the balance sheets of the banks themselves. Because the position is not revealed it is regarded with anxiety. The depression in the agricultural area is having its iniluence felt on the 1 securities of the Federal Land Banks. These banks are of a semi-Govern-ment character, though ■ they are not, guaranteed by the Government. Their security consists largely of mortgages on farm land. The banks, of which there are 12 in existence, arc having difficulty in disposing of land over which they have foreclosed. Their bonds, which bear interest at usually per cent, and were issued around 101.1, have fallen in the past few months to around 70. It is thought that the United States Government may .ho compelled eventually to give its guarantee to these securities.