Course of Commercial Credit During Depression
Although excess reserves of member banks of the Federal Reserve System averaged $2,278,000,000 during July, the highest figure on record, the amount of commercial loans outstanding on the ledgers of weekly reporting member banks on July 31 was about $4,360,000,000, the smallest figure since 1914. Commercial loans increased somewhat during August, but the total volume outstanding failed to exceed the approximate level of 1914. Except for slight increases during short periods in the last three years, bank loans to business and industry have declined continuously and rapidly since 1929. Outstanding commercial loans of weekly reporting banks of the Federal Reserve System totaled $9,390,000,000 in August, 1929. Taking this amount as 100, the volume of outstanding commercial loans during August of each depression year was as follows:
During the first part of the Roosevelt administration, loans to business and industry were held to be an indispensable requirement for recovery, and a strong effort was made by the administration to stimulate the extension of bank credit. President Roosevelt, in a message to the annual convention of the American Bankers Association in September, 1933, said:
We still have much to accomplish in making credit facilities adequate for the national recovery we are bringing about. The banks must play an important part in making increased loans to industry and commerce. … Loans can and will be made. I want, you to know that we rely on your organization for its cooperation in furthering the free flow of credit so essential to business enterprises, whether they be large or small. Only if this is done can employers do their full part in the great recovery program now under way.