The Decline of Commercial Banking

September 3, 1935

Report Outline
Course of Commercial Credit During Depression
Long-Term Trends in Commercial Banking
Economic Changes Affecting Bank Credit
Effects of Reduced Demand for Short-Term Credit
The Future of Commercial Bank Credit
Special Focus

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:

1930 90.4
1931 84.1
1932 57.3
1933 50.8
1934 48.3
1935 46.9


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.

ISSUE TRACKER for Related Reports
Jan. 20, 2023  The Future of Cryptocurrency
Apr. 06, 2018  Financial Services Deregulation
Sep. 26, 2014  Digital Currency
Oct. 05, 2012  Euro Crisis
Jan. 20, 2012  Financial Misconduct
Jan. 13, 2012  ‘Occupy’ Movement
Oct. 24, 2008  Financial Bailout Updated
Sep. 01, 2000  The Federal Reserve
Jun. 22, 1990  S&L Bailout: Assessing the Impact
Nov. 04, 1988  Behind the S&L Crisis
Apr. 26, 1985  New Era in Banking
Nov. 18, 1983  Bankruptcy's Thriving Business
Aug. 07, 1981  Banking Deregulation
Jul. 19, 1974  Banking Stability
Jul. 17, 1968  Banking Innovations
May 06, 1964  Monetary Policy in Prosperity
May 16, 1940  Revision of the Securities Acts
Feb. 27, 1937  Expansion of Branch Banking
Sep. 03, 1935  The Decline of Commercial Banking
Dec. 11, 1934  Proposals for a Government-Owned Central Bank
Sep. 12, 1934  Bank Reserves and Credit Inflation
Nov. 27, 1933  Bank Credit in Depression and Recovery
Aug. 12, 1933  Closed Banks and Banking Reform
Apr. 04, 1933  Unified Control of Banking
Apr. 09, 1932  The Glass Banking Bill
Mar. 24, 1932  The Guaranty of Bank Deposits
Apr. 17, 1930  The International Bank and the Gold Standard
Feb. 08, 1930  Branch Banking and Chain Banking
Apr. 29, 1929  Mergers of Banking Institutions
Oct. 28, 1927  The Federal Reserve Rate Controversy
May 21, 1927  Labor Banking and Finance Since 1920
Jan. 31, 1924  The Northwestern Bank Failures and the Attack on Treasury Savings Certificates
Dec. 01, 1923  Why State Banks Do Not Join the Federal Reserve System, the Effect on the System and the Issues Involved
Nov. 23, 1923  Branch Bank Controversy
Economic Crises
Financial Institutions