Banks and banking - History ; Depressions

Joseph R. Mason

English

Research Papers in Economics

FEDERAL  RESERVE  BANK  OF  ST. LOUIS
151
MAY/JUNE  1998
American Banks
During the Great
Depression:  A
New Research
Agenda
Joseph R. Mason
P
rofessor Charles Calomiris and I have
been working for some time now on 
a project, entitled Assistance to Banks
During the Great Depression, made up of
two data-coding endeavors.  The ﬁrst
involves the encoding of data from original
bank Reports of Condition  and Reports of
Earnings, Expenses, and Dividends  (i.e., Call
Reports) of about 6,500 state- and nation-
ally chartered Federal Reserve member
banks in existence between 1929 and
1935.  The second involves the collection
of bank-structure data, including mergers,
acquisitions, and failures, for this same
time period.
All Call Report  data came from micro-
ﬁlm archived at the Board of Governors of
the Federal Reserve System, the result of a
1947 initiative to preserve data that had
been collected on Federal Reserve member
banks since 1916.  The original Call Reports
of individual member banks were supplied
by the Federal Reserve Banks and micro-
ﬁlmed by the Board of Governors.
Table 1 summarizes the data
microﬁlmed by the Board of Governors
covering the period from 1929 to 1935.
The Fed focused its ﬁlming effort on the
Call Reports  of state Federal Reserve
member banks, ﬁlming semiannual data
from these banks (except the balance
sheets of June 1934 and June 1935).  For
national banks, only the December 1929,
1931, and 1933-35 Reports of Condition
and Reports of Earnings  and the June 1931
and 1933-35 Reports of Earnings  were
transferred to microﬁlm.  At each Reserve
Bank’s discretion, the original records were
destroyed after ﬁlming and, apparently,
few of these records have survived.  The
microﬁlm held by the Board of Governors
is the only known comprehensive
collection of the reports of individual
banks before the use of magnetic tape
beginning in 1961.
From the Reports of Condition, we
encoded balance-sheet data from the main
schedule, as well as information from var-
ious supplementary schedules.  For exam-
ple, we encoded information on bank
loans and discounts, including such items
as real estate loans (farm and nonfarm),
loans on securities, etc.  We also encoded
data on bills payable and rediscounts with
Federal Reserve Banks and the Reconstruc-
tion Finance Corporation, the distribution
of cash and amounts due from other banks,
a detailed breakdown of demand and time
Joseph R. Mason is an economist at the Ofﬁce of the Comptroller of the Currency.
With ﬁnancial assistance from the National Science Foundation, the National Bureau of Economic Research, the University of Illinois at Urbana-Champaign, and the Federal
Reserve Bank of St. Louis, Professor Charles W. Calomiris of Columbia University and Joseph R. Mason are nearing the completion of a signiﬁcant compilation of individual
commercial bank records from the 1930s. Mason described the project and some of their research ﬁndings at the conference.  The following is a summary of his remarks.
Availability of Data from Board Micro lm,
1929-35
State Member Banks  National Banks
Balance Income  Balance  Income
sheets  statements  sheets  statements
Dec. 1929  X  X  X  X
June 1930  X  X
Dec. 1930  X  X
June 1931  X  X  X
Dec. 1931  X  X  X  X
June 1932  X  X
Dec. 1932  X  X
June 1933  X  X  X
Dec. 1933  X  X  X  X
June 1934  X  X
Dec. 1934  X  X  X  X
June 1935  X  X
Dec. 1935  X  X  X  X
Table 1FEDERAL  RESERVE  BANK  OF  ST. LOUIS
152
MAY/JUNE  1998
deposits, and the liabilities to each bank of
its ofﬁcers and directors.  The Reports  also
list the Federal Reserve district, state, county,
and city in which each bank is located, and
the number of its branch ofﬁces.  
We also encoded data from the Reports
of Earnings, Income, and Expenses  of each
bank.  Speciﬁcally, we encoded each bank’s
current earnings, expenses, chargeoffs, and
recoveries.  One of the ﬁrst results to
emerge from these data concerns the rela-
tionship between deposit interest rates and
bank risk.  Subsequent to the Depository
Institutions Deregulation and Monetary
Control Act of 1980, most banking experts
believed that risky banks could attract
deposits by increasing interest rates,
thereby placing undue burden on the
safety net.  Calomiris and Mason (1997)
found that during the Great Depression,
interest paid as a percent of demand
deposits was, on average, lowest at high-
risk banks.  This ﬁnding conﬁrmed a weak
relationship, as indicated by aggregated
data (Benston 1964).  On ﬁrst glance, this
ﬁnding appears paradoxical, though
Gorton and Pennacchi (1990) suggest that
some bank depositors may be very
unwilling to accept increased risk on their
accounts, even if offered higher interest
rates.  Risk-intolerant depositors may
prefer to adjust to changes in a bank’s risk-
iness by adjusting the quantity of their
balances with the bank (see also Calomiris
and Wilson 1996).  Our research, which
found large deposit outﬂows from high-
risk banks, conﬁrms this assertion.
The ﬁnal phase of the project involved
the collection of merger, acquisition, and
failure information for the member banks
whose Call Reports  were encoded.  These
data were obtained from Rand McNally
Bankers Directory.  We are currently build-
ing usable structure databases to link banks
across time and to explain disruptions in
individual bank histories.  We anticipate
that our project will be completed within
the next year, at which time the data will be
made available to researchers through the
Inter-university Consortium for Political and
Social Research and the Federal Reserve
Bank of St. Louis.
REFERENCES
Benston, George G.  “Interest Payments on Demand Deposits and Bank
Investment Behavior,” Journal of Political Economy (October 1964),
pp. 431-49.
Calomiris, Charles W., and Joseph R. Mason.  “Contagion and Bank
Failures During the Great Depression: The June 1932 Chicago Banking
Panic,” American Economic Review (December 1997), pp. 863-83.
______, and Berry Wilson.  “Bank Capital and Portfolio Manage-
ment: The 1930s Capital Crunch and the Scramble to Shed Risk,”
Working Paper, Federal Reserve Bank of Chicago Conference on 
Bank Structure and Competition (1996:32d).
Gorton, Gary B., and George G. Pennacchi.  “Financial Intermediation
and Liquidity Creation,” Journal of Finance (March 1990), pp. 49-71.

American banks during the Great Depression: a new research agenda

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