FRB in New Moves To Loosen Credit
The Board moved on three fronts to make available about $600 million of additional bank reserves during the coming season of rising credit demands. This will enable the banks to make several times that amount in loans.</br></br>Effective Aug. 25, the Reserve will permit so-called country banks to count any vault cash in excess of 2% per cent of net demand deposits in meeting their reserve requirements. At present they can only count such cash in excess of 4 per cent.</br></br>Effective Sept. 1, Federal Reserve Banks in New York, Chicago and other large cities will be permitted to count vault cash in excess of 1 per cent of net demand deposits, instead of the present 2 per cent, in meeting reserve requirements.</br></br>The board also announced that effective Sept. 1, Federal Reserve banks in New York and Chicago will be permitted to reduce their reserve requirements from 18 to 17% per cent of their demand deposits.</br></br>This was described as the first step toward compliance with a 1959 law to equalize reserve requirements between the New York and Chicago banks and banks in other big cities by 1962.