Long term loans of Iowa banks
Iowa Agriculture and Home Economics Experiment Station Research Bulletin: Volume 10, Issue 129
1. In most Iowa banks, the deposits constitute from 70 to 85 percent of the total liabilities.
2. Of all their liabilities, the banks have the least control over their deposits. It has been chiefly withdrawals of deposits, consequently, that have put the banks in a position where ready cash was urgently needed.
3. The average extent of deposit withdrawals since 1914 has not been great. It has varied among the banking systems in close relation to the character of the deposits, being greatest where the deposits have consisted largely of demand and bank accounts and least where time and savings accounts have predominated.
4. The banks have been able to meet these average deposit withdrawals by moderately reducing their loans, cash resources and securities, and by borrowing small sums from other banks.
5. Occasionally, however, there have been extensive withdrawals of deposits. In supplying the funds needed at these times, the banks have not found it expedient to reduce their loans to any great extent. Instead, they have allowed their cash resources to be depleted and have borrowed heavily from other banks.
6. Even in the best of times the average term of bank loans has been nearly one year. The turnover of bank loans was most rapid from 1917 to 1920 and fell to a very low rate after 1920.
7. The experience of the period 1914 to 1927, inclusive, proves that Iowa banks have not needed to confine their loans to those of short maturities. In actual practice the banks have not so confined themselves, and the demands of depositors have been met by means of very small reductions in the loans.
8. Since the proportion of time deposits in Iowa banks has been rising rapidly since 1920, and time accounts have been subject to withdrawals of less extent than the other type of deposits, Iowa banks in the future should be able to have their loans of even longer average maturities than was feasible before the war.