Banking standards under the federal reserve system

Bibliographic data

Monograph

Identifikator:: 1762969653

URN:: urn:nbn:de:zbw-retromon-142432

Document type:: Monograph

Title:: Banking standards under the federal reserve system

Place of publication:: Chicago

Publisher:: A. W. Shaw Company

Year of publication:: 1928

Scope:: xxxviii, 420 Seiten

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Correlated series for all Member Banks by districts

Collection:: Economics Books

SERIES CORRELATED WITH NET EARNINGS 253 respect to the items just mentioned, and an average result is calculated, it does not necessarily follow that the average rate of net earnings is large when gross earnings rates are large or when total expense rates are small, or that it is small when inverse conditions obtain. Neither does it follow that when the average rate of gross earnings is large or small, the average rate of net earnings is large or small, because nothing is said about total ex- pense, and, of course, this is the important “missing link” in the equation of relations. Now the facts are, as shown in Chapters V, VI, and VII, that ratios of gross earnings, of total expense, and of net earnings for member banks, by districts, vary from district to district and from year to year. Such variations are of two types: the respec- tive ratios vary among themselves, and with respect to each other. That is, for the experience studied, gross earnings, total expense, and net earnings do not stand in the simple relation given above— 8—-6=2 and 6 —4==2. They are rather of the following type: 8—6=2 and 7-4=3. Accordingly, with variation character- izing all three series, comparisons of them individually and one with another can be made only by using some form of an average as a standard. And when this is done, the relations found to obtain are true only “on the average.” For the collective experi- ence compounded into an average figure, the simple relations be- tween high or low gross earnings, high or low total expense, and high or low net earnings, or vice versa, do not necessarily hold. This much is apparent with respect to the correlations found to obtain between different series, as developed in previous chapters. But more of this presently. Average net earnings, as has already been noted, are residuals, depending upon the relations between average gross earnings and average total expense, each of these averages summarizing condi- tions varying with respect to the member banks by districts and by years. Moreover, both average gross earnings and average total expense ratios are functionally related to operating condi- tions, and these vary among the respective banks. It is apparent, therefore, that in studying by districts (1) the norms and trends in the ratios of net earnings themselves, relative to appropriate average conditions within the districts or for the country as a whole, and (2) the correlations of net earnings with other series, variation rather than strict uniformity rules: and, further, that

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