VI

NORMS AND TRENDS IN OPERATING EXPENSES

I. INTRODUCTION

THE operating expenses of member banks in the Federal Reserve
 system, reported by years ending June 30, are classified
as follows:
1. Operating expenses (total);
2. Salaries and wages;
3. Interest on deposits;
4. Interest and discounts on borrowed money;
5. Taxes; and
6. “All other” expenses.

It is an analysis of the total and of each expense item with which
this chapter is concerned. Attention is given first to the total;
the amounts in the respective districts for the years 1919 to 1925
being expressed in terms, first, of earning assets, and second, of
gross earnings.

2. TOTAL EXPENSE

It will be recalled that in the earlier chapters the different
amounts and ratios used applied to all member banks, combined,
in each Federal Reserve district. That is, the banks in each district
 were considered as a single institution, the loans, investments,
 deposit items, gross earnings, being totaled into a single
figure and expressed as a percentage of a suitable base. The
operating expenses are similarly treated and in this section of the
study are expressed as percentages of earning assets.!

[1) The Relation of Total Expense to Earning Assets
If the seven-year period 1919-1925 for all member banks in
the twelve districts is considered as a unit, the average ratio of
1 For method of calculation in an analogous case, see note 6, page 41.

Y