242 
BANKING STANDARDS 
3. INDIVIDUAL EXPENSES 
The individual expense items of member banks, as distinguished 
in the reports of the Federal Reserve Board, are as follows: 
salaries and wages, interest on deposits, interest and discounts 
on borrowed money, taxes, and “other expenses.” Each of these 
expense elements has been examined as to norms and trends in 
Chapter VI. Moreover, the manner in which each of them is 
correlated with variable loans and discounts, deposits, and gross 
earnings, and so on, is discussed in the chapters relating, respec- 
tively, to these topics. Correlations of ratios of individual ex- 
pense items with ratios of total expense were not considered in 
Section 2 of this chapter, inasmuch as together they make up the 
total, and it is statistically inappropriate to correlate a total with 
any one of its parts. 
In view of the relations found to obtain between variable ratios 
of loans and discounts and of deposits,® and so on, with ratios of 
individual expense items—the respective items constituting the 
dependent, and the ratios in the other series, respectively, the 
independent variable—it is unnecessary to trace out the relations 
with the positions of the variables reversed. The type of asso- 
ciation between the series correlated according to the first is, in 
general, the same as that found according to the second method. 
The present analysis, therefore, relates to the association of paired 
deviations from district averages between the expense elements 
themselves, attention, because of the limited space available, being 
restricted to the following items: salaries and wages, interest on 
deposits, and interest and discounts on borrowed money. It is, of 
course, unlikely that there are direct functional relationships exist- 
ing between the separate elements of expense. On an a priori basis 
none would be expected. Correlations found to obtain are prob- 
ably indicative of mutually direct or inverse effects attributable to 
common causal elements—a phenomenon frequently encountered 
in social affairs. This fact is particularly true with respect to cer- 
tain correlated series; with respect to others, it is not so apparent. 
(1) Salaries and Wages 
By taking the seven-year average ratios of salaries and wages 
8 See Tables 9%, 08, 111, 113, 121, 127, 131, and 133.