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-> FEDERAL RESERVE BANK OF N E W YORK New York 45, N.Y. April 16, 194-8. Honorable Marriner S. Eccles, Member, Executive Committee of the Federal Open Market Committee, Board of Governors of the Federal Reserve System, Washington 25, D. C. Dear Mr. Eccles: The enclosed schedule entitled "Comparative Schedule of Balance Sheet Data of United States Government Securities Dealers" has been compiled from recent financial statements of each of the six dealers (excluding the five dealer-banks) with which we transact business for the System Open Market Account. All six of the dealers showed substantial declines in net worth for the year 1947 which was probably due, at least in part, to the effect of the decline in prices of Government bonds in the latter part of the year on long positions and to lower income from interest accruals on reduced bond portfolios. Detailed earning reports received from First Boston Corporation and Blair and Company, Inc. included the results of their general securities business and showed: 1947 1946 First Boston Corporation Net income before dividends Dividends $1,636,000 2,413,000 $4,138,000 2,557,000 Blair and Company, Inc. Net income before dividends Dividends 49,000 (loss) 193,000 641,000 193,000 As indicated on the attached schedule, the decline of $2,865,000 in the net worth of Blair and Company, Inc. reflects primarily VICTORY BUY UNITED STATES http://fraser.stlouisfed.org/ _WAR Federal Reserve BONDS Bank of St. Louis FEDERAL RESERVE BANK OF NEWYORK 2 Honorable M.S.Eccles 4/16/1948 Washington 25, D.C. the segregation of their securities business from other affiliated interests. We have been assured that there will be no withdrawal of capital from the new Blair and Company, Inc. without prior notification to us. Discount Corporation reported an operating loss of $324,000 for the year and paid dividends of 1300,000; however, this was partially offset by an adjustment of the carrying basis of their United States Government securities to reflect market values rather than cost as formerly, resulting in a credit of $396,000 to undivided profits and a net decrease of #228,000 in undivided profits for the year. C. J. Devine and Company informed us that their operations for the year in United States Government securities showed a profit and that the decrease of #448,000 in net worth was due primarily to lower market values of net long positions in New York State bonds and bonds of the International Bank for Reconstruction and Development, part of the $777,000 decline in net worth of First Boston Corporation may also have been due to the lower prices of International Bank bonds. As & further result of the decline in prices of United States Government securities during the latter part of 194-7, the portfolios carried by the dealers at the year end were much smaller than at the end of 194-6. C. J. Devine and Company was the only dealer who carried any significant amount of bonds due after one year and these holdings were small in relation to net worth and as compared with former holdings. The balance of holdings of all the dealers was almost entirely in short-term issues. Aside from the foregoing, the dealers1 statements contained very little that was of direct interest to us in the analysis of their Government securities business. Very truly yours, Robert G. Rouse, Manager, System Open Market Account. Attachment COMPARATIVE SCHEDULE OF BALANCE SHEET DATA ()F UNITED STATES GOVERNMENT SECURITIES DEALERS (OOO o m i t t e d and l i s t e d a c c o r d i n g t o s i z e of n e t worth) Collateral Loans Pavable U. S . Government S e c u r i t i e s Balance Sheet Date Net Worth Decrease in Net Worth during year Total Portfolio Due i n 1 t o 5 years The F i r s t Boston C o r p o r a t i o n 12/31A7 $21,792 $ 777 $3O,2OO(b) (1) | C J . Devine ft Company, I n c . 12/31A7 7,3UO UU5 Ii5,383(c) (L) U,i57 D i s c o u n t C o r p o r a t i o n of New Y o rk 12/31A7 6,1*62 228 8li,577(d) (s) C.F. C h i l d s & Company, I n c . 12/31A7 6,030 315 1/ 1/U8 5,700 115 12/31/U7 2,227 2,865(a) Salomon B r o s . ? : Hutzler B l a i r & Company, I n c . (Delaware) NOTES: *(L) (S) (a) (b) (c) (d) (e) Due over 5 years Other Securities Owned Amount Ratio t o Net "Vorth 300 $ 18,1*27 $ 38,882 1.8 (L) 23,308 8,13k 65,620 8.9 8,600 (L) 5,900 53,5U9(e;) 8.3 23,9OO(c) ( 3 ) 2,800 (s) 1,500 Nominal 60,609 10.0 13,8O5(b) (s) 1,300 (L) 1,100 8,506 2U,0U0 U.2 (s) 8,100 (L) 700 1,9U9 U,017 1.8 l,000(b) 1*00 (L) $ — Long P o s i t i o n Short Position On December 31, 19U7 the former Blair & Company, Inc. (a New York Corporation) was dissolved and succeeded by B l a i r Holdings Corporation, a holding comDany, and i t s wholly owned subsidiary ^ l a i r ft Company, I n c . (a newly organized Delaware Corporation) to which was transferred a l l the s e c u r i t y business of the former B l a i r ft Company, Inc. The indicated reduction in net worth represents l a r g e l y the value of the other s u b s i d i a r i e s of B l a i r Holdings Corporation which i s no longer a t the risk of the s e c u r i t i e s business. Also general dealers in s e c u r i t i e s other than U. S. Governments. Also dealers i n municipal bonds. Includes ^25,577,000 sold under repurchase agreement. Includes ^25,577,000 l i a b i l i t y in connection with (d) sale under repurchase agreement - at contract p r i c e .
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