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i SUMMARY OF METHODS OF ALLOTMENT1 USED IN DISTRIBUTING SYSTEM PURCHASES OF BANKERS ACCEPTANCES AND GOVERNMENT SECURITIES V In July, 1923, a plan was put into effect to distribute purchases of bankers acceptances among the Reserve Banks on the basis of their reserve percentages in such a way that the reserve percentages of a l l banks would be equally affected by purchases. In January, 1924, this plan was adopted for the allotment of government security purchases as well as bankers acceptances, though in addition special allotments were made to individual banks needing additional earnings. On June 1, 1924f a new plan was adopted based on estimated r e - o quirements of the banks for earnings to cover expenses, dividends, and charge-offs. Adjustments continued to be made from time to time to take care of individual banks. This general plan has been followed continuously with respect to purchases of bankers acceptances and was followed also with respect to government securities until May 28, 1933. In February and March 1933 there were temporary readjustments of allotments to meet large movements of funds in connection with the banking c r i s i s . On May 89, 1933, a plan was adopted for distributing government security purchasrs in accordance with the ratio of each bank's reserves above a 55 per cent reserve ratio to the System t o t a l . This method wma necessary because of the limited amount of free reserves of some of the Reserve Banks. The basic percentage was later reduced from 55 per cent to 50 per cent, O In February, 1935, this plan «»as discarded because i t was no longer necessary to consider the resfrve position so carefully, and from c - 2 - that time forward the basis of allotments has been the requirement of each bank for expenses, dividends, and charge-offs, rith provision when necessary for adjustments to take care of the position of individual banks. During this period there have been numerous reviews of the whole question and a number of attempts to develop other possible formulae as a basis for allotments, but none has appeared to be as satisfactory as the formula now used. From time to time redistributions of securities have been made to equalize the position of the different banks, but in general no attempt has been made to force rigid week to week conformity with any set of percentages, recognizing that any besis of allotment is somewhat arbitrary. Federal Reserve Bank of New York May 21, 1936 o
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