The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
V23SB
Form F. R. 567
END
SHEET
K IN D OF M A T E R IA L OR NUMBER
333*3^3
nam e o r s u b j e c t
Allocation of Participations in
System Open Market Account
Federal Open Market Committee
PART NUMBER
Part 2
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* VM 58
I iv
in F t i M
c
nrSf -i1}
n it
^^iftitfrHajig
jjJ^~'h
’
Deeeaiber
31# 1<&2*
Mr* Robert G. Rouse, Vice President,
Federal Reserve Bank of New York,
Hew York, New York*
Dear Mr. Rouse:
Ths re is enclosed a 8tatament, prepared in accord
ance with the formula adopted by the Federal Open Market
Committee on December 18, 19UO, showing the changes necessary
in allocations of Government securities in the System Open
Market Account on January 1, 19^3•
Current earnings, exclusive of earnings on Govern
ment securities, and current expenses have been estimated by
multiplying the actual amounts thereof July through November
by 2mh* Estimates obtained on this basis for current earnings
have been adjusted by deducting estimated net earnings on in
dustrial advances and commitments attributable to funds received
from the Secretary of the Treasury*
Very truly yours.
X« L» Smead, Chief,
Division o f Bank Operations*
Steelssuhp#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority 1E..Q* 12358
F o rm F . R .
1481>
» B 9 F U S S SECTION
TELEGRAM
I
BOARD OF GOVERNORS
I
OF THE
C:C3 11942
V
Yn.au■■-. riiiri.mr ; jr-Tgornmij i
FEDERAL RESERVE SYSTEM
LEASED WIRE SERVICE
WASHINGTON
51# 19h&
ftsoombor
Bout#’- How Toxic
*his will confirm understanding in tolsphono conversation
that adjnstmsnts of participations in Systo® Account will
bo ti follows, in thousands of dollars*
Inoroasosi
Vow York
70 .0U9
Philadoiphia
15,157
Cleveland
55, 182
928
Chicago
St. Louis
UnnoapoXis
IS.ShZ
Dsorsaso* >
Boston
i?,oal*
Richmond
2T,29i*
Atlanta
13,70b
Kansas City
8.83U
Dallas
8,370
San Fsmnoi soo
60,978
SMBAD
E D
E E
IT
16—4573
• P<
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority f c .Q* 12358
let I*RtcotossAit
APRi 91968
Fe d
era l
of
Re
Ne
se r v e
w
Yo
B
ank
rk
December 1, 194-2 •
Dear Mr* S^ead
We received your letter of November^ 30, 1942|^and have
today sent to the Reserve banks a :co|^S'^FccSpiHSfion showing
the adjustments to be made today in participations in the System
Open Market Account, pursuant to the plan adopted at the meeting of
the Federal Open Market Committee on December 18, 1940*
Enclosed herewith is a copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks on
- November 30*
Yours faithfully,
Manager, System Open
Market Account"*
Mr- E* L. Smead, Chief,
Division of Bank operations,
Board of Governors of the
Federal Reserve System,
Washington, D* C.
E n d s . (5)
R eproduced from the U nclassified
I D ecla ssified H o ldings of the N ational A rchives
F ~
D E C L A S S IF IE D
A u th o r ity £ . . Q ‘
securities i)tn
1^ 3 5 %
i m m
Hoveaber 3 0 # 1 W &
$ m m
send m
m i m m
t & x a m to p&esident
or m m w m m m mrnrn i basic as
IMDICATED I M }
la. accordance with action of
Federal Open Market 0«*ami‘l£e« ft it*
aeetinf Septeaber 2S, 1942, * readjustment of participation# in Government aecuritiea
held in the %»tei» Account ii called for on Deceaber X under the plan for reallocation
of Gorernaeat eecurltie?* adopted fey the Federal Open Market Committee Beeettber 18> 1940*
The coaputationa shoving adjuataenta to be ^ade in participetiona of the
aeveral Federal &ei»erve banka on December X wil>-^)e a
Deceaber 1,
ed to aXX Reserve banka m
Theae coaputatiooe indicate
in y & m
p*rti*4$*tie>a. on Deoeaber X*
1, 1942 tfc* d#iaiX*d
entri?» to be aade.
J
paddock
^
~
I
9,600,000
**
WILLIAMS
m ro u to ^ X A ■
FLatlMG
CL2YSLAHD
leach
KIOOiOlD
13,265,000
MoioA&Ui
ATLATA
13,363,000
I0UMG
CHICAGO
14,625,000
DAVIS
ST* LOUIS
23»?35,008
***
1,539,000
UIKKEAPOLIS
T.yienY
H im c m
OXUHKr
1AM.AS
161
m
.AMIT©A1&JWUfW
t
11,398,000
3,465,00)
16,771,000
9 ,m ,o o 0
A3,255,000
D M
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
d e c l a s s if ie d
Authority fc.Q* 1235%
MISC. !<SCA 75M-J2-41
F E D E R A L R E S E R V E B A N K O F H E W 'YORK
December 1, 1942#
Bear Mr* fllliiuaai
In accordaace with my telegram of yesterday, I
anclem herewith computation of the readjusteamts to b@
mdm today in the participations of tfaa Federal Rasarra bank#
la tha System Open Market portfolio*
Youra faithfully*
,
r - .....■■■■«■■■
I
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E-.Q*
F o rm F . R .
‘ia;- ■} K FILES SECTION
118b
TELEGRAM
.
BOARD OF GOVERNORS
FEDERAL RESERVE SYSTEM
L E A S E D W IR E S E R V IC E
£oY«sfeer
30.
ISkZ*
Ifew forte
? M * *111
^ © w m i l w that
!*9a%* ® t p a r t i a l i a
*4IX
*#
of dollarii
Atlanta
lf#5&3
ih jm
tm*** city
, .»
D*orea*«a t
B m 7&rk
St. Lonia
Minneapolis
61*135
1,559
,
j
OF TH E
WASHINGTON
1942
la
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
1235B
r1*- , ■ 1.1miiiW>i ' r...
'--‘•-'-•.I.m....
l w ^!D IN FILES SECOXON
X**e«b«r 30, X9U2.
Mr* Robert
Reuse, Vioe President,
ffcdteyal Reserve lank of low fork*.
? # rk * law f #fit,*
Saar Hr* Rou«#»
Thare If enoloaed a statement # prepared in aooordance with the forwila adopted by tha Federal Open Market
Caaaittae o h Daoember 18 # 19l»G# showing the ohanges neoassary
in all^oation* of Qovorniasnt securities ia tha System Open
Market Aeoount on Tteoeaaber |,t 19^2.
Gurrent earnings.* exclusive ©f earnings on $Qvarn**
**at aeoviriti*** and current expenses have been ©stiia&ted by
sml-tiplylng./the aotual saaomnts theraof January through Ootofeer
by ^n© and one*»fiftli* Esti&atss obtained on thtt Mils have
bean adjusted in the sans manner a* ftr the previeus realloca
tions this yeari na^ely^ by addift| fl^SG.OCJO to ourrent expenses
at few fork to oover extraordinary depreciation charge# on air**
oondittoning equipment and by deducting from current earnings
estimated net earning* on industrial advanoas and oo^sitmnti
attribmtable to funds received f r m the Secretary of the Treacnry.
Very truly f9Wt*t:
8. t* &*ead# $&&*£*
of Bank %#ra%i«n»*
Kncloeure
tm rn m n u *
ftEALLOCATIOH OF (JOVBRHOIirP SSCHRtTIHS IIf STSTSSI OFBI? HARKIT ACCOUNT, PECBMPSR 1, 19U2
(In thousands of dollar*)
0-4
ft-H --------------------------\
t
dU S3^*nso*
1* Jistlaatod w i « a l
\ 1942
sjim
r waatea j 'I?**
I B°,t0n 1 Tort
jAtlUlW [ ChlO»R» -“s n —
Looii
' " T O T [“CT«5="
! dalphl* i laud
$*0
]■ W m * - * I VlMMf I Btlltil
City
Pranoiseo
>P«U*
37.925
2.850
9.197
2.895
3.513
2.567
1.753
4.969
1.979
1.110
1.939
1,542
3.621
8.667
566
5.18U
706
886
3M>
593
955
269
183
280
266
717
W.598
3,416
22.381
3.603
MlOl
2*915
8.056
5.984
2.SW
1.293
2,209
1,808
4,338
166
126
98
35
35
180
35
19
169
18
75
44,632
i£,6U
25
3.500
3.323
12.158
12,324
3JW
3.563
k,m
4.576
2.748
8.785
1.9U6
1.981
5.572
5.75*
2.156
2.191
1,267
1,286
1,98b
2.153
1.737
1.755
981
93
57
io
25
132
75
172
57
7
56
53
?* Allooation rsqulrod (on basis
Of l#l499036< oarnlngt rsto
on Gov’ts) to produoo oamlng*
Deosjaber* *qual iso "S”
O
MHHIMk i»n>lf
770,506
73,045
Wt.7&9
31.417
19,636
103.677
58,907 135.094
iiU.769
5.1*96
43.984
41,628 168,082
U* AT«r«g« daily parti#ipattons*
par osafc, In Systoa. Aooom %
«inoo .hmo 30, 1936
*
100.
+
26^913
3.1910
9.9020
5 j*282
U*2i#J
U.60li7
3*0307
4.7852
3.8536
1 .^Itftiastod dividends, 1QU2
1j
*m Kstlaatsd oxponsos and dlTldacdi,
19^
J* Saralags
1# tstinstod ourronfe oaralngs*
*9^2 (oxolttsiiro of oara*
tugs on
2* Istlmtod oarnlngs ©a §©▼**
•oourltlof to Jhrr# 5®
5* Total
979
B. Sx o o m of **C" ov«r *T>3"
*
7.3105
11.4361
1* Allooatl on of reminder of
3y»t«® holdings (IU.929.529.000
loss 1770,506,000) on basis
*f *g*»
4,158,8^
30(4.0311.S3.220
340.619 101.807 aas/ftp
I* Total allocation of Go*»nas»nt
sooxnritios
4.99.39
377,076 1*237,909
372,066 U31,Ut3 329,426 255^26 610,701
J* Prosont allocations
4,929.329 388,474 1.899,122 381,666 U55.378 316.161
K. Chango in allooatlons
—
t a
214
8.5174
|
>11.398 "61.133
-9.600 -23.935
♦13.365
176.721 475.607 191.501 126.0l|2 199.« 8
256.270
131.540 242,992 201,892
222,265
596.076 237.809 135,005 286,821
♦13,363
♦14,625
-1.539
160,264 354,224
-3.465 ♦16,m
522,306
192,101 479.051
*9,791 ♦43.255
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
IB r S ' aortic
"sect^
APR L 9 \m
Fe d
eral
Re
ser v e
B
ank
of N e w Y o r k
November 2, 194-2.
Dear Mr. Sinead:
We received your letter of October 31/and have today
sent to the Reserve banks a copy of the computation showing
the adjustments to be made as of November 1 in participations
in the System Open Market Account today, pursuant to the plan
adopted at the meeting of the Federal Open Market Committee on
December 18, 194-0.
Enclosed herewith is a copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks on
October 31*
Yours faithfully,
^
Manager, System Open
Market Account.
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. 5*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
D E C L A S S IF IE D
Authority £..Q« 1235%
M1SC
! 40A 75M-1 2-41
F E D E R A L R E S E R V E BANK. OF N E W Y O R K
Morember 2, 1942*
Bear Hr, I#aaeht
In accordance nitii ay teiegr&a of October 31, I enclose
herewith cospwtation of the readjustments to be m im today as o.f
HoTeaiber 1, of th© participations of the Federal Beserve banks in
the System open Market portfolio*
lours faithfully,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q - 1235%
G
0
P
I
seg -r h b /jn /mh
October 31, 1942
PLEASE SEND THE FOLLOWING TELEGRAM TO PRESIDENT OP EACH FEDERAL RESERVE B A M AS
INDICATED BELCH* j
In accordance with action of the Federal Open Market Coaaittee at its
Meeting Septeaber 28, 1942, a readjustaent of participations in Government secur
ities held in the Systea Account is called for on Noveaber 1 under the plan for
reallocation of Governaent securities adopted by the Federal Open Market Coaaittee
December 18, 1940*
The coaputations showing adjustaents to be aade in participations of
the several Federal Reserve banks on Noveaber 1 will be aailed to a U Reserve
banks on Noveaber 2*
These coaputations indicate an
^ncreases 0f
decrease
—
...
—
in your participation on Noveaber 1. We shall wire you on Noveaber 2, 1942 the
detailed entries to be aade as of Noveaber 1#
INCREASE
DECREASE
PADDOCK
BOSTON
WILLIAMS
PHILADELPHIA
FLEMING
CLEVELAND
4,733,000
-
LEACH
RICHMOND
2,697,000
-
McLARIN
ATLANTA
•
XOUNG
CHICAGO
•
DAVIS
♦23,988,000
mm
-
I
872,000
1 ,003,000
5,122,000
ST. LOUIS
6,340,000
mm
PEYTON
MINNEAPOLIS
1,263,000
-
LEEDI
KANSAS CITT
GILBERT
DAI
SAN FRANCISCO
-
3,120,000
-
3,155,000
6,487,000
ROUSE
mm
CONFIDENTIAL
System
Boston
UeiT
York
Phila- | Clove- | Rich*
dolphia! land
mond
Atlanta
Chicago
’■“St.
Louis
Minne
apolis
Kansas
City
Dallas
~Si£---Francisco
A* Expenses
1.
Estimated ourrent ex
penses , 19U 2
B.
Estimated dividends, 19^4-2
C#
Estimated expenses and divi
dends , 19^2
D.
37,326
8,666
566
3,18U
708
888
U5.992
2 ,5 18
1.7H
U,872
1,951
1,097
1,882
1,508
3.513
5U8
303
95U
269
183
280
266
717
2,666
2,0lU
5,826
2,220
1,280
2,162
1.77U
U .230
Earnings
1. Estimated current earnings,
2*
3*
on Gov’ts)
Estimated earnings on Gov* t
securities to Oct# 31
Total
988
2k
166
128
99
36
35
181
3U
20
171
19
75
38.837
39,825
2,8U3
2,867
10,639
10,805
2,992
3,7^7
3,8146
1,685
1,720
U,859
5 ,0)40
1,875
1,909
1,109
1,129
1,720
3,12 0
2,37U
2 ,>410
1,891
1.5 1 2
1,5 3 1
3.1*82
3.557
3H
151
271
2)43
673
E.
Excess of "C" over wD3n
6,167
521
1,U82
U50
529
U56
29U
786
F.
Allocation required (on basis of
1 mhlU5^5% earnings rate op
Govfts) to produce earnings
November-Deoember equal to ”E” 2.502.597
211,142k
601,1402
182,612
21U,671
185,0U7
119,307
318,962
126,205
61,276
109,973
9 8 ,6 11
273.107
7.2953
28*75lU
8.2025
9.9190
5 .I4O29
I4.2U26
11.U193
U.5990
3.0382
U.7903
3.8525
8.14865
Allocation of remainder of System
holdings ($U,559,038,000 less
52,502,597,000) on basis of "G" 2 ,056.14)4!
I50t 03h
591.256
168,680
203,978
111,107
87 ,2)46 2314,831
9^,576
62,1479
98,510
79,2214
17U.520
Total allocations of Government
securities
14.559.038
361,^58 1 ,19 2 ,65s
351,292
1+18,6Li9
296,15U
206,553
553,793
220,781
123,755
208,1483
177,835
1447,627
Present allocation
U.559.033
337,1+70 1 ^ 2)4.,9^4
352,16 U
Ul3,866
293,U57
207,556
55^,915
2ii4,ma
122,[492
211,603
180,990
I4J41 ,1^0
-32,286
-872
+U,783
+2,697
- 1,003
-5 ,12 2
*6tik0
+1,263
-3,12 0
-3,155
*6,U87
6.
H.
I.
J*
Average daily participations, per
cent, in System Account since
June 30, 1936
Change in allocations
K. for FRASER
Digitized
100.
-
+23,968
Reproduced from the Unclassified I Declassified Holdings of the National Archives
REALLOCATION OF GOVERNMENT SECURITIES IN SYSTEM OHSN MARKET ACCOUNT, NOVEMBER 1, 19^.2
(In thousands of dollars)
>
C
i
r-f
l=r j
s
&'
^ ol
W:
»-r\ n
I t£> >
00
—- C/5
* 6
*«3
*<
w
o
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
D E C L A S S IF IE D
Authority £..C« 123 5 8
F o rm
>'D IN BUBS SSCTiaN
F. R. 148b
1942
" - ' • ' 2
TELEGRAM
BOARD OF GO VERNORS
d ~
OF THE
FEDERAL RESERVE SYSTEM
L E A S E D W IR E S E R V IC E
WASHINGTON
Tkls wl 11 ottsTlm
tlmi & 4>trWats trl
tbou*«d»
tm m m w *
tW
m * £#*$•
a** fm m k w m
Wm ?#*tr
I W lj
Utag
L*
£
OFT
for 7
S - ‘ E. i t
16— 4573
0
r0
j- '
Reproduced from the Unclassified I Declassified Holdings of the National Archives
‘
D E C L A S S IF IE D
Authority £..()■ 1 2 3 5 8
O•tobar 31 , 19 tt2 .
Hr* Robert 0* Rouse, Tlee President,
Federal Reserve Bank of Hew York,
lev York, Bew York*
Deer Mr* Rouse*
There I# enclosed a statement prepared in this
Division showing; the ohangea neeessary ia allocations of
Governaent securities In the System Open Mirk»t Aooount on
November 1, 19^2# prepared In accordance with the fonmla
adopted by the Federal Open Market Coraalttee on December 18,
19U0.
Current earnings, exclusive, of earnings on Govern-*
m a t securities, and ourrent expwasea have been eetlaated by
Multiplying tha aotual amounts thereof January through Sept*
enber by ease and one-third. Kstinates obtained on this baaia
have been adjusted in the sane manner aa for the previeua
reallocations this yeari namely, by adding #14&O,OO0 to our*
rent expenses at Bow York to oover extraordinary depreoiation
chargee on alr»eonditioning equipment and by deduoting from
current earnings estimated net earnings on industrial advaneee and ooamitaents attributable to ffende reeeived fra*
the Secretary of the Treasury* Estimated earnings m Treasury
bills held by the Keaerve Banka under reaale option have been
inoluded in the figures for itoa *D2*» eatlaated earnings on
Government seourities to Ootober 31*
Very truly yours.
S. L* insad, Chief,
Division of Bank Operations*
Enclosure
T
%
%
E
1-,.
w gnnw m xL
Reproduced from the Unclassified I Declassified Holdings of the National Archives
REALLOCATIOM OF OOVlSSiBOT SBCTJUmHI IS SYSTEM O O T MAXIEJ^ACCOtJITT, «Ora»J» 1# l#4t
(la theutaade *f dollars)
04
cn
MHMMaiMMlM
System
o
£
tcpeases
1, Setlaated eurreati «•»
penB«8, 1$ M
| l9»t©a
MMf
fork
pmlu>
r 'c i v w r t o
delphl*} laad 1 — Pd
1*,872
1.951
1.097
1,882
305
95U
869
M3
280
i.5«e
5,826
2.220
1,280
2,162
1.771*
4.230
166
128
99
36
35
181
31*
20
171
19
75
2.8U3
10.639
10.885
2.992
3,180
2.371*
2.140
1.685
U,859
5.01*0
1,675
1,909
1.109
1.129
1,891
1.512
1,531
3,1*82
3.557
5a
1,1*82
1*50
766
311
151
271
2U3
673
45.992
3.388
12,887
D. laratage
1. Bstia*ted eurrent earnings,
19U2 (exolusiva of earnings
988
on Chwr*t*}
2. Estinatad earnings oa Qwr't
seearities to Oot* 31
38.837
39.885
3. Total
2b
6.16?
1.7U
Fraa«4**t
2.01U
3.18U
Ixeoes ef "C* eter *D3*
...
■"•
g
rr. •"”»
9Stt
2,866
566
S«
tglUi
naiM
1*,375
8,666
2,862
708
Bstlaated expenses aad dl*i*
deads, 19US
c w “ *»l LMl.
TBSnSw1
3.578
9.103
%
-m r
OOfi
900
2,822
Bstlmted diridanda, 19^2
.
2,518
3l*8
37.386
I.
Atlanta
2.867
3.1*87
3.71*7
3.81*6
5®
1*56
1,780
2?1*
1,720
M
3.513
717
>
C
c“f
F, Allocation required (aa basis ef
l*U7i*50^ earnings rate ea
Sotrabef^Ditafetr equal
0, Average daily participations, per
eenfc, la Systea Aoeowit sinee
100,
211,14244
60ljt0t 182,612
7.8958 88.751k
8-3025
150.03I* 591.256 168,680
214,671
9-919©
1
1
I* Allocation ef reaalador of Systea
holding. (♦14.559,038*000 !••«
^#^7
5-1*02?
111,107
U9*3®7
3*6525 8.U865
87.8U6 23U.831
94.576
62,479
96.510
79.82)4 174.588
220.781
Present allocation
337.1*70 l,22t*,9W* 352.161*
K#
Change la allocations
♦23,988 -32,286
-1,003
-5.122
<6,340
rn ^
I to
>
* uo
&
1*3.755 208,483 177.835 1*7.687
122.492 211,603
293.1*57 807,556 558.915
♦2,697
273.
fe.WJ
J*
«1*.783
96,611
3-°582
361.1*581.192.658 351.892 1*18.61*9 896,151* 806,553 553.793
-872
109,973
U -5990
fetal alleeatieas of Ctorernasat
seearities
1*13.866
126,205 61,276
11.1*193
M b
&6
318*9^
1.
]
I g!
*1 * t«|^J97
•to* 3©# 1936
jj
tr
♦1.863
-3.120
180.990 1*1*1 .11*0
-3.155
♦6.4BT
vaN
w>
>-<
W
o
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.O* 12358
F
’D IS FILES SECTION
OCT 5
BD A RD
D F
1942
G D V ER N D R S
□ F THE
FEDERAL RESERVE SYSTEM
W A S HIN GTO N
ADDRESS
OFFICIAL C O R R E S P O N D E N C E
TO THE
BOARD
October 3j 1942.
Dear Sir:
This letter is for the purpose of formally advising'
you of the decision reached by the Federal Open Market Commit
tee at its meeting on September 28, 1942, at which all of the.
Presidents were in attendance, to change the present procedure
with respect to the allocation of securities in the System
open market account to provide, in addition to the four quar
terly allocations, for allocations as of November 1 and Decem
ber 1 of each year on the same basis as the quarterly alloca
tions are now being made.
As you know, this change, which will take effect
during the last quarter of this year, is for the purpose of
effecting a more even distribution among the 12 Federal Re
serve Banks, in relation to their expenses, of the earnings
during a calendar year on the securities in the System account.
Very truly yours,
Chester Morrill, Secretary,
Federal Open Market Committee.
TO THE PRESIDENTS
FQ^/ICTORY
BUY
OF
ALL FEDERAL RESERVE BANKS
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
•;
Fe d
era l
R
e ser v e
Bank
of N e w Y o r k
October 1, 1942.
Dear Mr. Sinead:
We received your letter .^September 29/and have today
sent to the Reserve banks a copy of the computation showing
the adjustments to be made in participations in the System Open
Market Account today, pursuant to the plan adopted at the
meeting of the Federal Open Market Committee on December IB, 1940*
Enclosed herewith is a copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks
yesterday.
Yours faithfully,
Manager, System Open
Market Account.
Mr* B. L* Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends* 5*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
OotetMHr 19 1 W
Dmt Mr* milUmt
la aceorcUxie* « lt h «jr t «l«* r M i o f y «* t ifd * y » 1
h#r*witk eoBjmtattoa o f th*
to 1*
tfc* p *rtic ip *tio o * osf
f i d i T i l it e w m beak# in th » % * t « i
Open Market portfolio*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
SECOIITIBS 130*7
HHBififl
September 30, 1942
please m m r m w u m m
Under th* pim
t m j m m to m m
federal w a w m u r n m
isdicated bjsloi*
for reallocation of Gorornaent **curltie* adopted by th*
Federal Open Market Committee December 13, 1940, & readjustment of participation*
la Qcnrernment securities held in the System Account is called for October 1, 1942*
the computation* showing adjustments to be Bade in participative of the several
Federal Reserve beaks will be nailed to all Beserve bank* tomorrow,
these computations
Increase
o f _______ ......-.in your participation on October 1 * He
decree**
shall wire you on deltober 1 , 194t| the detailed en les to be aad* oa that date#
indicate ta
111&S1MEI
e
innw
fiwUwl
£&i£M£i&
113,000
TTTTllifl
FLBOTG
18,2^3,000
T+LfW
25,088,000
%LABpl
UtOXfOOO
xouso
£, 594,000
DATIS
,
pxnos
4 005,000
LlttftT
5.970.000
ftTIJHCBT
4.807.000
DAI
31>328,000
ftOIITWI
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
12358
I HEO' -i i s w'tEs’licH o'fl
Form F.R. 118t>
TELEGRAM
BOARD OF GOVERNORS
O F TH E
FEDERAL RESERVE SYSTEM
L E A S E D W IR E S E R V IC E
WASHINGTON
September 30,
19142«
Ro h m • lew York
This will ooafirx understanding in telephone conversation
that adjustment# of participations in System account in
thousands of dollars will be as follows t
Increases s
Boston
Philadelphia
11,113
4,692
Richmond
25,068
Atlanta
11,
1*11
Kansas City
5,970
Pallas
U,807
San Franoisoo
31,328
Deoreasesii
l«v Tork
55,355
Cleveland
18,280
Chicago
8,594
St. Louis
8,175
Minneapolis
4 ,0 05
SS|^|fc
F
F
lft— 4578
« »
*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
September 89* 19^2.
Kr* tofcort 0* louse, Vioo fcrosidoat,
federal Reserve lank of low fork,
Star York, low fork*
Dear Hr* X«ai»t
There li eaelosed * »tati*oat proparod in this
Division showing tho ehaagos aeoossary In allooatioas of
Oovoraasat ooooritios la tho iyotoa Opoa Market Aooount m
Ootobor l§ I9k2, proparod ia aooordaaee with tho fersaila
adopted by tho Federal Opoa Market Coaadttoo oil lN»oo«bor
18, 19140.
Current earnings, oxolusive of earnings oa
doveraiasnt seeurities, sad ourreat expenses have boon estiaatod by Multiplying tho aottial aaoants thereof Jaaaary
through August by 1*5* Estimates obtained oa this basis
have been adjusted ia tho saao asaner as for tho previous
roallooatioas this year, aaasely, tho additioa of |i*899000
to ourreat oxpoasos at low Tork to sever extraordiaary
dopreoiatioa eharges oa air-eeaditioaiag o$sip»at aad tho
doduotioa from ourreat e arelags of estimated aot earnings
on iadustrial advaaeos sad ooanttaoats attributable to ffcads
reeeived froa tho Soorotaty of tho treasury*
Toty truly yours.
1* t* 9h m £ # Chief,
Divisioa of Baak Operation*.
Inoloaure
^
I
’ y m n t m TIAL
s.
^ —
!
,................ ......... —
System
Boston
)
jSA:*
,t
M m %T ACCOST, OCTOBER X, X9L2
txp#nsas
(1) Estlmatad current axpansas, X9^2
< S» Erth.s*t«d divi dands, 19M*
C* Estimated axpansas and dividands,l$i2
u, Sanalegs
(X) Istimtad currant aaraingi, 19^2
(axelusiva of aarnln^s on Gov’ts)
(2) Estimated •a.mingi on Got*t
sseuritias to Sapt. 30
(5) fatal
8* Rxoass of "C* over "D^)*
In
Tork
Phila CXevedelphia Xand
Rich
AtXant*
mond
Chicago
MnnSt.
Louis jaapoiis
Kansas
City DalU»
Reproduced from the Unclassified / Declassified Holdings of the National Archives
;l
mkLLOCAnCM OF GCmm'MEUT SBCTJRITI S Xr: SYSTEM O P M
San
Francisco
36,962
2,738
9,068
2.838
3,1^0
2,495
X,702
4,644
1,915
1,085
1,872
1 ,5 0 1
3,464
8,665
566
3,184
708
888
348
302
954
269
183
280
266
717
45.627
3.304
12 ,2 5 2
3.546 4,328
2,843
2$00h
5,798
2,X8l|
1,268
2,1*52
1.767
4,181
996
25
162
131
99
37
5T
193
32
22
X?X
17
72
53,887
2,1*77
9,325
2,616
3.308
2,o49
1.458
4,234
980
2.993
2,502
9.487
2,747
3,*407
2,085
1,49 5
4,427
1,002
1,49 2
1,663
1.316
34,885 -
1,61*0
1,6?2
1.333
3.065
10,742
R02
2.765
799
921
758
509
1.371
512
266
489
434
1,116
8,877,116
214.606
7^0,572
F. AXXoaaticn raquirad (on basis of
X Ji8X2©£ aaraings rata oa Gov’t*)
to produea wrningi Octobar-Dacamber
aqual to wg*
214,002 244679 303,021 136,330 367,306 137,133
0, Avarag;« dally participations, par
oant, in Systam account sinea
Juna 30, 1956
. A1X ©cation of raaaindar of Systam
holding® (13,358*765,000 iass
12*877,1X6,000) on basis of *G*
100.
7.2931
26.7967
8.2145
9.9**02
5.^769 4.231*8
71,21*5 130,973 116,242 296,907
11.3982 *4*59^4 3.0)i70 4.7940
3 .8!.96 8.4566
—-
39,565 47,877
25,896
20.397
54.899
22,139 14,676 23.090
16.541
1(0,731
35,127
138,709
I. Total allocations of Government
securities
5,358,765' 249,933
879,281
253,5^ 294,556 226,919 156.727 422,105~ig9,272
8^,921 15l*,OS3 134.783 339.638
J. Present aXlocations
3.358.765
238,820
934.636
218,875 312^36 203.831 145.316 430,699 1^7,Wi7
89,926 11*8,093 129,976 308.310
♦11,113
-55.355
K* Change in aileoations
>
I
&
!
S'
i
§.
* w1
rT\ O
\
r
o
>
• uo
481,649
♦4,692-18.280 +25,088 ♦11,411
-8,594 *8,175
-4,005
♦5.970
♦4,807 ♦31,328
c/3
* 5
§ wo
R eproduced from the U nclassified / D eclassified H oldings of the N ational A rchives
jREC’D II FILES SECTION
I■
AUG 2 7 '.342 ,
! 7> h ?) . 3
:
Auguot 26, 19ii2
Syotoil OjMWI ia rk # t allocation*.
Hr* Tan Foa*on
l#£#rri**c to y # w p#mll wmtmwtomjf I do not find anything
la the r#f#rt m 1 th#
m : $ * M M m m m m in regard to th*
t m t M a t of lotati on O o r M w a t aoourltloa §ol«, Tho prooont pro- '
##dur#* of *«tur««» 1* t# #ll#©ai* nuey, ;i#o«o* ia proportion to arorag# '
participation* la tho 8yatem Opon Market aooount alnoe Juno 50, 1936,
i*#,f on tfe# ***o l>#iii§ on *&£#& 'profit# ar# *U4**t«d»
- th# $fonoa& fr®o#d»r# rogardiiif: fn**%orIy *&I#o*ti©»« **»&
tho troataant of prtfit* and I®**#* m i #4#fft#i #H t m m & m 1&# $9tt* ■
by tho WwtomX Open »ark#t 0««ii*itt#* at it a*«fe£*g *t »§i$#l* *tl #£ th#
Preoldente of tho Federal Reaerre Bank* wore ia attond*n»e. Aooordlag to tho pj#r^i„l#$t«*i .*£
..M*.
..$S4$# appro*** «f th# w m ■'.
proood\iro wae gir#a by til# J*r#i»M»liti *S **Ii ** % til* ?#$#r*X Opon ■
Market ■Puialtt##. P r f W « l ^ ***
ohange
th# ■.■
approrral #f tho F*d«rm3, & p m Httdwl $tf*&tt##.
4# 1 rweall th#ro M l *m undorstanding with Mr. Ii«*«# and '■
Mr. Mlllor that If la tho laot garter of any yoar It appoaro that
thore waa a likelihood that any Floral Rooorro Bank would not haro
eurront not .amlng* #nf#i#l*ill 't# ##*#r #*$#*»#* «**d dtvtd#«i»;* ti*#*#
would bo apodal roaUooationa of tho 8y»ta» Opoa Markot aooouafc on
lorort&or I and Dooombor U Tkoro I# no pr#*#iit life#iili##d #£ *ay
situation arioiag aad, accordingly, thoro dooo not appoar to bo any
neoosslty for * reallocation during th# current calendar yoar subsequent
to tho forthcoming Ootobor 1 reallocation. It is hollered, however, '
that it would bo doeirablo to got ao aoourato an estimate of probable
oxp«uoi during tho last four monfcha of tho yoar for uoo in this ro- '’■■:
allooatloa ao lo practicable. Wo oould, of oourao, aok tho Fodoral
t###rf* Banka again, ao wo did last yoar, to giro uo an estimate of
«n#|i expenses. I b#lim m * k m # m t §.m '****• 4# J»«t *# good a ,j#h and;
perhaps a fc#tt#r m m on th# fc#«i# #f MtfmX #xp#iM»# to th# ond ,##' •
''***
|r«i##ittsfm ii to add 50 |Nir
t# ^oi##nto# at tho .
ond of *ng»it to obtain th# #itimit#d onj*#*i§#ii tar m m in- th# t#t*ik#r 1
roaliooaticn. ln'vi«#' #f th#
i m r m m in #*p«io## &&&$.
tho fr#o^l" ^yo#r# I b#ii#f# it would bo proforalbi# m tlt-is ###«#'i#ii t#
uao oxponaoa to tho ond of Auguot pluo oacponooo for til# four month* ■
May to Auguot inolualro. Inaamuoh a# tho mothod of ootlmating oacpoaaa#* ..
ha§ »#t boon *^prw#4 fey th# ©£•** Hirk#t
it' i».# #f ##«ri»#
fooaibi# .for you «nd Hr. Kp w n i t#. adopt any *o^M»d #f ##ti*#tii^ .
•xpoiuos wi^out #Bteitt.i«g it t# m * 0 p m U m p M itaKitt## to* #ppr#f#l*
It i# IWti«W»t#d tli*t you diacmoo M U l m t t ^ with #r* »!«•#
at t i l # mooting |» low Swfa M M d w*«te mnA if It i»
to &#*# fm*
allooatloa# on Mvrmbmr X m & D^ortior 1 «iat an appropriate rooeeaonday
\JYv
tIon h#
Markot C
VF:seh
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q*
BOARD DF GO V E RN O RS
□ F THE
FEDERAL RESERVE SYSTEM
Office Correspondence
To_
M r . Smead
FronL
Mr. Van Fossen
REC’OINRCCQRHS
APR 1 9 !966
Date A igust 26. 19142_____
Subject; System Open Market allocations
Referring to your pencil memorandum, I do not find anything
in the report of the Committee on Self Insurance in regard to the
treatment of losses on Government securities sold. The present pro
cedure, of course, is to allocate any losses in proportion to average
participations in the System. Open Market account since June 30, 193&,
i.e., on the same basis on which profits are allocated.
The present procedure regarding quarterly allocations and
the treatment of profits and losses was adopted on December 18, 19^0
by the Federal Open Market Committee at a meeting at which all of the
Presidents of the Federal Reserve Banks were in attendance. Accord
ing to the Board’s letter of December 27, 191+0, approval of the new
procedure was given by the Presidents as well as by the Federal Open
Market Committee. Presumably any proposed change should have the
approval of the Federal Open Market Committee•
As I recall there was an understanding with Mr. Rouse and
Mr. Miller that if in the last quarter of any year it appears that
there was a likelihood that any Federal Reserve Bank would not have
current net earnings sufficient to cover expenses and dividends, there
would be special reallocations of the System Open Market account on
November 1 and December 1. There is no present likelihood of any such
situation arising and, accordingly, there does not appear to be any
necessity for a reallocation during the current calendar year subsequent
to the forthcoming October 1 reallocation. It is believed, however,
that it would be desirable to get as accurate an estimate of probable
expenses during the last four months of the year for use in this re
allocation as is practicable. We could, of course, ask the Federal
Reserve Banks again, as we did last year, to give us an estimate of
such expenses. I believe, however, we can do just as good a job and
perhaps a better one on the basis of actual expenses to the end of
August. The usual procedure is to add 50 per cent to expenses at the
end of August to obtain the estimated expenses for use in the October 1
reallocation* In view of the continued increase in expenses during
the present year, I believe it would be preferable on this occasion to
use expenses to the end of August plus expenses for the four months
May to August inclusive. Inasmuch as the method of estimating expenses
has not been approved by the Open Market Committee, it is, of course,
possible for you and Mr. Rouse to adopt any method of estimating
expenses without submitting it to the Open Market Committee for approval.
It is suggested that you discuss this matter with Mr. Rouse
at the meeting in New York next week and if it is decided to have re
allocations on November 1 and December 1 that an appropriate recommenda
tion be prepared for submission by you and Mr. Rouse to the Federal Open
Market Committee at its next meeting.
|
j
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.C* 12358
APR I 9
V
’-'..J' .&
}■
■
'
Fe d
eral
Re
se r v e
B
ank
of N e w Y o r k
June 30, 1942
Dear Mr. Smead:
We received your letter of June
29 land have today
.......^ ef
sent to the Reserve banks a copy of the computation showing
the adjustments to be made in participations in the System Open
Market Account on July 1, 1942, pursuant to the plan adopted
at the meeting of the Federal Open Market Committee on December 18,
1940*
Enclosed herewith is copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks today*
lours faithfully,
Manager, System Open
Market Account*,^
Mr. E* L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D* C.
Ends. 5.
J
Reproduced from the Unclassified I Declassified Holdings of the National Archives
_____ ____
d e c l a s s if ie d
Authority
V23SB
M IS C . 1 4 0 A 7 5 M -6 -4 1
FE D E R A L R E SER VE B A N K O F N E W YO R K
Juno 30, 1942•
Bear Mr. Flemings
In accordance w ith sy telegram of today, I sneloae
h e re w ith computation o f th e readjust&eats to be aade on
f*1? h
of the participations of th e Federal il©serve
banss ia 'the Systea Open Market portfolio.
lours faithfully,
Jpen
Jr. !'u. J* Flej&iiig;j. Prjga^tlesit$
Federal Reserve B a n ^ f C i ^ e l a n d ,
Cleveland, Ohio*
f
\
Ene.
MBfFD
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 1235%
SECURITIES DEPARTMENT
RHBiFD
Ju n e 3 0 , 1 9 4 2 *
PLEASE S M B THE FOLLOWING TELEGRAM TO EACH FEDERAL RESERVE BANK AS INDICATED BELOW:
Under the plan for reallocation of
Government securities adopted fey the
Federal Open Market Committee December IB, 1940, a readjustment of participations
in Government securities held in the System Account is called for July 1, 1942*
The computations showing adjustments to be made in participations of the several
Federal Reserve banks is being mailed to all Reserve banks today* These
[LnOX*0£1*3©
computations indicate an
______ _____ _—
participation
decrease
on July 1*
However* these computations are based on holdings at close of
business June 2 9 , and are exclusive of purchases made for delivery today and
tomorrow.
Consequently our wire to you tomorrow will advise entries to be mad©
on that day covering both the quarterly reallocation and additions to holdings
since June 29#
Increase
Decrease
Paddock
Boaton
-
9,776,000
Williams
Philadelphia
-
20,519,000
Fleming
Cleveland
-
27,446,000
Leach
Richmond
9,761,000
~
McLarin
Atlanta
2,534,000
-
Young
Chicago
25,162,000
-
Davis
St. Louis
11,799,000
-
Peyton
Minneapolis
Leedy
Kansas City
3,082,000
Gilbert
Dallas
1,203,000
Day
San Francisco
-
21,231,000
ROUSE
10,288,000
-
-
mLLOCATICK OF GOVERNM5NT SBCTJRITIES P? SYSTBV OPEN MARKET ACCOTJFT, <OTT 1, 191*2
cmnmruis
A. I X M B N I
(l) Estimsted current expenses,19U?
B« Estiwated dividends,
G. Average daily participations, per
cent in System account since
June 30, 1936
A lloeation of remainder of System
holdings (| 2 ,617,083,000 less
#2 ,59*1,^63,000) on basis of "G"
I . Total allocation of Government
securities (*F* plus *HW )
J. Present allocations
K. Change in allocations
9 ,16 1
8,650
565
3.182
Us, 360
3*229
99®
Dalla*
lan
Fn»«l«oo
1 , 651.
I*,903
1,9 52
1,078
1,825
1 , 1*77
3 , 3&>
709
887
3^8
297
952
268
I83
279
265
715
12 , 3h3
3 ,KS8
bAi6
2,776
1,951
5,855
2,220
1,26 1
2,104
1,71*2
4,075
19
168
119
10.4
47
34
I 83
32
25
176
21,607
1 , 60S
*,912
1,710
2 , 16?
1,299
926
1,026
653
1,62*
6,060
1,829
2,271
1,34 6
960
1,058
678
952
1,128
841
860
1,863
22 , 6os
2.653
2,836
2^,755
1 , 60S
6,263
1,629
2,075
1,430
991
3,019
1,162
583
976
862
2 , llfO
2 , 59^ , 1*63
182,996
71^,090
185,73^ 236,586 l63,OU5
112,991
3l?4,218 I 32 J488
66,1*72
111,281
100 .
7.3057
28.8556
2 , 71#
8 . 2611* 9.97^1
5-3365
4.2295
11.3149 4.5737
3.0686 4.8167
2?,620
1,652
6,s27
2,617,083
181 *,650
720,617
187,603 238,^43 164,252
1 1 3 ,^
346,777 133,523
67,166 112,370
2,617,083
1 9 W i2 6
727,360
208,1>2 266,289 154,491
111,4.14
32l,6is 121,724
77
-9,776
“6 ,7^3
—
NOTE: Computations are based on holdings
in the Account June 29, 191+2.
Kansas
2 ,l*a8
C. Estimated expenses and dividends, 19^2
P. A ll 00ation required (on basis of
1*73963$ earnings rate on Gov’ ts )
to produoe earnings July-December
equal to *E*
2,64*
Mlnn-
tools eapo lis
3.J+99
19fj2
»• Earning*
( l) Estimated current earnings, 19^2
(exclusive of earnings o»n fle e ts)
(2) Estimated earnings on Gov*t
seeurities to June 30
(3 ) Total
E. Excess o f "C" over #D (3)"
5 6 ,7 1 0
“it.
1,869
2,257
- 2 0 ,519 - 2 7 ,4 1 ,6
1,207
+ 9 ,7 6 1
957
♦ 2,534
2, SS9
♦ 25,162
69L
1,035
1,089
109,288
+11,799 -10,2P8 ♦3 ,0 8 2
19
Reproduced from the Unclassified I Declassified Holdings of the National Archives
System ^ Boston
(in thousands of dollars)
New [P hils- T Cleve Richmond
YoA {delph ia 1 land
72
1,935
100,563 243,997
3.81,81*
871
8.1*11*6
1,903
101,1*31 21*5,900
100,231 224,669
♦1,203 ♦2 1 , 2 3 1
>
&
c
0r
f
rn
1
o
—
*
I
S
g!
^
r
>
I
C/A
3
5
w
©
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
12358
RBC'O IN ' ItfS
'KGTXON
JU N ., 01942A
■
Aw* 39,
Mr. Robert G. Rouse, Ylo# President,
Federal Reserve Bank o f Hew York,
Sew York, *®W York.
Doar Mr. Mouse t
fh*t*o I* eaolooed a statement prepared 1m this
DlTlaien showing the changes nooesfary in allocations of
Gtorernaent #e«arltiet la 'tlx# Systesa Open Market Aoooimt on
July 1, 19U2, prepared in accordance with the formula adopted
by tha Federal Open Market CoBaaittee on Deee*ber 18. 19*40*
Currant tamings# exclusive ©f earnings :«n fkwera*
securities, and current expenses havs boon estimated fey
M u lt ip ly in g
the actual amounts tho roof January through l a y
2*1*. Estimates obtained on this basis hare been adjust## In
tho saas naaner a# for the January 1 .and April 1 reallooations,
naiaely, th© addition of tltB®,®©© to current expenses at Sew
York to oovor extraordinary depreciation charge* ea airoonditloning equipment and the deduction from ourrent earnings
of estimated net earnings on industrial advanoes and ooscnltwent* attributable to fuads reoeived from the focretary of th*
Treasury.
Very truly yours,
g. L. g*eadt Chief,
Division of lank Operations,
Snelosure
T
CCKFXBESTIAL
BSALLOCATIOK OF G O W m W * ? SECURITIES U
SYSTk Qf m MAHST ACCOUST, JULY I, 19**2
- - ..I —
I25
;
frt,.......... .
iO
Syeten
CM
^A.'txponsos
■g il) 8-tl-t.d oarrent .xp
Boston
low
York
Phila Clefcdelphia land
Rich- Atlanta
mend
3,182
709
887
U5,360
3*229
12,31*3
3.^58
l*,3i*6
2,776
998
19
160
119
loh
hi
2 1 ,60?
5,912
1,7 1 0
2 ,16 7
1,299
926
22,605
1,605
1 ,62^
6,080
1,829
2 ,2 7 1
1.& 6
22,755
1*605
6,263
1,629
2,0 75
P. Allocation required (on basis of
1*73983^ •**»!«£• rat# on Gov'ts)
to produce earnings July-December
equal to *S*
2,59W*63
182,996
71^,090
6. Average daily participations, per
cent, in Sjttes aocount sinee
June *50, 1936
100.
22,620
1,6 5 2
I. total allocation ef Government
securities (*f* pins *1*)
2,617,063
18^,650
J. Present allocations
2,617,083
n
Change in allocations
—
6,527
720*617
19i*,li26 727,360
-9.776
-6,7^3
I83
279
265
7 15
5.855
2,220
1,2 6 1
2 ,id*
1 ,71*2
1,075
I83
32
25
176
19
1,0 2 6
952
1,128
8ia
860
1.935
976
862
2, ll#0
1*95*
565
E. Allocation ef reminder of System
holdings (12*617*083*000 lose
|2, 5$*,1*63 ,000 ) so basis of *<f
268
952
8 ,6*30
38.8556
% 36o
297
3.^59
7.3037
1,177
1,9*2
2,71*9
*. Ixeess ef *C* over *8(3)*
1,8 2 5
J*,903
9,161
2M
1,078
1*6514
2,661*
^I^SstisAtsd dividends, 19 L2
a
_.
y}« Ssti«atod expenses and dividends, 1#;2
M
i
•V*
^-leittings
(1) Estimated current earnings, 19^2
(exclusive of earnings on 0ev* ts)
(2) Sstiaated earnings an Got*t
securities to June 30
(3) Total
Stllti
it.
Louis
36,710
2,1*36
Minn- Kansas
•apolls city
Chisaga
*
Francisco
72
960
2,653
2,836
1,058
653
676
1,1*30
991
3.019
1,162
5»3
185,73k 236,566 16 3 ,01*5
112,991
3Wi,218 132,li88
66,1*72 Hi.aBi
10C,563 21*3.997
l*.2295
ll*31ii9 i*-5737
3.0666 U .8167
3-81*81* 8.1*11*6
8.2611*
1,869
9 .9761* 5*3365
2,257
1,307
957
187,603 2«,8l*3 l6t*,252
308,122 266,289 15Wtfl
113.&8
<*30,519 •27,L?6
♦9,761
lll,lili*
♦2,531*
2,559
1.035
69L
1,089
&6.7T7 1*5,523 67,166 112,^70
321.615 1 2 1 ,721* 77 5^ 109,288
♦25,162 ♦11,799 -10,2F8
♦3,062
871
I.863
1,903
101,1*3^ 21*5,900
100,231 22jL,669
j
♦1.203 ♦2 1 ,2 3 1
'
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..O* 1235%
M RECORDS SECT
APRl 91968
*^
F e d e ra l R e s e rv e B ank
of
N
e w
Yo
r k
March 30, 19U2,
Dear Mr© Sinead:
We received your letter of March 28jknd have
today sent to the Reserve banks a copy of the computation
showing the adjustments to be made in participations in
the System Open Market Account on April 1, 19U2, pursuant
to the plan adopted at the meeting of the Federal Open
Market Committee on December 18, 19U0*
Enclosed herewith is copy of the letter of
transmittal together with three copies of the computation,
also copy of the telegram which was sent to each of the
Federal Reserve banks today*
Yours faithfully,
%
Manager, System Open
Market Account®
Mr# E* L* Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D* C<>
Ends* (£)•
1
Reproduced from the Unclassified I Declassified Holdings of the National Archives
__________
D E C L A S S IF IE D
Authority
1235%
Mi SC. 140 A 75 M -6-41
FE D ER A L R E S E R V E BANK OF NEW YORK
March 30, 1942
Qmt Ur* i)ey:
In accordance1with agr teiegrius of tod&y, I enclose
herewith computation of tli© reacijttataents to be m d m on
April lf 194^ of the participations of the federal Reserve
b*mfca in the System. Open Market portfolio*
rnBtm
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
declassified
Authority
123SB
s t c s i t m a nsir*
mmm
ftroii SJ,
n * * m »«mI tt» m u r n i m
**ch V M M
M o m
t M «r t m Pirn t w x r n m & m m «C
r*«m a
a * ««r lu * »
Xi, 3MA» • w m kj& fitm *- «f
itevlwi ( M i d i
twiX*S. in ite Sjwtav
ia ^ w n m o t
ftMfc ft* ii*fc<»%«Kl M U w t
Tim
i# is*tXX**t fsar IprtX I* Xffit*
t» tot mdm in
r$dm*l
In M in e
In die*t*
m
* • ®h*JI
wtr* /ou
'
®f
t * a l l taMftrtt
____________________in.
«*i % r i l X* X&2 ih * 4#&aAX#tl
« f %hm m m m X
today.
H m m cM g^tftttoa*
fmat smrtl«igMtfUhm m
# r t X X*
to to* « i 4 » im th*t
nil
Zmm&
M t7 ,o c o
71,000
m
€ Z0
5,800,000
m
nrnmmtt.
S *»5,o o o
m
AtXftnU
3,106,000
m
7,283,coo
m
ktXXJ, ooo
m
m
i,75W ,coo
m
SiUJt®Bai
i*X#6|3Ul^
tmmg
tw*%»
tm % r
n u UmiM
m m m city
«*
fiJJtarfc
tm r
**
x#ate,ooo
*»
8 m 'Prwmimm
mmn
$»3n,ooc
m
ii#,ooo
REALLOCATION OF GOVERKkiil<T SECURITIES IH SYSTW OPEil MARiiBT ACCOUNT
________________ APRIL 1, 19U2________________________
cm n m r r u L
.... — —
Systa*
A. IzpiBtH
1 * Estimated currant expanses,
19^
B. Earnings
1 . Estimated currant earnings,
1942 (exolusive of earning*
on Got* ts)
2* Estimatad «train|f on Go t *t
securities to Mar. }1
3. Total
c. Excess of •A-l" o-rer "B-3"
36,631
Boston
2,802
York
8,925
(In thousand© of dollars
I M 1 T C T T" ....
j
Si.
!
!delphia jciawland iRichmond Atlanta* L
,Chicago ! Louis
2,898
3,666
2,391
1,659
u .700
kinneapolis
kansas
City
Sail "
Francisco
"
Dallas
1,894
1,190
1,642
1,486
3,178
*>
1,059
57
158
116
94
44
42
lbo
36
24
l>5
22
85
10,625
1 1 ,68^
782
2,933
3,091
839
955
1,0 5 1
452
494
1,292
1,478
502
536
321
>45
i+86
681
4m
436
1,003
1,165
3,222
1,356
645
1,161
1.050
2.175
918
5,84+
1,943
2,521
635
679
1 .7 1 2
136,537 1405,764
135,1^5
175.348
119.076
61,032
22^,106
94,317
56.774
80,753
73.033
151,282
3,133
711
686
345
296
950
267
lo2
276
265
715
509,047
33,415 185,620
42,124
52.4^3
20 ,u40
17,537
1^,61;
10,733
16,-,71
15 .7^0
42,361
2,244,236
169,952 591,404
177,269
177,196
227, &+1
139,518
98,569
260,3^0
69,557
97.22^
66,733
95,463
273,102
110,136
1 u 6,019
67.761
102,599
87.451
♦ 1 ,2 o2
1;3.&*3
l>3.e92
24,947
D. Allocation required (on basis of
1.90823$ earnings rata on Go t *ts)
to produce earnings Apr .-Dae*
equal to "C*
1#735#189
I. Estimated dividends, 1942
" »■—1
8,592
839
1,963
564
1,145
P. Allocation of remainder of Sys
tem holdings ($2 ,244 ,236,000
less #1,735#189*000) on basis
of mE m
G. Total allocation of Go t *t
securities ("D* ♦ "F")
H. Present allocations
I. Change in allocations
2 ,24^,236
—
165,135 619,452
♦4,817 -28,048
♦71
221,>6l
+5*880
^34,203
♦5.315
♦ 3,106
♦7,266
♦•U.117
♦1,796
_c
/,7 c.
-249
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
12358
o
lo
Haroh 28, 19142.
Kr. Ecbert 0. H o w , VIo* Prooidont,
Podaral Ho«.rro Bank of l w Tort,
low lork. Sow lork.
Dear Hr. Rousei
thoro 1* onoloood a i t a t w n t proparod lo thi»
Dlvi»ion showing tho ohangoo n»o»»«*ry in allooation* of
SoToramant .o o u rlti.* in tho S y .tm 0pm
Ao! ° ! “ V
on April X, 1942. pr«p»r»d in aooordanoo «ith tho
adoptad hy tho Fodoral Opan Uarkst Condttoo on Dooo»t>or
18, X9l»0.
Current earnings# txoluiivi of tiriilQiii on
Government *eouritiea, and current expen*** havo been
estimated by multiplying the aotual amounts thereof
October through February by 2.U* Estimates obtained on
thi# basi* hate been adjusted in the m m manner a* m i
done In connection nith the January 1 reallocation, namely, the addition of 1480,000 to current expense* at low
Tork to cover extraordinary depreciation charge* on airconditioning equipment and the deduction from current
earnings of eetimated net earning* on industrial advance*
and commitment* attributable to fund* reoeivod from the
Secretary of the Treasury.
Very truly your*.
So L. Smead, Chief,
Division of Bank Operation*.
Enclosure.
h \
MB: je=3
|
COPY
mkojookmm m
coif : m s t x a l
mmmnss in snrm ofbm umr&t accob*s
APRIL i, 1942
______
c i
C/ *
S/at—
:>• Efcponoaa
1 . latlnatad currant
1942
— #v Baraing*
1. Eatinatod currant aarttlngs,
l'^4£ (axoluaiva of earning*
oa Sevfta)
2* Batinated earning* an Gov’t
aeearitie* to STar. 51
i« Total
c. Exoeaa of "A-l* « i t r *8-3*
Boaton \ fork
(la thotjsa&d# of dollars)
T O t e n ------ =*p----- p ----- r
]— sir
‘delphia 'Cleveland *RlohaattdjAtlanta ']Chloago
IrOttla
! Mlaa**"™*
aapolla
ganaaa
City
MHMMMMNMtiMMMtMNNNMNaMfr'
Sflfcft
Dallaa
Fmnaiaaa
2,809
8,925
2,896
3#666
2,391
1.659
4,700
1,894
1.190
1.842
1.436
3,178
1,059 y
57
156
116
94
44
42
166
36
24
195
82
85
10,625y
11,684 '
24,947 J
788
8,933
3,091
1.051
1,145
452
502
321
486
494
1,892
1.478
538
681
414
436
1,003
5,834
2,521
345
1,963
839
955
1.943
635
839
1,712
1.16 5
3.222
1.356
845
1 .1 6 1
I .050
2,175
135*145
175.348
119,078
81,032
224.106
94.317
58.774
00,753
73.033
151,232
TU
836
345
296
950
267
188
278
265
715
42*124
52.4^3
20,443
17.537
56.284
15.819
10.783
16,471
15,700
42.361
887.841
139.518
96.569
280,590
110,136
69.557
97.824
88,733
193.643
177*196 281.961
134.803
95,463
873.108
106.019
67.761
102,599
87,451
193.898
♦5.315
♦3,106
♦7,288
♦4.117
♦1.796
-5.375
♦1,268
-849
at9
918
!5* Allocation required (oa baai* of
1 .90825$ earninge rot# oa ©ov’ta)
to produoo earning* Apr*•Dae*
equal to *C*
1 .735*189 ^ 136,537 405,764
S. latiaatod dividends, 1942
8,592 J
564
3,133
F. Allocation af remainder of Syeton holding* (.$2 , 2 *44,236,000
le*a 11 ,735,169,000) an baaia
of *»*
fetal allooatioa of 0o?*t
aeeuritiea (*n* ♦ ■**)
Preaant allocations
I. Change in alleeatieaa
509.01*7 v
33.415 135 , 6eo
2.8i*.236 y 169,958 531.404
2,244.836^ 165.135 619.458
~
♦4.817 •28, OI4.8
,*71
+5,680
s
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £ . 6 - I M 5 8
fe l) IN RECORDSSHT
(
m
i
3 ,
d m
i,
F e d e ra l R e s e rv e B ank
v.
of
New Yo rk
December 30, 1941
Dear Mr. Smead:
sent to the Reserve banks a copy of the computation showing the
adjustments to be made in participations in the System Open
Market Account on January 2, 1942 as of January 1, pursuant to
the plan adopted at the meeting of the Federal Open Market
Committee on December 18, 1940.
Enclosed herewith is copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks today.
Robert G. Rouse,
Manager, System Open
Market Account.
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
J
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
"
>»
-
Authority £..()■ 1235B
•* *.
'
® m m xm mm*
M g I M 'l
M i r Wm ftat f«r *^Xi«w*sti«asi e£ iifirvwiwmt WMttriU** j&4©$>U«i Igr Uni
fw&mmt Opm U w r ^ t
i w » i » r I f , 1$4® # * rm^pmfimmm « f j * r t l 4 * f * % i i f t f t tm
1# lf42«
■mm®?iMm& W ld ia th# %#*#* &mmm% i# «aU*a f«r
®MK^%&%lmM ■mmdm
1h*
t e * * **»*§# in p&rkl®lp*%im& # £ tfe * a te m rib ’l f t o 6 m i
li i WHTi Itaaka it &*4*m£ mm% to all &#t»*nr» taofca immj* thmm
M lM w «b
.v
ln e r * * * *
d ie * * * * *
uc
^
...
__ ____ __
1r
yn rM »lpfc1iili«ii «& J iR M ff 1*
'
2 , i$ 4 ? tto » t i s M l f t i « **fc ri# » t e b * mcm m t h a t l * t *
■m
Wrntm
f illis s s
y iir y t liig
ffiy p i^ b w w l
«fci tttkusmtxiiHfi
M * r i»
A tlm tJk
Wmk»
Mm IMtoX#
f if t H i
lam t?
&J11 MP%
CX^
6 6 ,0 0 0
«aMb
♦
2 3 1 ,3 0 0
i , 5 8 6 ,0 0 0
6 ,8 9 1 ,0 0 0
9 ,1 5 5 ,-;> jo
i JU JLJ300
igm
<1*11, .» r e jpmi
«,# o f l i M
f | ' 1#
# ,1 5 3 ,0 ®
!**
IS O ,96©
2 ,9 9 3 ,0 0 0
4»
n ^ 6 6 ,a c a
6 ,7 8 4 ,0 0 0
m
m
«**
m
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12-35%
M IS C . 1 4 0 A 7 5 M -6 -4 1
FEDERAL RESERVE BANK OF NEW YORK
dftMrtmr 30, m i .
Dear Ir. Flemings
In accordtaaee with ay telegram df tocl&y, I
©nclos® bmrmlUi computation
b»
m£®
o®
Jmmry
to
pi
2,
pwttielp&ttcms ojM5b« Jtack*rat
X* of
tbs
banks $ft th#
System 0*nws lliirf«t nut t’
Uob9Tl 0*
M a n a g e r ,.
S y s te a
Sir^at Account*
ISy* I* J* Flaming,, Pr«#idoatf
Ftdor&l R«d«rv* Bank of Clevelsiad,
Cleveland, Ohio*
Q p m
CONFIDENTIAL
HS1LI/>CATI<* OF GOVERNMENT SECURITIES IN SYSTHI' OP15N LARKBT ACCOUNT ON JANUARY 1, 19^2
System
A. Expenses
Estimated current expenses,1942
(in thousands of dollars)
Phila Cleve Rich
Boston I *"*'
mond
1 York delphia land
B. Estinated dividends, 1 Q[j2
5U.523
8,526
C. Estimated expenses and dividends,1942
1*3.01*9
3,113
11.790
3,423
4.249
1,016
20
191
105
92
12.033
3,093
11.599
3.318
4,157
D. Estimated earnings, 191+2 (exclusive
of earnings on Gov’ts)
E. Excess of •c * over nTf
2,549
8,682
2,709
3,371
564
3.108
714-
878
At
lanta
2,222 1,52 0
Ifiinn- Kansas
Louis eapdia
City
Chicago St.
Dallas
Sar
Francisco
4,366
1.757
1,112
1,8 2 3
1,400
3 .0 12
293
935
264
180
276
262
710
2 ,56^ 1,813
5.V1
2,0 21
1,2 9 2
2,099
1,662
1.722
25
194
35
23
178
2[,
90
2 ,515 1,788
5,117
1,9 86
1,269
1,921
342
49
I .038
*, 6*r
F. Allocation required (cm basis of
1.88225$ earning rate on Gov’ts) to
produoe earnings equal to "B*
t
2, 23^,125
1^,325 616,230 176,278220,853^133,617
9l»,993
271,855 10S C12 67 , 1*19 102,0«3
87,021 192,<=6o
G* Allocation of remainder of System
holdings ($2,254,475,000 less
$2,23^,125,000) on basis of average
daily participations in System
Account since June
1936
21,3!®
1,557
6,189
1.770
2,129
1,127
902
2,397
973
656
1,036
821
1,793
H. Total allocation of Gov’ts
2,254,475 165,862 622,419 178,048 22^982 134,7U> 9^895 27L,252 104185 68,075 103,095 87,845 194 ,7 ^3 -
I. Present allocations
2,25^,475 17k,035 592,196 177,982 223,162 137,757 95*664 305,718 113*26? 66,509
J. Change in allocations
—
-6,153 *30,223
♦
66
-180
-2,993
*231 -31,466 -6,781+ *1,566
96,204 78,6*) 1 9 V W
*6,891 *9 , 1 5 5 ♦ 1 ,4^4
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..O* 12358
Deoember 29 , I 9J4I .
Mr. R. G . Rouse, Vice President,
Federal Reserve Bank of New York,
New York, New York.
Dear Mr. Rouse*
There is enclosed a oopy of the statement prepared
in this Division showing the changes necessary in allocations
of Government securities in the System Open Market Account on
January 1, 19o2* prepared in accordance with the formula adopted
by the Federal Open Market Committee on Deoember 18, 19^0*
Current earnings, exclusive of earnings on Government
securities, and current expenses have been estimated by multiply
ing the actual amounts thereof from July through November by 2*1*.
To the estimates of current expenses obtained on this basis we
have added 11.130,000 for New York to cover extra depreciation
charges on air-conditioning equipment* We have adjusted the esti
mates of current earnings obtained on this basis by deducting esti
mated net earnings on industrial advances and commitments attribu
table to funds received from the Secretary of the Treasury, which
of course are not available to cover Bank expenses, dividends, or
transfers to Section 7 surplus.
Very truly yours.
E. L. Smead, Chief,
Division of Bank Operations.
Enclosure
b b c d in f u e s section
eovriccarYUL
■BALtocATiois or ooynmwrnt sictTKin^fi i i m u m apm w m & i acca m
SyitM iOOtOB |wwr
1f«rk
Am ISp««i«
Botiaatod current o*pon*ot,1^2
V* Kotinatod dividend*, I9kt
6* B*ti*ated exponeee and dividend*, 19^2
Botiaatod o«»iBg«> 19U* f•solsol**
of earning* on dor* to)
\
B* Ixmii of *C* over *1f
5U.5*57 2 , 5(49
8. 5* 6 x
5«.
1.016 '
2,709
5.571
3*106
711*
878
1*2,053
5.1*25 l*.at£
105
ao
5.095 U,!£9
u 19M
A
9a
3.5M JU.157
a.aaa 1.530
3fc2
893
a, 5a* 1.813
10
*5
2,515 1.788
A.
«n ii4
DEC 3 01941
" -ax: , At
’1 m : w n i
m uii.
delphia l«nd mmi lanta Chioagc Loaio eapdfca Wty
6,662
U3.0ti9 v 5.115 11*790
ov m m m
i
S
Skila* - T K —
PnUMilM
3.012
ISO
1.8*5 1 ,1*0
962
276
5.501 2,021 l#29t
2,099 1,668
3.7*2
1*.366 1*7!? 1,112
<935
181*
23*
15
5.117 1*966 1.86?
710
17*
at*
90
1.921
1.658
3»6f2
t. AllooatioB rH «irad (on baoit of
I*882I9( Miftlsgi vmtt on 0ev*%o) to
produoo earning# equal to *1*
0. Allocation o f n n t s d t r o f Syotea
I t U l s f i f $2t2$*0h?%OQO
#2ft f 5 fX2%000) OB be*!# Of ftTOrfcgO
daily participation* in Syote*
looowst oioee <Nao 10, 195^
1 . Total allocation o f 0ov*t«
X. frooont allocations
J, Change In a l l 00atiant
/
a,fJMa«S 161*.3*5
616,230 176,278*30.95?
153.6X7 9l*.9» *71/55 »S512 «»M*19 103,099 87.03U 192.960
/
656 1,036 821 1,795
l,25l*.i*75 *65,888 683.109 17*.Ol,8 88*982 13lt.7Ut9S895 ^ 1,252 1041*85 66.075 103.095 87.81*5 191.755
2,**».1*75 im.055 992.196 177,908 22*163 157.7* 9* 66fc 305.718 11*269 66.509 96,O h 78.690 193.309
— / *8,153 '*3°.223 ^ ♦ 66 7 -H8o/ -a.995 **31/-31.W6 -6.7tt*yH , 566' *6,891 <9,155 ♦ U A k
1.557
6.1*9
1.770
8.139
1.1*7
908
2.397
975
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.C* 12358
7E'
1/
//
e g-b a
::
jooard v;f Governors
of the
Federal Reserve System
Leased W ire Service
Roceived at Washington, D. C.
W28WASH B361 BOS 29-3.51P
MORRILL
~fb (Lt£j f C O
YOUR WIRE DECEMBER 24. W
E SEE NO OBJECTION TO OMITTING NET
EARRINGS ON INDUSTRIAL ADVANCES AND COMMITMENTS RE QUARTERLY
ALLOCATION OF GOVERNMENT SECURITIES
YOUNG.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12.358
FfiJSS
k^ard of Governors
DEC 30194!
of tke
Federal Reserve System
i ■- -- __
Leased Wire Service
W48WASH B 2 7 1
N Y J M ^ I OP
Received at Washington, 0. C.
M O R R IL L
.
P<f a
&Mj
A N SW E R IN G YOUR W IR E WE APPROVE S U G G E S T IO N E A R N IN G S ON IN D U S T R I A L
ADVANCES AND C O M M ITM E N TS B E O M IT T E D
R E A L L O C A T IO N OF GOVERNMENT 4 O T M M W K
I N C A L C U L A T IO N FOR
S E C U R IT IE S
ROUNDS.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £..C« V23 5 8
x,.
^
"
..
. ••
-r?t
j - li
^
W28WASH C 4 6
P H IL A 2 4 - 2 5 1 P
r*^ ^ ;
.
:
■^
Federal Reset^e System ,P « C'C ?
Leased W ire .service
l> ' ’
Ronivcd at Washington, D. C.
M O R R IL L
RE TE L DECEMBER 2 4 .
/~v
'o - .j:-, ./ ■„ ,
A
IS
I
N n 5 £ siS S S 1
:) P f ;
:X'
•
1
y \ :
T H I S BANK
-,70
-
m
IN FAVOR OF TH E PRO PO SED CHANGE
THE B A S I S FOR Q UA RTERLY R E A L L O C A T IO N OF GOVERNMENT S E C U R I T I E S .
■,
IN
j
Reproduced from the Unclassified I Declassified Holdings of the National Archives
__________
^ D E C L A S S IF IE D
Authority
‘o r
E G
j L'v
‘v
123 5 8
NBC'D IN FEUES SEOTOH
DEC 3 0 1941
Beard of Governors
or the
Federal Reserve System
Leased Wire Service
Received at Washington, D, C.
m
DEC 2 4
W98WASH G253 CLEV 24-146
MORRILL
RETEL 24TH
A>
AM
I HAVE NO OBJECTION TO ELIMINATION OF EARNINGS 13-B REFERRED TO
T IN YOUR TELEGRAM IN THE CONSIDERATION OF REALLOCATION OF
GOVERNMENT SECURITIES
FLEMING.
PH 2
06
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.C* \2fl58
E L E G - R A M .
a*
IN
'Board of Governors
of the
DEC 3 0 1941
Federal Reserve System
Leased Wire Service
Received at Washington, D, C.
DEC 2 4
W91WASH RH 76
MORRILL
■
RICH 24-140
F I?finnfcs
RETEL. SEE NO OBJECTION TO OMITTING ESTIMATED EARNINGS
ON INDUSTRIAL ADVANCES AND COMMITMENTS IN QUARTERLY
REALLOCATION OF GOVERNMENT SECURITIES
WALDEN.
PM
Reproduced from the Unclassified I Declassified Holdings of the National Archives
__________
“ d e c l a s s if ie d
Authority fc.Q* 12358
mi f
3 L E G B \ "I
I
\\ v
Board of Governors
of the
^
Federal Reserve System
l/vL
Leased Wire Service
Received at Washington, D. C.
O h.
\9
IN FILES SBSmm
DEC 3 0 1941 >
W23WASH FI 22 ?8 ATLA
MORRILL - BOARD
24-317P
r
f c <>'( f t-t.H -•
, t :
AFTER CONSIDERATION OF YOUR WIRE ATLANTA OFFICERS FEEL THAT THE
PROPOSAL TOOMIT IN QUARTERLY REALLOCATION OF GOVERNMENT SECURITIES
THE NET EARINGS ON INDUSTRIAL ADVANCES AND COMMITMENTS ATTRIBUTABLE
TO TREASURY FUNDS SHOULD BE ADOPTED
BRYAN.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ .0- I M 5 8
RB'D IN FH£S SHOT*
T E L E G R A M
.Board of Governors
of t&e
Federal Reserve System
WireService
Receivedat W
ashington, 0.0.
Leased
DEC 3 01941
>5
154
~Dr■-3 m
24
-
PM . 4
_____
'05
W44WASH G405 CGO 24-245
MORRILL BOARD
r
Aim, r
RETEL YOUR WIRE'THE PROCEDURE IN YOUR WIRE AS TO ESTIMATED EARNINGS ON
INDUSTRIAL -ADVANCES AND COMMITMENTS MEETS WITH OUR APPROVAL. WITH
REFERENCE REALLOCATION OF SECURITIES WISH TO ADVISE THAT SALARY
ADJUSTMENTS WILL NOT BE EFFECTIVE UNTIL JANUARY 1 BUT WILL AMOUNT IN
AGGREGATE $115,000
YOUNG.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.O* 12358
HL E . G- B A H
B o a r d o f Governors
of the
Federal Reserve System
Leased Wire Service
Received at Washington, 0, C.
W30WASH G 367 STL 2 4 - 1 ^ 5
MORRILL
:~hr 6. L tj
NO OBJECTION TO CHANGE SUGGESTED IN WIRE TODAY R E LATIVE TO
O M IT T IN G FIGURES IN CONNECTION WITH 13B A C T I V I T I E S FROM EARNINGS
IN A R R IV IN G -A T B A S IS FOR REALLOCATION OF GOVERNMENT S E C U R IT IE S
D A V IS .
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £ ..()« 12358
tT E L E G R A M
jpoard of Governors
of the
Federal Reserve System
Leased W ire Service
Received at Washington, 0, C.
194!
24 PM
RBC'D B f FHJ3S SECHON
DEC 3 01941
W22WASH G } 4 2 MPLS 2 4 - 1 4 7
MORRILL
“th •*- a M ,1 h
RETEL 2 4 REALLOCATION WITH O M IS S IO N OF EARNINGS OF IN D U S TR IA L
ADVANCES AND COMMITMENTS SATISFACTORY TO US
PEYTON.
/f
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12-35%
-tPrf* •* .*•<*'
^■
>
.
,V»
L E G E \ r
rd of Governors
of t he
Federal Reserve System
Leased Wire Service
Received at Washington, D. C,
1 9 « DEC 2 4
PM
RBC'D IN F U S S SECTION
DEC 3 01941 /(
_
S > .X ' •
W25WASH G 355 KC 2 4 - 2 0 1
MORRILL
REPLYING YOUR WfRE WE SEE NO OBJECTION TO SUGGESTED CHANGE
IN REALLOCATION OF GOVERNMENT S E C U R IT IE S BY E L IM IN A T IN G
ESTIMATED EARNINGS ON IN DUSTRIAL ADVANCES AND COMMITMENTS
LEE D Y .
f\
Reproduced from the Unclassified I Declassified Holdings of the National Archives
“
d e c l a s s if ie d
Authority
V2358
v. / M f i H P o l i m a s
rr“ L E Q ’R A ! !
£o?.rd of Governors
o f the
W29WASH G 3 6 4 DLS 2 4 - 2
MORRILL
DEC 3 01941
!
Federal Reserve System
Leased W ire S ervice
[> C :’ A
Received at W ashington, 0= C.
REPLYING TELEGRAM D A TE . E L IM IN A T IO N OF ESTIMATED EARNINGS ON
INDUSTRIAL ADVANCES AND COMMITMENTS IN DETER M IN IN G
QUAARTERLY REALLOCATIONS OF GOVERNMENT S E C U R IT IE S IS
E N TIRELY SATISFACTORY AND WE TH IN K PROPOSED CHANGE SHOULD
BECOME E F F E C T IV E AT CLOSE OF YEAR
G IL B E R T .
s e c t io n i
:;i
>0
,
“
Reproduced from the Unclassified I Declassified Holdings of the National Archives
__ ___
D E C L A S S IF IE D
_
-
Authority E..O* 123 5 8
W43WASH G401 SF 2 4 - 1 2 2 4
BOARD
^Tb- aj£> f
a
REPLYING Y O U R W I R E DEC 2 4 UNDER PRESENT C O N D ITIO N S NO
OBJECTION TO O M IT T IN G EARNINGS ON IN DU S TR IA L ADVANCES AND
COMMITMENTS FROM CONSIDERATION IN MAKING REALLOCATION OF
GOVERNMENT S E C U R IT IE S .
Reproduced from the Unclassified / Declassified Holdings of the National Archives
'
D E C L A S S IF IE D
Authority
£ .6.
TV
F o r m
F . K . 1 4 8 to
TELEGRAM
BOARD OF G O V E R N O R S
O F
T H E
FEDERAL RESERVE SYSTEM
L E A S E D
W IR E
S E R V IC E
WASHINGTON
Young - Boston
Sproul - Mew York
Williams - Philadelphia
FIOKing - Cleveland
Leach MoLarin
Young Barle -
Richmond
- Atlanta
Chicago
St. liouis
Peyton - Minneapolis
Leedy * Kansas City
Gilbert - Dallas
Buy - San Francis oo
Tinder present procedure, total estimated earnings on industrial
advances and oow<aents are taken into aeoount in quarterly
reallocation of Government securities*
Sinee net earnings m
industrial advanees and ooBBdtmaat* attributable to funds
received f r m Treasury are not available to cover Bank expenses
and dividends or for transfer to Section 7 Surplus, it has been
suggested that reallocation would be raore equitable i f such earn-*
ings
to
were omitted*
Please advise whether you see any objection
change*
m m iL L
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Fe d e ral R eserve Bank
of
N e w Yo r k
i
September 29, 1941
Dear Mr. Sinead:
We received your letter of September 27/and have today
sent to the Reserve banks a copy of the computation showing the
adjustments to be made in participations in the System Open
Market Account on October 1, 1941, pursuant to the plan adopted
at the meeting of the Federal Open Market Committee on December
18, 1940.
Enclosed herewith is copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks today.
Yours faithfully,
Robert G. Rouse,
Manager, System Open
Market Account.
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
E n ds.
(5 )
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority JL.Q* 1235B
J40A
SUM
l;- 4 0
FEDERAL RESERVE BANK OF NEW
YORK
September 29# 1941.
Dear Ur* Gilbertt
In accordance with ay telegraa of today, X
enclose herewith computation of t&* readjustments to
be made m October 1 , 1 9 4 1 ,.pi the' fjarti^ipatione
of the federal EeserwlbaSt^^ the^yst«»\0pesi
Uarket portfolios.\
/
\
\
\\Y
'y
lou^H, faithfully,
\
i
Robert (I* Eouse,
Manager, §y»te» 0p©n
Market Account,
Hr* E» R. Gilbert, President,
Federal Reserve Bank of Dallaa,
Pallas, Texas*
%©#
from the Unclassified /Declassified Holdings of the National Archives
" -----------------------------------------------------------------------
D E C L A S S IF IE D
-4
MISC.
, >
Authority £ .0 * 1235B
14OA 13M 3-39
F E D E R A L R E S E R V E B A N K O F N E W YORK
g«ptoftboy * J t X9kl
Pie a m MUl lb* followInf telogrmjs to oottlt Kadorol Hoooroo Monk ao lodlMUd
bolovi
Undor tho plan for
of ^Jawnvsoii ooourltloo odoptod
by tho r#ri#r*l Opoii Market Coradttoo **ooe»ber 18,
o roodjootooot of
participation* la Qov«rwao«t ooourltloo hold in tt»« %«i«i Aooooat !• ooIXod
for otobor 1, 19UU
YHo o m ^ U U o m Stowing adjiotMiito to bo tmdm la
portlolpotlono of tho sovorol Potenl Heeeml Honks io being cent t<> oil keeerve
lnereaee
of
Thooo oeapBtiiloM JUaiieltto on'
deeraeee
wire you oft ictcbcr 1 U m do*
is yotur participation on O e to b o r 1.
Vo
tailed ontrioo to bo oaOo ojo liot <
jssaaaa
1 o m
lo ,3 U ,o o o
1 7 5 ,« »
|
m ilo a o
n
owl m
Loooh
^ o u u rla
C le v e la n d
R lchnoad
A
U
ia U
XOOHR
M
l
fa y to n
Laody
iU lb o r t
’*oy
i> t* L o a io
M tsm o ep o llo
Xanooo C ity
E aU a*
& » fw n e ie o e
ogBBgaat
m
l l #35of ooo
•
15,33?,ooo
l,l»»,0 t )0
3o( 795,ow
Oft
5 ,5 ^ ,o o o
Oft
3 ,3 ^ ,0 0 0
«o
Oft
1 4 ,0 5 3 ,0 0 0
kguss
-
•
I f l
O ft «
A M
X i» , « » A K ^ I I W
9 ,2 7 6 ,0 0 0
-
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £..Q» 12358
1
<>■
September ^7^19Ul*
Mr. R. G. Rouse, Via# President,
Federal Reserve Bank of Hew York,
Hew York, Hew York*
Bear Mr* Rouses
There is enclosed a copy of a statement prepared
in tills Division showing the changes necessary In allocations
of (rorerment seeurities in the System Open Market Account
on October 1, 19^1* 1st aooordanoe with the fbnxnla adopted by
the Federal Open Market Conaittee on Deeemher IB, 19U0.
Current expenses for the year have been estimated by
taking aetual amounts for January through August plus estimates
for the renalnder of the year obtained frost the Federal Reserve
Banks, except that the estimate of original oost of Federal
Reserve currency was made by this Division* Hie have included
an additional #500,000 for New York and $120,000 for St. Louis,
as was done in connection with the previous allocations this
year* Current eaminps for 19Ul exclusive of earnings on
Government seeurities have been estimated by multiplying the
actual amounts thereof for January through August by 1*5*
Very truly yours.
1^"
1. L* Smead, Chief,
Division of Bank Operations *
jgpeloaure
SffiS
|j ^
xuuooitio* or oovsnmnr sseintmxs » stbtbi onir nuns accomi octomr i, 19m
(In thMusda of dollara)
'
8*
7
4
2
L
1
.is
{# ®
"
J E
f &l
%
|
By+m
Borfcan
WWI
T*rk
~ H X & - “BSw5=” •Ha*.—
MBd
land
driphl»
Atlanta
Hhttigjn
wu
T— «.
H|NpXI#
Kancac
cmjr
IfcllM
Ha
FftaeUo*
’’
eerrea*
«xp«a**«» X 9 &
Stralngt
X* Isttaatod w m » oar**
lagf» 19^1 (m m tom im
of «imiB|i w <krt**«)
2. Sotlmtod «tnlfl|« mi
(3oY*t ••ourltlwi *0
Sopt.
31*168
i.iiu
8.1|80
e,W6
2.653
55
815
156
95
2,159 _
8^98
2,361
3,«*»
3.M
2,0i*
1A35
85
7
lf6ljfi _
1.70?
1 .0 K 7
1,812
1.389
t*75«
206
2U
29
166
27
1ST
1^63
? 1*66
i,iioe
883
1.M8
l.Mlv .$*433
MS*
Total
30.937
2 ,2 1 k
8.713
a, 5 1 7
3.099
1,785
1.270
3 .6 7 6
l.!02
912
1.628
1,211
2*5**
C.
Sx«#»« «f *A»I* «vir *B«J#
2,3*5
266
-2U7
136
195
583
165
555
277
135
lau
118
218
B*
Allocation r#<juir#d (on ba*l»
•f 1.8ii657< Mrai> r*to
•a <J*rft«) to pntett itn*
Ixigi Oot*•&•#. •qt»l to "C*
57.150 -53.060
S9^aa
ia.8 9 6
69,397
35.1*50
1 1 9 .8 U3
59.511*
29.005
39.533
25.353
1.6,838
3.097
714
8 70
388
889
895
*58
180
256
703
l,66l*,5<9 U8,196
619.3*9 1W.797
173.997
57.799
178.997
91,599
35,999
5U.399
51.199
U<0,597
<1 * fvMl allocation »f CNrr*t
••#orltio« (*©# ♦ •*•)
a.iau.ioo W 9 . 3 W
566,3*1
13^.996
93.81*
£9 6 ,8(10
1 1 1 ,1 1 3
6 5 ,00 b
93.938
76.558
187^35
9.
PPO*«*lt l l l M i U l M
2.18l»,100 159,006 615,11#
171.8ti8 887.2i*3 119*66$
9«.0<e
267,14*
105.5^6
61.680
186.ll*
85.830
178,588
X.
Chungo In allegation*
-11.350
*1.189
♦30.795
♦5,597
♦3,38b -12,212
-9,878
♦14,853
3-
«■*t K»tU*t*d dlvii«a*s, ISfel
r*
U99.53*
04^9
561
Aiiooation of naftiBdir
of 8ym%m h»l*ingt
9 2 #X8 ^ X 0 0 t000 I m
1^99.531,000) ill t*«l« of
—
♦10,5142 -U8.888
17®.01? 215,893
*175
Ag enft
♦15.333
m
R ep rod uced from the U nclassified / D ecla ssified H oldings o f the N ational A rchives
D ECLASSIFIED
A u th o r ity
t
111 F O J ?
.. .. ... . , 7^9 :
, 4 'JJ
\
■L> *’
#*pt«#&er JL>,
Governor 8*ymc*ak
*•
H .l,
|
Hr. Smead
Expenses ©f the Faderal lesenri !lft»te» h**» been going up
rapidly since the beginning of the presant flsofcl, yaar, July 1, and .■
it m m appears that the expenses for tha jrwn* a* * whole will ba
;
substantial ly t»
.4 & r m ,$ p & .In...ftTof Jtoly &$/-^Eg§iaa#« for both July and Auguat war# aubatantially in '
'K*»iiT"'"if thoae for previous month* and beoause of this we have Obt*dm»
ad from th# Fedoral lesarfO Banka thair oatisaatos of expeasea for tha
last four month# of this yaar for use in connection with tha hOotobOir 1
reallocation of securities In th* System Open Xsjrfcot Aooount.
$ , ?, ,
On tha basis of the as estimates, it appears that tofcsl currant
expenses of the Fsdaral Reeerve Ba&fc# for tha yaar I9I4I will aggragfttt
approximately #3 3 *300.000 or about #U,100,000 in exceas of tho tot*l'
for tha yaar 19^0. Dividend paymenta in.
«til totltl fctaufe #6 ,1400,000.
It is expeotad that totfcl e w m l oaspansas wad dividenda 'Will exceed
astlmatad. aarninga, #141,10 0 ,000, by about #600*000. Up to -tha' pjre*«ist.
tins tha Fedaral Reaerve Banks haw. raoaiTad profits aggregating #50U*000
on sale# .»f United itat** Q & w v m m fc aaourities, and it ii anticipated
that this amount, after adjustment for other credits and debita to. profit
and loss aooount, will ba juat about auffioient to offset the exoess of
expanses and dividends onrer earnings. Beoause of the 'two per cent pay
ments to the f r m m & f on earnings on industrial advances, a few of th#
Banks my possibly hare to charge their Seotion 7 Surplus acoounts with
w all amounts at the end of the yw*i% For the System as a whole, how*
ever, it Is probable that Seotion 7 Surplus will inorease slightly.
Increased expsuaso# during recent months h a w been caused largely
'by increases in the following!
Salaries
T f f lt m m X , p r i m X p & l f ia th* Check Collection,
Ctart’ttMy *ttd Coin SJofarteaoat*, and in the
of Regulation W unit.
Shipping expense on #u*re»«y and coin to and
from member banks.
Cost of printing Fedomt. Reserve not** and shipping
the* to Federal Reserve Banks and Branches.
Postage and e*p*Osmg# in connection with installment
oredit and other activities.
Hne inorease .in demand for currency during recent months has been
such that wt have had to lucre*** our printing order for Federal Reserve
notes to- the smxlmmt extent the tuream of Engraving and Printing can produce
under the present setup. If the demand for ourrenoy continues to inorease,
it nay be n*e#»s*ry_for the Bureau to work Saturdays, as it is understood
it is h*c
e**v
J
E L S ; s e h
R eproduced from the U nclassified / D eclassified H oldings of the N ational A rchives
DECLASSIFIED
r- '
Authority
j* " D ™
|/V
OCT 1 -
1941
;
3 7 J
j
>* w
M p M w
Young - Boston
SpwiI * 9 m Torfc
V i U l M I • IttUWh&jtiS*
ftafrag - ClvveXaod
L«aoh * Rlahmnd
MoLsrla * Atlanta
Young * $hl*ig©
Daris * St* Loui*
P3i«if viff oatlaat#d oxpscsM of your
orlrlaal
Itsei ^
lwrti
oott
of
ttssorvs aurraMy.
23, ISto
P«QrUra - Minneapolis
Lsidy - Kansas 0 4 %
* DalUui
Day - Urn Franoisoo
cxoIuBiTd of
Itam 26 Im i
Pcr» P*R* f6* for Septeob^r «sad *1** fm t&m
tJis y^ar*
Xf is®t43Biiki^S®^l 83^si5flsj ara Hatsj^*
tally abova or MNpt awage
tor
paat tto* naBotha# plaaaa
•tst# Iscitii^&y ivtson fist* ohmyt*
8MRAD
For Fiief-
S. E. H*iuwi
HHI
^ l'.~ T1-^
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
V235B
f
\
APR1 91968
'A
Fe d e ral R eserve Bank
of
0
N e w Yo r k
June 27, 1941
Dear Mr. Smead
We received your letter of June 26/and have today
sent to the Reserve banks a copy of the computation showing the
adjustments to be made in participations in the System Open
Market Account on July 1, 1941, pursuant to the plan adopted
at the meeting of the Federal Open Market Committee on December
18, 19 4 0 .
Enclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also
copy of the telegram which was sent to each of the Federal
Reserve banks today.
Yours faithfully,
Robert G. Rouse,
Manager, System Open
Market Account.
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £..C« 1235%
MISC. H O A
1 5 M 9 31
FEDERAL RESERVE
BANK O F N E W YORK
3m® 27, 19a
Dear Mr. Flemings
Ia accordance wiih iaJ\teIeg*M of today, X
enclose herewith. Qompvt&lim of tfte readjkstaenta to be
\ /
aade on July 1, 194^* of tfais»^ticiprtio*ie of th® Federal
Reserve banks jfik
%ateis Open al&rket portfolio*
\
.f a i t h f u l l y ,
.Robert C*. Rous* |
Manager, %ete» Ojhmi
Market Account.
Mr* I* <T* Fleming, Presidentf
Federal lieserve Bank o f Cleveland,
Cleveland, Ohio*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* \2358
MISC. H O A
15M
9 38
FEDERAL RESERVE
BANK OF N E W y y y j y ,
ivrMum
sw * n ,
¥%*&am ***£ tfe» fallals# Utlm&rsM %&
WwSiflP H w
MLtrvt
fitow^iswsiil.' s s ih iir S ^ S s s
Immfcm l i t l% 0 t *
rm lem l Ojwwsi 3§&rfc#t
19 a
teals:
f'&sr y*»»l 1
in Oofwu-ttBMWt • m r t t & M i fe*M In tfee % » i« *
fey
o f fK rtt«J4 *% lM *
ia
li# «*<*» in
-Car
1 # 194&*
#f t**» s«'WmX
f«d « n u l 8 » # « m WbJca in M a g went to *1 1 Bmmmm ternks
B u t**
iWBPMMMI
iiwSica.t^ *a
$&&U w ir *
M iic ’i -fc ir
* >&,1
WW3.
trtMMdi
fic U r iu
T<w »g
r*»y t '
I * * i 4 gr
O U lw rt
My
<MT v -
1
^
....
In. y$&f* |M>rlAi&i|MilloiR ok
X*
c« J«3k? X H i# t it t t t llt f i ta la r i* * te fe# $ *4 * m %h»% ^ .t« *
R U JU b d b X ^ JU
E4 d6WQWy|:
Chic« t* ta rt*
H liw xw i. Him I #
!& ***& # C i t y
J ftH ft*
S i s S^Psysciissfli
i j m j m
2^1109
*$03,000
4*
4.327.000
2.217.000
10,057,000
B V W ObEBVIIOMS
DIAISIOIA ot
iwczai
Hrn nArn
m&m
CONFIDENTIAL
REALLOCATION OF GOVERNMENT SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON JULY 1, I 9I4I
System
A. Expenses
Estimated current expenses, 191+1
8,176
8,l|05
2 ,3 1 1
561
1*0,032
2,872
31,627
B. Estinated dividends, 191+1
c . Estimated expenses and dividends, 19Ul
D. Earnings
(1) Estimted current earnings, 191+1
(exclusive of earnings on Gov'ts)
Boston
(In thousands of dollars)
Phila Cleve RichNew
York delphia land
mond
St,
Atlanta Chicag) Louis
.... i . .
2,505
3,181
1,901
1,361+
3,923
3,093
7114
867
326
288
11,269
3,219
U.OliB
2,227
Minn Kansas
eapolis City
Dallas
San
Francisco
1,618
986
1,793
1.311+
2,555
890
257
180
271
256
702
1,652
1+.813
1,875
1,166
2,061+
1.570
3,257
1+
215
23
29
159
26
109
1,11+5
1+9
212
ll+5
90
81+
(2) Estimated earnings on Gov*t.
securities to June 30
19, 61*1*
1,1+22
5,61+8
1.565
1,951
1,086
837
2,229
919
597
970
787
1.633
(3) Total
20,789
1,1+71
5,860
1,710
1,170
81*1
2.W+
9142
626
1,12 9
813
1. 71+2
19.21*3
1,1401
5,1409
1,509
1.057
811
2,369
933
51+0
935
757
1,515
E. Excess of "C" over "D-3"
2, 01*1
2,007
F. Allocation required (on basis of
' 8l|657# earnings rate on Gov*ts)
j produce earnings July-December
equal to "En
G« Average daily participations, per
cent, in System account since
June 30, 1936
H. Allocation of remainder of System
holdings ($2,181+, 100,000 less
$2,067,198,000) on basis of ”Gn
2,067,198 15 0 ,501+ 581,067 162,106
100.0 7.2732
116,902
8,502
215, 601* 113,5U9
29.15l|l 8.3285
9.9561
5.2298
3U,082
11,639
6,111+
9,736
87,123251+,1+92 100,228
58,010 100,1+1+3 81,322 162.750
1+.2231 11.0798 1+.5237 3.0882
i+,937 12,953
5,288
3,610
1+.8766
3.8562
8 .1+107
5,701
U,508
9,832
I. Total allocation of Government
securities ("Ftt plus "H")
2,181+, 100 159,006 6 15 ,li£ 171,8142 227 .21*3 119,663
92,060 267^4+5 105,516 61,620 106,ll4l+ 85,830 172,582
J. Present allocations
K. Change in allocations
2,1814-,100 157,817 623,1+75 173,137 218,51*1 121,1+86
—
-1,823
•♦■1,189 -8,326 -1,295 ♦
9i+,88l+ 250,6142 101^5
-2,821+ ♦16 ,8Q3 ^171
8,702
65,91+7 106,11+0
-i+,327
88,01+7 182,639
♦1+ -2,217 -10,057
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
June 26, 191*1v
Mr. Smead
Earnings of the Federal
Mr, Van Fossen
Reserve Banks.
In the July 1, 19i&# reallocation of Government securities
in the System Open Market Account, the Federal Reserve Bank of
Chicago will receive the largest increase in allocation, approximately
117,000,000, and th® Federal Reserve Bank of San Francisco will have
the largest decrease, approximately $10 , 000, 000.
Estimated current expenses for 19^1 a# used for the July 1
reallocation are lower for the Federal Reserve Banks of San Fr&noiseo,
Atlanta, and Minneapolis than the estivate used for the April 1 re
allocation. These three banks and the New York, Philadelphia, Rich
mond, and Dallas Banks, which had relatively small increases in
estimated current expenses, will all have smller participations than
they received on the April 1 reallocation.
The large increase in Chicago’ s participation is due to a
very substantial increase in estimated expenses. In this connection
you will recall that the Chicago Bank is the only one that will
probably not have sufficient earnings on June JO to cover dividends
for the first half of the year. There has been an increase in expenses
of the Federal Reserve Bank of Chicago each month during the year,
the Increase for May being exceptionally large. The principal items
showing an increase during that month were printing, stationery, end
supplies in which there was an increase of #22,000 to approximately
150 , 000, and in furniture and equipnent in which there was an increase
of about 117*000 to approximately $19,000. It is assuned that the
lnorease In furniture and equipment was due to the purchase of currency
counting Machines, which, it is understood, the Chicago Bank has pur
chased in order to be able to furnish the Chicago banks certain eervioes
that have not heretofore been furnished* Following is a tabulation
showing estimated expenses for 19i*l for the Chicago and San Frsnelseo
Banks, and for all Federal Eeserve Banks combined, as estimated for the
January 1, April 1, and July 1 allocations of the System Account, also
actual expenses in 19 i|0j
Estimated Expenses for 191*1
Chloago
San Francisco
All
F.R.Banks
For January 1 allocation
For April I allocation
For July 1 allocation
13,508,000
3,685,000
3*923*000
*2,I|97.000
2,586,000
2,555.000
#30,017,000
30,931*000
31*627,000
Actual expenses In 19*40
3*1+71,000
2 ,1493,000
29,165,000
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
V2358
'JvmA
wujLUr ir^y0 IQl.l
Hr* R. 0* Rous*, Vic# President,
Federal Reserve Bask of lew York,
V«v York, Bow York*
Dear Mr. tense*
There ia enclosed a copy of tho statenent
prepared in this Division showing the changes necessary
In allocations of Government securities in the System
Open Market Acoount on July 1, 19^*1* in accordance with
tho foraula adopted hy the Federal Open Miarket Committee
on Deoenber 1 8 , 19140.
Current expenses and current earnings* exclusive
of earnings on Governments, have boon estimated by Multiply
ing the aottal anousta thereof frooi January through Idaty
1 % 1 hy 2JU. To the estimates of ourreot expenses obtained
on this basis, wo have added # 3 0 0 , 0 0 0 for Sew York and
$ 1 2 0 , 0 0 0 for St* Louis as was done in connection with the
January 1 and April 1 reallooations.
Very truly yours,
S. L* Snead, Chief,
Division of 9*ak Operations.
Snelosure
REfcLLOCATIOI OF QOmSMSVT SECURITIES IM SYSTEM OPEI MARKET ACCOUST OH JULY 1, 19l*l
(In thousands of dollars)
! x * * ! PhUa-i Clc.ve- lEloh-*
8ysts» Bo,ta* 1 Tork tdelphlal land Imond
_
A* £acpe*ues
(1) Esti*ated current sxpniMi, I9I4I
B ''stlasted dividends, 191*1
31,62?
2,311
8,lj05^
19
Estimated expenses and dividends, l*l
1*0,032 A
P. «*raings
(1 ) Estimated current earnings, 19l*l
(exclusive of earnings on Govfts)
(2 ) Estimated earnings on Gov’t,
securities to June 30
1.H 6 '
3
( ) Total
I. Excess of "C* over wD-3*
F. Allooatlon required (on basis of
1.8ii657^ oarnings rate on a©v*ta)
to produce earnings July-Deceniber
equal to "E*
0.
erage dally partiolpations, per
cent, in System aooount since
June 30, 1936
H. Allooatlon of remainder of System
holdings (|2,181*,100,000 less
12,067,198,000) on basis of "a*
1. Total allooatlon of Government
securities ("F" plus "H")
J. Present allocations
I, Change In allocations
.
561
2,872
3,093
2,505
Tlk
11,269y 3,219
3,181
1,901
367
326
M l# *
1.361* 3,923
288
1145
90
81*
1*
1 1*22
5,6148
1,565
1.951
1,086
837
1,101
5.960'
1,1|01
5,l¥>9'
✓ ,
20,789
^
2,067,198 150,501+ 581,067 162,106 2 15 ,601* 113,5^
1 1 6 ,902 v 8,502
31*,082
9,736
11,639
5.2298
6,111*
966
1,793
1.311*
2,555
257
180
271
256
702
1 ,1 6 6 '
2, 061* -
890
215
2,229
23
29
159
919
597
970
9L2 '
935
87,123 Z5k,l&2 100,228
J
5.288
1,570 - 3.857
26
109
787
1.633
626 J 1,129 '
813
1.7142 '
5h$J
757 ' 1,515 '
9i5 -
58.010 100,143 8 1,322 162,750
U .2231 11.0798 U .5237 3.0882
1*,937 12,953
San
Francisco
1,618
1,710 2, 01*1 ' 1,170 v 8I4I v 2,l4ljll '
811 * 2,369 J
1,5097 2, 007' 1.057 '
100.0 7.2732 29 .1514! 8.3285 9.9561
Minn Kansas
eapolis JEJSL- Dallas
2,227 4 1,652 J 4.813 ' 1.875
212
18
19,61^
19,2143"
8,176
St,
Atlanta Chicagp Louis
3,6 10
1*3766
3*8562
8.1*107
5,701
1*,508
9,832
2 ,1814.,100 159.006 6 15 .11 *9 1 7 1 ,81^2 227 ,21*3 119 .6 6 3 ' 92 ,060J267,1*1*5 115,516 61,680 106 ,tlil*' 85,830'172,582 J
2,18l*,100157.817 623,1*75 173.137 218.51*1 121,1)86
♦1,189
-8,326
-1,295
*8,702
-1,623
9l*.88l* 250,61*2 »ljl*5
65,91*7 106,11fi 68,01*7 182,639
-2,821* +16,003 *1071
-1*,327
♦1* -2,217 -10,057
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
/
r
IXPUiAf XO* O f COMPUTATION OF ITEMS INDICATED
(Reallooation of Government Securities July l0
A-l and D-l
19I4I)
2 * h tints aotual figure* January to May, 19l*l,
with A-l adjusted by adding #500,000 to Sow
York and #120,000 to St, Louis, as was dons for
th* January 1 and April 1 reallocations,
B. Aoorusd dividend* May 31 plus 3*5 P*r osnt of paid-in
oapital Juno 18.
D-2 and G
As telephoned fro* New York by Mr. Behrens June 23.
F« Earnings rats as of Juno 30 tslsphoned by Mr. Behrens
June 23* Aetna! rats used .9308736 por osnt (181*. X 365^h
of annual rats).
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
lo tm V . B. 131
B O A R D
D F
G O V E R N □ RS
FEDERAL R ESERVE SYSTEM
Office Correspondence
Xo_____ Mr> Sinead
Vrntn
Mr. Van Fossen
APR1 91968
.
Df teJune 15, 19iil.
Subject: Losses and participations in
System account.
Beginning with the January 1, 19Ul, reallocation of the
System Open Market account, profits and losses on sales of Government
securities have been disregarded in the reallocation as approved by
the Open Market Committee. The procedure is to allocate to each
Federal Reserve Bank an amount of securities sufficient to cover its
estimated expenses not covered by earnings, if any, already accrued
on Government securities and estimated earnings from other sources;
next to allocate participations sufficient to cover dividend require
ments, and finally to allocate the remaining securities in proportion
to average daily participations in the System account since June JO,
1936. Where a sufficient volume of securities are held to necessitate
a third step, the first and second steps can and
ombined
into a single step.
^
If it were desired to have the quarterly allocations of
the System account cover losses not provided for by insurance or
insurance reserves, it would be possible to do this in a number of
ways. For example, such losses could be included with expenses in
step one, or they could be provided for separately in a new step
following the provision for expenses b|^preceding the provision for
dividend requirements. The suggestion has been made that the entire
profit and loss account of each Federal Reserve Bank be taken into
consideration in making the quarterly reallocations. This could be
done very readily, of course, either by combining the profit and
loss account with estimated expenses or in a separate step. It
would seem that if the entire profit and loss account is to be taken
into consideration, it would be appropriate to modify the procedure
as regards any securities remaining after expenses, profit and loss,
and dividends have all been covered to allocate such remaining
securities on a basis designed to equalize the capital position
of the various Federal Reserve Banks. As you know, a number of
suggestions have been made as to how this might be accomplished. I
do not believe that it is worth while at this time to consider the
methods that would be most appropriate for the purpose.
\
j
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
d e c l a s s if ie d
Authority fc.Q* 1235%
APR 2 51968
Extract from Appropriation Aot of Kay
19-1+1# making
approprie fcions for the Treasury Department for the fiscal year
ending June JO, 1942t
"Expenses of loans*
The indefinite appropriation *Ex-
penses of loans, Act of September
2h$
1917»
amended and extended1
(31 U. S. C. 7<^» 76l), shall not be used during the fiscal year
1
to supplement tho appropriation herein node for the current
work of the Bureau of the Public Debt, and the amount obligated
under such indefinite appropriation during such fiscal year shall
not exceed
292,000: Provided, That the proviso in the Act of
June 16, 1921 (31
S* C. j6l), limiting the availability of
this appropriation for expenses of operations on account of any
public debt issue to the close of the fiscal year next following
the fiscal year in which such, issue was made, shall not apply to
savings bond transactions handled by the Federal Reserve banks
for account of the Secretary of the Treasury,”
A
/*• / ’3 /1^1/
“ I ' j t f
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 1235%
« itc e fe s &•'
APRJl 9 f9B«
F e d e ra l R eserve Bank
of
N e w Yo r k
March 28, 1941.
Dear Mr, Van Fossen:
We received your letter of March 27\ and have today
sent to the Reserve banks a copy of the computation showing the
adjustments to be made in participations in the System Open
Market Account on April 1, 194-1, pursuant to the plan adopted
at the meeting of the Federal Open Market Committee on December
IB, 194-0.
Enclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also
copy of the telegram which was sent to each of the Federal
Reserve banks today.
Yours faithfully,
Manager, System Open
Market Account.
Mr. John R. Van Fossen, Assistant Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
Reproduced from the Unclassified / Declassified Holdings of the National Archives
__
DECLASSIFIED
Authority
Siallar letter sent to
*
*
*
John S* Sinclair, Pres*, FEB of Philadelphia
II* J* Fleming,
*
* « Cleveland
Hugh Leach,
*
* » Richmond
William S.^.ltlcL^rln,Jr., First Vice President,FRB of Atlanta
* Clifford S. Young, »
*
» Chicago
* F*0uy Hitt, First »ice ^resident, FEB of St. Louis
* John N. Peyton,
Pres*, FRB of Minneapolis
11 Harold G* Leedy, First Vice ^resident, FEB of Kansas City
» E« R. Gilbert, Pres#, FRB of Dalla*
* W* A* Isay, Pres*, FEB of San Francisco
Hareh 2®, l$4l
Dear ir* Xotmgt
In accordance with agr telegraa of today, I
enclose herewith coapatation of the readjujstiaimis to he
aade on April X, 1941, of the participation* of the
Federal Beserre hanks in the %stssa Open Harket portfolio*
lours faithfully,
Robert
ia»af«r,
Bouae,
en Open
Market Account*
Honorable Soy A# Toung, President,
Federal Eoserve Bank of Boetea,
Boston, Ifiass#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Bareh 28, 19*0.
PIm
m
mo£ the f oU oid sfi talegraja to e*ch J M w n i Km
w m
pisua for raJuJ.©c&ui<wi or {tovttnwttKre
mmwr
tfaa F tddral Oprn 'Market C oeaitiae
tmm&wr M $
b*nic as isdlctitad b «lo w i
adopted igr
* r«»djii*taw n t # f p a r it s t -
pfttioas ia Gov»rnaeat t#eurltl«» h « M In th# %»t#s Accomt Is called far
April lf 1$WU
*&• computations ahowia^ atdjn#t»eat» t© b® aade la partieipatiami
»£ tli# »*Feral
Imnot* banka i# feeing # m % to *11 l « » # m feaaks today.
$h#»* caaputatioiis todieate m
patioii on ipxil 1.
*f .
in yeaar particl<Ss#r<i*®#
Iii» eh&lX wire jw* m April I th# &etail©<S «ntri»s t© toe aad#
on that d&t*.
Isergasa
Xoufig ioatasi
Sinclair Pfcilatl*l|ihia
tjmuK
t _ai_Jfc.-LM.jlhi.
MvaCrfi
QiAwmjUHBm
iKSS
.Mr
kthkM
rvxc
onOMtiJkM
tik.jJl
tt
Mclarin Atlanta
Xcmag
Chicago
Bitt'
6^4,000
1,705,000
3,*5S,0»
1,510,000
3,775,«»
5,798,000
at* &mi§
905*006
Peyton
IdMwdiy
Ollfcart
Bern Fironetm
Deertaf#
1,212,000
2,163,000
3.555,000
CONFIDENTIAL
REALLOCATION OF GOVERNMENT SECURITIES IN SYSTEM OPEN EARKET ACCOUNT ON APRIL 1, 19^1
(In thousands of dollars)
8ystem Boston
New
York
-"San —
“TOla-l Cleve- ■RleV- ' Atlanta Chicego "ST."" Minn- Kansas
Louie eapolis _C_ity__ !1 Dallas
mond
delphia] land
____ Francisco
A* Expenses
(1) Estimated current expenses* 191+1
30*931
2*2148
8*019
2 ,14.53
3,060
1*877
1*373
3*685
l.5l«
1,004
1*767
1*310
2*586
8*380
561
3*091
713
863
325
287
880
255
179
270
256
700
39*311
2*809
11*110
3,166
3.923
2*202
1*660
4,565
1.804
1,183
2*037
1*566
3*286
(l) Estimated current earnings, 191+1
(exclusive of earnings on Gov’ts)
1,211
3k
205
145
124
19
211
26
30
170
32
111
(2) Estimated earnings on Gov’t
securities to March 31
9*676
702
2*802
775
954
531
1+01+
1,085
457
296
I486
385
799
10 *e8?
756
3*007
920
1,078
615
1423
1,296
U83
326
656
1*17
910
28,1|2U
2*053
8*103
2,2li6
2,81+5
1*587
1*237
3,269
1,321
857
1,381
1*11+9
2*376
B. estimated dividends, 19 J4I
C. Estimated expenses and dividends *19l+l
D« Earnings
(3)
Total
£♦ Excess of
"C» over "D -3"
81+
F. Allocation required (on basis of
1«83183^ •arnings rate on Gov’ts)
co produce earnings April-December
equal to nE"
2,059*1*86 1148,751 587*110 162,736 206,137 llU*988 89*628 236*858 95*7114- 62,095 10CV062 83*252 172,155
6* Average daily participations* per
oent# in System aocount since
June 30* 1936
100*0
7.275U 29*1821
8.31)69
9.9538
10,1401
12,1)01*
5*311+5 U.2175 11.0616 U.5183 3.0914 4.e774 3 .8I482 8.U129
H. Allocation of remainder of System
holdings ($2*1814-*ICO,000 less
$2 #059#i4fl6 *000) on basis of "G*
12i|,6li+
9*066
36*365
6*1+98
5*256 13,784 5,631 3,852
6,078
U*795 1 0 , 1*84
I* Total allocation of Government
securities (WFW plus nHn)
J. Present allocations
K. Change in allocations
2*18lj.,100 157*817 623*U75 173,137 218.5U1 121*1+86
9l+,88i+ 250 *6ii2 101*3^5 65,947 106,i4o 88*047 182*o39
2*18l|.,100 158*1481 632,503 i7U,eii2 215,303 119*976 91*109 2l4U,910 103,138 66,852 109,695
—
-66b
-9*028 -1,705
+3,238
+1*510
+3*775
+5,732 -1,793
80*835 180*456
-905 -3*555 +1*212
+2*183
CONFIDENTIAL
REALLOCATION OF GOVERNMENT SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON APRIL 1, 1941
Reproduced from the Unclassified I Declassified Holdings of the National Archives
System Boston
(In thousands of dollars)
..-San ’'■
New “T E H a - Cleve-1 Rich
Minn Kansas
Atlanta Chicago
!
Dallas
Francisco
delphia land
mond
Louis eapolis City J_
York
•
■p
CO
(
A* Expenses
30,931
2,21+8
8,019
2,14-53
3,060
1,877
1,373
3*685
1,5149
1,004
1,767
1,3 10
2,586
8,380
561
3*091
713
863
325
287
880
255
179
270
256
700
39*311
2,809
11,110
3*166
3*923
2,202
1,660
4,565
1,804
1*183
2,037
1*566
3,286
1*211
5U
205
145
124
84
19
211
26
30
170
32
111
9*676
702
2,802
775
954
531
4o4
1*085
457
296
486
385
799
Total
10,887
756
3*007
920
1*078
615
423
1*296
483
326
656
417
910
X* Exoess of "C* over ”D -3"
28,1421+
2,053
8,103
2,21*6
2,845
1*587
1,237
3*269
1,3 2 1
857
1,381
1*149
2,376
(1) Estimated current expenses, 1941
8* estimated dividends, 1941
C* Estimated expenses and dividends,1941
D* Earnings
(l) Estimated current earnings, 194l
(2) Estimated earnings on Gov’t
securities to March 31
(3)
P. Allocation required (on basis of
1*83183* earnings rate on Gov»ts)
to produce earnings April-December
equal to "E"
059*1+86 11*8,751 587*110 162,736 206,137 114*988
89,628 236,858 95*714 62,095 10U 062
G* Average dally partioipations, per
oent, in System aocount since
June 30* 1936
100.0
4.2175 11.0616 4*5183 3.0914 4.8774 3*81+82
7.275U 29.1821
8.3469
9*9538
5.33LU5
83*252 172,155
8.4129
>
S
c
or
t g
«-r\ O
! r
o
*
■
—
H* Allocation of remainder of System
holdings (#2 , 184 , 100,000 less
$2,059*1*86,000) on basis of "G"
121**611+
I* Total allocation of Government
securities ("P" plus *HW)
184*100 157*817 623*1+75 173*137 218,541 121,486
94*884 250,61*2 101,345 65*947 106,i4o
J* Present allocations
18l+*100 158,1+81 632,503 174,8142 215*303 119*976
9 1,10 9 21*4,910 103,138 66,852 109,695 86,835 180,456
K. Change in allooations
>
in
C/5
>«■*
—
9*066
36*365
•661+ -9*028
10,401
-1*705
12,1+04
♦3*238
6,498
+1,5 10
5*256
+3*775
13,784
5*631
+5,732 -1*793
3*852
6,078
-905 -3*555
m
4*795
10,1+84
88,047 182,o39
+1,212
+2,183
o
R eproduced from the U nclassified
I D ecla ssified H oldings of the N ational A rchives
DECLASSiFIED
A u th o rity £.6.
WVSi
:KSJ’B W W
i m 2 7 m
Hu-eh 27, 19U1.
Mr. t, S* Ro\i*e, Ti&#- President,
Federal Re*erve Bank of lew Tork ,
Bmr f o r k , Xm Tork*
D*#r Mr. Sosmi
Th«r« !• enoloaed * eopy of th* *tate»*itt prepared
in thi* Mvlftloa showing th* ohaag** neoeaeary In allocation*
of OonriDM«t **euritle* In th* Sy*te» Open Market lo count
an April 1, 19U1, la. aeoordenoe with th* fimtli adopted by
th* Federal Open Market Coaalttee an Beeodber 18, 19UO.
C m rrm t eacpenae* and current earning*, *xb1 u*1 t*
'Of Amins* 00 Ckrrernwant*, ham been eatinated by wnltlplylng
the aetual amount* thereof fro» October 19i|D thro«*gh February
19^1 by 2*1*. To th* «*£laa&«*. of oarrewfc expense* obtained
on tfel* b u l l , we have added $^00,000 .for low York wad
$120,000 .for St* Loui* a* was done In eoneetion with the
January 1 reallocation.
Very truly yo«r**
J. R. Van Pio***»# A**t. Chief,
Dlri*lon of Bank Operation*.
Enolo*or*
R eproduced from the U nclassified
I D eclassified H oldings of the N ational A rchives
D ECLASSIFIED
A u th o r ity ^ . 0 -
M R
2 7 18
m
m n m m m
#f
A *4 §»4 B * t
t Jk fc l* # *
m
or m m
doTTxamat
mwmrn
Airil.
%,
19i4l)
I 9 h& t #
J fip r * *
t $ i & * wiOk A *1
^
$500,000 $# I**' Tork *«i |lt0t.l500 %« tfe*
31
%m&M* ** *** tMfift# £e**' 'fefc# i i w y
§.
A w e m b g&vite** Fttes*t*f M
’t f m 5 I#**
##^1*1*1 HnftJi 19*
SM 8 «&& t
F*
tm m . I * # Tm?k lay H r * i# iiF * * s * U n ro ll $ 5 *
At
t e f i l a i * fm t# * • # f ***■*& 3 &
A#% m l
«§ # £
l * ; p o t f '$ « r # in t
fear fc*> W &vm m W tm h $ # *
{$ 7 5 I
-p^
'D IN FILES SECTION1
&
RBAXJUQCAT 10$ OF G m m w m t SECTXRXTI&S If? STSTS? OPEN MAHfEt ACCOUKT OH
& £Ll.
-------------------- r-----
Sy*t«ss jBoston
a >
hnt-
A«
) ^ « ‘treated ©arrant o%p«na««,l9^1
c« Ealimatfd expenses and dividends,I9I1I
0 . iSarnings
(1 ) fcstimated current oarning*, 19^1
(exclusive of earnings on Gorft«)
(2) Estimated earnings on Gor*t
securities to Kareh 3 1
(3)
Total
E. Exosis of "C" a r a r
*8 -3"
rm
"Wiim-*1' Kanaa*
At lanta fChifife o
ORPOIIg
Louie
1
Wolf
York
delphtall&sd
mond
1,310
2,566
%»k53
3 *0 6 0
1 , 87?
1*373
3*685
1 , 5*49
U O O li
1 , 76 ?
561
3 ,0 9 1
713
863
325
287
SSO
8 55
179
270
39*3 1 !^ 2,809
11,110
3.166
3.923
2,808
1,660
4.565
i,eo4
1.183
2.037
1,566
3,286
805
11*5
181*
84
19
811
86
30
170
32
111
4o4
1,085
457
896
I486
385
799
423
1,296
483
386
656
417
910
1.237
3.869
1.321
857
1,381
1,149
2.376
1,211
$1*
9,676 '
706
2 ,8£»
775
954
10,887 A
756
3.007
920
1.078
531
615
8,053
8,103
8,845
1,587
28,1*21*
8,21*6
f . Allooatlon required (on t»»la af
1.83183^ «*rn'ag* rat* on !?ov*t«)
to produo® earning* April-Daoaaibar
,
•qual to "E"
8,059.1*86 11*8,751 567.110 168,736 806,137 114,988 09.688 236,858 95.714 62.095 1C&062
0,
S»s
Dallaa Franoigoo
8 ,0 1 9
J
8,380'
dividends, 19Ul
(In thou«a»d» of dollar.)
2>2k8
50,931
Ia
APRIL X, 19*4
256
700
83.252 172.155
100*0 '
7.2754 29*1821
8.31*69
9*9538
5*2145
4.8175 11.0616 4.5183 3.0914 4.8774 3.8488
8.4189
5.256 13.784 5.631 3.852 6,078
I# Total allocation of Govoms«jt
securities (*F* plus **!")
2,184*100 157,81? 683.1475 173.137 218,51+1 121,1*86
94,884 250,6148 10.345 65,91*7 1C6,140
88,01*7 182,o39
J* Present allocations
2.184,100' 158,1481 632.503 174,842 215,303 119.976
91.109 2W+.910 10438 66,652 109.695
86.835 100,456
*3.775
+1,212
m
b
p
>
• uo
gJjg)tm
J
6,498
IT* Change In allocations
J1
C
r-f
# s
H. A llocation of rm &lnder o f SyatMi
holding* ($8.161*.100,000 le a *
*2.059.1*86,000) on buais o f *0*
>
t
or
rerape daily partie ipatIon *, per
cent, In System aooount alnoa
June 30, 1936
Reproduced from the Unclassified I Declassified Holdings of the National Archives
&
124.614'
— 7
9.066
*664
36.365 10,1*01 12,404
**9,028
-1.705
+3.236
+
1,510
+5.732 -1.793
-905 -3.555
4.795 io,4s4
+2,183
06 a
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority C..Q* 12358
C D ti
%
Fe d e ra l R eserve Bank
of
N e w Yo r k
December 28, 1940.
Dear Mr. Smead:
we received your letter of December, 26/and have
i'Vt f
today sent to the ileserve banks a copy q£,-%hs computation
showing the adjustments to be made in participations in the
System Open Market Account on January 2, 194-1? as of January 1,
pursuant to the plan adopted at the meeting of the Federal
Open Market Committee on December 18, 194-0.
Faiclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also
copy of the telegram which was sent to each of the Federal
Reserve banks today,
lours faithfully,
Manager, System Open
Market Account.
Mr, iii. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
imcls, (5)
A
A
Reproduced from the Unclassified I Declassified Holdings of the National Archives
”
D E C L A S S IF IE D
Authority £..()■ 12358
MISC. l i O A
ISM
9 38
FEDERAL RESERVE
BANK O F N E W YORK
Similar letter written to the President of each Federal Reserve bank except New York
December 28# 1940
Bear Mr* Flemingi
/
In. accordance wi|,h my
today, £
•nolose herewith c o ^ p u ta tio h ^ ^ th ® readjustments to to
mad#
m
m
1, o f
tli® p a r t i c l e
t lo n i o f th# fe d e ra l fU»e®*3£© tayrfk* in th® System Gpan
Market portfolio,
"Yours faithfully,
Robert Gf Eouee,
Manager, %stem Open
Market Account.
Mr# M. J. Fleming, Prenideat*
federal Keaerve Bank of Cleveland*
Cleveland, Ohio*
Encl.
R ep rod uced from the U nclassified / D eclassified H oldings of the N ational A rchives
__
—
MISC.140A
I BM
^ D E C L A S S IF IE D
Authority
1235 %
9-38
FEDERAL RESERVE
BANK OF NEW
smmmzM jaa?t*
YO RK
- mb jm
Bmmimr ?£, i f | 0
¥ % m m *«n d
m l u d l c a t « d fc*tw r#
t mlrngprnm t# $b«
of
FediamX a®o^rv« benk
At tfe*
ef the Federal Opeo Sftriset fkms&i&Mm m December IS,
th« plec of *& *o «ti0 fli o f (kmrtmvnt «©curttie« M M in tit# $y«ta& '&pm italcet
Account imuv refleed effective &»&£?? X*
The
% M $st*<t at that
.it ae £«&&*«** ' * (1 }
aufflcient *ec*SJFitie# to «*«& bank to co^rer e**v
peaee* not oenrered by accrued •*mln£* on Government #ec**ritt«# anc estimted
froa
eonrce## f l j *lX»«te & #*afftd e **t aamint of
■
*e # *ifliie # to- eech benk to « w n ‘ iiirfJertd re^iireasiOEto, *»& (3 ) a llo c a te any
nwiaiMf eeourltle* aaong the talk* m the be«i# ■$£ m m m $ n 8*X3tf i»»3*tifii.p*itie*»
in the %*iem Attttmrai sine* June $&# 1936. Whan m t i m U d m m i M g w eftmX m
exceed eetiaated «k£*khmmi «nd
*t»£Ni 1 *»& &# indicated m b m m t w t H
mi., .-aI -Ufa# n,- .n .ft H . , . .
f .' ■.:.*> t fV T ii ' lr A V
—1 H
jfe,j . * • M
d* combined
totu 8-| ia
rljxying til# aJuLdC&tiOE.
USm egmrbm 3ty
accordance e ith th i* ?&*% *awi tlte
aad* la |mrfcicif»ti«*sii cf the *ew
■<iiX Eeeerve btaalg®;' today. Theee
in y e w f»rfeiciisattoii «n 3i
■laaaa&ry Xf iS&X i# in,
adjustments to be
~b«fi3e* i« btl&g Bent to
ItatiorB i n d i c t an Ir.crwtB*
decrease af ...........
I*!#* ywa on January
H m 4#t*i3Lid
entries to b* mid* m ©f «fi
Staapyefee
lOUXig
B o sto B
rxMLing
lii^tl:^
l^ n w r
Atlanta
SchAlXer
Ifertin
Peyton
H^alltgn
Gilbert
Chic^o
A,076,000
7.325.000
4^429,000
St* Loui*
^ n p aapnl f.fr
Kane&a City
'MMm
'$m
4.605.000
2*652*000
ly99&*000
CONFIDENTIAL
RKALLOCATiOL
1. Estimated dividends, 19 ^ 1
c . Estimated expenses and dividends,19’ •1
OPSr.
ilAPKET ACCOl'JT'01'
JA l^AFY
1, 19l*l
Dallas
■Tin"""
Franci sco
1,769
l.sat
2,197
179
2&f
250
(*7 l
1,781-
1,16 1
^ ,0 3 6
1 .5H 1
3,19li
2 10
31
28
173
39
137
M56
1,753
1,133
1 ,8 6 3
l.lj-75
3.057
6 3 ,5 5 1 10’ J °8
82,7*)'
171,L71
5,197
)-,100
8,v8 5
_ .
Boston
New j Phila-Jcieve--j P.ich- Atlanta
v ,
1 York |aelphiaj land | mond
30,017
2,188
7,895
2,396
2,901
1,800
1,281;
3,508
1,533
982
8,297
560
3 ,0 6 6
713
852
322
282
85$
251
2 ,7 )v8 1 0 ,9 6 1
3,109
3,753
2 ,12 2
1,5o 6
ll,366
2 U0
151
ldi
82
22
2,667 1 0 , 7 2 1
2,958
3,&S
1,0) Q
1 9$'h
Sys tem
A. Expenses
(l) Estimated current expenses,lc1-1
OF GOVE?3;liB:iT SECURITIES h. S*'STLii:
38,31^
ChicagoJ St. | 12.nn- ! Kansas
| Louis jeapolis] City
D . Estiinated eam.’ngs, I9I1 I (exclusive
of earnings on Gov’ts)
E. Excess of "C" over "D*
F. Allocation required Ton basis of
1»7B281/* earning rate on Gov1 ts)
to produce earnings equal to "E"
G. Allocation of remainder of System
holdings ($2,IB)', 100,0(0 less
§ 2 ,OJ7,39)',000) on basis of average
daily participations in System
account since June 30, 193&
1 ,2 7 8
37,036
61
2,077,391'. 150,717 601,35>; 1 6 5 ,9 18 2 0 !'*6 7 7 llJJ'26
V
106,706
7,73. 31,1’'9
8 opl 1 0 ,6 2 6
8 5,605 233,11?
98,328
11,79S
J-,811
5^0
*,*01
H. Total allocation of Gov*ts
2, IS)-, 100 158,1,81 632,<503 1 7 ’,8 )2 215,303 11^976
91,109 PJJ ,910 107,l^9
66,8R2 10°, P-
8 5,-^.
180,) 56
I. Present allocations
O
7 * 1 & 15 ,355 1*5,007 218*731 1 1 5 , c 00
u j 18)', 100 15 6 ,
83,781' 01,0 ^ 7 9
9)', ^76
6 2 ,2: 7 I07,a’'3
8 ):,9 22
132,515
+7 , 3 2 5
+R, 7 >*
+ ' , 60 ^
+1,91°
-2,1^9
J. Change in allocations
—
+1,700 -12,852
- 8 , 1 5 5 -3,;.?* ■^,076
+ 2,6 52
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
J
|REi 0 IN FILES SECTI9W
BOARD OF GOVERNORS
i
I
DEC 3 0 1940
&?
F E D E R A L R E S E R V E S Y S T E M <335 *
□ F
T H E
W A S H I N G T O N
ADDRESS
O F F I C I A L J3 D R R E S P O N D E N C E
TO THE
BOARD
December 27, 194-0
Dear Sir:
All of the Presidents of Federal Reserve Banks were in
^attendance at the meeting of the federal Open Market Committee on
December IB, 194-0, and are familiar with the actions taken follow
ing the consideration of the report submitted by Messrs. Smead and
Rouse under date of September 26, 194-0, with respect to the basis
for the allocation of securities in the System open market account
and the accounting procedures that might be adopted for the ac
count. Therefore, this letter is written for the purpose of for
mally advising your Bank of the actions taken.
Approval was given ly the Presidents and by the Federal
Open Market Committee to a basis for the quarterly allocation of
securities in the System open market account, as recommended by
■
Messrs. Sinead and Rouse, which would allocate (1) sufficient se
curities to each Federal Reserve Bank to cover expenses not cov
ered by accrued earnings on Government securities and estimated
earnings from other sources* (2) a sufficient amount of additional
securities to each Bank to cover dividend requirements, and (3)
any remaining securities among the Banks on the basis of average
daily participations in the System account since June 30, 1936,
which is the basis on which profits on sales of securities in the
System account are distributed among Federal Reserve Banks at the
present time. This action was taken by the Federal Open Market
Committee with the understanding that, if possible, the new proce
dure would be followed in connection with the January 1, 1941, re
allocation of securities in the System account.
The decision was also reached to recommend to the Board
of Governors that no change be made in the manner in which Govern
ment securities held in the System open market account are shown in
the weekly statement of condition of Federal Reserve Banks, and
that for the current year profits on securities sold from the
'
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..O» 1235%
-
2-
System open market account should be transferred to reserves for
cont ingenc ie s.
Very truly yours,
Chester Morrill, Secretary,
Federal Open Market Committee.
TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
,
Authority £..Q« \2fl58
m o ' D in piles s E m m
&
DEC 2 7 1940
3_s J #
tooaribor
3
19ij0*
Mr. K.
Rouso, fioo Prosldsot,
JDfluliXb 4pX JMW» <EvwaC^
lew York, low York.
J3oor Mr. Firriirot
Iktr* la onoloood a oopy of a t a t w i t profarod
in this Division Shoving th#
m t i iiKry in allocations
of aqyini— nf soouritlos 1a tto Systaa Opsa Markvt Acoouat
Ml Jiamary 1, 19i*l( in tMordaae# with 'tto r*il*#4 fonacala
adopted by tto Fedtrtl Open Muscat Coanaittco at lt« aootiiig
am Pscadiar 18, 19irf>.
Cwrrwt oxponaos aad eurrtat oaralags (oxoluaiTw of
o» Onrrrn— nt<) t o w boon ootiaatod by ■ultiplylng
th* aotwal sskkb&o ttoroof fro* July tta-o^gh Hwosfcor, 19l|0*
fcy 2*%* V# tovo addod 1500,000 to th# ostiaato of ©urront
oxpoasos for low Yorit, obtainod oa this basis, in Ti»t of a
prospootl?* iaoroaso 1b azunaal doproolaticsi charge* and Im
ropairs and alterations is oonMotioa with oir-ooodltiottiMg
'tto low York building, and $120,000 to tto ostiaata of' oarront
expsasos for St* Urn is to ooaplato tho porograa *f sotting
aoido a 100 poroostt roaoroo on flxad aachinory and o^uipMttt
In ooaaootion with air^ooadit loalng tho hoad offloo and b miioh
buildings, Wo b m m dodastod fro* tto ostiaato of ourrsat
oxpostaos for Chisago $70,000 in riow of o toaporary iaoroaos
for tho aonths of Saptsafeor to lirroriha r, inoluaivo, in doproolation ofcargos oa flxod aaohinory aad oqul|annt in tto Chicago
building*
Ttry truly your a,
E. L. 8a*ad, Chisf,
Diriaioa of Bank Oporatioas.
'
*2yuuu»AfioK of m vm m g m t s m m t r i m m srmai. orfi m m m accost ok jA m m t i, v&X
Syatcei
A* Ispeaftee
(1) Setlmted current ex?ext*e«,IQlsl
3©,oi? 2.W8
7,895
Stun "
yen— > Dellet
Fnucelsco
Sity
8,596 a ,901
1,800
l#*l»
5,506
1,533
982
1.769
1,26k
2,1*97
560 5,066
715
892
5M
882
858
*51
179
2«r
250
697
etli*te4 exwmeee and diridende, 19^1 58.51k 2,71# 10,961
5,109
5.755
2,128
1,566
li,566
l»78k
1*161
2,056
1.51k
5 ,1 *
ate
151
lflti
88
22
210
3*
28
175
59
137
57,056 8,487 10,721
2,958
a.oto
l,5*Ji
Is, 156
1*753
3**33
1,86?
1.1*75
5.057
itiattd dlvidende, I9hl
0
Cla thooeeiida ef &sllar»)
Cl#w*| Pdeh- Atlanta Chioftgo St'. '' Wlua**
1 Sblle* r
Boetoa
l»yyf 1 mflfi'Hl
jdelphie
Tort
Louie eepolic
»* Kotin* ted M »ingS| 19kl ( e*el»ei*e
ef mmiMg* on
B. Excee* ef *0* «t«p *P*
8,297
1,278
61
5 .«* »
r . Allocation required f<m beeie ef
WfcH&lg mirai»c rete ®b Set* te)
ie pretec* earning* equal te *S* £#077#3$i 19*7*7 40U3«£ l^ m ^ k ^ T T UkJM
Allocation of reminder ef Syete*
holding# (12,18l«,1G0#C>00 l«t«
#2,077,39^*900) oo be»it ef average
daily participation* In Syetea
eeoossst since June 30# 1936
106,706 7.7a» 51.H.9
8 , 92ft lo .& S
86,605 255.115 98,338 65*591 2 W M 9 *
5,550
11,795
kgtll
3#301
8S,75is 171.U71
5,197
li,100
8,985
fc* *otel allocation of Sot *te
2,18M00 l^i#! ^ 5 0 3 U M b f t 2*5,303
91,109 2M,910 105,159
66,852 1©9*695
86,85ft
180,(456
I. Preeent alleeattoite
2,18£ul00 1$^?§1 61*5,355 183,007 tt%731 UV-QO
85»78ti 21’9.559
62,^7 107,0li3
8li,922
182,615
4 s.,605 +2,652 ♦1,912
-a,159
4* Change in allocation*
—
♦1,700 - X
Ui'
B*52 *6,165 - 5 ,1*28 4,0 76
*3,u
♦7.5*5
*8*763
accoput cm 4*m m
1*
v&t
Reproduced from the Unclassified I Declassified Holdings of the National Archives
nhM&oe&TKm of OQtmmmm mmmfiBB m sysm? arm mmrs
thousands e f 6eliars)
Sew i m u * Cleve- j m *k < Atlanta
York [delphia land
Systeaa
Cl) Estimated eurreat e*peaaas#19iil
8,996 2,901
r
j ' H^T ISa***^
►SpoliS
[ Louis j<
Kansas Balias ~ ^ 5 » r ~
C ity
Francisco
1,800
i,aeU
3.506
1.533
982
1.769
1.261*
2.1*97
5,066
713
858
523
282
858
251
179
2<7
250
stlsate* expenses and dividends, 19l?l 38*$lJh 2,71(8 10,961
3.109
5.753
3,128
1,566
1».366
1,781
1.161
2.036
1.511*
3.19**
at*
151
idU
88
22
210
31
28
173
39
137
yr#c56 8,687 10.721
2,955
3.&9
?,oJo
i , 5Mt
(2.156
1.753
1.133
1,865
l.li75
3 .0 #
<77 UW<26
86,605 233.115
96.326
8,92li lo.&ii 5*550
k.5QIt 11.795
M il
stiaated dividends, I9^tl
0
3$*017 2,188 7,895
Chioago
8*297
Eetine ted earns ags, 19til (exclusive
•f earnings on Gev*ts)
1.278
B. £seessnef ”C* ever *P*
5*0
6i
r. All©©*tie required f on basis ef
taming irate es $*** ts )
te pre^»«e earnings equal te "£* 2.077.391. 154717
Allocation of remainder ef System
holdings ( iSS* 18??.»100*000 leas
$2,Q?7,?$i#000) en basis of average
daily participations in %atssi
aecetiist since June 30# 195&
1U Votal allocation of Gov* ts
I. Present allocutions
Change I n alloeaM aas
106,?q6 7.7& 31.H9
165,918
2,18?.,10015*181 6^505 ITJt.BJi*8^,503 111976
2.18li.l00 ig 6tf*l 6t»5»355 183 . 00? 84731 11*90©
—
♦1,700 -14B52
■6.165 -5,1»0S
4t,076
91.109 StfJ .910 105,139
63,551 10t>.L98 82,73);
3.301
5.197
It,100
66,852 109.695 86,8*
tm
171.1*71
>
C
I
j
r-f
8.985
180,(156
S’
2.
M i
«
ffl
85.781- 2^9.339 9k.S76 62,217 107,^5
8!i,922 182,615
jn p
ia >
♦7,325 •^4,1:29 ♦8,763 ♦It,605 ♦2,652
♦1,912
!S I
*
uo
05 M
06 0
-2.159
i
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £..()» V235B
December 16, 1940.
Mr.' S^ead,
The attached represents my recommendation
to Mr. Harrison in connection with our report.
R.G.R.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
C44
/ s*//
"As you recall, the Committee on Accounting Procedure in connection
with the System Open Market Account (Smead-Rouse) filed a report at the
September 27th meeting which I understand is to be considered on Tuesday.
If
I ain called on for recommendations, I shall recommend (1)
No change be made in the form of the weekly press statement.
(2)
It should be regarded as System policy to transfer profits
realized on the sale of Government securities to reserves
for contingencies, however, without any binding resolutions
that might have to be revised in event of changes in cir
cumstances.
If it were generally urged that profits arising
out of switches (particularly those involving the sale of
’’rights1’) be used to write down the cost of the replacement
securities, I would not oppose it.
(3)
The proposed formula for allocation of securities be adopted,
as it seems to me the best available.
Mr. Smead and I are in substantial agreement on these recommendations.
This
formula would tend to reduce the interest income of the New York, Philadelphia
and Cleveland banks, as their dividend ratios are in excess of their holding
ratios over a period of years.
However, the theory that the apportionment of
excess securities should bear a direct relationship to the profit and loss or
holding ratio, seems to me to be the governing principle.n
December 16, 194-0
R eproduced from the U nclassified
I D eclassified H oldings of the N ational A rchives
DECLASSIFIED
Authority E..O *
£EC ^ Xtf FILES SECTION j
v
OCT 2 - 1 9 4 0
6 6o m
October $ m/ 19bP.
Mr, Roy A. Young, Presidsot,
Federal Reserve Bank of Boston,
Boston, Massachusetts .
D#ar Ifor. Tomtgt
2fc accordance with * request received
ov*r the telephone trw m Hr* Rouse, I aa enclosing
herewith a copy of the^riliort aade by Mr. Rouse
•ad aysalf cm^a«»t«^er,%., :igiO^ to tha aofewr*
of the Federal Open Market Coonittee nynt th®
Presidents of the Federal Reserve Banks m acoountim g p m m & m m in connection with the Systea Open
Market Account.
t'ia&srsly yours.
J&m I>• ISnsad, Chief,
Division of Bank Operations.
Snolosure
t *
<
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..C* 1235%
IK-.. IN FILES SECTION
-
OCT 2 -1 9 4 0
3 J5 ®
J
Mr. R. 0. lottoe, V i m Praaident,
Fadwral I m m Bank of Sow York,
York, Mm fork.*
Baar Mr* SeuMi
In accordance with y'mat telephone
roqyoat, I aa enclosing herewith two additional
procedure Is ©onneotion with tha System Opon
Markwt Aeoount.
Sincerely youra.
E. L* &aead# Chief,
Dlriaion of Bank Operationa
teoloauraa 2
vl
v i _ __
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
/
/
F e d e ra l R e se rve Bank
of
N e w Yo r k
September 28, 194-0
Dear Mr. Smead:
We received your letter of September2£^ and have
today sent to the Reserve banks a copy of the computation
showing the adjustments to be made in participations in the
System Open Market Account on October 1, 1940, pursuant to
the plan adopted at the meeting of the Federal Open Market
Committee on November 30, 1937.
Enclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also
copy of the telegram which was sent to each of the Federal
Reserve banks today*
Yours faithfully,
Robert G. Rouse,
Manager, System Open
Market Account,
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
C
Authority
12358
W SC 140A 13M 8 - » 9
FEDERAL RESERVE B AN K O F N E W YORK
SECURITIES DEPT, - RHB FMS
September 28, 1940
Please send following telegram to the President of each Federal Reserve bank
as indicated below:
Under the plan for reallocation of Government securities adopted by
the Federal Open Market Committee November 30, 1937, a readjustment of partici
pations in Government securities held in the System Account is called for
October 1, 1940*
The computations showing adjustments to be made in participations
of the several Federal Reserve banks is being* sent to all Reserve banks today*
Increase
\
These comnutations indicate an
- of \
.in your participation on
decrease,
t
October 1.
We shall wire you on October % th'&\detailed entries to be made on
that date*
\
laargftMt
Young
Sinclair
Fleming
Leach
Parker
Schaller
Martin
Peyton
Hamilton
Gilbert
Day
Boston v \
tiladelbhia>levelan©
Ri^QOZMif
Atlanta
Chicago
St. J*ouis
Minneapolis
Kansas City
Balias
San Francisco
ROUSE
11, 699,000
3.571.000
2.976.000
16,090,000
Decrease
13,788,000
5,284,000
10,958,000
4 102,000
133,000
2.544.000
,
1.031.000
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
FEDERAL RESERVE B AN K O F N E W YORK
Similar letter written to the President of each Federal Reserve bank except New York
Septonber 28f 1940
of today# I
tho readjustment* to bo
Jfcho porticlpatioiui of th*
st*w Opon J3*rk#t portfolio*
faithfully*
Bobort G
_^
MFPIv
Honorahl* 8ey A« Tcaing* Proaidoct,
rSnTlml DfllVl I* H R K Oi OOfWDi
Boston, XftM*
tod.
*9
DIAieiOMOk
Reproduced from the Unclassified / Declassified Holdings of the National Archives
CONFIDENTIAL
RLALLOCATJOH OF C-OVERlOff'NT Sb'CUHITib'S IN SYST ^ OPEN IvAHKET ACCOUNT OK OC GBiiK 1, I9ii0
System
A - Expenses
1. Estimated current expenses, 1940
Boston
Hew
York
Phila
delphia
Cleve
land
Atlanta Chicago
26,897
2,127
7.297
2,31-1
2,862
1*717
10)4
97
3.266
1,6 16
298 ___
Kansas
Minn-
St.
Louis
eapolis
Dallas
§an
Franoisoo
1.21-3 * 3,372
1,518
97b
1.731
1 .2)43
2,1*52
55
218
26
26
172
59
152
1.272
3»)jh 2
332
l,b*J6
9b9
1,250
l.ii92
lb7 __ 115
2 ,6bl
128
1 .&
1,069
1,811
1.58b
3 ,01*6
B - burnings
1* Estimated ourrent earnings, 19^0
(exclusive of earnings on Govts.)
2. Estimated earnings on Govts, to
September 30
3* Eat profits on Govts, to Sept. 26
l,).i20
*9
262
200
31.95^
3.003
2.3&
219
9.667
872
2,958
i*.
36,398
2,602
10,821
3.020
3,668
1,870
lJj.55
3,992
8,210
560
3,065
7li)
8)*1
318
279
825
2L?8
177
26^
2b?
e t2
7ii9
85
-J»99
35
55
165
67
205
U 16
82
iait
106
78
19,566- 105,658
8,057
12,061
37.982
15,b23
1*7.189
33.608 18,876
U2,355
2 b.b00
17.955
Total
C• Batinated dividends, 19)'0
D. Exoess of A-l plus C over B-Jj
E. Allooation required (on basis of 1*72353^
earnings rate on Govts.) to provide
earnings October-Dec ember equal to D
172,UlU
252
136 ___9b^
F. Allooation of remainder of System
holdings (#2 ,)j33 ,600,000 less
|172,Ii11l,000) on basis of C
2 , 26 1,18 6 15 t*,23li 8Ui,158 196,6k9
2 ^1,627
G, Total allooation of Govts.(E plus F)
2,^33.600 173.800 738,500 20)1,706
2W>,288 125.565 92,266 27L.K09 101,912 67.625 115,0 6 5
H. Pree+nt allocations
2 ,)j33 .6oo 177. ^
2L-9.572 121,99b
I* Change in allocations
—
-3.7*8
7Ui.996 193.007
-6 ,!i96 ♦11,699
-5,281.
87.583
♦3.571
76,8k3 227,220
253
68, 30b U8,7ii9 72.710 66,026 185,061
92,1*26 205,036
89,290 258,319 112,870 71,727 115.198 9ii,972 20U,067
♦2,976 +16,090 -10,958 -b,102
-133 -2,5bli -1,031
>
c
c
r
0
*-•
>5'
r\
'ey
|
0!
H
O
L
>
in
C
Z3
S 2
w
0
a
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
;Oi'FIDENTIAL
5 3
m
s y
?
September 26, 19UO.
REPORT TO MEMBERS OF THE FEDERAL OPEN MARKET COMMITTEE AND
PRESIDENTS OF THE FEDERAL RESERVE BANKS ONyACCOUNTING FROCEDURE
IN CONNECTION WITH THE SYSTEM OPEN MARKET ACCOUNT
At the meetings of the Federal Open Market Committee in
Washington on March 20 and May 28, ItyliO, we were requested to study
the present basis for the allocation of securities in the System
Open Market Account and the accounting procedure followed in con
nection with the Account, to make a report to the Federal Open
Market Committee and to the Presidents of the Federal Reserve Banks
which would include a statement of the various accounting procedures
that might be adopted for the System Account, and to be prepared to
make recommendations as to the procedure that should be followed.
As we see the problem, there are three main questions to
be considered:
(l) how should United States Government securities
owned by the Federal Reserve Banks be shown in the weekly press
statement, (2) what should be the disposition of profits on ss.les of
securities, and (3 ) should there be any change in the procedure under
which participations in the System Account are now allocated among
the Federal Reserve Banks?
^
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ .0 * VM58
-2-
Amounts at which securities are shown in published condition statements.
The Federal Reserve Act* section 11, paragraph 2 (a), pro
vides:
"The Board of Governors of the Federal Reserve System shall be
authorized and empowered:
To examine at its discretion the accounts,
books and affairs of each Federal reserve bank and of each member bank
and to require such statements and reports as it m y deom necessary.
The said board shall publish once each week a statement showing the con
dition cf-each Federal reserve bank and a consolidated statement for all
Federal reserve banks*
Such statements shall show in detail the assets
and liabilities of the Federal reserve banks, single and combined, and
shall furnish full information regarding the character of the money
held as reserve and the amount, nature and maturities of the paper and
other investments owned or held by Federal reserve banks.”
It is the present practice to show Government securities in
the statement at par and to include premium on securities purchased in
"Other Assets1* and discount on securities purchased in "Other Liabilities"
Two alternative methods have been suggested for showing the System* s
holdings of Government securities in the weekly Federal Reserve Bank
condition statement, as follows:
(l) show securities at book value,
i.e., at par plus premium and less discount, and (2) show the par value
of the securities as at present and show the amount of premium less
discount as a separate asset item in the statement.
With respect to tho current method, tho following comments
are offered:
It has been the practice since early in the history of
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..C* 12358
-3the System to show securities in published statements at their par
value,
A schedule is also appended to the weekly publication of the
statement of condition, showing at par value the maturity distribution
of U, S, Government securities.
Securities in the statement are shown
at par value principally, we understand, in order to indicate as clearly
as possible any increase or decrease in the System account, and to
obviate any possibility of tho public* s gaining tho impression that
there has been a change in the System* s holdings, when, as a matter of
fact, no change has taken place.
Par value is used in the maturity
schedule for the same reason and also to indicate as clearly as possible
in what maturity categories changes occur.
Changes in security holdings
as disclosed by the statement are likely to be interpreted by the public
as reflecting purchases and sales.
Under the present arrangement all
purchases and sales, except those that represent switches within a
given maturity group, are reflected in the statement.
Shifts of equal
amounts within a given maturity grouping would not be clarified by
either of the alternative methods.
With respect to tho first alternative method, i.e., that se
curities be shovm at book value, reported holdings would fluctuate as
a result of the following, as well as through purchases, sales and
shifts:
(l) amortization of premium, which would reduce book value, (2)
accumulation of discount, which would increase book value, and (3 )
valuation reserves and charge-offs.
If United States Government securi-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..Q*
•< *•
•ti
t le s were shown among assets in press statements at book value, they
would normally be shown likewise in the maturity classification, but
if thought desirable, they could continue to be shown in the maturity
classification at par value.
With respect to the second suggestion, it would be a simple
matter to**show "Net premium on U* S, Securities" as an asset item, say,
following "Total bills and securities"•
Opinion has been expressed
^ that minor changes in book value brought about by amortization of prem
ium, accumulation of discount, shifts within maturity categories and
application of reserves and charge-offs, should be shown clearly.
It
has also been suggested that if public attention were called to such
changes by inclusion of an item in the published statement, the public
might get an impression of a change in System holdings when no real
change has occurred#
No accounting difficulities would be involved in showing
United States Government securities in the weekly press statements in
either of the above alternative ways, and neither would involve any
material changes in the accounting procedure now followed.
What should be the disposition of profits on sales of securities?
Present Procedure
In accordance with the plans approved by the Federal Open
Market Committee on November 30, 1937* effective January 1, 193^*
profits on sales of United States Government securities have been dis
tributed among the Federal Reserve Banks in proportion to their average
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
:s* "
Authority £.6* VMS8
-5daily holdings in the System Account since June 7)0, 193&* and are now
treated as an addition to current not earnings and used to cover ex
penses or dividends, or are transferred to surplus, or to reserves for
contingencies through surplus, depending upon the situation at each
Federal Reserve Bank,
Reasons for Present Procedure
From 192U to 1929* inclusive, profits were distributed daily
^ on tho holding ratio.
From 1930 to 193&, inclusive, they were held by
the New York Reserve Bank in a suspense account and distributed at the
end of each year on ratios based on daily average holdings in the
Account for the last 12 months preceding.
In 1937 profits wore distri
buted daily on ratios based on average daily holflings in the Account for
the last twelve months preceding*
Since January 1, 193&* as outlined
in the memorandum on accounting procedure for handling transactions in
the System Open Market Account adopted beginning January 1, 1958* pro
fits have been distributed daily on ratios based on the average daily
holdings in the Account since June 30> 193&*
This relating of profits
and losses more nearly to the period over which securities are held by
lengthening the period over which the average holdings are figured in
distributing profits, largely removes the apprehension that a bank
might, in some time of emergency, find it necessary to take over from
other banks a substantial block of Governments on which, within a short
period, it might sustain serious loss, for the loss, if any, would be
distributed in accordance with the bank* s holdings of securities over
an extended period rather than for any short period.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ .6 * I2fl58
-6-
A change has been suggested in our accounting procedure
with respect to the treatment of profits realized on sales of securi
ties*
The principal reasons advanced therefor* are that during the
generally rising market of tho past few years, principally through
switches, (l) the book value of the Account has been written up, and (2)
profits have been treated in a manner not in accord with the practice
which the System recommends to member banks#
The view has been ex
pressed that the System* s "Reserves for Contingencies'* should be in
creased at least to the point that they equal the net premium on securi- ties in the Account, and that the writing up of the Account by switches
should be minimized by the application of profits so realized to the
reduction of the book value of the replacement securities.
Reserves for contingencies now held by the Federal Reserve
Banks as a whole amount to t3U*627*03i», as compared with t38,13lb.,196
of premium carried in the System Account as of September lJj., 19U0,
Of the total contingent reserves, $3lJ±8l,9lj-6 were set up out of
current net earnings and #
3
#
out of surplus.
Reserves for con
tingencies vary from slightly over 57 per cent of the premium account
at Boston to more than 100 per cont of the premium account at four .of
the banks.
Realized profits might be used as indicated in one of the
following alternative suggestions as to our accounting procedure:
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
v- "
Authority £.6* UflSB
Alternative Suggestions for Accounting of Security Profits
Profits on sales of securities could be—
1. Transferred to Reserves for Contingencies;
2, Set aside as a valuation reserve and deducted in the
balance sheet from premium on U. S* securities;
3* Used to write down the book value of the System Account#
Profits may be realized not only on outright sales of securi
ties but also on switches, i*e#, the simultaneous sale of one security
and purchase of a like par value of another.
Under our present practice,
-when securities carried on the books at amortized price of, say, 101
are sold at a profit of 2 points and other securities are bought at 103 *
profits on securitios sold are increased and the net book value of the
portfolio is increased by a like amount.
Switches in the account might
leave the net book value of the account unchanged and at the same time
reduce current earnings*
The advisability of this so-called writing-up
of the portfolio as a result of sales and purchases may be questioned,
but if profits on switches or outright sales of securities, cr both,
are to be used to write down the book value of the System Account they
should, in our opinion, continue to be shewn as profits on sales of se
curities in published statements of earnings and expenses of the Federal
Reserve Banks.
With respect to the first alternative, the transfer of profits
on sales of securities to roserves for contingencies would regularize
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority !L.C« VM58
*-
8-
a practice which has existed to a substantial extent for a number of
years*
Prior to 1937$ transfers to reserves for contingencies were
charged against the current year* s earnings*
have been charged to surplus.
Since that date, they
Reserves for contingencies are included
in the balance sheet of the Reserve Banks among "Other Capital Accounts”*
They are not shown as a reduction in the carrying value of assets#
With respect to the second alternative, that is, that profits
on sales of securities be set aside as a valuation reserve and deducted
in the balance sheet from the premium account, it may be pointed out
that if this were done and a substantial portion of our present contin
gent reserves were also allocated for that purpose, the time vrould come
when tho valuation reserve would equal the value of the premium account*
In such case the amortization of premium would not have to be discontinued,
but the combined result of the valuation reserve and true amortization
of premium would reduce, in effect, the book value of the System Account
below par value.
The latter course would not be inconsistent, as there
is no particular connection between the amount of profits taken and the
premium account*
The amount of possible loss that might be realised
is not limited to the premium account.
It is regarded as sound practice
to set up such reserves when funds are available and to maintain them at
a point adequate for tho contingency*
That point obviously is a variant
and requires constant consideration*
The third alternative, i*e., the use of profits on sales of
securities to write down the book value of the System Account, would
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
j
Authority £ .6 * 12358______
-9 '
make it necessary to distribute these profits among the Federal Re
serve Banks on the basis of their current participations in the System
Account*
It would not be practicable to apply them on the basis of
average participations in the System Account since June 30* 193&# an<*
retain the present set-up of the pool account.
We should like to point out that the use of profits to write
off premiums would probably result soon in losing sight of the true
earnings on any given issue and of the true profit and loss on a sale.
We assume that if profits were used to write down book value, such
action would be arbitrary and not involve the writing up of securities
if losses are sustained.
In the event that consideration is given to partial revision,
it may again be mentioned that switches in the Account that result in a
profit from the sale, often write up the account,
In such transactions
the sale and purchase are prfcticmlly simultaneous-, and it may be argued
that the profit realized is not a true profit until the replacement se
curity is sold, and therefore the profit on the sale should be used to
write down the cost of the replacement security*
However, if the se
curities sold and purchased are not of the same general maturity, the
switch may appear in a different light,
The sale of ”rightsfl and their
replacement with other securities represents perhaps the clearest case
arguing for application of the profit on the sale to reduce the cost
of the replacement security because the profit results primarily from
the exchange value of "rights” and because the replacement securities
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ .6 * 12358
•10*
purchased in the open market would produce a relatively lower yield
than if the "rights” had been exercised*
Should it be decided to reduce book value and charge off all
or a large part of the present premium account, the amount to be charged
off by each Federal Reserve Bank, in the absence of instructions to the
contrary, would be applied on the basis of its current participation in
the System Account in accordance with the present method of apportioning
accrued interest, premium and discount*
Should it be decided to allocate profits realized on sales of
securities to contingency reserves until further notice or until the
amount of such reserves bore some certain relation to the System
Account, such profits should be taken into the books of the several
banks on the basis of the present formula for distributing profits.
Had profits on sales of United States Government securities
been used during recent years to write down book value of the portfolio
or to establish valuation reserves, there would have been deficits in
net earnings of the Federal Reserve Banks, after dividends, in 1935*
1936, and 1938#
Quarterly allocations of securities among Federal Reserve Banks.
The procedure now followed in allocating participations in the
System Account among the Federal Reserve Banks provides, first, for
allocating a sufficient amount of securities to each Federal Reserve
Bank to cover its expenses not taken care of by other earnings, and,
second, to allocate the remaining securities in the System Account
Reproduced from the Unclassified I Declassified Holdings of the National Archives
" d e c l a s s if ie d
"
Authority £.»Q»
- 11-
among the Federal Reserve Banks on the basis of their dividend re
quirements,
The relationship between the expenses of individual
Federal Reserve Banks and total expenses of the System is quite different
from the relationship between dividend payments by individual Federal
Reserve Banks and total dividend payments by the System,
Since profits
on sales of securities are now taken into earnings and thus reduce the
amount of securities needed by the Federal Reserve banks to produce
sufficient income to cover expenses, it is apparent that as profits
increase, the amount of securities allocated to the Federal Reserve
Banks to cover their expenses decreases, and the amount of securi
ties allocated to the Federal Reserve Banks on the basis of dividend
requirements increases*
%xen these profits are substantial there is a
substantial fluctuation in participations in the System Account on
quarterly reallocation dates.
These fluctuations could be materially
reduced if realized profits were not taken into account in making
allocations of securities among the Federal Reserve Banks.
There would
also be considerable merit in distributing securities not needed to
cover expenses and dividends on the basis of each Bank* s average partici
pation in the System Account as, during periods when tho bulk of the
portfolios of the Federal Reserve Banks is made up of Government se
curities, losses, if any, which the Federal Reserve Banks sustain, would
result principally from depreciation in market value of Government se
curities*
This is tho basis on which profits on sales of securities in
the System Account are now distributed among the Federal Reserve Banks.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority £ . 0 * 1235*8
-
12 -
If this procedure were adopted, the quarterly reallocation would he
as fellows.*
fl') allocate sufficient securities to each Bank to cover
expenses not covered by accrued earnings on Government securities and
estimated earnings from other sources, (2) allocate a sufficient amount
of additional securities to each Bank to cover dividend requirements,
and (3) allocate any remaining securities among the Banks on the basic
of average daily participations in the.System Account since June 30,
193&*
Vihen estimated earnings equal or exceed estimated expenses and
dividends, steps 1 and 2, indicated above, could be combined thus
simplifying the allocation procedure.
If the Federal Open Market Committee desires, we shall be
prepared to make recommendation on points discussed above.
K. G, Rouse
E* L* Smead
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..O* 1235%
NOTE:
With respect to the last paragraph of the
attached memo rand-urn, my recommendations would, in
general, be as follows:
1.
Weekly press statements.
Recommend no change, but see no particular
objection to showing net premium as a separate item.
2.
Treatment of profits.
Recommend no change. Use of profits to
write down premium would increase current earnings and
thus give an exaggerated impression as to real earnings
on System Account and would make it impossible to determine
real earnings or real profits from the published statements.
3.
Allocations of securities in System Account.
Recommend that securities be distributed
as follows: (l) Allocate sufficient securities to each
bank to cover expenses not covered by accrued earnings on
Government securities and estimated earnings from other
sources, (2) Allocate a sufficient amount of securities
to each bank to cover dividend requirements, and (3)
allocate any remaining securities among the banks on the
basis of average daily participations in the System Account
since June 30, 1936.
E. L. Smead
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
r-
If
Authority
1235B
t h i s p r o c e d u re w e re a d o p te d , t h e q u a r t e r l y r o a l l o c a t i o n w ou ld be
as f o l l o w s ;
fl)
a llo c a te
s u f f ic ie n t s e c u r it ie s to
oach Bank t o c o v e r
exp en ses n o t c o v e r e d by a c c ru e d e a r n in g s on Government s e c u r i t i e s and
e s t i m a t e d warnings from o t h e r s o u r c e s ,
o f a d d itio n a l s e c u r itie s
(' 2 ) a l l o c a t e a s u f f i c i e n t amount
to each Bank t o c o v e r d i v id e n d r e q u ir e m e n t s ,
and f 3 ) a l l o c a t e any r e m a in in g s e c u r i t i e s among th e Banks on th e b a s i c
o f average d a ily p a r t ic ip a t io n s
19-56,
ffhen e s t im a t e d e a r n in g s
d ivid en d s,
i n th e System Accou n t s i n c e June 7) Q,
e q u a l o r e x c e e d e s t i m a t e d exp enses and
s te p s 1 and 2 , i n d i c a t e d a b o v e ,
c o u ld be combined thus
s i m p l i f y i n g th e a l l o c a t i o n p r o c e d u r e .
If
t h e F e d e r a l Open M arket Committee d e s i r e s , we s h a l l be
p r e p a r e d t o make recomniend&tion on p o i n t s d is c u s s e d a b o v e .
R e p ro d u c e d from the U n cla ssified
I D ecla ssified
H o ld in g s of the N a tio n a l A rc h iv e s
[“ “
DECLASSIFIED
Authority E..Q* \235S
Hr* M*
“f&wi
F*i|«#«fc| tm m rm Wnmk *f Y*ir
¥#if
W&nt
&mt* Mr* law*#*
m
fl**## ,1*
l§ri«4«£i
wi
U k*
«&l<Hwfc&ttt« #f ftwrnnmmb t i w i l l i i
Wm&m%
m.
mmwmk
m&
%%#& m
Tb« #%* Susiii
th# 8$m%m -&$m
1*
m . i&m htmUm mt
JN$ewt*
l»
*##srtl&$#§ *sr*
mmrnfaygB £ m m xy through
tar
m S&&* %#*§• «*»
'Is ■frmtimm.
m, mm
$*»#*
I* 3W S m d ,
farfcirgtti* #f' %mk
R e p r o d u c e d fro m the U n c la s s ifie d
I D ecla ssifie d
H o ld in g s of the N a tio n a l A rc h iv e s
DECLASSIFIED
Authority
12.^5%
;‘D IN FILES SECTION
SEP 2 6 1940
dr oRii'H'' itchp l w §m
t#f timmu
-iD^sy*.Vwi*
m$mum#
addinc l i p ,000
M t i & p ft# M » | *# ter*#lloo«tionA bhl*
•
#*M»
'1HI
JWSI
S
i
B *£
«r
MrigsHi ii$ INmf
by twiijlwti .fin Mr*
pi^$ *n4 iwwii&.j,
fl plu*
%** £#r w m tt.vt
<*«$&«& *a
pu
X<rtu«Ll r<fc%# V # i *OOU5UU2.
O mDE KTIA L
R1ALL0GATXOI OF GOVKKWJ'UT SECURITIES IH SYSTEfc OPIH MARKET ACCOUMT OB ©CIOBM 1# 19b0
cn
CD
QJ-
CL
Systo®
Ul
P
g
- %poaaoa
j 1* Batlaatad atirraiit exponsas, 1939
1
B -Earnings
1* Estimated aurront oarnings, 19b0
( sotclusive o f earnings on Govts*)
2* latlaatad earnings on Oorts* to
Saptaabar 30
3* Bat p ro fits cm Oorts* to Sept* 26
iw
Total
C* Estimated dlrideads, 19^0
28*897
2.127
7.297
1,1*20
(f)
26e
31#955
3.005
2.3U*
219
9.667
a
5M 99 2,602
8,210 960
P. Mt q m i o f A -l plus C w ar B-l*
E« Allocation required fan teals of 1*72353^
earnings rata on Gorts.) to proride
earnings 0©tober~Dee«»ber equal to 0
(i n thousands o f d o llars)
Phila- Clara*
Boston Tork
Ipynl
7lt9
172.1illi
85
87
10,821
5.065
-<i 59
19, 566- 105,658
2.511
2.882
Riohmmd
|Atlanta Chicago
1.717
lGk
200
97
2.568 3,266 1,616
2^2
398
157
3.020 3.668 1.870
8l (l
71f)
518
165
35
55
8.057
12.661
57.982
231.627
87.583
1. 21.3
.3.572
55
218
1.272
126
3JJi2
14 i 55
3.992
279
67
15J«25
332
St*
Klim*
1.518
26
ljt5 8
156
1.620
829 2)i8
205 U.6
li7.189
Kansas
Louis
97l
26
1.751
Dallas
1, 21)3
172
39
l^i9 2
1U7
1.230
115
1,069
1.811
1.38L
177
26ti
« (7
82
181*
106
9t«9
33.608 18,876
1*2.555
3lj00
Pranoisoo
2.U52
152
2,< l»l
*55
3. 0ti6
67a
78
17.955
F• Allooatlon of reneinder of System
holdings ( |2 #J;3% 600,000 less
1172*1*5? ,000) on baaia of C
2, 261,186 l* .2 3 k
6* Total allocation of $oTts*fl plus F)
2.^53.500 175,800 738,500 30fi,706
alii ,388 125.565
76.SI13 227,220 66. 50k !t8,7li9 72.710 68,028 185,081
92,266 27W 1O9 101,912 67.625 115.065 93. 1i28 205.056
B. Present allocations
2J453.600 117.588 7W».996 195.007
2ii9.572 121.99li
89,290 258,319 112,870 71.727 115.198
9l».972 20^,067
♦2,976 ♦16,090 -10,958 -Jl.102
-2 ,5 U j
I* Chango In allocations
_
-5.788
66 9
8Ut,158 W . L
61*96♦11.699
- ,
*5(26li
♦3.571
-133
-1.031
R e p r o d u c e d from fh e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s
DECLASSIFIED
Authority
A.%
o f tiik*
12.^58
Ops* lfericart CtiBLltrto** lji
■h1rnJt»n tax ttarok 30 m m L May 26 # 1 9 ^ # # # HI#1
# t
nr< w t
» f « r th *
Iferkat i n m r t
1
uk4 tha i m i m l ini
1f
M «u r 1
%
rtu^T'
l a ■$&* B i i t ■■ C m
i r » < i < 1 i n fa llflw * # l a aoaM M 'tiaa v l t k
th* Jtoaovrt # ## Bak* a in — I ta th* r*d*ral #(*## Martel Co m k 1% W « lEffft
%• l b * r r »«1 d— ^< « f tb a f » 6 f a l T T » i » r n l M k j
rh** — at * f t k * m
r l«
a*a<nart i a * I***# # *# *# # tfaat
v »u l4
la a la d * a
b * a d a jt**!
far SB#
## W » y#i#i|#y» itn# *b#s&4 fc# ^4Siiwi*
,
Hr-
m
^
iitafc
tA ^ra a ra tfcra* Mula auavfeLiaM 1w> ba
Ta i * i b m w >
|('l
# |) IfuHik AjwrftA lM lt«<i "tt>
'P1^ t<
W-*>W- -WW
a a a u r lt ia a^ wmtadSfP: trr
‘th* fa A a r a i S a a a rra Bank* ba #fe#tiii la tha waaJdy praac • ,W 1ja*#frt, (2 )
hAmk% ik#«i# Ini Hi# A|jif##iili#ii %$ p * M k $ m M m
(J )
««i
rtwruld %i»aira 1b# ■ */ aliaj»^a l a IS # p f a a ^ y r a untfac #&lah p»**ti 1 « lya
t i« i
in tK * 9rataai A.aao*imt a ra Hit# ■ 11 i — t i l m m u idhs F a d *ra l j i n r i i
BaakaT
9 / i^ t >
R e p ro d u c e d fro m the U n cla ssified
I D e cla ssifie d
H o ld in g s of the N a tio n a l A rc h iv e s
F
DECLASSIFIED
Authority E ..O - 12-35^5
Amoimts at whloh securities are shoum ia published oandIt Ion rtateaassxts .
th® Federal Eeaerve Aot# section 11# paragraph 2 (a ), provide®*
*fhe Board o f Gorernors o f tha N « f H
and empoweredt
Re—rva Systs* sh all fee authorised
To srramine a t its diaeretion tha aooow ta, books and
a ffa ir s o f oaoh Fadaral reserve bank and o f each tm tbr bank and te re
quire suoh statements andreporta as tt nay daen neoessary.
Tho said
board sh a ll publish onoe eaoh week a statensnt showing tha condition of
aaoh Fadaral raaarrs bank and a ooneolidated statsmant fo r a l l Fadaral
reserve banks.
3uoh statsosute sh all Show in d a ta il tha assat* and l i a -
b i lit is s o f tha Fadaral reserve banka* single and ooutoined, and ahall
furnish f u ll information regarding. tha oharaoter o f tha aonay hald aa
reserve .and tha aaomit* nature and’ w aturities o f tha paper and other in rastaaaxits oaaad or held by Federal reaerve banks."
It ia the present practice to show Oovewossnt securities in the
stat—snt at par and to include preniuei
m
securities purohased in "Other
Assets** and diaooxnt on seouritiea purchased in "other L ia b ilit ie s ".
Two
alternative nethod* bar® been suggested for showing the System’ s holdinga
■o f (Jovernasot seouritiea In the weakly Faderal Reserve Bank condition
stateosnt, aa follow s*
(1 )
show seouritiea at book value, i , e M at par
plus prosiiisa and le ss discount, and (2 ) show tha par value of the securi
tie s aa at preesnt and show the aaoiaxt o f premium le ss dieoount aa a
separate asset item in the atatansot.
With reepeet to the ourrsnt Method, the following oosmsnts are
R e p r o d u c e d fr o m the U n c l a s s i fi e d / D e c l a s s i fi e d H o l d i n g s of the N a t i o n a l A r c h i v e s
DECLASSIFIED
Authority
12-35%
lft.1
J-t"*V
* 3 •
offered i
I t haa boon tho praotioo aiaoo aarly la the hiatory o f th *
Syoto* to ahow aoouritloa In pt£>llaho4 a t a t * * * «t a at thoir par walua9
A aohodulo
alao appwdod to 'tho waakly publication o f th * s t a t w e t
o t condition, «ho«ing at -pur valua tho Maturity distribution o f u. S*
Ggvarr— nt eocuritlaa.
Soouritloa In tho rtatoauct aro thown at par
*a lu * p rin c ip a lly , wo uadoratand, l a ordor to indloato a * o lo a rly aa
poaalblo any lnoroaao o r dooroaaa in th© Syataa aoootast* and to obvlato
any p o aaib ility o f tho jn & llo ’ a gaining tho inproaaioa that tfaaro has
boon a ehan^o l a tho B y ata^ a holding«#
ohaaga has talnwri plaoo.
on, -as a aattor o f fao t, no
Par Taluo la uaod l a tho M aturity aohodulo
for tho aaaa roaaon and also to iadloato aa oloarly aa poaalblo l a '*iat
Maturity oatogorloa ohaagoa ooour.
Chaagoa la aoourity holdiaea aa
diaoloaod by tho atatowottt aro llk o ly to bo intorprotod by tho pt& llo aa
roflootlag purobaaoa and aaloa.
Utodor tho proaont arran^aoont a l l pur-
ohaaoa and aaloa, oxoopt thoaa that roproaoxt awitohoa w lth la a gliract
Maturity group, aro roflootod la tho atatam nt*
Shlfta o f equal aaeuata
w lth la a Klvwn Maturity grouping would not bo o la rifio d by either ©f
tha alternative nothoda«
With roapoot to tho flr a t alternative aothod, i , o (| that ao-
ourltioa bo ^*oott a t book ^raluo, roportod holding a would fluctuate aa a
roault o f the follow ing, aa w a ll aa through purehaaoe, aalea aad a h lfta «
(1 ) aaeortixation o f premim, whloh would reduo© book value, (2) aoounula*
5
tlo a o f ila o o u n t, whloh would laoroaao book v alu e, aad ( ) valu ation r o aervea aad charge-off» .
I f 7Jnltod Statoa Gorernaaot securities war*
R e p r o d u c e d from th e U n c la s s ifie d
I D ecla ssified
H o ld in g s of th e N a tio n a l A rc h iv e s
'd e c l a s s i f i e d
Authority £ -.0 - 1235^$
m
*
whom, among assets ia press statiewnfrs at book rn lm , they mould normally
be iihocn likew ise la the maturity c la ssific a tio n , but i f thought desirable
they oould continue to be tfiaein In tho Maturity c la ssific a tio n At par
value*
With respect to tho second suggestion, It would be « simple
wetter to ehow "Hot p m i a i on U. S« Seeurities* ms *n asset item, say,
following "Total b i lls end *eo\xrltiesn •
Opinion has been expressed that
minor ohanges la book value brought about by tao rtlsaticn o f prcndtsa,
accumulation of discount, sh ifts within maturity categories sad applica
tion o f reserves aad oharge-offs, should be sheen o le a rly .
It has a lso
been suggested that i f public attention were called to suoh changes by
Inclusion o f an i t s * la the published stateswat, the public might get aa
Impression o f a change la System holdings *h*a a© re a l shaage lias occurred
Ro accounting d iffic u lt ie s would be involved la showing United
states Government securities la the weekly press statements ia either o f
the above alternative ways, aad neither would involve any m aterial changes
ia the accounting procedure a m followed.
What rfiould be the disposition o f p ro fits on sales o f se c u ritie s?
Present Prooedure
In accordance with the plaas approved by the Federal Open Market
Committee on lloveriber 30, 1937# e ffect I t s January 1, 193®# p ro fits on
sales of Baited States Government seeurities have been distributed amoag
the Federal Reserve Beaks ia proportion to th eir average d a ily holding#
R e p r o d u c e d from the U n cla s sifie d
I D ecla ssified
H o ld in g s of the N a tio n a l A rc h iv e s
.
„
D e c l a s s if ie d
Authority
12/35%
m
In th* Syston Aooottttt *inoo Juno 30, 1936, and aro now troatod aa an
addition to ourront a rt earning* and u*od to oovwr oaqpMoso* or dividend* #
o r a r * tra n *f# rr»d to ot*rplia*# o r to
fo r eontingoneios through
•urplu*, d*p*ndln£ upcn th* situation at oaoh Fodoral F ***rr* Bank.
»*a*0tt* fo r Pr*—nt Procedurw
nr<* 192U to 1929# lAolu«lva, p ro fit* w *r* distributed d aily
Oft tho
holding ra tio .
T r m 1930 to 1936, in o lu *iro , tboy nor* hold by
tho Sow York Ro*orwo Bank in a suspons* aooount and distributed a t tlso
ond o f oaoh yoar on ra tio * ba*od on d a ily aworago holding* la tho Aooount
fo r tho
on
la s t 12 nonth* proooding,
In 1937 p ro fit* woro d irtrib u t*d d aily
ra tio * ba*od on average d aily holding* in th * looo\*at fo r tho la s t
tw olr* south* prooodlng.
Sinoo January 1, 193®# * * o \itlin *d in tho imbo-
randun on aooounting proooduro fo r handing transaction* in th * §y*t**i
Op*n Martcot Aooount adoptod beginning January 1, 1938* p r o fit * har* boon
d i*trib u t*d d a ily on ra tio * ba**d on tho awora^o d a lly holding* in tho
M o mmto sine* Jvam 30# 1936.
n early to
Thi* relating o f p ro fit# and lo**o« aero
tho porlod o w vfcioh *o o i*ritio * a r* hold by X«a>h4tting tho
poriod f u r whioh tho a w rago h oldin g* aro figured i s di*tribufcing p ro fit# ,
iargoiy rm o fo * xn* apprononaian xaat a oazuc m gnx, in.
tm
or
*aorg*noy, fin d i t nooooaary to tako o r*r from othar bank* a substantial
bleok o f Oo^onoBMit* on which, w ithin a short p erio d , i t nigfet sustain
soriou* lo * * , fo r tho loas, i f any, would bo distributed in aooordsnoo
with th * bunk** holding* of ooouritio* o r*r an oactondod period rath or than
R e p r o d u c e d fro m fh e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A r c h iv e s
DECLASSIFIED
A uthority £ . . £)» 12/^5%
m
fo r any short
m
period.
A Change
has bosn suggested in our accounting prooedure with
respect t o th * treetaasnt o f p ro fits realised on tales o f se c u ritie s*
Th# principal reasons advanced th erefor, aro that during th# generally
risin g aark#t o f th# pact f#w y ears, p rin cip ally through switches,
(1 ) the
have
book y/mlm o f the Aooount has be*n w ritten up, and (2 ) p ro fits
been treated in a. wanner not in accord with th * practice which
the System reeensmdS to wmkwr bank*.
The r i m ha* been expressed
that the System's "Reserves fo r Contingencies* should be inoroase* a t
le a st
to the point that they c$wal tho net prsmius an 'secu rities in
the Aooount, and that the w riting up o f the Aooount by snitches ahould
be
minimised by the application e f p ro fit* so realised to the reduction
o f the beck
value of the replacement secu rities#
Reserves fo r contingencies sow held by the Federal Reserve
Banks as a whole amount
premium
to $$kg687,01h» * s ocsqpared w ith $38,131^196 of
carried in the System Aooount as of Septssfeor Ih$ 19lj0.
t o t a l ocntiagsot reserves, $31#l*81,9l|6
Of the
wer# set up out o f current net
earnings and $3,li£*068 oat o f surplus. Reserves fo r oonting*noie* vary
from s lig h tly over 57 per cent o f the pr*m ii*i aoooiaat at Boston to more
than 100 per cent o f the premium account at four o f the banks.
Realised p ro fits might be used a s indicated in one o f tho
following altern ative suggestion* as to our accounting procedure*
R e p r o d u c e d from the U n cla s sifie d
I D ecla ssified
H o ld in g s o f the N a tio nal A rc h iv e s
„
C
d e c l a s s if ie d
Authority L..O - 1 2 3 5 ?
m- *J m
JLltornati^o SMEgostloas fo r Appointing of Soourlty P ro fits
P ro fit* m
00X00 « f
soouritios oould bo *
It
T rw if«rr# d to Kooortos fo r Cootlngsnoiosj
2*
Sot maid* a* a n du atloa rosorvs and doduotod ia th#
balanoo A e t t from proodm on U. 8, soouritiosj
5*
UMd t o w rit* down th# book **lu o Of tho Syoto* Aooo\*nt.
P ro fit* *ay bo roalisod not only on outright sal os of soouritio s but also on svitohos, i * o * # tho siaaultanoous sals o f oao soourlty
»yy4 purohaso of n lik o par' valuo o f anothsr.
Utodor our prosoot praotioo,
uM b soouritios oarriod on tho books at anortisod prioo o f, say, 101
aro sold at a p r o fit o f 2 point* aad othor soouritios aro bought a t 103#
p ro fits on soouritios sold aro lnoroasod and tho not book valuo o f tho
p o rtfolio it lnoroasod by a lik o aaouot.
Switohoo in tho aooow t sdg&t
loa*r» tho mot book m lu o o f tho aooouo* unchsngod and a t tho m m tlao
roduoo ourrsnt earnings.
Tho ad v isa b ility o f th is so -o all«d w ritin*-up
o f tho p o rtfo lio ao a rosult o f salss aad jaarohaoo* mar bo quostionod,
but i f p ro fit# on svitohoo o r outright solos of soouritios, or both, aro
to bo "Hood to o rito down tho book vmluo o f tho Bysto* Aooovsrt thoy should,
in our opinion, continue to bo shorn as profit s on saloo o f soouritios
In p*toli#ied statonsaots of sam lngs and oxponsos of' tho Podoral Fosorvo
Banks.
With roopoot to tho f ir s t altoraativo , tho transfor o f p ro fits
on sales o f soou ritioo to rooorrso fo r oontingsnoloo would rogularlso
R e p r o d u c e d from the U n cla s sifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s
DECLASSIFIED
Authority E .O * 12.35%
* 8 *
* praotieo whloh haa m lotod to * *\£>st**itial oxtont for a nsttfcor o f
years*
Prior to 1957# tn m «f*r* to rooortoo for oootine*nei*s woro oharc*d
against th* otarrottt ywar's *arnlngs«
«har£*4 to surplu*,
$1M l that d*to, th*y bar* bosn
R ***rr** fo r c o n t in u a l* * aro iaoludod in th* boiftsioo
Shoot o f th* Ro*orv» Bazik* taocg "Oth*r Capital Aoeounta" *
Th*y aro not
ahovn 09 * roduotian in th* carrying valu* of a ss*ts,
With rospoot to tho tooood a lto rn a tiv *, that io t that p ro fit*
on aaloo of s **u riti*s bo * * t asldo a* * valuation rosorvo and d*duotod
in tlko bal ano* sh**t fr*a& tho ir o d w a**ouat, i t n»y bo p o in ts out that
i f th is woro 4mm and a o ub*t*ntial portion of our p r***n t *ootia^*at r * o*r**s woro also allocated fo r th at purpofto, th* tia * would om m whoa tho
valuation r***rv * would oqual th * m l m of th * pr*Miu* aooouxt.
In *u*h
•as* tit* *»© rti»atico of p t m Im would not hav* to bo diooontinuod, but
tho oo»feta*d r* *u lt of tho valuation rooorv* *nd tru * amortisation o#
proaiu* would roduoo, In o ffo o t, tho book valu* of th * Syotoa Aooount bolow par valu**
tho lo tto r oour** would not. bo in o o n *i*t*n t, a* thoro is
'no p articular o«m>*otien botwoon tho snowt o f p ro fit* takon and tho- p r*a lw
aoooomt.
Th* awtixii* o f possible lo t* that night b* roallsod Is not l i a i t *
od to tho 'prflBdUR acoount.
I t is rognrdod at sowkd fraotlo o to sot up
suoh r**«rv*« wh<m fmtds aro a m ila b l* and to Maintain thaaa at a point
adoquato fo r tho ocsKtlnc*tt*y# that point obviously is o variant sad ro*
qulr*s ooastaafc consideration.
Th* th ird altornativo, i» o « , tho uoo of p ro fit* on saloo o f ooourit i* s to w rit* doaa th* book valu* o f th* Syston Aooount, would wmkm i t
R e p r o d u c e d f r o m th e U n c l a s s i f i e d
I D ecla ssified
H o ld in g s o f the N a tio nal A rc h iv e s
f~~~~~ DECLASSIFIED
'
Authority
1235%
* 9 -
nooossary to distribu te these p ro fit* among the fed eral HeSmnrm Bank* o®
the baaia of th eir currant partioipationa in tho System Account .
It
would lioi be practicable to apply thaw m the baala o f average participa
tion* in tho Syaten Account einoe Jun* J0# 1936, and retain tho present
eet-up o f tho pool aooount*
Wo should lik e to point out that tho uoo o f p ro fits to w rit# o ff
pfOttttins would probably resu lt soon in lealn g a i ^ t o f the tru e earalnga
on any given laeue aad of tho true p ro fit and loas m a aalo.
ft# aastaae
that i f p ro fit* w o used to w rit# dawn book value, oooh action would bo
arb itrary and aot involve tho w riting up o f aoouritioa i f loaaoa aro
austalned*
In tho evant that consideration ia given to p a rtia l reviaion,
i t nay again
bo mentioned th at eadtehas in th® Aooount that re su lt in a
p ro fit froai tho aalo, often w rito up tho aoeo\srt*
tha
In such tranaactione
o ali and purehaao aro p ra c tic a lly T^F"*l t anamT y
th at tho
it
'nay bo argued
p ro fit roalisod ia not a tm e p r o fit u n til tha roplaooawnt eeourity
la aold, and thoroforo tho p ro fit on tho aalo ahould bo used to w rito down
tha cost o f tha
replan waait aecurity. Bowever, i f tho sse u ritic e aold and
purchased aro not of tho aana general M aturity, tho awltoh nay appoar in a
difforont lig h t*
Tho aalo o f ^righ ta* and. th o ir roplaoonont with othor
aoouritioa roproaonta porhapa tha oloaroat oaao arguing fo r ap p lication
o f tha
p ro fit on tho aalo to roduoo tho coat o f tho replaeensttt secu rity
booauao tho p ro fit re m its p rin a rlly from tha whangs value of "righte"
and because the replaosnaBt
aoouritioa purchased in tho span narkct would
R e p r o d u c e d fro m th e U n c la s s ifie d
I D ecla ssified
H o ld in g s of the N a tio nal A rc h iv e s
DECLASSIFIED
j A uthority £ ..£ )• 12 -^5%
• 10 •
produco a r e la t iv e ly lower y ie ld than I f th# ’’rig h t*" had bees exercised,
. Should I t be doeldod te roduo* book value and charge o f f a l l
or a largo part o f th* present prtmiua account, the anottst to be charged
o ff by eaoh Fedoral Eeoorvs Bank, in tho abssnoe ©f in struction s to the
contrary, would bo applied on tho baolo o f it s current participation in
th* Syetsn Aooount in accordance with the proooBt nsthod o f apportioning
aoorued i a U r v f t , premim *nd 41*OOtmt«
Should It bo dcoidod to allocate p r o fit * realised on sale* o f
se c u ritie s to contingency reserves u ntil further n o tie* or u n til tho
aaount o f snoh ro s e n e s bor* sea* certain relation to tho Systen Aooomzt,
such p ro fits would be taken Into tho book* o f tho coronal banks on tho
basis o f the prcccnt forvula fo r distributing p ro fit*.
Sad p ro fits on s a l os o f United State* Goremnent **o u rltl**
boon need during recent years to w rite dona book m in e o f tho p o rtfolio
or to e sta b lish valuation rceorvca, there would have bosn d e fic it* in
not earnings o f th* Fodoral Resort* Banka, a fte r dividends. In 1935, 1936,
ond 1936♦
Quarterly allooatloa* of soourltlcs onong r*d *ra l Reeonrs Bank*.
Tho prooedur* now followed in allocating participations in the
System Aooount aasng -the fe d e ra l Re**rv* Banks proride*, f i r s t , fo r allocat*
lng a s u ffic ie n t araount o f *eouritios to sash Federal Reeervc Bank to cover
Its expenses not taken care o f by other earnings, and, seeend, to alleeate
the renalnlng se c u ritie s in tho Systsn Aooount sneog the Federal Seserws
on the
1* of tfeeir dividend requlreancnt* •
The re la tio n sh ip
mmmmsmmmmtw*
R e p r o d u c e d fro m the U n c la s s ifie d
I D ecla ssifie d
H o ld in g s of the N a tio n a l A rc h iv e s
j“
DECLASSIFIED
Authority
* u
12/^5%
•
bsteesn tho expenses o f In dlrldual Federal Reeerre Banks and to ta l expenses
o f th* fiysten it quit# differen t fr o * th* relationship between diridsnd
paynents by indiTidm l Federal K tw rvt Sonks and to ta l dividend payssnts
by th* S y sts^
earnlncs
61*o* p ro fit* on s a ls * o f soouritios are m m taken Into
rodnoo th* i b m b I' o f * * * u r lt l* * needed by the Federal R*-
* *r r* bonk* to prodneo so ffle lsB t Inset* to oerer expenses, i t i s apparent
that &• p ro fits Increase, th* a sro it o f eeeurlties alloeeted to tho Federal
S o so m Bonk* to ««T *r th o lr expenees deereases, and th* aaoiant o f securi
t ie s allocated to tho Federal Reserve Bonks an tho basis o f dividsnd ro f a l r n n t o inoreasee*
l&sn those p ro fits aro substantial th *r* is * sub
stan tial fluctuation in participations in th* Systen Aooount on quarterly
reellooation dates.
Theee fluctuations eould bo n a to rla lly reduced i f
United States soouritios In Systen Aooount not needed to corer expense
sad diridsnd rogu lr— its were allocated a*gng tho Federal Reserve Banks
on tho basis of th e ir a*ora«e dally participation in the Aooount •inoe
Jxme
30#
1936*
this is tho basis on uhieh p ro fits on sales o f soouritios
in tho Syotsu Account are now distributed mmmg tho Federal ke*erre Banks *
During periods idvea tho bulk of tho p o rtfo lio o f tho Federal toserwt Banks
is nade tip o f Oercransnt seouritiec, losses, i f any* uhleh the Federal Res e m Banks sustain would resu lt prin oipally freia depreciation In narkot
tnloo o f Qo'rcm— nt soouritios and, oonsequently# there iwuld appear to ho
considerable n orlt in distribu tin g seourities not needed to oorer expense
and dividend rcgMlrnccntc on tho basis of oaoh bank's average participation
in *fco System Aooount,
I f th is were done, an additional th ird stop would
R e p ro d u c e d from the U ncla ssified
I D ecla ssified
H o ld in g s of the N a tio n a l A rc h iv e s
f
DECLASSIFIED
Authority
•
12.^5%
12 m
b# lmrolv#4 im th# qm rb*rly roa lloca tion #£ th# SjwUm Aooowrt. 2b#
roallooation would bo a# follow# i
(1)
allooato ouffioiont #oow lti## to
oaoh B#mk to ©off#** iT]i#iT#i not oororod by >oon»d earnings on Hinoi iiii#nt
•#o u rlti### ##tlm#t#d #arnimg# froa ott*#r •oiaro##, *m dprofit»t (2) allooat#
#
MMWtt o f a d d iti« a l ••c u r iti** to #Mh Bank to oor#r diridoad
roqtiironoata, #md (3) allooat# any r — Inliy^ a#o\irltioa aawwg th# Banks <m
tho baala o f « m ft(# d aily p articipation* Im th# Syrfcoea Aooount alnoo
Jin# 30* 1936.
I f th# Fodoral Opon Market Coomitt## d #«ir#a, wo »h a ll b# pr#~
parod to aak# r#oo*aemdati«ie with roapoot to th# point# dl#ou###d ab#v«.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
3 i-3
Fe
d e r a l
of
R
N
e s e r v e
e w
Y
B
a n k
o r k
September <4, 194-0
Dear Mr. Smead:
Enclosed is a new draft of our pending joint report to the
Federal Open Market Committee on the subject of allocation of securities
in System Open Market Account and the accounting procedure in connection
with it.
I had hoped to prepare a letter to go along with it, but there
was not an opportunity today and there will not be tomorrow.
Accordingly,
it seems better to let it go to you Bas isfl rather than to hold it up for
comment or farther editing.
In accordance with our recent telephone conversation, I suggest
that after you have had a chance to check the report, you spend a day
here so that we may have whatever discussion is necessary as to the report
and our recommendations.
With kind regards, I am
Very truly yours,
Robert G. Rouse,
Vice President.
Mr. Edward L. Smead,
Chief, Division of Bank Operations,
Board of Governors of the Federal Reserve System,
Washington, D. C.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
r
Authority f c .Q* 1 2 3 5 8
REVISED DRAFT OF MMORANDPM TO FEDERAL OPEN MARKET COMMITTEE
September
3, 1940•
At the meeting of the Federal Open Market Committee in Washington on
March 20, 194-0, ins were requested to study the present basis for the allocation
of securities in the System Open Market Account and the accounting procedure
followed in connection with the Account, to make a report to the Federal Open
Market Committee and to the Presidents of the Federal Reserve banks which
would include a statement of the various accounting procedures that might be
adopted for the System Account, and to be prepared to make recommendations as
to the procedure that should be followed.
As we see the problem, there are three main questions to be considered)
(1) how should United States Government securities owned by the Federal Reserve
banks be shown in the weekly press statement, (2 ) what should be the disposition
of profits on sales of securities, and (3 ) should there be any change in the
procedure under which participations in the System Account are now allocated
among the Federal Reserve banks?
Amounta at which securities are shown in published condition statements#
The Federal Reserve Act, section 11, paragraph 2 (a), provides*
*The
Board of Governors of the Federal Reserve System shall be authorised and empower
ed!
To examine at its discretion the accounts, books and affairs of each Federal
reserve bank and of each member bank and to require such statements and reports
as it may deem necessary.
The said board shall publish once each week a state
ment showing the condition of each Federal reserve bank and a consolidated state
ment for all Federal reserve banks.
Such statements shall show in detail the
assets and liabilities of the Federal reserve banks, single and combined, and
shall furnish full information regarding the character of the money held as re
serve and the amount, nature and maturities of the paper and other investment*
owned or
held by Federal reserve banks*"
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
D ECLA SSIFIED
Authority
- 2 -
1235B
9/3/40.
It Is the present practice to show Government securities In the state*
meat at par and to Include premium on securities purchased in "Other Assets11 and
discount on securities purchased in
"Other Liabilities*. Two alternative methods
have been suggested for showing the Systems holdings of Government securities in
the weekly Federal Reserve bank condition statement, as followsi
(l) show se
curities «t book value, i#e,, at par plus premium and less discount, and (2 ) show
the par value of the securities as at present and show the amount of premium less
discount as a separate asset item in the statement.
With respect to the current method, the following comments are offered*
It has been the practice since early in the history of the System to show securi
ties in published statements at their par value,
A schedule is also appended to
the weekly publication of the statement of condition, showing at par value the
maturity distribution of 0* 8 . Government securities*
Securities in the state
ment are shown at par value principally, we understand, ih order to indicate as
clearly as possible any increase or decrease in the System account, and to
obviate any possibility of the public1s gaining the impression that there has
been a change in the System*s holdings, when, as a matter of fact, no change has
taken place. Par value Is used in the maturity schedule for the same reason and
also to indicate as clearly as possible in what maturity categories changes occur*
Therefore, all. eweurity changes
tbs aeeeunt are indicated, with the exception
of Shifts of equal amounts within a given maturity grouping, wkieh would not be
clarified by either of the alternative methods.
the present method is well understood by the public and is simple in
operation.
It also appears to meet the requirements of the statute.
With respect to the first alternative method, i.e., that securities be
shown at book value, reported holdings would fluctuate as a result of the
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
DECLASSIFIED
Authority
\235B
- 3 -
9/3/40.
following, 00 well as through purchases, sales and shifts!
(l) amortisation of
premium, which would reduce book value, (2 ) accumulation of discount, which would
increase book value, and (3) valuation reserves and charge-offs.
If United
States Government securities were shown among assets in press statements at book
value, they would normally be shown likewise in the maturity classification, but
if thought desirable, they could continue to be shown in the maturity classifi
cation at par value.
With respect to the second suggestion, it would be a simple matter to
show "Wet premium on. U. S. Securities11 as an asset item, say, following "Total
bills and securities* • Opinion has been expressed that minor changes in book
value brought about by amortisation of premium, accumulation of discount, shifts
within maturity categories and application of reserves and charge-off®, should
be shown clearly.
On tka oiker hma&j m xcfr ehwagas., if public attention wore
called to tfeeft by meost# qpf such a balance sheet item* carry tfee poggt M H &y of
* public impression of a change in System holdings when no real change has
occurred* a**4 in themselves do
ciar£#y
statement.
No accounting difficulties would be involved in showing United States
Government securities in the weekly press statements in either of tho above
alternative ways, and neither would involve any material changes in the account
ing procedure now followed, although the present method is somewhat simpler to
handle.
What should be the d isp osition o f p ro fits on sa le s o f securities?
Present Procedure
In accordance with the plans approved by the Federal Open Market
Committee on November 30, 1937, effective January 1, 1938, profits on sales of
United States Government securities have been distributed among the Federal Re
serve banka in proportion to their average dally holdings in the System Aecount
Reproduced from the Unclassified I Declassified Holdings of the National Archives
~
r
D E C L A S S IF IE D
Authority
- A -
12358
9/3A O .
since June 30, 1936^ and are now treated as an addition to current net earnings
and used to cover expenses or dividends, or are transferred to surplus, or to
reserves for contingencies through surplus, depending upon the situation at
each Federal Reserve bank*
Reasons for Present Procedure
J'rom 1924 to 1929, inclusive, profits were distributed daily on the
holding ratio*
From 1930 to 1936, inclusive, they were held by the New Xork
Reserve bank in a suspense account and distributed at the end of each year on
ratios based on daily average holdings in the Account for the last 12 months
preceding*
In 1937 profits were distributed daily on ratios based on average
daily holdings in the Account for the last twelve months preceding*
Since
January 1 , 1938 , as outlined in the memorandum on accounting procedure for
handling transactions in the System Open Market Account adopted beginning
January 1 , 1938, profit® have been distributed daily on ratios based on the
average daily holdings in the Account since June 30, 1936* on the theory that
under thi-a pl&n Reserve banks are less affected as to any profits or losses
by current readjustments i» the amount ef their holdings * this relating ef
profits and losses to the period over which securities are held by lengthening ,
the period over which the average holdings (profit and loss fatlb) are figured,
largely removes the apprehension that a bank might, in some time of emergency,
find it necessary to take over from other banks a substantial block of Govern
ments on which, within a short period, it might sustain serious loss, for the
loss, if any, would be distributed in accordance with the bank1s holdings of
securities over an extended period rather than for any short period.
A change has been suggested in our accounting procedure with respect
to the treatment of profits realised on sales of securities and the principal
Reproduced from the Unclassified I Declassified Holdings of the National Archives
_
r
d e c l a s s if ie d
Authority
12353
- 5 -
9/3/40,
reasons advanced therefor, are that the System Account, during the generally
rising market of the past few ymmvm through switches, (1) has written up the
book value of the Account, and (2) has treated profits in & manner not In
accord with the practice which th. System reoo«m.nd» to *«ber b u * 8 . The
view haa been expressed that the System* s "Reserves for Contingencies* should
be increased at least to the point that they equal the net premium on securities
in the Account and that the writing up of the Account by switches should be
minimised by the application of profits so realized to the reduction of the
coat of the replacement securities on our bosks.
Reserves for contingencies now held by the Federal Reserve banks as
s whole amount to $
, as compared with |
in the System Account as of September
$
, 1940#
of premium carried
Of the total contingent reserves,
were set up out of current net earnings and $
surplus*
ftm System could us* $
out of
-ef contingent reserves set aside out
of earnings as a» offset to the premium carried on itr books*
si any time it
should determine that these reserves are in reality reserves for the contingen
cies related to our securities rather than "capital accounts*• Such application
might be along the line indicated in #2 or #3 of the following alternative
suggestions as to our accounting procedure*
Alternative Suggestions for Accounting of Security Profits #
Profits on sales of securities could be 1.
Transferred to Reserves for Contingencies*
2 . Set aside as a valuation reserve and deducted in the
balance sheet from premium on U* S. securities in
the Item "Other Assets*!
3.
Used to write down the book value of the System Account.
Keproauced from the Unclassified / Declassified Holdings of the National Archives"
-----------------------------------
DECLASSIFIED
r
■.
Authority
- 6 -
*
12353
9/3/40.
P ro fits nay be realised not only on outright sales of securities but also
on switches, i.e., the simultaneous sale of one security and purchase of a lik e
par value of another.
Under our present practice, when securities carried oa
the books at amortised price of, say, 101 are sold at a profit of 2 points and
other securities are bought at 103 , profits on securities sold are Increased
and the xvkL book value of the portfolio la increased by a l£ke amount.
writinfH*P ooeM ebizsist of
* e a tfttft.
Thi«
ehaage 4*i net book value ttfc*h a Eaduc&Lat |n
the advisability of this so-called writing~up of the portfolio
M a result of atlch sales and purchases may be questioned, tfea two swErees of
p ro fits may be eeaeiderwc^ separately in studying th is problem
If profits on
switches or outright sales of securities, or both, sbevetd be used to write
down the book value of the System Account, in our opinion, they should coa~
tiaue to be shown as profits on sales of securities in published statements
of earnings and expenses of the Federal Reserve banks.
With respect to the first alternative, the transfer of profits oa
sales of securities to reserves for contingencies would regularise a practice
which has existed to a substantial extent for a number of years*
Prior to
1937, transfers to reserves for contingencies were charged against the current
year*a earnings. Since that date, they have been charged to surplus.
Reserves
for contingencies are included in the balance sheet of the Reserve banks among
"Other Capital Accounts*.
value of assets.
They are not shown as a reduction in the carrying
The current ptacn up to this tine has been regarded as sound
from an accounting standpoint, and is flexible in that it can meet changing
condition*,
The prtnptpal er£t£o£«*0 have bean, those stated above.
With respect to the second alternative, that is, that profits on
sales of securities be set aside as a valuation reserve and deducted in the
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £..Q« 12.35B
9/3/40.
- 7 -
balance sheet from the pyeaen t
*®ti*sr hmwetB*, it may be pointed out that
if th is were done aad a su bstan tial portion of our present contingent reserves
were also allocated for that purpose, the time would come when the valuatioa
reserve would equal the value of the premium account,
la such case the amorti
sation of premium would not have to be discontinued* but the combined result
of the valuation reserve and true amortisation of premium would reduce, in
effect, the book value of the System Account below par value*
the latter course
would not be inconsistent, as there is no particular connection between the
amount of profits taken and the premium account,
the amount of possible loss
that might be realised is not limited to the premium account*
It is regarded
as sound practice to set up such reserves -when funds are available and to main
tain them at a point adequate fo r the contingency#
That point obviously is a
variant and requires constant consideration.
The third alternative, i.e,, the use of profits on sales of securi
ties to write down the book value of the System Account, would make it
necessary to distribute these profits among the Federal Reserve banks m
basis of their current participations in the System Account*
the
It would not be
practicable to apply them on the basis of average participations in the System
Account since June 30, 1936;and retain the present set-up of the pool account.
We should like to point out that the arbitffwy W£ite**dom of book
would probably result soon in losing sight of the
©■£ any giverf
and
issue i* tesms- *£ a**3*r«at book v»£ae/of the true profit and loss on a sale.
We assume that if profits were used to write down book value, such action
would be arbitrary and not Involve the writing up of securities if losses are
sustained.
In the event that consideration is given to partial revision, it may
again be mentioned that switches in the Account that result in a profit fro*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
_
r
D E C L A S S IF IE D
Authority £ .0 * 1235B
- 8 -
.
1
the sale, often write up the account.
j
9/3/40.
In such transactions the sale and purchase
are practically simultaneous, and it m y be argued that the profit realized
is not a true profit until the replacement security is sold, and therefore the
profit on the sale should be used to write down the cost of the replacement se
curity.
However| if the securities sold and purchased are not of the same
general maturity, the switch may appear in a different light,
fhe sale of "rights*
and their replacement with other securities represents perhaps the clearest case
arguing for application of the profit on the sale to reduce the cost of the re
placement security because the profit results primarily from the exchange value
of "rights* and because the replacement securities purchased in the open market
would product a relatively lower yitld than if the "rights* had been exercised*
Should it be decided to reduce book value and charge off all or a large
part of the present premium account, the amount to be charged off by each Federal
Reserve bank, in the absence of instructions to the contrary, would be applied
on the basis of its current participation in the System Account and not on the
ratios based on average daily participation in the Account since June 30, 1936
in order to avoid (l) changing the present method of treating the Account as a
pool account, and (2 ) changing the present method of apportioning of accrued
interest, premium and discount.
Should it be decided to allocate profits realised on sales of securi
ties to contingency reserves until further notice or until the amount of such
reserves bore some certain relation to the System Account, such profits would be
taken into the books of the several banks on the basis of the present formula
for distributing profits.
Had profits on sales of United States Government securities been
used during recent years to write down book value of the portfolio or to
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
- 9 -
V23SB
9/3/4-0.
establish valuation reserves, there would have been deficits in net earnings of
the Federal Reserve banks, after dividends, in 1935, 1936 and 1938*
Quarterly allocations of securities among Federal Reserve banks#
The procedure now followed in allocating participations in the Systea
Account among the Federal Reserve banks provides, first* for allocating a sufficient
amount of securities to each Federal Reserve bank to cover its expenses not taken
care of by other earnings, and,second, to allocate the remaining securities in
the System Account among the Federal Reserve banks on the basis of their dividend
requirements.
The relationship between the expenses of Individual Federal Re
serve banks and total expenses of the System is quite different from the
relationship between dividend payments by individual Federal Reserve banks and
total dividend payments by the System*
Since profits on sales of securities are
now taken into earnings and thus reduce the amount of securities needed by the
Federal Reserve banks to produce sufficient income to cover expenses, it is
apparent that as profits increase,the amount of securities allocated to the
Federal Reserve banks to cover their expenses decreases, and the amount of se
curities allocated to the Federal Reserve banks on the basis of dividend require
ments increases*
fhen these profits are substantial there is a substantial
fluctuation in participations in the System Account on quarterly reallocation
dates*
these fluctuations could be materially reduced if profits on sales of
securities were set aside as realised as a protection against future losses and
if our formula for allocating securities among the Federal Reserve banks were
expanded to embrace three steps instead of the present two.
be as follows1
these steps might
(l) allocate sufficient securities to each Federal Reserve bank
to cover expenses not taken care of by other earnings, (2 ) allocate to each
R e p r o d u c e d from the U n c la s s ifie d
I D ecla ssified
H o ld in g s o f the N atio nal A rch iv e s
DECLASSIFIED
cT
Authority £..0*
_________________
Federal
"\&mk *
m w m % of
% m i a n d
(3 ) illa&at# Hh» -«p|^toag s*duriti»i among 1fo* federal Reserve
bank* in proportion to 'ikeir #«%£!& *ad
Vould fratbar ndtwatU* th# «t*a
$#taX
expenses and dividends
would fee justified in
to cover 4t*i&*Ktd W**
tor Ufcr Sra^em
Id
w*ra ®0»b&tiit*t in i#
!%'•
if
*mti# 'in. y**r# M
earnings equal to or in
m
of
TWW&MWmtA* ■
la
n# have assumed that *xggr
could be
various idtamaiivt suggestions girea In tkli r«f#rt'
idal^t $ m night ad©$t would be t&*3#* i & M
^tajugh changing condition# and which would r«~
quire simplicity ef
If the y*d*r*X $$1 $ lariat $®a«i4tt*e &»«!#«## «§ shall be prapir*4
to
r»®#a»iaiditi®»i *lt3a r**f»©t to t&# points dis#u»«*<t above.
/
&*#* !»«#**
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
REC’D IN FILES SECTION
v
JU L 1 2 1940 ^
J'
Fe d e r a l R e s e r v e B a n k
jf
o f N e w Y o rk
July 1, 1940,
Dear Mr* Smead:
Receipt is acknowledged of your letter of June 28/
enclosing statement showing changes in allocations in System
Open Market Account as of July 1 on the basis of estimated
expenses and earnings of each Federal Reserve bank during
1940.
The statement is in agreement with the one which
we prepared on June 28 on the basis of figures received by
telephone from Mr. Van Fossen and which, with your approval,
was mailed to the Reserve banks on that day*
Yours faithfully,
Market Account.
Mr. £• L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Reproduced from the Unclassified / Declassified H oldings of the National Archives
D E C L A S S IF IE D
Authority
12358
v
Fe d e r a l R e s e r v e B a n k
of
N
e w
Yo
r k
June 28, 1940.
Dear Mr. Sinead:
In accordance with the figures received over the
telephone from Mr. Van Fossen this morning covering the
quarterly reallocation of securities in the System Open Market
Account, we have today sent to the Reserve banks a copy of the
computation showing the adjustments to be made in participa
tions in the System Open Market Account on July 1, 1940, pur
suant to the plan adopted at the meeting of the Federal Open
Market Committee on November 50, 1957.
Enclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also copy
of the telegram which was sent to each of the Federal Reserve
banks today.
Yours faithfully,
Robert G. Rouse,
Manager, System Open
Market Account
Mr. E. L. Snead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
R e p r o d u c e d fro m th e U n c la s s ifie d
I D e cla ssifie d
H o ld in g s o f the N a tio n a l A rc h iv e s
DECLASSIFIED
Authority
M1SC, 1 4 0 *
1A M
12*35%
8-39
FEDERAL RESERVE B A N K O F HEW YORK
S&ttlar Itfttftf sent to tho Proaidant of each Federal Reserve bank «xoapt Saw Yaifc,
Juna 28, 194.%
Daar Hr* Immgt
\
\
tm m&Q'X&mm with
of %od*$r# I enclos#
herewith oa*pttt*tion #f %hm \ ^ d $ a l ^ « K ^ to In® ttfcd* m
l$
\ \
J
\
1940, of tho participation#
banka %n tb«
S^atan
O pm
tfrk a i |»©f%f«li#* \ \
\ \
) Your « £*ltl»ikl3y*
Rob*rt
Bouaa,
i a i t a g # * * * fyniem Open
Merkot Account
Boaorabl© Roy A*
Fadaral $ta0# m Bank of Boston,
'Boston* Moas.
R e p r o d u c e d fro m th e U ncla ssified / D ecla ssified H o ld in g s of th e N a tio n a l A rc h iv e s
DECLASSIFIED
A uthority £..£>-
MIS C. 140 A
1Q M
0- 3S>
FED ERAL RESERVE
r
BANK OF NEW
SECURITIES DKPARTWfflT
YORK
- X i IKS
f l m m aend following telegraa to th* Preflidant of eaoh fa&tral S«mtp« bank
a# Indlcatad below j
tfnder th* pint im? raal&<SC«tt<® o f Government *ecuritie* adopted by
tha fa d a ra l Open Market Committee Hore»ber J0f
a readjustment o f p a rtiti-*
pation* in Government aa^uritiail held &» tha Syatem Account ia c&llad tv*
July 1 , X940#
The computations ifeowtng adjmatmanta to ba mada In partl#ij>at&®mii
of tha gavarfcl Fadaral Reeerve banka 1# baitig * a » i to a l l Raaorve bank* today#
ixicr
Thai*
indicate am
patio©.
fu ly l.«
ia yomr fa r t le i* .
decrease
fa afaftlX wire you on
d etailed antri©* to ba aad#
on that data*
Ina^reaa^
|
fmaaf
Sin^aJbf
#
Leach
Jr(fc3E^jywr
.Aa -Wa ^S' ^
Itartia
Payton
Hafll1,
G ilb ert
©iy
Deflreaae
711,000
Ri
Ablauts
Chicago
St. fe u i*
Jitesaapoli#
Kaaaaa $ ity
D allaa
fiut franc-!###
769.000
a»4flQ»o0o
959.000
*,919*000
RODSE
21,000
X#075*000
**<99*000
33«^flar«ooo
i tl f o #oo@
x9.M$»oee
CONFIDENTIAL
REALLOCATION OF GOVFRNVtEKT SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON JULY 1, 1940
System
A - Expenses
1. Estimated current expenses, 1940
(In thousands of dollars)
New
Phila
Cleve
delphia
Boston
_ York
land
Rich
mond
Atlanta Chicago
St.
Louis
Minn
eapolis
Kansas)
San
City it Dallas Francisco
28,569
2,111
7,283
2,285
2,869
1,679
1,221
3,261
1,529
973
1,697
1,231
2,430
1,477
72
261
229
104
105
70
218
20
29
171
39
159
21,372
1,543
6,451
1,730
2,183
1,087
884
2,321
969
638
993
818
1,755
1,555
113
451
131
154
81
67
172
70
49
76
60
131
24,404
1,728
7,163
2,090
2,441
1,273
1,021
2^711
1,059
716
1,240
917
2,045
4,165
383
120
195
428
406
200
550
470
257
4^7
314
385
477,851
43, 942
13,768
22,372
49,104
46,580
23,946
63,102
53,923
29,486
52,432 36,025
44,171
8,195
560
3,064
715
840
316
278
818
247
177
247
670
F - Allocation of remainder of System
holdings ($2,466,276,000 less
#477,851,000) on basis of "E”
1,988,425 135,878
743,445
173,487
203,817
76,674
67,453
198,478
59,932
42,947
G - Total allocation of Government
securities (WDM plus "F")
2.466.276 179,820
757,213
195,859
252,921
123,254
90,399
261,580 113,855
72,433 116,246 95,957 206,739
H - Present Allocations
2.466.276 179,841
739,335
196,934
252,210
125,853 104,181
269,930 113,086
74,262 113,846 94,998 201,800
-21
+17,878
-1,075
+711
-2,599 -13,782
T
Earnings
1. Estimated current earnings, 1940
(exclusive of earnings on Govts.)
2. Estimated earnings on Govt,
securities to June 30
3. Net profits on sales of Govt,
securities to June 28
4.
Total
C - Excess of ”A-ln over wB-4”
D - Allocation required (on basis of 1.729016%
earnings rate on Govts*) to produce
earnings July-December equal to "C"
E - Estimated dividends
I - Change in Allocations
-8,350
+769
-1,829
263
63,814 59,932 162,568
+2,400
+959
+4,939
CONFIDENTIAL
REALLOCATION OF G O V E R N M T SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON JULY 1> 1940
,
System
A - Expenses
1. Estimated current expenses, 1940
_______ (In -thousands of dollars)
New
ClevePhilaBoston
York
. delphia .land
___________________
Rich
Atlanta Chicago
mond
St.
Louis
Minn
eapolis
Kansas!
San
City , Dallas Francisco
28,569
2,111
7,283
2,285
2,869
1,679
1,221
3,261
1,529
973
1,697
1,231
2,430
1,477
72
261
229
104
105
70
218
20
29
171
39
159
21,372
1,543
6,451
1,730
2,183
1,087
884
2,321
969
638
993
818
1,755
1,555
113
451
131
154
81
67
172
70
49
76
60
131
24,404
1,728
7,163
2,090
2,441
1,273
1,021
2,711
1,059
716
1,240
917
2,045
4,165
383
120
195
428
406
200
550
470
257
497
314
385
477,851
43, 942
13,768
22,372
49,104
46,580
23,946
63,102
53,923
29,486
52,432 36,025
44,171
8,195
560
3,064
715
840
316
278
818
247
177
247
670
I?" - Allocation of remainder of System
holdings ($2,466,276,000 less
#477,851,000) on basis of ”E"
1,988,425 135,878
743,445
173,487
203,817
76,674
67,453
198,478
59,932
42,947
G - Total allocation of Government
securities ("D” plus tfF")
2.466.276 179,820
757,213
195,859
252,921
123,254
90,399
261,580 113,855
72,433 116,246 95,957 206,739
H - Present Allocations
2.466.276 179,841
739,335
196,934
252,210
125,853 104,181
269,930 113,086
74,262 113,846 94,998 201,800
-21
+17,878
-1,075
+711
-2,599 -13,782
Earnings
1. Estimated current earnings, 1940
(exclusive of earnings on Govts*)
2. Estimated earnings on Govt,
securities to June 30
3. Net profits on sales of Govt,
securities to June 28
4.
Total
C - Excess of "A-l" over nB-4”
D - Allocation required (on basis of 1.729016$
earnings rate on Govts.) to produce
earnings July-Deeember equal to "C”
E - Estimated dividends
I - Change in Allocations
-8,350
+769
-1,829
263
63,814 59,932 162,568
+2,400
+959
+4,939
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
r
Authority
V23SB
K?
"> I U Fii: KS SEC TION
m
#
......
June 28, 19^0 •
^ ^ '
Mr* R* G* Rous©Manager,
System Open Market Account,
c/o Federal Reserve Bank of New York ,
Wow York, New York*
Dear Mr* Houses
there is enclosed a statement prepared from avail
able information showing changes in allocations necessary ia
the System Open Market Aocount as of July 1 on the basis of
our estimates of expenses and earnings of each Federal Reserve
bank during 19fj0*
In estimating current earnings and current expenses*
actual earnings (other than earnings on Governraent socuritios)
and actual expenses for January through May of the current year
have been used as a base, in accordance with the formula.
Estimated current exponnes arrived at on this basis have been
adjusted for all of the banks by making allowance fbr the pro
ration in June and December of the net expense of the New York
Bank in handling foreign accounts and transactions and by addinn* 1150,000 for St* Louis, as was done at the tine of the
last reallocation*
Very truly yours.
B* L* Smead, Chief,
Division of Bank Operations•
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..Q* 12358
Explanation of basis for items indicated *
A-l
2.U times actual current expenses January to Mayadjusted byi
31* Adding 1150*000 at St. Louis as in
previous real locations this year,
and
2# Adding for 11 banks and deducting th#
total thereof from the Now York
figure, estimated portion of net ex
pense of foreign dapartment of Hew
York Bank for year, using estimates
for first six months obtained from
New York by telephone June 26*
B-l
2*4 times actual earnings, exclusive of earnings on
Governments, January to May.
8-2 and B-3
Obtained by telephone from Mr. Behrens at New York,
June 28*
D
Actual rata usod, .0087161
E
Accrued dividends at May $1 plus 3*5 times paid-in
capital on May 31, adjusted by addition of 128,000
at San Francisco to cover increase of t910#000 in
paid-in capital at San Francisco during week ended
June 19.
X 1.72901^).
REALLOCATION OF O O r a a ilfta iT S E C U R IT IE S I E SYSTEM OPEM i:A R K ?T ACCOUKT OK JULY 1 ,
System
|Boston
Bmr
Y o rk
Phil*- Cleve Bioh**
delphia land
mond
Atlanta jChioago
19bO
Minn
Kansas
eapolis City
St.
Louis
San
Franoisoo
Balias
A.
(1} Fatimatod currant expenses, 19?j0
V
36,5^9 / 2,111
(2) Estimated earning* on Govern
ments to Jvtm 30
{3 ) Het profits ©a Government*
t© thane 28
(!* )
T otal
E x c e ss
of
A~1 o v e r
f
6*
latissated
^
21,372
*,555
8-I4,
d iv id e n d s ,
4,165
/
3#261
1,529
973
1.697
1,231
2,1*30
lOii
I05
70
21S
20
29
171
39
159
1*730
2,183
1,087
88li
2,321
9^9
638
993
818
1 ,7 5 5
131
15U
81
67
70
te
60
131
2 ,0 9 0
2,1(1:1'
172
2 ,7 11
/ 1*059
aoo
55®
1*6,580 22 , 9li 6
65,102
72
261
229
1 ,5 ^ 3
6, 1*51
113
1*51
1 . 726'
'
ft?7,85X
19&)
.llooation o f remainder o f Systs®
holding* (#2,fi66,2?6 ,OOO le t s
lit??,851,000) on basis o f *1*
2 ,8 6 9
8 ,1 9 5 J
7 »1 6 3 ''
383
120
195
1(26
it?,9it2
13,768
22,372
t o .io it
560
3.06*4
7X5
at*o
1.273 /"
l'Q>S
3X6
1,021
278
*
818
716 '
76
1 , 21x0 /
917 s
li?0
257
hW
3iit
385
53,923
29,1iB6
524 i32
36,025
U i,1 7 1
177
263
r
(no
2h7
Shi
2. ob5«
,k 2 5
135.878 ?1*3.W»5 1 7 3 M 7
203. 81? 76, 67!* 67,^53 198, 1.78 59,932
It2,9ii7
63. 8SI,
59,952 162,566
2,U 6 6 ,a ? 6
179 ,8 20 7 5 ? ,2 1 3 195 .8 59
252,921 123 . 2&
?2,1«53
116 . 2W ,'
9 5 ,9 5 7 306,739
1 .9 S
T o t a l a l l o c a t i o n o f Governments
("D* plus nfn)
H* Present allooatlon*
I.
u m
2W i < & v
D# A l l o o a t l o n r e q u i r e d
( on
b a s i s o f 1 .729016^ p e r aimuxa e a r n
in g r a t e o s Gov’ t s ) t o p r o v id e
e a r n in g s J u ly-D eoom ber e q u a l to ^ C *
E.
1,221
2.385
lA R M M S
\l) Fstixastsd current earning8,19?4©
(exclusive of sarniags o n
Governments)
C,
1,679
7 ,2 8 3
C hang# i n
a llo o a tio n e
9 0 ,3 9 9
261,580 1 1 3 , 855'
2 ,1 ,6 6 ,2 7 6 179.81*1 7 3 9 ,3 3 5 19o,95?> 253,210 125.853 101 .1 8 1 269 ,9 30 113 ,0 6 6
-2 1
♦ 1 7 ,8 7 8
- 1,0 7 5
*711
-2 ,5 9 9
-1 3 ,7 8 2
-6 ,3 5 0
*769
? i*,2 62 I1 3 ,e fi6
- 1,8 2 9
^ .L o o
9k,9 9 8 201,800
+999
«t* ,9 3 9
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
*
^
MEMORANDUM
FILES SECTION
MAY 211940
ft
.{ ^ 3
9 J (/ >
^
--- ---7 *'
Tot
Messrs* Van Fossen and Smead
From*
Mr# Daniels
May 20, 19^0
Svbjeoti Estimates of Earnings
and Expenses In Reallocations ef
System Open Market Acoount #
There are attached two tables comparing changes in participations
in the System Open Market Aocount at the last three real locations with changes
whioh would have resulted (1) had "Furniture and equipment” and "Depreciation
on bank building” been excluded from estimated esqpenses and (2 ) had earnings
and expenses on industrial advances and commitments been excluded from
estimated earnings and expenses#
Table I indicates, if proof were needed, that we should not exclude
depreciation and furniture and equipment from expenses In making these esti
mates, but rather continue to make adjustments as they appear necessary in
view of anticipated or reoent abnormal oharges to expense for depreoiation and
furniture and equipment#
Table II shows that the changes in allocations caaitting industrial
loan earnings and expenses would generally have been in the same direetion#
New York and Cleveland, especially, would have received saaller participations,
due primarily to the fact that the part of the total account allooated in pro
portion to expense requirements would have been larger# Philadelphia would have
gained considerably, and Atlanta and Minneapolis would have gained to a lesser
extent, owing mainly to relatively large net earnings on industrial advances.
These are the principal differences.
I believe we should in the future omit earnings and expenses of
industrial loans and commitments in estimating earnings and expenses, especially
since only Cleveland, Atlanta, and San Francisco now have any Federal Reserve
bank funds Involved in industrial loans# At Cleveland industrial loan earnings
and expenses are running about equal to one another, and at San FrancIsoo all
current net earnings are being appropriated to cover estimated losses# This
leaves Atlanta as the only bank for which it would be appropriate to include
industrial loan earnings and expenses (about 12 per cent) in making the esti
mates of earnings and expenses in the reallocations#
Attachments 2
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
D E C L A S S IF IE D
Authority fc.O* 1235B
nLv u
its
(*«.*»
-SEC 4.**
APR! 91968
K E M 0 R A S D lT K
To:
Messrs. Van Fos sen and Smead
From:
Mr* Daniels
May 20, lQqO
Subject: Estimates of Warnings
and Expenses in Reallocations of
System. Open Market Account •
There are attp.ched two tables comparing changes in participations
in the System Open Market Account at the last three real locations with changes
■which would have resulted (l) had rfFurniture and equipment” and "Depreciation
on bank building" been excluded from estimated expenses and (2) had earnings
and expanses on industrial advances and commitments been excluded from
estimated earnings and expenses.
Table I indicates, if proof were needed, that we should not exclude
depreciation and furniture and equipment from expenses in mailing these esti
mates, but rather continue to make adjustments as they appear necessary in
view of anticipated or recent abnormal charges to expense for depreciation and
furniture and equipment.
Table II shows that the changes in allocations omitting industrial
loan earnings and expenses would generally have been in the same direction.
New York and Cleveland, especially, would have received smaller participations,
due primarily to the fact that the part of the total account allocated in pro
portion to expense requirements would have been larger. Philadelphia would have
gained considerably, and Atlanta and Minneapolis would have gained to a lesser
extent, owing mainly to relatively large net earnings on industrial advances.
These are the principal differences.
I believe we should in the future omit earnings end expenses of
industrial loans and commitments in estimating earnings and expenses, especially
since only Cleveland, Atlanta, and San Francisco now have any Federal Reserve
bank funds involved in industrial loans. At Cleveland industrial loan earnings
and expenses are running about equal to one another, and at San Francisco all
current net earnings are being appropriated to cover estimated losses. This
leaves Atlanta as the only bank for which it would be appropriate to include
industrial loan earnings and expenses (about 12 per cent) in. making the esti
mates of earnings and expenses in the reallocations.
A11aebment s 2
,/ 3 '/6~
X
o
♦EH
-t
Ol o
W
W
a H
~
♦J
E C*
w. >“*
TABUS I
(In thousand* of d o lla r*)
October 1 ,
S W ««i
!
Reproduced from the Unclassified I Declassified Holdings of the National Archives
CHANGES IU RSCHfT ALLOCATIONS Of SYSTSM OPKS MARKET ACCOBHT CC&fPARSD
WITH CHAJIGES HAD DBFRBCIATIOH ASD FORWITURB AID ®qpiBffi!!T BBEW SXCLTOKD FROK ESTIMATED SXFSKBS*
serf®
Bank
“1
Btoluding
tJnder preaent j depreciation
forwula
I and furniture
(a
January L 19«o
Szoli^ing
Under preaeot < q rw )> tla i
and fu rn itu rt
formula
and •quipM xt*
A p ril 1 , 1 $ 10
Under present
fonaala
1,1 r 1
InHndlag
{•p rao iatlo a
and h n lt a n
and eqalpeent*
- 2 ,1 1 1
■*4,605
-2,736
-191
♦3.U28
*5»m
♦Uj.226
♦113 , 3m
-16.566
♦623
-8.873
♦20,192
♦2,009
-3,816
-8,91^
-8,901
..»» orr*
*4#|6 0
U0.l|D5
-775
-5,fll»2
-8,298
♦671*
RlohMsi
-9.7iK>
-17,705
-3.005
-k.’W
*695
Atlanta
-h.m
-llt.07 9
♦285
-3,825
♦U.lU*
Chicago
*k.(>70
*10,186
-5^*30
-5,661
♦u.006
-50.050
-35.277
♦27,079
Bo«toa
Warn York
Philadelphia
Cleveland
- 1.7 0 1
>
St* Louis
Minneapolis
C ity
~£#879
~ io ,ia 9
Dallae
San Francisco
♦U.128
-5,018
♦6,015
♦2.328
♦u.9 31
♦1.195
-1.333
-Wi.299
♦3,9*i6
- 3.298
-1.729
- 11,9 6 7
-H ,U 6
♦U.527
♦2,607
♦967
~£*ti27
♦3.9U3
♦633
*692
-1,550
-1,9^2
♦ feut not excluding apeelal adjustment* oa aooount of depreciation os fixed machinery and equipment •
♦1,017
I
t
§!
r
o >
*
in
fo £2
A
W
o
TABLE II
CHANGES IN RBCKfT ALLOCATIONS OF SYSTEM OPSN MARKET ACCOUNT COMPAH.SD WITH CHAHGSS HAD
m v m s A ^ SXPBHSES OK IWDOSTRIAL LOANS 8ES9 IPK2L0M© FROM SSTIMAT2D EARHIHGS AMD W B S I S , IBSFSCTim Y.
(In thmasaiaAs o f d o lla rs )
October 1.
Fodoral
Rooorw
Book
tfndor prosontj
forsnla
j
Boston
1939
January
.
mm* ad ta g
industrial
$OSUB
oporations
Ondar present
formula
0
ia] ,
Sxcludii^j
Industrial
loan
operations
13
A r .il 1. 19iiD..... ........ .....
ffg
industrial
TSndmr ; N M i t
fonsula
loan
operations
-2,786
-2,876
16,568
-21,261
♦18,465
-a ,9 ii*
-4,603
-5.255
«96l
10, 1(05
♦1,475
-5,842
-7.1*86
♦67b
-2.099
HwllMKIlril
-9 .ThO
-lD .llQ
1,863
♦695
♦2,775
A tlan ta
-4,793
♦1.729
♦1.567
M^llh
♦7.183
vhioago
♦4,670
♦1,10?
-5,1*30
-6,280
-34,183
♦27,079
♦36,095
♦2*328
♦688
♦
6,015
♦7,535
♦1.195
♦2,200
-2,111
X«v Tort:
♦26,439
Philadelphia
Cleveland
S t* Louis
♦ S it
♦2,009
♦
-
30,050
-
3.005
-
—
♦3,032
-
8,873
-12,627
+1.943
Xinneapolis
-2,879
♦3,673
Kansas C ity
-10,419
-11,919
♦3.946
♦ 3 ,U a
-1.72?
-3.044
-3,224
♦4.527
♦4,685
*9&?
♦863
*6,973
*633
♦i,al*6
-1.550
-1,875
D allas
San Franoisoo
♦4,128
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc .Q *
j**"'
... ■ -■■■
I!
,
'SC»D IN FILES SECTION
.
J
MAY 6 - 1940^
33 i 9 2 U A
v h .m °
Mr* R* G* Rouse, Vice President,
Federal Reserve Bank of New York,
"lew York, H. Y.
Dear Mr. Rouse:
As I told you over the telephone on Thursday,
we have prepared a draft of the report that might be
subraitted to the Federal Open Market Committee on ac
counting connected with the System Open Market Account*
This draft is, of course, in preliminary fora and in any
case would need considerable editing* You may have an
entirely different way of approaching the problem than
is followed in the attached draft, and, if so, I shall
be very glad to have you rewrite the report accordingly*
I am also enclosing a copy of a memorandum from Mr. Van
Fossen with regard to the formula for reallocations of
the System Account* This takes a sonewhat different
view than is enbodied In the draft*
The draft of the report, as enclosed, isay be
so worded as to enable one to infer the kind of recom
mendations I would be in favor of, but in any case I
assume we will have to get together to agree upon what
our reoosnendati ons will be if w® are called upon by
the Corariittee to raako them*
Sincerely yours,
E. L* Sraead, Chief,
Division of Bank Operations*
Enclosures 2
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc-Q* 12358
TH FILEK ACTION
i
'V A Y f i . 1940
...
DRAFT OF W M M m tm TO FEDERAL OFEI MARKET COMITT HE
May I*, 19&>*
At the mooting of tho Federal Open Market Comraittee in
Washington on M*j*ch 201 19)40, we were requested to stud^y the present basis
for the allooation of seourities in the System Open Markst Acoount and
the accounting procedure followed in connection with tho Account, to make
a report at the next meeting of the Federal Open Market Coomittee which
would include a statement of the 'various accounting procedures that might
be adopted for the System Aocount, and to be prepared to m k e recommendations
as to the proeedure that should be followed*
As we see the problem* there are three main questions to be oonsideredt
(l) how should United States Government seeurities owned by the
Federal Reserve banks be shown in the weekly press statement, (2) should pro
fits on sales of securities be used to write down the book value of security
holdings, and (3 ) should there be say change in the procedure under which
participations in the System Account are now allocated among the Federal Re
serve banks?
Amounts at which securities are shorn in published condition statements«
With respect to the first question, it is the present practice to
show Government securities in the statseaent at par and to Include premium on
securities purchased in ”Other assets” and discount on securities purchased
in "Other liabilities".
The premium is currently mortised into earnings to
the call date of the securities and the discount is accumulated into earnings
to the maturity date of the securities#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £..6* 1235%
Tot
Federal Opsn Market Canalttee
- 2 -
Two alternative methods have 'bees suggested for showing the
System*« holding# of Governs)*ob seeurities ia the weekly Federal Reserve
bexik condition statmont, as follow*!
(1 ) show securities at hook valu e,
l*e*, et per plus proRium and less discount, end (2 ) show the per value of
the seeurities as at present and show the amount of premium less disoount
as a separate asset item In the statement*
With respeet to the first suggestion^ i*e*, that seeurities be
shown in the weekly statement at hook value* the fallowing consents are of
fered*
It has been the praetlee since early in the histozy of the Systea to
iioff seeurities in published statements at their par value, principally, we
understand, in order to obviate any possibility of the public1 s gaining the
impression that there has been a ohango in the Systemfs holdings, when, as
a natter of faot, no ohange has taken placo*
Should seeurities be shown at
book value in published statements, reported holdings would fluctuate as a
result of the following, as well .as through purchases and salest
(1 ) amortixa-
tien of premium, whioh would reduce book value, (2 ) accumulation of discount,
which would inorease book value, and (3 ) valuation reserves an<1 charge-offs*
If United States Government securities were shown among assets in press state
ments at book value, they would normally be shown likewise in the maturity
classification, but if thought desirable they eould continue to be shown in
the maturity classification at par value*
With respeet to the seeond suggestion, it would be a siiaple natter
to show "let premium on U* S* Securities” as an asset item, say, .following
"Total bills and seeurities**
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £ ..6 « 12358
Tot
* 3 "
Federal Open Market Cosaaittee
16 accounting difficulties would be inirolved in showing United
States Government securities In the weekly pross statements in either of
the above ways, and neither would involve any mterial changes in the
accounting procedure now followed*
Profits on sales of United States Government securities*
Profits on sales of United States Govermaont securities are m m
treated as an addition to current net earning* and are used to ©over «at»
pauses or dividend* op are transferred to surplus, or to reserves for contin
gencies through surplus, depending upon the situation at eaoh Federal Reserve
bank*
In aeoordanoe with the plan approved toy the Federal Open larlast Com
mittee on November 30, 1937, profits on sales of United States Oovernment
securities beginning January 1, 1938, have been distributed among the Federal
Reserve banks in proportion to their average holdings in the System Aocount
since <Jon» JO, 1936*
Instead of accounting
fbr
profits on sales of United States Govern
ment securities as at present they could (a) toe used to write down the book
value of the System aocount, (to) toe set aside *s a valuation reserve and
deducted in the balance sheet from "Prewlua on securities**, or (0) be trans
ferred to reserves for contingencies *
With respect to (a) under our present practice idien securities
carried on the books at an amortised price of, say, 101 are sold at a profit
of two points and other securities are bought at 103* profits on securities
sold are increased and the net book value of the portfolio is increased by
a like amount*
The advisability of this so-called writing up the port*
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
Tot
Federal Open Market Copwittee
- 1* •
folio as a result of mioh sales and purohasos raay bo questioned.
Should profits on solos of soourlttos* either on so-called
switches or on outright sales, ho used to- writ* down th* hook m l m of
tho System Account it would ho necessary to distribute profit* among tho
Fodoral Boservo hanks on tho basis of their current participations in tho
Sy* % m Account*
It would not ho praotlo&blo to distribute th«a aiaong th*
Fodoral Reserve banks on th® bos Is of average participations In tho System
Aocount since June ^0# 1936*
If profits on switch*# or outright solos of securities aro usod
to write down th© book value of th* System Account they should, in our
opinion, continue to bo shown as profits on salos of securities in publish*
od statements of earnings and expenses of tho Fodoral Reserve banks*
With respect to th® second alternative, i*e*# tho use of profits
on sales of securities to ostabllsh valuation reserve# which would be do*
duoted from the prmtvm aocount* It may bo pointed out that if thia woro
d©as, and a substantial portion of our prosont contingent reserves woro aloo
allocated for that purpose* th* tlao would presumably oewo in the course of
the n»xt fow ysars when ths valuation reserve would equal tho amount of the
premium account.
In suoh oase tho amortisation of prmixm would have to bo
discontinued unless a portion of the valuation reserve woro either returned
to profit and loss or used as a reserve to reduoe tho book value of tho
System Aocount below par value*
The purpose sought to be acooi^plished by
this method, i«e«, reduction in the preiaiuia account, could be achieved
equally as well and more siraply by using profits to write off premium as
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
r
Toi
Authority fc.Q* 12358
Federal Open Market Cowaittee
-
5-
outlined in a lte rn a tiv e ( a ) *
la d p ro fits on sa le s of United States Ctovennsnfe so o u ritio s been
used during reoent years to w rit© down tha book m ine o f the p o rtfo lio or
to e sta b lish valuation reserves* there would havw boon d e f i c i t * in not
earnings o f the Federal Reserve bank®, a ft e r dividends, in 1935*
X93&*
Tho th ird a lte rn a tiv e mentioned above, i * e * * tho tra n sfe r o f
p r o fit * on sa lo s o f so o u ritio s to reserves fo r contingencies,would regular
is e a praotioe #vich has existed to a su bstan tial extent fo r a number o f
years*
P rio r to 1937 tran sfers to reserves fo r contingencies were charged
again st the our rent year* a earnings*
Since that date they have been charged
to surplus*
Reserves fo r oont infancies now held by the Federal Reserve banks
as a whole amount to
11 596*606 o f
$3k 062J9Qlh, as compared w ith - * ,
carried on the System Acoount as o f A p ril 22* 1 ^ 0 *
reserves* t
31*l*8l * 9k6 were
out o f surplus*
premium
Of the to ta l contingent
3 $*068
set up out o f current net earnings and $ #li
The System oould* o f course* a t any tin e i t saw f i t * use
the t31,ij31,9i.i6 o f contingent reserves se t aside out o f earnings to w rite
o f f an equal amount of the premium now carried on United States Goveraasnt
se c u ritie s*
I f suoh were done* however* the rate o f earnings on Government
se c u ritie s as shown in the earnings reports o f the Federal Reserve banks
would be suoh nearer the coupon ra te than a t present* as the premium amor
tisa tio n charge again st earnings would be g re a tly reduced*
Should i t be
deelded to oharge o f f a l l or a la rg e part o f the present praalum acoount.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
Toj
Federal Open Market Coawittee
1235%
- 6 -
the amount to be charged off by each Federal Reserve bank, in the absence
of instructions to the contrary, mould be based on its
tions in the System Account*
current participa
If desired, however, the amount of the
ehargc-off to be aade by each federal Beserve bank could be based on its
average daily participation in the Account since Juns 50, 1936*
Quarterly allocations of securities among Federal Reserve banks*
The procedure now fb1 1 owed in allocating participations In the
System Account among the Federal Reserve banks provides first tor allocating
a sufficient amount of securities to each Federal Reserve bank to cover its
expenses not taken care of by other earnings, and second to allocate the
remaining securities in the Systea Account among the Federal Reserve- banka
on the basis of their dividend requirements*
the relationship between the
expenses of individual Federal Reserve banks and total expenses of the Systea
is quite different from the relationship between dividend payments by indivi
dual Federal Reserve banks and total dividend payments by the System* Since
profits on sales of securities are now taken into earnings and thus reduce
the amount of securities needed by the Federal Reserve banks to produce
sufficient income to cover expenses, it is apparent that as profits increase
the amount of securities allocated to the Federal Reserve banks to cover
their expenses decreases, and the amount of securities allocated to the Fed
eral Reserve banks on the basis of dividend requirements increases*
#fhen
these profits are substantial there is a substantial fluctuation in participa
tions in the System Account on quarterly reallocation dates*
These fluctua
tions could be materially reduced if our formula for allocating securities
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
Tot
Federal Open Market Committee
1235B
- 7 -
enong the Federal Reserve banks were expanded to eiabrae® three steps Instead
ef the present two*
These steps might be as follows:
(1) allooate sufficient
securities to each Federal Reserve bank to oover expenses not taken oare of
by other ineoras, (2) allocate to each Federal Reserve bank a sufficient amount
of securities to cover dividend requirements, and (3 ) allooate the rwaaining
securities a wmg the Federal Reserve banks in proportion to their combined
expense and dividend requiresisnts.
If the Federal Open Market Comittee desires t ire shall be prepared
to sake reoowoendations nith respect to eaoh of the points discussed above*
Reproduced from the Unclassified / Declassified H oldings of the National Archives
DECLASSIFIED
Authority
To:
Federal Open Market Committee
- 2 -
Two alternative methods have been suggested for showing the
System*s holdings of Government securities in the weekly Federal Reserve
SL-
bank condition stal^ment, as follows:
(l) show securities at book value,
i.e*, at par plus premium and less discount, and (2) show the par value of
the securities as at present and show the amount of premium less discount
as a separate asset item in the statement*
With respect to the first suggestion, i*e*, that securities be
shown in the weekly statement at book value, the following comments are offered#
It has been the practice since early in the history of the System to
show securities in published statements at their par value, principally, we
understand, in order to obviate any possibility of the public’s gaining the
impression that there has been a change in the System*s holdings, when, as
a matter of fact, no change has taken place*
Should securities be shown at
book value in published statements, reported holdings would fluctuate as a
result of the following, as well as through purchases and sales:
(l) amortiza
tion of premium, ^friich would reduce book value, (2) accumulation of discount,
which would increase book value, and (3) valuation reserves and charge-offs#
If United States Government securities were shown among assets in press statei
&
r *■
ments at book value, they would normally be shown likewise in the maturity
classification, but if thought desirable they could continue to be shown in
the maturity classification at par value*
With respect to the second suggestion, it would be a simple matter
to show MNet premium on U« S* Securities” as an asset item, say, following
ttTotal bills and securities”.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
To:
1235B
Federal Open Market Committee
folio as a result of such sales and purchases may be questioned.
Should profits on sales of securities, either on so-called
switches or on outright sales, be used to 'write down the book value of
the System Account it would be necessary to distribute profits among the
Federal Reserve banks on the basis of their current participations in the
System Account• It would not be practicable to distribute them among the
Federal Reserve banks on the basis of average participations in the System
Account since June 30, 193&®
If profits on switches or outright sales of securities are used
to write down the book value of the System Account they should, in our
opinion, continue to be shown as profits on sales of securities in publish
ed statements of earnings and expenses of the Federal Reserve banks *
*/ith respect to the second alternative, i.e., the use of profits
on sales of securities to establish valuation reserves which would be de
ducted from the premium account, it may be pointed out that if this were
done, and a substantial portion of our present contingent reserves were also
allocated for that purpose, the time would presumably come in the course of
the next few years when the valuation reserve would equal the amount of the
premium account*
In such case the amortization of premium would have to be
discontinued unless a portion of the valuation reserve were either returned
to profit and loss or used as a reserve to reduce the book value of the
System Account below par value.
Tbe purpose sought to be accomplished by
this method, i.e., reduction in the premium account, could be achieved
equally as well and more simply by using profits to writ© off premium as
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £..Q« 1235%
^ORKlfcCTiON
APR1 9 1968
To:
Federal Open Market Committoe
among the Federal Reserve banks were expanded to embrace three steps instead
of the present two*
These steps might be as follows:
(l) allocate sufficient
securities to each Federal Reserve bank to cover expenses not taken care of
by other income, (2) allocate to each Federal Reserve bank a sufficient amount
of securities to cover dividend requirements, and (3 ) allocate the remaining
1
securities among the Federal Reserve banks in proportion to their combined
expense and dividend requirements.
If the Federal Open Karket Committee desires, we shall be prepared
to make recommendations with respect to each of the points discussed above*
y
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
RKC'D IN FILES SECTXOK
-'MAY 6 -1940 a
>t A
/ '% Z
^
/ /
J
f >
Dr
April 50, V $ P
Mr* Smead
Allocation of the
Mr. Van Fossen
Si’& t m Aacaunt
iA, ■
r*v ■
are
the
and
ing
In connection with the memorandum which you and Mr. Rouse
to submit in regard to profits on sale of Government securities,
method of reporting security holdings in the weekly statement,
the method of allocating the System Account, I have the follow
suggestions:
In accordance with long established oustom, the Federal
Reserve banks will undoubtedly continue to pay the regular dividend
even though not earned so long as they have sizable surplus accounts,
Accordingly, it is suggested that in allocating the System Open
Market Account, the first step be to allocate a sufficient amount
of securities to cover estimated expenses and dividends after isaking
allowance for earnings from other sources. Under the present for
mula any remaining securities would be allocated in proportion to
capital or to its equivalent, dividends. In support of this pro
cedure it m y be pointed out that if earnings over a period af years
averaged just about sufficient to cover expenses and dividends,
this method of allocating the System Account would result in the
accumulation by each Federal Reserve bank of excess earnings in pro
portion to their respective capital accounts and the drain on such
accumulated earnings in years ■when earnings were insufficient to
cover dividends would likewise be in proportion to capital. Accord
ingly, over the entire period the effect would be virtually the same
as we would have if earnings in each year were just sufficient to
cover earnings and dividends.
In further support of this method of allocating securities
in excess of amounts needed to cover expenses and dividends is the
fact that earnings of th© Federal Reserve banks are applied first
to cover expenses, losses, etc., and only such earnings as remain
are available for dividends. Inasmuch as it is likely that the Federal
Reserve banks will ordinarily have at least sufficient earnings to
cover expenses, there does not appear to be any reason for allocating
securities remaining after expenses and dividends have been provided
for on the basis of combined expenses and dividends as has been sug
gested. In this connection it should also be borne in nind that one
of the criticisms of our present formula is that a bank which reduces
its expenses gets very little benefit therefrom and a bank 'which
spends money freely gets an allocation sufficient to cover its expenses
so that so far as the allocation of the System Account is concerned
there is no inducement for a bank to keep down its expenses. To
allooate securities remaining, after expenses and dividends have bssu
R e p ro d u c e d from the U ncla ssified
I D ecla ssified
H o ld in g s of the N a tio n a l A rc h iv e s
DECLASSIFIED
A uthority
tot
Mr. Snead
12 -^ 5 8
- 2 -
provided for, in proportion to expenses and dividends combined
would is. addition give a larger share of excess earning* to tho
bank that does not hold down Its expense*.
IBtlle in norm! oiro«s*tanoo* the only drain upon *urpin* is likely t o be to pay a portion of dividend* in year* when
earning* are low, it i* posaible, of oourse, for the Federal Re
serve bank* to sustain hea-ry loss#* on investments which Blight
necessitate a substantial charge to surplus or to reserves for
contingencies. Accordingly, there is something to be said in
favor of allocating securities regaining, after expenses and div
idend* have been provided for, in such a way as to equali£e the
position of the varlou* Federal Reserve bank* in respect to *urplus and reserve* for contingencies 1 aa in fact inclined to
favor a formula whioh will aooooplish thi* objective. If such a
formula 1 * to be adopted the first con*ideration would be to
decide upon a ba*i* of comparison. For thi* purpose, 1 would
suggest total deposits of sienfeer banks in each Federal Reserve
diatriot on the theory that this represents as good a neasure a*
ww e*a find of the potential relative risk to each Federal Re
serve bank of granting d ia o o u n t aoeawaodatlon t o it# iwwfeer bank*.
My *uggestion would be that after allocating a sufficient anount
of *ecuritie* to cover expenses and dividends, the remaining
securities be divided equally among the Federal Reserve bank*
that have a ratio of aurplu* (Section 7) plu* other oapital
aocount* to total deposits of its mewber bank* less than the
similar ratio for the System as a whole, with the provision that
thla special allocation *ball not exceed $50,000,000 for any bank*
I would then allocate any securities still remaining in propor
tion to capital.
Following is a table showing the amount of surplus
(Section 7) plus other oapital aocount* of each Federal Reserve
bank, total ®eaber bank depoeit*, the ratio of the former to the
latter, and the ratio of dividend* of eaoh bank to the Sy*tea
total and of expen»e* and dividend* of each bank to the Sy*tem»
Reproduced from the Unclassified I Declassified Holdings of the National Archives
_
r
to*
D E C L A S S IF IE D
Authority
Mr, Snead
1M 58
~ $ -
(In t t o a m d i)
... l u M a t .fS ™ ? ! Y .....
Federal
Reserve
ItmmV
pltxa "other cap ital"
accounts
M ultiple*
Amount | o f < H
T M r 'i
dividend*
12,231
21.8
l6.l&h
20.9
23.1
Boston
lew York
Philadelphia
63.946
Cleveland
Richmond
Atlanta
18,153
6,808
7.474
Chloage
S t, Locals
Minneapolis
Kansas City
B alias
San Frenelseo
to ta l
21.6
21.5
26.9
Total
member
depoaits
Ratio o f
Ratio o f Ratio o f expenaea
C o l*l to
d iv i
and
d iv idends
Col* 3
to
denda
(percent)
to to ta l
to ta l
2,767.556
18.011,692
3,256,029
.355
.507
3,882.686
1,958,959
l,7l<9.278
•2j£3
.& 8
Ji27
6,977,1(1)5
1,732,025
1,134,6 lit,
Jm
*U&
29,866
6,250
36.6
21.2
5,215
29.5
4,909
5,861*
12.1&0
18.7
23.8
19.5
4.928,038
.571
*253
189,700
23.2
49.31(0.152
.384
1, 858,726
1, 582,112
.361
MO
6.87
37.56
7.25
27.95
8.19
10.29
3.87
3.140
10.05
8.76
9.98
3.02
2.17
3.21
3.01
7.86
100.00
4.37
11.23
4.76
3.20
5.26
3
8.34
100*00
I t w ill bo noted that surplus (Section 7 ) plus other capital
accounta fo r the System aa a i&ole ia su fficien t to cover dividends at
the present rate fo r slig h tly over twenty-three years and that in the
ease o f the Chicago, Hixme^polis, Atlanta* and D allas banks the ra tio
ia higher than fo r the twelve banks combined, It w ill a lso be noted
that fa r the 9ysteai aa a whole surplus (Section 7 ) plus other capital
accounts la equal to .581+ e f one peroent o f to ta l wambmt bank deposits
and that th is percentage la higher than fo r the System at the Federal
Reserve banka e f Philadelphia* Cleveland* Minneapolis* Boston* Chieago*
and A tlanta. Allooation o f the Syataai Account in accordance with the
proposed plan would* o f course* tend to reduce the percentage fo r these
t lx banka and increase that o f the other six .
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
Toj
Mr.
12358
-l4-
19
Below is a oanparison using t o m r y 1#
I # , fig u re s o f
the d istrib u tio n o f the ^62*973*000 o f se c u ritie s remaining a ft e r
expenses sad dividends have been provided fort
Federal
Reserve
Bank
Boston
I m York
Philadelph ia
(in thousands)
A llo catio n or rem in der or account
On i t i i i o f
Under present la proportion
surplus n d
formula* i te M to dividsnda
in proportion •ad •acponaM other e *p it«J
to dividends
•M o n ti
41,396
33.349
133.055
37.194
11,284
111,273
14,571
Cleveland
Riohaond
A tlan ta
47.259
17.651
15.658
47.211
24,783
19,473
16,636
56,213
5,512
Chisago
S t. Louis
MlfinespoT 1a
46.006
13.893
10,021
50,782
22,311
14,530
16,195
54,891
3,528
Kansas C ity
D allas
San Frans iseo
l4,7fc?
13.894
36.30B
23,226
18,479
38,580
55,191
54,891
62,788
462.973
462,973
462,973
T otal
32,057
1714,061
la colons 1 is the d istrib u tio n under the present form ula,
as a c tu a lly aside m J u n sry X* In ooltaas 2 Is the d istrib u tio n that
would have besn made i f these se e u ritie s had been allo eated in pro*
portion to dividends and expenses, and in oolxaa 3 1* the d istrib u
tio n that would have been nade i f the Federal Reserve banks o f le v
York, Richmond, S t, Louis, Kansas C ity , D a lla s , and San Franciseo
had eaoh been a llo e a te d 150,000,000 and the remaining #162,973*000
had then been allo eated to the twelve banks in proportion to c a p ita l*
R e p r o d u c e d fro m the U n c l a s s i fi e d
I D e c l a s s i fi e d
H o l d i n g s o f th e N a ti o n a l A r c h i v e s
DECLASSIFIED
uthority £..£)« 12^5%
To*
Mr* Smead
- 5 -
fh e following observation# appear to be la order:
Boston, Philadelphia* Cletolaild* Atlanta* Chicago, aad
Minneapolist ... .
According to the above mentioned standard, the surplus plus
th* r « t « m for contingencies at oach o f these banka is too largo and
tha proposed forwala would substantially reduoe it# participation.
low York i
Surplus is too sn a il. Proposed formula would tend to build
it up but net aa rapidly ft# present fom u la.
Klohmond, St. Louis, lanaas C ity, Dallas, and San Francl#oot
Surplus too n a i l *
increase partioipation*
Proposed formula mould substantially
'^
Attention A# ealled to the faot that i f the plan o f a llo c a t
ing exness seeuritiea in proportion to dividends and expenses were
adopted, the e ffe e t on the allocation of the Sy#t«m Acoount would be .In
the wrong direotioa im the ea#e of the liohaagjag * Atlanta* Chieago,
H I l i * and Minneapolis Banks and in -.all the other oase# the- change in
the bank#* participation, while in tfee righ t direction* would be mswh
less substantial than it would be under the other proposal.
In order not 'to take away on one allocation shat is granted .in
the preceding allocation , it i# reooousaded th at -each quarterly allo ca
tion be made a#- .if it were fo r ft 12 r a t h period* just as the January 1
allocation now i s , or that the allocation be made but omee a year here
a fte r. Instead o f estimates based on figures fo r 5 months, t b e lie v e it
wonld be preferable t o '«*## actual fig u re # fo r the preceding 12 months
both in the ea*e e f expanses and of earning# other than on Government
secu rities.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E ..0 * 1 2 3 5 8
XH FILES SECTION
MAR 3 0 1940
1. liiflrnii ---- -
Fe d e r a l R e s e r v e B a n k
o f N ew Y ork
March 29, 194-0
Dear Mr. Smead:
We received your letter of Marches jmd have today
sent to the Reserve banks a copy of the computation showing the
adjustments to be made in participations in the System Open
Market Account on April 1, 194-0, pursuant to the plan adopted
at the meeting of the Federal Open Market Committee on November
30, 1937.
Enclosed herewith is copy of the letter of transmittal
together with three copies of the computation, also copy of the
telegram which was sent to each of the Federal Reserve banks
today*
Yours faithfully,
Robert G. Rouse,
Manager, System Open
Market Account.
Mr* E. L* Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C*
*
nuassiTied / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
E.0« 12358
M IS C . 14 0 -B -1 5 M-10 3 8
March
29# 1940
D»ar Mr* S in clair t
In tccordtoc* with my
f today, 2 end***
herawlth conputAtion o f tb#
bs anaiift cm April
l f 1940, o f th* participate
Basarve banka
In th* fi^staa
Hobart G * B o o s e ,
8am g«r, Strata® Open
Market Aceount*
l r » John S« S in c la ir, Pr*aidant#
Fadaral Bftstnt Bank otf Philadelphia,
Philadelphia* Ft*
Sa d *
produced from the U nclassified / D ecla ssified H oldings o f the N ational
--------------------------------
DECLASSIFIED
>
;SC
UOA
13 M
Authority
12.358
a-3^
FEDERAL.
RESERVE
BANK
OF
NEW
YORK
SECURITIES DEPT* - HAH/JV
March 29, V&O
Please fin i following t i l i g r a to tha President « f aach Federal Reeerve bank
as indicated below:
Under tb* plan for reallocation of Qovarawnt eecuritie s adopted by
the Federal Open Market Gasmittee Itam ber 30, 1937» a readmetaent of partici
pations In Qorenu*nt securities held In the Staten Aocount le eel led fo r A pril
1, 1&0.
the computation* ehoTring adjustments te be made In partial potions of
the eereral Federal Reeerre banks is betpg sent to a l l Reserve banks today#
increase
These ooaptjtationa Indicate m .
of
In your participation
daoreaae
on
l j r 11 ! ♦
l a shall wire
you an A prp X th ^ di
d entries to he aad* on
that date«
Toung
Sinclair
Flexing
Leach
Paricar
Schaller
Martin
Nytifi
Has<**
Oilbart
Day
Boston
^phla
ClaTalm
Ridurad
Atlanta
Ohio ago
5t« Louie
Minneapolis
Kansas City
Dellae
San Francisco
*3^28,000
5,255,000
6 7 k ,0 0 0
695.000
U,lU4#000
U, 006,000
2,328,000
1,195,00©
1,789,000
967.000
1 , 550,000
HDUSK
DSFIDENTIAL
(In thousands of dollars)
System
A - Expanses
1. Estimated current expenses, 19^0
B - Earnings
1. Estimated ourrent earnings, I9I4O
(exclusive of earnings on Govts.)
2. Estimated earnings on Govt*
securities to March 31
3. Net profits on sales of Govt*
securities to Maroh 28
U.
Total
C - Exoess of "A-l" over nB-Uw
Boston
New
York
Phila
delphia
Cleve
land
Rich
mond
Minn
Atlanta
e a p o lis
7,270
2,316
2,879
1,700
1,338
3,337
1 ,5 1 3
1,007
1,682
1,217
2 .1M
1,590
79
305
2iil
108
112
73
2 17
'^1
55
187
36
156
10 ,76 3
770
3,268
883
1,098
51j6
U36
1,16 0
1483
318
50U
I4IO
887
571
A<2
165
U3
57
30
2h
63
26
18
28
22
1£
12.921*
891
3,738
1,172
1,263
688
533
1,1*140
530
391
719
1)68
1.091
15,1398
1,228
3,532
l.lU;
1,6 16
1 ,0 1 2
805
1,897
983
616
963
71*9
1,353
8 ,16 6
561
i,2r/->,6RQ
270
7 3,8 16
57,142
103,710
177
262
2146
6/42
38,010 27,238
1<0,319
37,857
98,797
253,136 126,201 10 U ,/-£6
270,828 113,359 7U,U56 Hl+,135
95.269
202,507
2 5 2 ,^ 2 125,506 100,372
266,822 1 1 1 , 0 3 1 73,261 1 1 5 ,861+ 9U, 302
201+,057
97,690
123,869
77,572
61,705
1^5,^408
3,067
715
8!j0
316
278
815
96,332
U71,978
110,031
129,267
148,629
1*2 ,7 8 1
125,1420
G - Total allocation of Government
securities ("D" plus "F")
2.J+75.270 130,lj60
7i-i2,7l2
197,721
H - Present allocations
2.U75.270 177,032
751,585
202,976
-3,873
-5,255
I - Change in allocations
San
Fria ciiflfl
2,119
9U,129
- Allocation of remainder of System
holdings ($2 ,^7 5 ,270,000 less
♦1,218,611,000) on basis of "E"
Dallas
28, 8° ?
D - Allocation required (on basis of 1.73156$
earninga rate on Govts.) to produce
1 ,2 1 a ,6 11
earnings April-Deoember equal to ”C"
£ - Estimated dividends
Kansas
City
-
+3J429
+67U
+695
♦U,nU
+U,006
75,31+9 147,218
2l+7
♦2,328 +1,195
-1,729
♦967
-1,550
Reproduced from the Unclassified I Declassified Holdings of the National Archives
REALLOCATION OF GOVERNMENT SECURITIES IN SYSTEM OPEN MARKET,ACCOUNT ON APRIL 1, I9I4O
>
C
i
&
!
§•
* w
r t\ O
r
o >
*
— in
&
'« %
W
O
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
12358
j REC'D IN FILES SECTION
I d - MAR 2 9 1940
[ 3
33r
March 28f 19140.
Hr, R. 0. Rouse, Vie® President,
4 Federal Reserve Bazik of Hew York,
Hew York, Hew York*
Dear Mr. Route *
There is enclosed a oopy o f tho table
showing ohaages accessary la holdiagS o f JEJaited
State* government securities o f the various Fed
eral Reserve banks oa A p ril 1, 19lj0, under the
formula for reallooatioas of the ^System Opea
Market Aooount.
Current expeases sad ourreat earalags
(exelusive of earniags oa Government securities)
were estimated by multiplying the amounts for
October, 1939# through February, 19lP» by 2.U#
exoept that adjustmeats were made la the figures
fo r Hew York aad St. Louis as described below.
la oomputiag the estimates of earnings
aad expeases fo r the Hew York Baak earalags aad
expenses of the Aaaex Building were excluded from
the figures for the base period aad to tho result
thus obtaiaed budget amounts for earalags aad
expeases o f the Annex Building for 19l)0 were added.
The estimate of expenses fo r the St. Louis Baak
obtaiaed la accordance with the regular formula
was increased by |150,000, as was doae at the time
of the January 1 reallooatloa. I have discussed
these adjustments over tho telephone with Mr* Behreas.
Very tru ly yours.
htj
J* R. Van Fosseat Asst. Chief,
Division of Bsak Operatioas.
Enclosure 1 .
f o r Vi h
r
^
Reproduced from the Unclassified I Declassified Holdings of the National Archives
25
O
M
Eh!
O CD
REALLOCATIO* OF (X>VER10fE*T SSCURITm I I STSTKM OPES XHBm ACC001T OS APRIL 1, 19l#
cn
(2a thousand* o f d o lla r*}
cr*
w T5T
CSC
x
■f
' Systssi
KxxMMMriMt
1. }£ottaatod current aacpenses, 19^1/
B * Earning*
1* Istiaated current earnings, 19M*
(exclusive of earnings oa 0o*t*.)±/ /
2, Estimated earnings m Govt*
securities to March 31
3* Set p ro fit* on sales o f Oott*
securities to larofe 26
4.
*S*4**
m —
BOW
York
Phila
delphia
C le W - ] kiehland
Atlanta
Chicago
Minn- Kansas
St,
^LoiiiJL aurella ■filter
Dallas
[Fnmciigfl
28,822
2,119
7,270
2.316
2#879
1.700
1,333
3.337
1.513
1,007
1,682
1,21?
2.1M
1.590
79
305
214
108
112
73
217
21
55
18?
36
156
770
3,268
883
1.098
5Jj6
436
1,160
483
318
50ii
1*10
887
1(2
165
1)8
57
30
2b
63
26
18
28
22
48
891y
3.738 '
1.172 y
1.263 v
533 y
1,1*140 y
530 y
391 '
15.896 ^ 1,228 ‘
3.532 -
1.11*1* y
1,616 - 1,012
805 y
1,897
983
10.763
571
'
/
12,921* >
Total
C * Excess o f *A-1* o w
Boston
688 7
y 616
'
719 y
1£8 7
1,091
963 '
71*9 ;
1,353
B - Allooation r e t i r e d (on basis o f 1.7315^
earning* rat# on Gorfcs.) to produce
1,218,6117 94.128
£ * Estimated dividends 3/
?
Allocation o f reaaiador o f Syvtea
holdings (# 2, 1175, 270,000 leas
11,218,611,000) m basis o f *S*
8,166 •'
561
270.731*
87.690
123,869
77,572
61.705
ll*5 ,lp 8
3.067
715
Qlfi
316
278
815
471.978
110,031
129,267
0 * Total allooation o f Sowmwmt
securities ("D" plus *F*)
2,U75,270 180,460 • 7142.712
197.721
H - Present allocations
2.U75.270 177.032
751.585
202.976
-8.873
-5.255
1 - Change ia allooations
1.256.659 J86,332
_
♦3.428
1/ See l e t t e r t o Mr* Rouse
2/ A c tu a l r a t e used - . 0130 I46 (275/365 X 1.73156#)
J / D ividen ds a c cru ed , Febru ary 29, p lu s 5?® o f p a i d - i n c a p i t a l stock on March 20
1(2,781
125,420
75.31*9 1*7.218
2k7
‘V#
177
38,010 27,238
73,816
57.1*12
103,710
262
246
61)2
1(0,319
37,857
98,797
253,136 126,201 101*^36
270,828 113,359 74,456 lll*,1 3 5
95.269
202,507
252, 1*62 125,506
100,372
266,822
94.302
204,057
♦4.114
♦4.006
♦967
-1,550
♦674
1*8.629
♦695
111,031
73.261 115,861*
♦2,328 *1,195
-1,729
rry O
‘ r
o >
* in
—- C/3.
5> 3
» g
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
12358
April 1 reallocation
Hr, Sinead
Hr, Van Posaen
In oonneotion with the fortboosting reallocation in
theSystsei Open Hsricet Aocount, ttie question arises &# to h(W
we should arrive at th# lew York estimated earnings and #x~
penses for 19^0 in vi«v of th# fact that #arning# and expense#
in connection with th# Annex Building will be reported a# such
currently instead of being included for th# year as a whole in
th# Deesmber figure# |i m s don# in 1939 *
Sit York1# functional expens# report she**#, that ex~
pen### in oonneotion with the Annex Building during. 1939 totaled
$93,726,92 and earnings 162,116,19, These amounts, a# indicated
above, were Included in the December earning# and expense state**
inents. Following i# a table aiuariijg various estimates of 19^.0
earning# and expanse# as wall aa the actual figure# fo r 1939
n*ti«h, o f oourse, inolude figures connected with the Annex
Building* You will note that lay suggestion is that th# figure#
of both earnings and expense# obtained according to the usual
fonsula be reduced by $ 125, 000, I t may be that this. slig h tly
over eatisates th# asioimt of the expen###, but it 1# believed
that it definitely over states the earnings and, accordingly,
it is believed that the net result is satisfactory and incidentally
pretty closely in line with the 1939 actual figure#,
FEDERAL RESERVE BANK OF S M YORK
'Earning#
other than
o r Oorts,
Expense#
(m thousand# o f d ollar#}
1939 * Aetual
IS m - Jan, 1 estimate*
April 1 ##ti»at#**
Six times Jan, & Feb.
April 1 estimate adjusted
Proposed adjusted eatiraate
7,312
7,3**6
7tW4
7,303
7*2*3*
7#53&
3^3
229
I|25
266
299
3®®
eBased on Ju ly to loveaber aooording to fomula
**Based on October to February aocording to forsaila
-
*
>
R
L
E
C
O
P
Y
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority fc.Q* 12358
strictly c
o
n
f
i
d
e
n
t
I
APR 2 61968
PROFITS ON SWITCHES IN SYSTEM ACCOUNT |
3 3
3 ,
*
~
A question has been raised as to whether the present accounting
procedure used in the System Account may at times be a deterrent to the
,
proper administration of the Account, The procedure in question is that
/ y y' 0
by which profits on switches in the Account are added to current profits
and the securities purchased taken up at cost. The alternative under con
sideration is to use the profits to write down the premium account on the
System^ books.
In carrying out the policies of the Fodcral Open Market Com
mittee seeking to maintain orderly market conditions, it is frequently
desirable to make shifts in the System Account by selling individual is
sues that are in considerable demand and buying issues in considerable
supply, particularly if the shift would be advantageous to the Account.
These shifts can properly be made at times when the market as a whole does
not need outright purchase© or sales by the System Account, At times like
the present when the market is above book value, each shift (l) increases
.the book value of the System Account, although the par value remains un
changed, (2) reduces future income from the Account, and (3) increases
current profits.
The suggestion has been made that the accounting practice should
be reconsidered, because there is a possibility that it may militate
against the execution of transactions that are desirable from the point
of view of both the market and tho Account, At times when the market is
above book value there may be some hesitancy to undertake otherwise desir
able transactions, because (l) to the extent that the book value is written
up and immediate profits are taken the possibility of incurring losses in
the future is increased and (2) to the extent that current income is re
duced the possibility of failing to meet System expenses in the future is
increased. At times when tho market is below book value there may also be
hesitancy to undertake otherwise dosirable transactions, because of an un
willingness to take losses*
An alternate procedure would be to use the profit on the issue
sold in a switch to write down the cost price of the issue purchased,
either directly or after this profit has been carried through the profit
and loss account. If this principle were applied when securities are
sold at a loss, it would be necessary to add the loss to the cost of the
issue purchased. From the accounting point of view a switch may be con
sidered in either of two lights* The present accounting practice considers
the purchase and the sale in a switch as two separate transactions. From
another point of view a switch is somewhat in the nature of an exchange,
because in most routine switches both sides of the transaction are com
pleted simultaneously and the total par value of the System^ investment
in Government s#curities is not altered. From this point of view the dif
ference between book value and selling price is not the same kind of a
profit or loss that results from outright sales* The existing practice
amounts in effect under present market conditions to a write-up of the
System1s portfolio whenever a switch is made in the Account and results
in a decrease in the current rate of earnings on the Account,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
12358
It is recognized that the ultimate return to the System Aocount
on its investment in Government securities will not be known unless and
until the entire Account is liquidated. The ultimate return at that time
would be the same, regardless of the accounting practices that are fol
lowed in the interim. The question for consideration is whether better
current results are provided by the existing procedure or by the use of
profits either on switches or on outright sales as well to write down
the cost of the issues purchased. Incidentally, if profits on sales of
securities were used to write down premiums, changes in the holdings of
the several banks in the Account on quarterly reallocation dates would
be substantially less than under the present procedure.
It may be noted in this connoction that profits and losses are
distributed-among individual Reserve banks on the basis of average hold
ings in the Account since June 30, 1936, The premium account and current
earnings, however, are distributed on the basis of the current participa
tion. Should it be decided to use profits to write off premiums paid,
the simplest procedure would be to make the entries on the basis of cur
rent holdings rather than to continue to distribute profits on the basis
of average holdings since June 30, 1936. This is a question, however,
that would need to have the consideration of the committee.
REALLOCATION OF GOVErJ&EIJT SECUTttTI* c I.
System
0 ^ ^ ^ s t i i i a t e d ourrent expenses, 19^0 28,772
T New Phila
Boston 1 York delphia
2,079
7,3l»6
2 ,3 3 5
SYSTM
C le v e
la n d
2,891
OPEK 1ARKLT ACOOUi’T 01. JAI.UAP.Y 1, I 9L0
R ich
A tlanta^ Chicago
mond
1.669
1,2 6 5
Minn
e a p o lis
§ t;
Lo u is
3,286
1 , 1.86
998
Kansas
C it y
1,7 11
San
Dallas Franoisco
1,210
2 .U76
1
Got* t s )
C* Excess o f A -l orer B -l
1,502
92
229
216
111
loll
51
211
2h
65
1SU
hi
lfl*
27,270
1,987
7 ,1 1 7
2 ,1 1 7
2,780
1,505
1.211;
3,075
1.W 2
935
1 .5 1 7
1,16 9
2,312
&• Allooatlon required (on basis of
l«75li0( earn ingrate an Got* ts )
to produce earnings equal to *C " l,557,0l|0
1« Estimated dividends, 19b0
F. Allocation of remainder of System
holdings (*2,i*fl!t,270,000 less
•l#357»ObO,000) on basis of nE"
8 ,13 1
927.230
113,1.52 1406,36012c;875158,730 90,1»99
563
3,057
727
830
310
ai.2O53li8.609 82,905 9li,650 3 5 .3 5 1
69,316 175,57!;83,1)76
275
£08
31,360 9 2 ,li2
53,386
2U|.
176
27,825
20.070
86,616
259
29,535
66,71*7 132,009
2l|lt.
636
27,825 7 2 .7 55
0* Total allocation o f Got* ts
( " i f plus " F * )
2 ,bBk, 270 177.6 55 75li.969 203,780 253, 530125^50 100.676 267,716 111,301 73,l.'-56 116,151 9I1.572 2oL.,76l*
Mm Present allocations
2 ,!i8/.'.,270 18 0 .36 1771,537 212,62t 259,222 126,855 100,391 273,11-6
8!',222
+285 - 5,!'30
+27,079
!• Change in allooations
- 2,726 - 16*568 - 8 ,91k - 5, 8li2 -3,005
67,I'M 112,90c
+6,015
♦3,9/j 6
90,0li5 20t'.,131
♦It, 527
*633
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
12358
v
I
f e ’D IN RECORDS SECTION)
\\VV
APR1 $ 1968
Fe d
era l
of
R
eser v e
B
ank
N e w Yo r k
December 29, 1959
Dear Mr, Smead
We received your letter of December 28jand have
today sent to the Reserve banks a copy of the computation
showing the adjustments to be made in participations in the
System Open Market Account on January 2, 1940, as of January
1, 1940, pursuant to the plan adopted at the meeting of the
Federal Open Market Committee on November 50, 1957.
Enclosed herewith is copy of the letter of trans
mittal together with three copies of the computation, also
copy of the telegram which was sent to each of the Federal
Reserve banks today.
lours faithfully,
Manager, System Open
Market Account.
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Ends. (5)
4
R eproduced from the U nclassified
I D eclassified H oldings of the N ational A rchives
~DECLASSIFIED
.orrty L/)- llHSo
SiAllur letter aent to Pr©«id«nt of «aoh Federal Reaterye Bank except New York
ttr* fm m g i
Ib *o#^'rd®aao* trlife
fcrtrirwtttJa
t©l»grsifc of to^Iay# X sueload
of i&*
to t># *&&« om
Janu* 17 tf 1940, *9 of ^ms&ary 1, 1940, of* tfcw
o-f % im
f a m r T * b m fc * In th©
% « s ll*;ritrfc port
folio*
Y<5mr# f&lf&fclly*
iob«rt 0* Bos**,
S«®.e^)0r^ %*t*« Qrp%&
Barkat AocoaPt
Honorable Boy A* Young, President,
Fi&Wjfl*! Rc*enre B«©k o f B© atoll*
i o ^ t ^ §&*#«
patios*
December m» 1939,
P I m m * m & following t*legraa to each President of the Federal Reserve Banka
as Indicated belewi
Bader the plan fo r realloeation o f Government aeeuritiea adopted ty
the Federal Open Metricet
Geastttee
SoveKber
50,
19 57, a readjustment o f participa
tion* in Government securities held ia the Astern Account is ealled for January
1, 1940*
the computations showing adjustments to be made ia participations of
the several Federal Reserve beaks i t being sent to all Reserve banka today*
M
These computations indicate an
on famaxy 1*
decrease
of .mrr-irii.n-.•.v«r«.
in your participation
We shall wire yon on January f the detailed entriea to be made
on that date ae of Januazy
1*
JOTS!
iasxsm
Jmmg
Sinclair
Vlesdsfcg
'"W
Parker
Sehaller
Martin
f^r%m
Hamilton
Hilbert
Day
Bo aton
Philadelphia
Cleveland
Meiiaond
Atlanta
CMoago
it* Louis
Mlnttaapol f fi
Kansas 0l1y
Bailee
San Francisco
«o»
«#o*»
«*o*»
«*0*»
285,000
27*079*000
8,015,000
5,940,000
4^ 7,000
655,000
t e a m
| £,728,000
8,014,000
8,842,000
$,005,000
5,480,000
«#0#»
mQmn
■wO"*
••0*“
f
o ONj IDE-TIAL
REALLOCATICK OF GOVEMilEL'T S E C U x L T r c
I.
SY STH
OIKK IAKKLT AC^Oi :.T Oi, JA M ’A fY
(in thousands of dollars)
New Phila Cleve Rich
Atlanta Chicago
mond
York delphia land
San
Dallas Francisco
998
1 ,7 1 1
1,?10
2l-
63
19*'
111
Id
3,075
1,1:62
935
1,5 17
1,169
2 .312
‘^ ,3 1 6 175.57li
83,176
08
2U<
176
299
2lJ’
638
31,360 92,11 2
27,825
20,070
29, *535
2 7 ,°2 5
72,755
253,^0 125,850 100,676 267,716
11 1 ,3 0 1
73,l'-56
Boston
A. Expenses
( 1) Estimated current expenses, 19^0
28,772
2,079
7,31)6
2,335
2,891
1,689
1,265
3,286
1,1.86
P ’'Warnings
( l ) Estimated ourrent earnings, 191-0
(exclusive of earnings on
Gov* ts)
1,502
92
229
216
111
Id '
51
211
27,270
1,987
7 ,1 1 7
2 ,117
2,780
1,5^5
D. Allocation required (on basis of
1.7 5 1W earning rate on Gov’ ts)
to produce earnings equal to "C” l,557,OliO
E. Estimated dividends, 19^0
F . A llo c a t i o n o f remainder o f System
h o ld in g s ($2,l'8l'.,270,000 le s s
* l
p j r s l . r\ r v r v r ^ ^
^
#
1 .5c 5
7 .OJjO.OOO) cm b e a is o
f "E "
G
Jotal a l lo c a t i o n o f G ov*Is
(" D " p lu s HFn )
H. P resen t a l lo c a t i o n s
I * Change in a l lo c a t i o n s
4
113 ,J.52 1*06,360 12(^875 158,730 90,1-99
8 ,13 1
5&> 3*057
927,230
6Ll,20331'8,609
727
177,655 75L,969 203,780
2 , 1:81',270
1 ^ 0 , 3 8 1 771,537
—
630
310
82,905 9^,650 35,351
2 , J'.Bl', 270
212,64i
1 9 l’0
Kansas
City
St#
Louis
System
C. Excess of A -l over B-l
1,
259,222 128,855
- 2,726 - 16*568 -e , 911.1 - 5 , 81-2 -3 ,0 05
1,21!
275
100,391
273 , 11:6
♦2 8 - - 5 , 1*30
Ivtinrieapolis
53,3R6 86,6l6
1 1 6 ,1 5 1
8)*, ° ?2 67, 1-M 1 1 ? , ° 0K
+?7 , 0?(v
♦ 6,015
♦5 ,9 )i6
2 ,1(76
66,717 1-3‘-.009
9f-,572 2o1',761i
° o , o l -5
20) ,1 3 1
+1*, 527
+633
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority £..Q« V23SB
December 28,
1939*
M r. R* 0* House, V ic e P r e s id e n t ,
f e d e r a l Reserve Bank o f How Y o rk ,
New Y o rk , New York#
Bear M r. Rouset
There i s en closed a oopy o f the t a b le showing the
changes n e ce ssary i n h o ld in g s o f U n ited S ta te s Government
s e c u r i t i e s # d i r e c t and gu a ra n te ed , by th e m r io u s F e d e ra l Re
s e rv e banks on January 1, 19U0, under th e form ula f o r R e
a l lo c a t i o n s o f the System Open Market Aooount.
^ C u rre n te x p e n se s and c u rren t e a rn in g s (e x c lu s iv e o f
ea rn in g s on Governments) hr.-*e been estim ated b y m u lt ip ly in g the
a c t u a l amounts t h e r e o f f o r J u ly through November 1939 hy 2 .U *
We have deducted from the e stim ate o f c u rre n t expenses f o r
Chicago o b ta in e d on t h is b a s is tljlj.,000 i n v ie w o f an adjustm ent
i n annual d e p r e c ia t io n ch arges on th e Chicago and D e t r o it b u i l d
i n g s . We have added 1150,000 to the estim ate o f cu rren t ex
penses fo r S t . Louis b ec au se o f th e p r o s p e c t iv e in c re a s e in
d e p r e c ia t io n o f fi x e d m achinery and equipment due t o the
i n s t a l l a t i o n o f a i r c o n d itio n in g a t th e head o f f i c e and
branches «
Very t r u l y y o u rs ,
E . L* Smead, C h ie f,
D iv is io n o f Bank O p e ra tio n s*
n m o c «io ji or oarsm an swrnmm a srsm c m huxet mcodvt or jum xt i, 19(10
(la thwuwaad* ef * «lU r «)
m/mrnmmmmm
^ 5 ---T O
UWMNW
n r ga r
Atlanta Chioa#;# Un^«
Loul* j—r>nl|<
ft ia r iw *
m m XI# @1# *"****il^ftlMla
i q w ■«
fH
>vT
A* B4& s L m *'>
(| M ^ M
■WV m u ?
Bertoa
m
mmvmk York id*lphlfl<i |A8i
l"<F■m
‘
enrvmt <ni>«MM,19i«0 «»7 T « /
(il|s*&ffgjk*d •urrait •*rning*»l&&
#rf«*3dhl**
m m ln & m m
0®**#)
6* !* * • • * o f A»S i w
1*§
8*079 7,jW
7
1.5087
*7 ,a r® /
1.927
2,395 2,891 1,629
1.265 5.886
1,1.86
2U
2b
6J
5,075
1J»6*
955
*a&8?$i$©*730 90A99 #*3t£f?S*5&
•54*76
229
216
7.117
2 .U 7
U1
2*7*0
lCt
1,585
1.21b
992
1,711
1*210
2,1*76
ISt
Ul
16b
1,517
1.1#
2.512
$* Alloeotien roqt*ir#<i (oa t e t li of
1.751& ••mlncrrmt* on 0*r* to)
/
t# produo# oorali*. oquftl to *e* *»99M t* U9#Xi9B
K. Sotiaftto*
19l*©
V# A-Xloootion of romolxuior o# fty>t>—
holding* (|2gii6li#a70»000 looo
| i #597#0U0#000) m b o tii of * * "
y
565
176
25 J
638
*0 1
aU»
3*#5*0 9t*lU r
87**25
20,070 29,555 27,825 72,755
MJ&J79 177.655 75fc.9<9205.7eo2«,yo 125350 I00,fir6 26*716 U1.301
73^56 116.151 9b,572 20b,76b
2^tti,2TO/ 180.5» 771.557 » M * 29*222 UM95 100,391 275^6
67*1.1*1 112,205 90,0fi5 2eti.l51
*#W
T27
8P
55,3#6 26,616 66,71*7 152,009
275
sS)L
/
tifettgJhM flf 8a#9©5 9 M 9 » 35#351
«• Total alloootion of Set***
{• if pltto *F*)
Ii* PrtWBt allooatioa#
I * Citoago In allocation*
— / -4,726 -I6568 >«,91Ii -5,8i*2 -?,005
«*,222
*285 -5,1*30 *27,079
*6,015 *3,9fi6 4,527
*653
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
MB mirror
U E Cl 2 9
EXPLANATION OF COMPUTATION OF ITEMS INDICATED
(R e a llo c a t io n o f Government S e c u r it ie s January 1, 19^40)
A~1
2»l4. tim es c u rren t exp en ses, July-Novem ber, a d ju s te d as
f o llo w s ;
1*
^lil^OOO deducted from Chicago in v ie w o f
adjustm ent in d e p r e c ia t io n ch arges on
Chicago and D e tro it b u ild in g s t o 2 p er
cent o f g ro s s book valu e#
2#
|150,000 added to St# L o u is in v ie w o f
p ro s p e c tiv e in c re a s e i n d e p r e c ia tio n on
fi x e d m achinery and equipment ( i n s t a l l a
t io n o f a i r c o n d it io n in g )•
B -l
2#U times c u rre n t e a rn in g s ,
D
Rate as o f December. 28, 1939# from Mr. M i l l e r b y t e le p h o n e .
E
6
H
As o f December 28, 1939, from Mr. M i l l e r by teleph o n e#
July-Decem ber.
p e r cent o f p a i d - i n c a p it a l on December
27 ,
1939*
Dooscfcor 22,
Mr, T. Guy Hitt,
F irst Ties President,
Fodoral R H « m Bezik of St* Louis,
St* Louis, Missouri*
1939
V
Doar Mr. Hitti
Roforonoe la nstdo to your l* t t * r of J)*oojsber 18*/1939*
in rexard to tho prospective lnoroases In expense* of your Bank
la 19U0 Incident to tha installation of air conditioning equipMBt in tho hood o ffloo and branch buildings*
A aunber of th* other Federal Reserre bankt whloh hay*
Installed a ir conditioning equipment la rooent years hare sot
aside a epeoial reserve at the md of the yoar In whloh th* in
stallatio n was ooapletod equal to the entire oost of the in sta lla
tion snd hare charged such oost to p ro fit and loss rather than
current expenses* It w u ld seem that whenever a Federal Resery*
bank wishes to dopreoiato now equipment over a period of ton
yoars the charge should be aside to current expenses, but shen It
wishos to w rit* o f f substantial anounts within the oourse of oa»
Or two years that I t is preferable to nake ths charge to profit
aad lees* as otherwise current eiqpenses aro unduly inflated during
suoh years* It Is suggested* therefore, that I f you wish to charge
the oost of ths a ir conditioning o ff within a two-year period that
you antes tho #mrge diroot to profit aad lo ss. In order to allow
fo r approximately h a lf of this cost’ s being written o ff in 19^0,
wo shall Include $150,000 for this purpose In our estimate of e » pcnsoc of your Bank in the Januaiy 1, 194*0* real loo at ion of
M ourltios in tho Systna Opon Market Account*
Tory tru ly yours.
B. L* Smead, Chief,
Dirision of Bank Operations.
R ep rod uced from tiie U nclassified I D ecla ssified H oldings of the N ational A rchives
D E C L A S S IF IE D
Authority E.&
•
•
•
•
J
,
3
-
« U
'/ 5 7
Fe d e r a l R e s e r v e B a n k
of
N ew Yo r k
Deceniber 15, 1959.
> c
* ***&•-*•'V
.t
C» t
S ires
*k/v»\
iL»Mb t
The board of directors of this bank, at it s regular meeting on December
14 , 1959 at which a quorum was present, adopted the following resolution:
"VOTED to declare a dividend for the six months* period ending
December 5 1, 1939, at the rate of six per centum per annum on the
paid-in capital stock of the bank, payable on the 50th day of
December, 1959, to stockholders as shown by the books of the bank at
the close of business on that date.n
There are enclosed two copies of a statement of estimated income and
expenses for the year 1959 In comparison with actual income and expenses for the
year 1958*
This statement was presented to the directors in connection with
their consideration of the above-mentioned dividend and the deductions from net
earnings shown in such statement have been considered by the directors and of
fice rs and are deemed appropriate.
Among the adjustments upon the books of the bank reflected in the en
closed statement is the transfer to "Reserves for Contingencies” of the amount
o f the p ro fit on sales of United States Government securities, shown in the
statemsat as $948,000.
The directors authorized the transfer to this account
o f fits total p rofit during the year 1959 on sales of Government securities so
that the figure of $948,000 may not be the fin al figure when the books are
closed for this year.
Before authorizing this transfer, the directors con
sidered the possib ility of applying the amount of the profit on sales of Govern
ment securities in reduction of the book value of this bank*s participation in
the System Open Market Account, but they fe lt that such an application of this
amount would be less desirable because of the bookkeeping problems involved in con
nection with future reallocations of this bank's participation in the System Open
Market Account and because i t probably would be less revealing of the actual results
o f our participation in the Account than the course adopted.
We should appreciate receiving the Board* s approval of the payment of
the above-mentioned dividend and the making of the adjustments indicated in the
statement*
The fin al adjustments would be made, of course, on the basis of the
actual year-end figures.
Respectfully,
X
Herbert H. Kimball,
Secretary.
Beard of Governors of the
Federal Reserve System,
Washington, D. C.
333.3
files. (2)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
*
Mr. Smead
'O C T 1 1 1939
Octgiber 34, 1939
Formula for reallocation
X
Mr* Van Fossen
of System account.
%
Following Is a statement shoeing the changes in participations
in the System account on April 1, July 1 , and October 1, and for purposes
of comparison the corresponding changes that would have occurred if (A)
securities not needed to cover expenses and dividend requirements had been
alloeated in proportion to total expenses and dividends combined, and
(6) if tbe reallocations on April 1, July 1, and October 1 had been made
on tbe m e m basis aa the January 1 allocation, i*e*# if accrued earnings
and exposes and profits during the current year had been disregarded and
the allocation aade to cover a twelve month period rather than the period
to the end of the current calendar year*
1939 w j & w c k y i o m of system accost
_____.................................................................. ...
Revised on basis of
distributing securities not needed to
cower expenses and
dividends in propoiv
■ti0» to expenses and
Actual
Federal
Reserve
Bank
|
1 Revised on basis of
j a 12 month estimate,
(disregarding earnings,
(expenses, and profits
j
to date
July
July
Oct* (April
April
Oct*
July Oct*
April
.1 ... .. 1 . .1 ....„;
. 1 .. ... 1 . ..1 .. J..1 . ....X. .r ......
Boston
Hnr York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St* Louis
Minneapolis
Kansas City
Balias
San Franc&aeo
♦3
-3
♦1
*5
♦1
-2
♦6
-3
♦n
♦4,
♦2
♦10
♦7
-9
-10
-10
*•$
-3
mmm
•*4
-2.
♦43
-6
•5
-10
-5
♦5
-30
-3
-10
~4
♦4
♦3
—3
♦1
-3
♦36
♦n
-5
♦4
♦1
~2
♦6
♦7
***9
-10
♦3
-69
-4
♦9
#10
~4
♦1
♦1
-1
♦7
♦17
-13
♦5
♦4
H
-g
-3
*■6
♦8
♦16
^4
-7
-5
-10
♦2
♦7
♦11
—
1
♦9
♦5
♦2
♦5
-3
-4
-2
♦28
♦3
♦6
-8
—S
♦2
-2
-n
—
2
-2
-3
-3
—
2
-4
—
6
<*4
♦3
*
■
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority £..()« 12358
Mr* Smead
It irt.ll be noted that the reallocation on April 1 and July 1
would not have been affected by adoption of Plan A above mentioned,
but that on tha October 1 reallocation results would have been affect
ed quite materially# and that in the case of six banks the change in
participations would have been greater than at any quarter date as
actually made* It will also be noted that under Plan B referred to
above changes in participations would have been much less pronounced
than under the existing formula or imder H a n A♦ It is also reasonable
to assume that changes on the forthcoming January 1 reallocation would
be reduced if Plan B had been used for the October 1 reallocation*
Tou will recall that in Bjy discussion of this matter with
Mbssts* Bouse and Hiller at New Tork they expressed the opinion that
the present formula is satisfactory, as evidenced by th© fact that it
has been in use for a considerable period of time and no criticisms
have been received for at least a year from any of the Federal Reserve
banks* Mr* Rouse also stated that he would dislike to make any change
in the present formula until he has had further opportunity to study
the matter*
Under the circumstances and particularly since results on
the January 1 reallocation would not be likely to differ greatly under
either of the proposed new formulae from those under the existing
formula, it is suggested that no change be made in the formula until
after the January 1 reallocation, and that steps be taken to obtain
accurate Information as to what the results would have been in 1939
under Flans A and B referred to above if they had been used during the
current calendar year* I have not discussed this matter with Hr.* Miller#
but the Federal Reserve Bank of New Tork is in position to compile such
figures and I do not believe that the undertaking would require an
excessive amount of work*
The foregoing does not contemplate, of course, any change in
the present objective of distributing the System account on the basis
fundamentally of expense and dividend requirements in excess of earn
ings from other sources* It may be desired# however# to five considera
tion again to the possibility of distributing the System account in
such a manner as to tend to equalise the position of the Federal Reserve
banks as regards their capital accounts# either as a whole or exclusive
of capital paid in and surplus (Section 13b)* In this connection it is
well to bear in mind that to accomplish this latter objective it is
necessary to establish some standard for determining what the capital
account of one bank should be as colored with another* I think the fact
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Mr* Smead
V2358
- 3 -
that the Federal Reserve Bank of Philadelphia has a paid in capital of
$12,116,000, Cleveland 113,790,000, and Chicago 113,603,000, is suf
ficient to show that capital paid in would not be a satisfactory basis*
In my opinion the most equitable basis would be to relate capital
account to total deposits of meafcer banks in each Federal Reserve dis
trict, and a somewhat less satisfactory basis would be to relate capital
account to required reserves of the banks in each Federal Reserve dis
trict* The first mentioned plan is based on the theory that total de
posits of ossber banks is a pretty good measure of the relative importance
of the various Federal Reserve districts and of the possible risk In
volved in granting discount accommodation* Of course expense and divident requirements would be provided for before any distribution of the
System account was made with a view to equalising the capital account,
lhat has been said above, I believe, is sufficient to demonstrate that
the problem of deciding upon a satisfactory standard for comparing the
capital set-up of the various Federal Reserve banks is a very difficult
6ns and that it would be very optimistic to anticipate that the twelve
Federal Reserve banks could be brought into agreement on this subject*
A second problem already suggested by implication is as to whether we
should be concerned in this connection with the total of paid in
capital* surplus, and reserve for contingencies or only with Section 7
surplus and reserve for contingencies* This in itself would probably
prove to be a difficult problem to solve Inasmuch as it is likely that
there would be considerable disagreement on the part of the Federal
Reserve banks in the matter*
Assuming that agreement had been reached as regards these two
subjects, there would remain the problem of deciding how securities not
needed to cover expenses and dividends should be allocated with a view
to equalising the oapital position* There are any number of ways, of
course, in which this could be done and I should imagine that getting
agreement on this point would not be the least of our troubles* My own
suggestion would be that after providing for estimated expenses and
dividends with some litt&e margin for error any securities remaining
should be divided equally aiaong the Federal Reserve banka that were
below the System average as regards capital, for example, if at this
stage 3200*000*000 of securities remained and eight Federal Reserve
banks had a ratio of capital, surplus and reserve for contingencies to
total deposits of member banks less than the System ratio, each of
these Federal Reserve banks would be given 125,000,000 in the final
allocation* An additional allocation of 325,000*000 which would, of
course, be subject to change at the end of three #®nths would represent
earnings of something like #100,000 during a three months period* In
the course of time, if the Federal Reserve System had substantial excess
earnings, it is obvious that om by one the banks that were originally
below the System average nould be brought up to the System average, and
in the meantime the System average would Itself be rising so that
ultimately all Federal Reserve banks itould be brought up to the level of
the highei
□
REALLOCATION 0 1 GOVhHMEi.T SECliPiTIES H i SYSTEL OPEN iARKET AGCOVi T Oh OCTOBER 1, 1939
q eo
I ^
"I
„
....
•
System
Boston
New
York
2,135
7,236
5 Jk:~ #j$>enses
yj
a
1. E stim ated c u rre n t expenses, 1939
28,1'89
P h i la
d e lp h ia
2 ,3li8
C le v e
land
R ich
mond
A tla n t a
Chicago
2 ,83k
1,673
1,535
3,267
*1
San
Francisco
1,35k
9U2
1,718
1 ,1 9 1
2,U58
i
B *f^ r a in g s
1* Estimated
w
Kansas 1
Minn
sit.
Dallas
C ity [
Louis e a p o lis
c u rre n t e a rn in g s , 1939
( e x c l u s i v e o f e a rn in g s on Govts.)
2 . E stim ated e a rn in g s on Govts, to
S e p t. 30
3. Net p r o f i t s on G ovts, to Sept. 27
1 ,5 °2
110
258
175
115
78
56
208
25
65
197
h6
169
26, Ol-l
1,158
2,858
260
1,220
107
778
75
1,317
101
116
1.033
90
2,l6o
199
1,920
7 ,Ji72
170
670
2,137
197
2,601
230
1,387
2,337
29,880
2,200
8 ,I:-00
2,^09
2 ,9ii6
1,587
1,315
3,326
1,352
918
1,630
1,169
2,528
3 ,05k
725
822
305
272
823
239
175
256
2ia
Q h
1,890
56k
710
391
292
76L;
2Ll
199
3V 1
263
5^
127,295 h b l ,062
liiii,1 '56
181,851 100 ,1L 6
7li,789
195,682 61,727
50,9c9 88,108
67,362 12 4 ^ 5 6
1 ,082,880
75,308 1.07,785
96,805
1*0,725
36,319
109,891 31,912
23,367 3U,182
32,180
Gr» T o ta l a l lo c a t i o n of Govts. ("E” plus "F") 2,803,809
202,603 891,867
2)-l,26l
291,608 110 ,8 7 1 111,108
305,573 93,639
711,536122,290
99,5^2 229,111
H. P re s e n t a llo c a t io n s
20)’,7 lii 8>‘8 ,^'l
239,252
2*1,203 15 0 ,6 11 115,901
300,90^ 123,689
77,215132,709 103,988 22li,983
-2,111 +1-3,226
+2,009
I4..
Total
c. Bstisated dividends
8 ,110
D. Exoess of A -l plus "C" over B4+
6,719
K. Allocation re q u ir e d (on b a s is o f 1 * 51+90^
earnings r a t e on Govts.) to produce
earnings October-Decem ber equal to ” DW 1,720,923
F. A llo c a t io n o f rem ainder o f System
h o ld in g s (1 2 ,803 ,809,000 le s s
4 #1,720,923,000) on b a s is o f "C*
I.
Change in a llo c a t i o n
2,803,809
—
h97
109,757
+ 1C ,/-05
122
-9,7J'0
-k,793
+[.,670 -50,050
-2,879 -10,1-19
rU,lili6
8k , 655
+li, 128
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 1235%
a 8? 8ECQR0S SECTION
A Pftl 91968
Fe d
eral
R
eser v e
Ba
nk
o f N ew Y ork
September 29, 1 9 5 9 .,^
D ear Mr* Smead:
We r e c e iv e d y o u r l e t t e r o f September 28/and have today
sent to th e Reserve banks a copy o f the computation showing the
adjustm ents to be made in p a r t i c i p a t io n s in the System Open Mar
k e t Account on O cto ber 2, as o f O cto ber 1 , pursuant to th e p la n
adopted a t the m eeting o f the F e d e r a l Open Market Committee on
November 50, 1937*
E nclosed h erew ith i s
copy o f th e l e t t e r o f t r a n s m it t a l
t o g e t h e r w ith t h re e c o p ie s o f the com putation, a ls o copy o f the
tele gram which was sent to each o f the F e d e ra l R eserve banks t o
day.
Market Account
Mr. E. L . Smead, C h ie f,
D iv is io n o f Bank O p e ra tio n s ,
B oard o f Governors o f the
F e d e r a l Reserve SSystem,
W ashington, D. C.
E nds.
(5 )
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
r
M IS C . 1 4 0 A
Authority fc.Q* 1235B
15 M 8 - 3 7
FEDERAL
RESERVE BANK OF N E W
YORK
P le a s e send f o llo w in g telegram to each F e d e ra l Reserve bank
m
in d ic a te d b «lo w j
Under the p la n for r e a llo c a t i o n o f Government securities adopted b y the
fe d e ra l Q o m
M arket Commit te© November F*0t 1937, a readjustm ent o f p a r t i c i p a t i o n *
.in Government s e c u r i t i e s h e ld in the j^rstem Account i a c a lle d f o r O ctober 1 ,
th e
com putations showing adjustm enta to be made in a a r t i c t p a t i o n s o f the s e v e r a l F e d e r a l
R eserve banks i s
b ein g sent to a l l Reserve banks 'tedagr.
increase
These com putation* in d ic a t e
— ^ _\
aa
of
in y o i r r ~ ^ r f c lB ^ ^ t i o n on v c t o b e r 1*
We s h a l l
d e crea se
/
w ir e you on O cto b er 2 the d e t a i le d e n t r i e s to b©\ made o iH th a t d a te as o f O cto ber 1#
8PR00L
INCREASE
lo u n g
Sinclair
H eadng
Leaoh
Parker
S c h a lle r
M artin
Peyton
Hamilton
G i lb e r t
Dagr
Boston
P h ila d e lp h ia
C levelan d
Rtctoaond
A tla n ta
Chicago
S t . L o u is
M in n ea p o lis
Kansas O ily
D a lle s
San Francis©©
#
#
2, 111,0 0 0
2,009,000
10,405,000
9$740,000
4*793,000
4,670,000
BO,060,000
2.879.000
10,419,000
4.446.000
4,128,000
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
M IS C . 14 0 A
IS M
123 5 8
8 -3 7
FEDERAL
RESERVE BANK
OF N E W
YORK
S im ila r l e t t e r sent to P r e s id e n t o f each F e d e ra l R eserve bank*
September 29, 1959*
Dear Mr*
Youngs
In accordance w ith ay t e l e g r ^ o f today, X c-itclo^e h ere
w ith computation o f the x «a d jtt«ju M n ^ r-io ^ b a made on O ctober
?9 aa
o f O ctober 1 , o f the p a r t i e i j ^ t l o n s o\ the f W e r & l Beaerva banka
in the $ r a t « * Open & * r k a js p o r t lM io * /
Allan Sprout
'First Vice President
Honorable fioj A. Young, P r e s id e n t ,
F a d e ra l i^ s e r v e Bank ©f B oston ,
Boston, $&a«*
Sae.l»
BRB/JS
CC97IDSBTIAL
REALLOCATION
Ob
In thousands o f d o l l a r s )
P h i la
New
C le v e
Boston
d e lp h ia
land
York
R ich
mond
A tla n t a
Chicago
2B.489
2,155
7.256
2,51*8
2,851.
1,675
1,55 5
3.267
1,554
942
1,718
1.191
2.456
1,502
110
258
175
115
78
56
208
25
65
197
1*6
169
26 , OM
1,920
7,1; 72
170
670
2,137
197
2,601
230
1,387
122
1,15 8
101
2,858
260
1,220
778
2,337
107
75
1,3 17
116
1,033
90
2, l 60
199
29,880
2,200
8 ,L.OO
2,509
2 , 9li 6
1,587
1,315
3,326
1,352
918
1,630
1,16 9
2,526
8 ,110
56h
3,051+
725
822
305
272
823
239
175
256
21+1
63U
6,719
h97
1,890
710
391
292
76k
2ltl
199
263
56k
18 1,8 5 1 100 , 11x6
71-1,789
195,682 61,727
50,9c9
88,108
67,362 3 ii,li5 6
System
.. 1 ------- — ------------ —
A - Bxpenses
---------- -------
1
■ 1.... ^
1* E s tin a te d c u rre n t expenses, 1939
B -E a rn in g s
1 . Estim ated c u rre n t e a rn in g s, 1939
(exclusive o f earn in gs on Govts.)
2 . Estimated ea rn in g s on Govts, to
8ept« 30
3 . le t profits on Govts, to
h*
Total
c . B stiafcted
D. E xoess
S ept. 27
of
dividends
A - l p lu s nC"
over
B4*
E . A llo c a t i o n r e q u ir e d (on b a s is o f 1#5U90^
e a rn in g s r a t e on Govts.) to produce
e a rn in g s October-Decem ber equal to "Dw 1,720,923
F . A llo c a t i o n o f rem ainder o f System
h o ld in g s ( # 2 , 803 , 809,000 le s s
#1 ,7 2 0 ,9 2 3 ,0 0 0 ) on b a s is o f "C"
i
GOVERNMENT SECURITIES IN SYSTEL OPEN MARKET ACCOULT ON OCTOBER 1, 1939
127,295 148!',082
1Hm-i- Kansas
S t.
C it y
Louis eap o l i s
D a lla s
San
Franciseo
1,082,886
75*308 1i07.7B5
96,805
109,757
1 -0,725
36,319
109,891 31,912
23,367 31,162
32,180 8^655
G. T o ta l a l l o c a t i o n o f Govts. (" E * p lu s " F " ) 2,803,809
202,603 891,867
21.1,2 6 1
291,608
U>0,871
11 1,10 8
305,573 93,639
7l+,336122,290
99,5^2
229,111
H. P r e s e n t a l lo c a t i o n s
20l-,7lli 8 li8 ,6 L l
239,252
281,203
15 0 ,6 11
115,901
300,903123,689
77,215132,709 103,988
22L.,983
-2 ,1 1 1 +1i3,226
+2,009
+ 1C ,) j05
- 9.7110
- i t ,793
+JU,670 -30,050
I.
Change in a l lo c a t i o n
2,80^,809
—
-2 ,8 7 9 - 10 , 1 ' 19
nl4.,Lli6
tLi,12B
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
■4,
Authority fl.Q* 12358
'•
■Af
"t '
September %
Mr* Allan Sproiil,
flrit Vie© President,
Federal Beaerve Bank of Hew Tork,
Hew fork, So* Tork*
Dear *r. Sproul*
There ia encloaed a copy of the table showing the
change© neoeaaary i s holdings of halted Statea Government aecari~
tlaa by tl>« varloua Fadaral Heaerre banka on Qetober 1 1939
wader the forwila for reallocations of th# grates Open Market
Account.
,
,
Carreat expenses have been eatlnated by amltiplying
the anoints for J«B»ary through August by 1*5, and 1b the eaae of
Atlanta adding 170,000, aa at* done at the tlae of the July 1
reallocation. I have received a le tte r fro* St. Louie ateting
lt a Installation of air-condi tioaiag and ventilating equipaent
w ill not ba completed this year, and accordingly we have s&de no
adjmataacit o f eatinated expenaea for St. Louis.
latinated current earnings (exclusive of earning® on
Goveraaenta) were confuted by amltiplying each eamlnga for ternary
through Asguat by 1*5. We have adjuated the eatinate for' Richmond
stained os thia baaia by deducting f2$,000 In view of the recent
falling off in earnings on industrial advances.
fery truly y o u r s ,
E.
L. Snead, Chief,
Division of Bank Operationa.
unclassified / Declassified Holdings of the National Archives
*•
DECLASSIFIED
Authority £ .0 * 12358
wmMu&tm or coitptjTAfio* or it h is imiCArw
(Reallocation of Gorarnaent Securities October 1 , 1939)
*
i
1*5 tlaei c u r r e n t expenses January-Auguet, adjusted as
follow*!
Atlanta— 170,000 added to cover unusual ehargeoffs
and depreciation on account o f air conditioning and
general improvements of branch bank building* to
be completed till year*
1*5 tlaas earnings {excluding earning* on Governments)
January-August, adjusted aa follows*
Richmond— 125*000 deducted in view of recant falling
off in earninge on industrial advances*
Obtained or confirmed by telephone from Wav lorlc, September
27.
Dividend* paid and accrued through August 31 plus 2%
of paid-in oapital etocic on August 31*
Aetna! rate usad
§92/365 X 1.54900}.
fro* law Ior| by telephone September 27.
Bata obtained
- ---
----
For Filet
S. E Haiafet
A -
Expenses
1* E s t i i » t e d c u rre n t ex p en ses, 1939
B - E arn in gs
1 . Estim ated c u r r e n t e a r n in g s , 1939
{ e x c lu s iv e o f e a rn in g s on Gov+s.)
2 . E stisiated e a rn in g s on G o vts. to
Sept# 30
3* Ket p r o f i t s on Govts# to Sept* 2?
P h ila
d e lp h ia
Cleve
la n d
Rich
mond
7*236
2,3fi8
2,33k
1,673
258
175
115
78
2,137
2,601
230
1*38?
197
122
Boston
Hew
York
2*133
7
HO
26. 0f i l *
1,920
2,337 '
1?0
System
2B Ji89 /
1,50 2
ijm
670
A t la n t a | C hicago
1.5 3 5
K ansasf
S t,
Minn
D a lla s
Louis e a p o lis C it y |
San
F rancisco
3.267
1.35k
9i|2
1,71B
1,191
2 ,! l58
206
25
65
197
h&
16?
1.15 8
10 1
2,858
1,220
260
10 ?
m
75
1*317
1.033
2,160
90
199
2,528
116
29*880 7
2,200
0 , 1*00
2.509
2,9k6
U557
1*315
3,326
1.352
918
1,6 30
1.1<59
C* E«tiaated dividends
8,110 7
56b
3.0 &
725
822
305
272
823
239
175
256
aJUi
6&
D. F«©ess of A-l plus •c* over B—jU
6*719 /
U97
1,890
5®*
710
391
292
?6k
2fil
199
M
263
5&U
i>«
Total
E. A llo c a t io n r e q u ir e d (<s* b a s is o f 1,5^90^
e a rn in g s p a te on ^ovta.) t o produce
ea rn in g s October-Decemb©r equ al t o WD*
v
127,295 LBli,082
1,720,923
F . A llo c a t io n o f remainder o f Syat#®
h o ld in g s (12*803*809.000 less
| l #?aD#923#000) on b a s i s o f "C*
1*082,686
G. Total a l l o c a t i o n o f G o v t a .(nE* p lu s " F " )
2 ,8 0 3 ,609 7
lU t.h ^6 181,851 100.1L6 7h , 7B9
195,682 61,7a?
50,969 86,106
Reproduced from the Unclassified I Declassified Holdings of the National Archives
H-'ALLOCATi'.OI;
< Ot n O Y S - S m ^ SECUFiTIES IM SYSTKti OPEN MARKET ACCQFi.T OK OCTOBER 1, 1959
6?,}62 lM-, 1i56
>
c
0r
C
8l -,655
1*07,785
96*805
109,757
1.0*725
36,319
109,891 31.912
23,367 ^ ‘.182
32,180
202,603 891,867
2fi l , 26l
291*608
li*o* 87l
111,108
305.573 93.639
711, 356122*290
9 9 . ^ 2 2^,111
l
239,252
28I,2©3
150 *6 11
115*901
300, 903123,669
3#226
*£*009
+ 10 , 1*05
-9,7?*0
**•7 9 3
*£1, 670 - 30,050
75,306
t S!
jr^ p
1a >
*
H . P re s e n t a llo c a t i o n s
I . Change in allocation
2,803,809
7 2o!
,7 lli
8li8 , %
- 2 * 111 ^
77*215132,709 105,988
-2 ,8 7 9 -10,?’19
—J?0hho
22h.,m3
♦J?.,126-
i
uo
!§ l
OS ^
°® o
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £.»Q* V2358
F
»D IN FILES SECTION
^
JUN30 1939 . ^
3 5 3 * 3 1 3 ..... 1
■ 0
f i j */
June 29. 1939
Hr* Allan Sproul,
First Vice President,
Federal reserve Hank of !lenr York,
?terr York, Neir York.
Dear Mr* Sproul?
Referring to ay letter of June
26,
there is
enclosed a coper of the revised statement showing the
changes under the formula in holdings of United States
Government securities by the various Federal Reserve
banks on July 1, 1939# based upon the aiaount of United
States Ooverrmenfc securities in the System Open llarket
account as of June 2C*
Very truly yours,
J
E* L* Saead, Chief,
Idvision of Bank Operations*
Enclosure - 1
muficwriot m
mmmmmm
ta c m tn m
m
m m m , m m
w m m
te a m t m
( I i thocaaada ©f g a ll mm)
3»J— ^g-^. "W m "
SjrttaK ,WBmwtm
Tort
r a r m t axpaaaaa# 1959
m m
i* 1999
' A
T O T SKMHUi
"TECEP: S im *
Atlanta Chicago 1it* , aapoll*
Uad ..........
Louia
City
\W9
*&4t&yi
7.857
8*310
t#7ff
117
85b
in
U6
1*851
b.770
M j0 *
1#^
t*m
JLy» r
Win
fiallaa
2»b38
i# W
$?&
(X ) Wm*J m M I mar rant wmtwfaiga# 1 ^ 9
(aautlBi&v# iwf airntW|^> on
1*537
(2 ) lstJ a*l*6 aarmiajpl <S*fc
mob&i t» <?mmi 50
<3 ) Bat pmf%*m m Qmmrwmat*
tm J w m S it
1*675
im
w
lit
l#b90
T o tal
C • Wsmmm of A -l a ** r B«L
H * A ll«c*tio® required (on I m I « e f
I#336££/£ p
t t w a c a d m * rat*
on OwrH*) fc* j w r i d * aarttls^t
4l»ly*D *a«abar a ^ m l to * 0*
& • &*ti**t*4 d ir t d m x l* * 1 9 3 9
¥
188
u m
8.5J7
6!<T
io e
m
19b
b8
170
«
en?
T0i
an
£88
l.b 8 5
165
m
It
©
65
lb3
,lb 8
801
1.738
563
389
ti9b
i*w
9*
i.<78
1*753
5b
907
A3
m
583
/
/
/
l*8b3«61b
9*098
77
✓
S
/
7 7 *0 2 b3*b98
880
56b
/
S
,5 «
57.71*9
10},C88
8 »
2b0
633
• Allocation of r w iln lif of Syata*
*>14fcig« {feS 9 < V tf? aftafe l i M
ae tafia o f *g?
£ • t o ta l
tUaetti«M i
W • ^ N tttst a lle a a tle tK
{£8.918
116.85b
H 8*3b8
b9.066
b5.7b6
8.550,637 187.081 753*161
214*06
855.566 U A .U 9 lW .b 8 8 875.898 Uft.817 7U 7b3 !2 b*7 3 »
133.785 H5.97b
3i*?36
im * M
101*990 t i ^ n
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
cH /
1235B
hi RECORDS $ECTtC$
7^'
APR1 91968
F ed eral R eserve Bank
of
N e w Yo r k
June
1959.
D ear Mr, Sineads
We r e c e iv e d y o u r l e t t e r o f June 26 .and have today
sent to the R eserve banks a copy o f th e computation showing
th e adjustm ents to be made i n p a r t i c i p a t io n s in th e System
Open Market Account on J u ly 5, as o f J u ly 1 , pursuant t o th e
p la n adopted a t the m eeting o f th e F e d e ra l Open M arket Com
m itte e on November 50, 1937.
E nclosed h erew ith i s
a copy o f the l e t t e r o f t r a n s
m it t a l and t h r e e c o p ie s o f th e computation which was r e v is e d
in accordance w ith tele p h o n e co n v e rsa tio n .
Yours Ja^fcM & lly | ^
■
///,
* / / / # / /
,
/
'
A lla »^ s ¥ o u i
M anager, Eastern Open
Market Account
M r, E. L . Smead, C h ie f,
D iv is io n o f Bank O p e ra tio n s ,
B oard o f Governors o f the
F e d e r a l Reserve System,
W ashington, D. C.
E nds.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E.O* 12358
/
SECURITIES DEPT
rhb/j i
June 29, 1959
P le a s e send fo llo w in g telegram to each F e d e r a l R eserve Bank as in d ic a t e d belovt
Under th e p la n f o r r e a llo c a t i o n o f Government s e c u r i t i e s adopted by the
F e d e r a l Open M arket Committee November 50, 1957, a readjustm ent o f p a r t i c i p a t io n s
i n Government s e c u r i t i e s h e ld i n the System Account i s c a lle d f o r J u ly 1 .
The
com putations showing adjustm ents to be made in p a r t i c i p a t io n s o f the s e v e r a l F e d e r a l
R eserve Banks i s b e in g se n t to a l l R eserve Banks tod ay.
an
* n c r®4*® 0f
d e crea se
These computations in d ic a t e
_________________ ______ in your p a r t i c i p a t i o n on J u ly 1*
We s h a l l
w ir e you on J u ly 5 the d e t a i le d e n t r ie s t o be made on th a t d a te a s o f J u ly 1»
SPROUL
m m m
Young
S in c la ir
Flem ing
Leach
P ark er
S c h a lle r
M a rtin
Peyton
H am ilton
G ilb e r t
Bay
Boston
P h ila d e lp h ia
C lev elan d
Richmond
A tla n t a
Chicago
S t . L o u is
M in n ea p o lis
K ansas C it y
Dallam
San F ra n c is c o
-0 110,904,000
5.525.000
7.504.000
-0 -0 -O -0 -0 -0 -0 -
m om m
$5,509,000
-0 -0 -0 8,546,000
10,481,000
7,565,000
5,814,000
6,982,000
5,406,000
9,976,000
R ep rod uced from the U nclassified / D ecla ssified H o ldings of the N ational A rchives
DECLASSIFIED
Authority
M IS C . 1 4 0 A
13 M 8 - 3 7
FEDERAL
RESERVE BANK
OF NEW
YORK
Similar letter sent to President of each Federal Reserve bank
Jm m
2tf 1959
Dear Mr. Immgi
la aeoordance with my tel<
o f today, X encloee
herewith OMptrUtlaa e f th*
t « ta be aade on July S
it* of WLy % of the particij
th*\Fed«ral Reaerre baake
ia the flgratea
Opm
lUrkel
Allan Sproul
I« i* ff« r f gfpatm open
Market Aeoorrat
Honorable Roy A, Tom*, Preaideat,
Federal leaerre Baak o f Boatoo.
Boaton, Haas.
ftio,
19
REALLOCATION OF GOVi£hN)ii;r;I :>ECUKLTI£S IN SYSTEM OPEN MAKKE': ACCOUNT ON,JULY 1, 1939
(in thousands of dollars)
oystem
A - Expenses
jj^ l) Estimated current expenses, 1939
ooston
rtSV
York
Phila
delphia
Cleve
land
r.ichmond
>
Atlanta
| chicago jLouis
I
!
Minneapoli 6
Kaneas
City
Dallas
San
Franc i of 0
28,498
2,137
7,257
2,345
2,797
1,698
1,323
3,232
1, 4SC
936
1,711
1,190
2,432
1,537
IVi
254
171
116
108
58
209
25
67
194
48
170
16,?G9
1,251
4,770
1,361
1,666
883
774
1,673
805
522
871
688
1,425
1.675
20,121
122
1,490
480
5 ,& 4
l* 1
1,673
165
1,5^7
87
1,076
72
904
186
2, 2&S
77
907
5-4443
8,377
647
1,753
672
830
620
429
964
523
293
1,243,614
96,051
260,243
99,762
123,a8
92,043
63,688
143,111
77,642
8,098
564
3,054
724
820
304
271
819
F - Allocation of remainder of System
holdings (#2,550,637 le ss
♦ l , 243,614) on basis of " V
1,307,023
91,030
492,918
116,854
132,348
49,066
43,740
G • Total allocation of Governments
("D " plus " ! * )
2,550,637 187,061
753,161
216,616
255,566
141,109
H - Present allocations
2,550,637 190.39C
716,898
205,712
252,041
♦10,904 ♦ 3,525
- Earnings
(l)Estimated current earnings, 1939
(exclusive of earning8 on
Gore rnment s)
(2 )Estimated earnings on Govern*
menta to June 30
(3)Net p ro fits on Governments
to June 24
(4)
Total
C - Excess of A -1 over B -4
D - Allocation required (on basis of
1*33622^ per annua earning rate
on Gov’ ts*) to provide earnings
July - December equal to ”C*
2 - Estimated dividends, 1939
I • Chnnge in allocations
♦ 58,076
♦ 58,076
“ 3,309
*36,263
83
1 , 1* 6
65
143
^801
1,738
563
38?
694
43,498
83,58i
57,7*9
103,028
239
175
255
240
633
132,187
38,575
28,245
41,157
38,TJ(
102,167
107,428
275,298
116,217
71,743
124,738
96,485
205,195
133,725
115,974
285,779
123,780
77,557
131,720
101,890
215,171
♦ 7,384
• 8,546
- 10,481
• 7,563
“5,814
- 6,982
* y,4C5
- 9,976
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.C- 12358
fv
S*J
June 26^939,
Mr, Allas Sproul,
First Vice President,
^ Federal Reserve Bank of Sev lork,
lew fork, Sew lork.
Beer Mr* Sproult
There is enclosed a copy of the statement we have pre
pared showing the changes under the fornula in holdings of^ffii^ted
States.^Govenment securities by the vario^^Eeserve banks on July
1, 19391 the date of the next quarterly reallocation of securities
in the Systea Open Market Account*
I an also enclosing a copy of
t
sone notes explaining certain computations*
Tou will note that we
have adjusted the estimates of current expenses obtained in the
usual way by adding #70,000 at Atlanta, 162,000 at St* Louis, and
$4,000 at lansas City*
feiy truly yours,
y
£* L. Snead, Chief,
Division of Bank Operations*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
EXPLAHATIOI OF COMmATiai OF ITEMS INDICATED
(Reallocation o f Governaent Securities July 1, 1939)
2+4 times current expenses January-May (1939)#
adjusted as follows*
Atlanta— $70,000 added to cower unusual chargeoffs
and depreciation m account of a ir conditioning and
general laproreaent of branch bank buildings to be
completed this year.
St* Iiomis— 162,000 added to cower estinated increase
in depreciation expense on account of in stallin g a ir
conditioning and ventilating equipment at the head
o ffic e and branches*
Kansas City— $4,000 added to cover estinated increase in
depreciation expense tm account og in stallin g new
elevators snd a power plant at the head office*
2*4 tiaes earnings (excluding earnings on Governments)
Jannary-May (1939)
B-2)
B-8 )
Obtained or confirmed by Hew fork on talephone, June 26.
D
Actual rata used, .6700#?% (134/365 I 1.32925*).
tained fro * Hew Xork by phone, June 26*
1
Actual dividends accrued to May 31> plus 3*5* of paid-in
capital stock on May 31.
Bate ob
Reproduced from the Unclassified I Declassified Holdings of the National Archives
BEALLOCA 10^ OF ^0V1F»?OT SECURITY S Xr SYS?,?/ CPE* #AT?KLT /f'Cf-tNT OK JULY 1* 1939
( I n thousands o f d o l l a r s )
- Expenses
( 1 ) Estim ated cu rre n t expen ses *1939
*
E arn in g *
( 1 ) K atinated c u rre n t e a r n in g $#1939
(e x c lu s iv e o f a& m ln ^ s on
Governments )
{ 2 } estim ated e a rn in g s on Govern-*
meats t o June 30
( 3 ) S et r r o f i t s cm Ooverxssents
t o June 2k
System JBoston
Weir
York
28*1498' 2*137
7*257
2.3fi5
2.797
1*696
P h ila 1 C le W d e lp h ia 1 la n d
Chicago
S t.
Louis
1,333
3*232
l# t 3 0
R iel mond jA t la n ta
Minn
e a p o lis
Kansas
C it y
j D a lla s
1
San
jir a n c is c o
930
1*711
1,190
2 *ii32
1*537
117
25k
171
116
108
56
209
25
67
19k
lie
170
16*909
1*251
!i*770
1,361
1 ,6 %
ee3
77h
1*^73
805
*522
Cm.
871
088
I,li2 5
72
5a >
186
2*268
77
65
W '
l*7 3 B
hm
1,675
122
T r o 7 r a > .i ; i $ 0 v "T S 5 8 T 7 —
llt l
8?
17m 7
165
1^577
1*753.
672
330
620
Jj29
96!*
523
293
563
389
69k
* A llo c a t io n r e q u ire d (o n b a s i s o f
1,32925$ p e r annum e a rn in g s r a t e
on Gov’ t s ) to p ro v id e e a rn in g s
July-O eo ember e q u a l t o *C*
1,250*136*96*555 261*608
100,285
123, Soil
92*525
6Ji,cei
llt3,862
78*050
1x3*726
8L.019
56*058
103,509
7214
820
30!»
271
819
239
175
255
2h0
633
(h)
T o ta l
• Excess o f A~1 o v er 3
* Estim ated d iv id en d s# 1939
8,377 v
8* 09a -
6b7
561(
3*05t
- A llo c a t i o n o f rem ainder o f System
holdirsr© (i2 *5 6 Ji,0 1 5 *0 0 q#less
$1*250*136*000} on b a s is o f *E « 1*313*879" 9 **506 1*95*503
r ,w ~
*
—
w
5k
: ...... ..... s e t ”
83
'" “X I E F 7*
'
>
S
c
or
*r«1 §!
O
117»li67
1 3 3 *^3
!i9.3?3
1i3.969
132,SB1
36*778
28*393
l-tl*373
38*939
1€£:,702
r
£> >
*
- T o ta l a llo c a t i o n o f Governments
(mrf p lu s wFn )
2 #56li*0151S^0i>3 757*111
217,752
256*90?
H jl.eJ iS
107,990
£76.71*3
116,828
72*119
125*392
96*991
200*271
-
2# 56ii*015 191^22 721*957
206,9C?
253*398
13**227
llo,Ii22
287,127
12i4*17ii
77* M i
132*11:0
102*282
2 16 ,2 15
+10,S! j5
♦3*509
♦7,621
-6 ,!;3 2
-10,3Gti
-7,3l>6
-5 *7 2 5
~6*7k8
-5*291
-9*9W *
P re s e n t a llo c a t i o n s
- Change in a l lo c a t i o n s
—
•'$*259
+35*15^
i
i/ i
s g>>-<
K
O
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc .Q* 1235%
im j
V ’
April 12, 1939.
I'r. Hugh Leach, President,
Federal Reserve Bank of Richmond,
Richmond, Virginia#
Bear Mr* Leach:
lieferenee is made to your letter of April 7 inquiring
as to the method used in estimating current earnings of the
Federal Reserve banks for 1939, exclusive of eamines on Govern
ments, as used in the April 1 reallocation of the System holdings
of United States Government obligations*
It is our practice to base the estinate of earnings,
exclusive of earnings on Governments, on average earnings during
the five months (eight months in the case of the October 1 re
allocation) preceding the month in ifoich the computation is made.
Thus the estimate used in the January 1 reallocation was based on
average earninrs during the period July to November inclusive,
and the estimate .for the April 1 reallocation on the period
October 1938 to February 1939, inclusive* Had interest received
on past-due paper of closed banks been excluded from the figures
as a non-recurring item, the estimate for your bank used in the
April 1 reallocation would have been reduced by about 50,000*
According to the above nentioned practice, for the July
1 reallocation the estimates will be based on average monthly earn
ings from January to !-Iay inclusive, and for the October 1 realloca
tion on average monthly earnings from January to Aunist inclusive*
Obviously the estimates for the July 1 and October 1 reallocations
are likely to be more closely in line with actual figures for the
year, and the reallocations on July 1 and October 1 will thus take
into account any departure of actual earnings and expenses from
the estimates used in the previous allocations for the year*
Very truly yours,
E* L* Sraead, Chief,
Division of Bank Operations*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
£.0. ll«8
recd
w
in
f il e s
APR 2 5 1939
Fe d e r a l Re s e r v e B a n k
-C P
o f
Ric h m o n d
April 7, 193?>
\
Mr. E. L. Sraead, Chief,
Division of Bank Operations,
Board of Governors
of the Federal. Reserve System,
Washington, D. C.
Dear Mr. Smead:
In the computation of readjustments as of April 1,
1939 of the participations of the Federal reserve banks in the
System Open Market portfolio the estimated current earnings
for 1939 (exclusive of earnings on Governments) were shown for
this bank as §170,000. We have endeavored to verity the esti
mate, but even on a rather liberal basis have been unable to
estimate earnings of more than $107,000. I am enclosing a
statement showing the earnings of this bank (exclusive of
earnings on Governments) for the first quarter of 1933, the
year 1938, the first quarter of 1939, and an estimate for the
year 1939.
You will note that our earnings for 1938 were only
$-153,280, which included larger earnings on industrial advances
and commitments than can be expected for the year 1939 and a
non-recurring item "Interest received on past due paper of closed
banks" of $22,135* You m i l also note that the earnings of this
bank for 1938 were 117,000 less than the estimate which was used
as a basis for the reallocation of Government securities as of
April 1, 1939.
It is icy understanding that the computation referred
to is prepared in your office, and if you will let me know how
you arrived at the estimated figure of £170,000 it will be very
much appreciated.
Very truly yours,
Ht£gh Leaih,
President.
Enclosure
& *** *-///
9*
SECT*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
\2fl58
EARNINGS FROM SOURCES OTHER THAN GOVERNMENT SECURITIES
(C en ts om itted)
1939
193$
J an . .F e b . .Mch.
From
D iscounted b i l l s
Purchased b i l l s
I n d u s t r i a l Advances
Commitments to make
i n d u s t r i a l advances
A l l o th e r (E x c ep t G o v * t s .):
Income from banking house
I n t e r e s t r e c e iv e d on p a s t due paper o f c lo s e d bks.
M is c e lla n e o u s item s
T o t a ls
Year
J an. .F e b . .Mch.
E stim ated
fo r Year
I
2,840
$ 2,237
I 9,042
27
112
28
112
25,243
82,454
17,920
70,000
3,349
15,074
2,383
10,000
5,267
20,903
5,234
20,940
3.560
$
714
480
22,135
1,007
-.i,.560
716
137,610
$153,280
$26,995
(a )
$107,452 ( b )
(a )
The r e c e iv e r s h ip s o f a l l suspended banks have been c lo s e d , t h e r e fo r e
we w i l l not have any ea rn in g s to r e p o r t a g a in s t the item , " I n t e r e s t
r e c e iv e d on p a s t -d u e paper o f c lo s e d b a n k s ,” f o r 1939.
(b )
The estim ated amount o f th ese e a rn in g s on which the Committee based
i t s r e - a l l o c a t i o n o f s e c u r i t ie s on A p r i l 1 s t i s $170,000 - on
Janu ary 1 s t was $186,000.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
"
DECLASSIFIED
Authority fc.Q* V235B
RE
J IN FILES SECTION
vv APR 1 1 1939
£
March 30, 1939.
Mr* Allan Sproul, Manager,
System Open Market Account,
Federal Reserve Bank of New York,
New York, New York*
Dear 12r* Sproul i
Thank you for your le tte r of March 22
advising that Mr* I d l e r w ill be glad to come to
Washington at some mutually convenient time to
discuss possible improvements in the formula now
used in allocating securities in t&e System Open
Market Account* We are s t i l l experimenting with
various suggestions that have been aade, and i f
and when we are able to work out revisions in the
formula that we fe e l ’would be helpful in reducing
the size of quarterly changes in allocations, we
shall be glad to get in touch with him*
Sincerely yours,
E* L* Smead, Chief,
Division of Bank Operations.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..C* 12358
I’D IN FILES SECTION
Iw
ISarch 30, 1939
Ur* 0* M* Attebery, Vice President,
Federal Reserve Bank of St* Louis,
St* Louis, Missouri
Bear Ifr. Attebeiyi
Referring to your letter of March 20* /
enclosing a copy of Mr* Martin's liarch 13 letter to
Mr, Sproul, in estimating expenses of the Federal
Reserve banks in connection with the April 1 realloca
tion of the System Open Market Account, an allowance
of $70,000 was made in the estimate for your bank to
cover the anticipated increase in depreciation on
fixed mchinery and equipment*
Very truly yours,
S* L* Smead, Chief,
Division of Bank Operations#
APR 12 1939
^
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
i
'
Fe d
era l
Re
ser v e
Bank
o f N ew Y ork
March 27, 1939.
D ear Mr. Smead.
.
^
3
^
We r e c e iv e d you r l e t t e r ' on March 25 and have today
b„,.,
sen t to the R eserve banks a copy o f the computation showing the
adjustm ents to b e made in p a r t i c i p a t io n s in the System Open M arket
Account as o f A p r i l 1 , pu rsu ant to the p la n adopted a t the m eeting
o f the F e d e r a l Open Market Committee on November 30, 1937,
A copy o f the l e t t e r o f t r a n s m it t a l and two c o p ies o f
the computation a r e en clo sed h e rew ith *
Y ours fa ith J
■>
*, System Open
Market Account.
Mr, E . L* Smead, C h ie f,
D iv is io n o f Bank O p e ra tio n s ,
B oard o f Governors o f th e
F e d e r a l R eserve System,
W ashington, D* C.
Encs*.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
1235&
J-B-15M-10 3 8
Similar letter sent to President of each Federal Reserve bank.
March 27, 1959.
Dear Mr. Young:
In accordance with my telegram of today, I enclose
herewith computation of the readjustment^ to b
April 1 of the participations of ti?1
*al'
made on
serve banks
in the System Open Market poi
Allan Sproul
Manager, System Open
Market Account
Honorable Hoy A. loung, President,
Federal Reserve Bank of Boston,
Boston, Mass.
Encl.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D ECLA SSIFIED
Authority
. 140A
12.35%
15M 8 - 3 7
FE DE RA L RESERVE BANK OF N E W
SECURITIES DIPT,
RHB/J3J
YORK
March 27, 1959.
Please send following telegram to each Federal Reserve Bank as indicated belowt
Under the plan for reallocation of government securities adopted by the
Federal Open Market Committee November SO, 19 37, a readjustment of participations
in government securities held in the Sjjrstem Account is called for April 1 .
The
computations showing adjustments to be made in participations of the several
Federal Reserve Banks is being sent to a ll Reseijye Banks today.
These computations
Increase
your participation on April 1 .
indicate an decrease
of
be made on that date*
Be shall advise you on April 1 the de
SPROUL
DECREASE
Young
Sinclair
Fleming
Leach
Parker
Schaller
Martin
Peyton
Hamilton
McKinney
Day
Bostem X .
Philadelphia's.
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
J
) $ 5,516,000
1.048,000
mmQm,
4,526,000
705,000
awO**
6,527,000
4,561,000
«*0***
42,000
1,981,000
<n»0“»
»Qam
2,610,000
4,156,000
172,000
CONFIDENTIAL
New
York
TpPhila-
System
|~ Boston
29,003
2,171
7,313
1,743
113
337
208
8,363
613
2,364
671
307
10,413
22
743
39
2,790
13,535
1,423
4,528
) - Allocation required on basis of
1*33995? per annum earnings rate
on Governments) to provide earning s
April-Dece.nber equal to nC"
1 340,987
140,959
448,533
564
3,062
- Expenses
(l) Fstimated current expenses, 1939
- Earnings
(1) Estimated current earnings, 1939
(exclusive of earnings on
Governments)
(2) Estimated earnings on Govern
ments to March 31
(3) Net profits on Governments to
March 22
(4)
Total
! - Excess of A-l over B-4
- Estimated dividends, 1939
- Allocation of remainder of System
holdings (f2 ,564,0 15 ,000, less
? l t 3^0,987,000) on basic of "E"
i - Total allocation of Governments
("D" plus "F")
I - Present allocations
! - Change in allocations
8,097
Cleve- T' Rich
mond
At
lanta
Chicago
St.
Louis
idinne- 1 Kansas
aDolis 1 City .
Dallas
San
Francisco
1,703
1,332
3,317
1,469
977
1,741
1,230
2,533
131
170
52
204
25
76
190
53
189
841
436
336
916
391
262
431
347
705
26
905
1,002
16
622
13
451
34
1,154
14
430
348
1 , 37
1,318
1,081
931
2,163
1,039
629
1,105
818
1,613
7,081
92,223
214,262
102,921
62,307
109,459
81,029
159,780
304
271
816
233
174
254
233
632
723
321
10 ____ 15—
636
Reproduced from the Unclassified I Declassified Holdings of the National Archives
RELOCATION OK GOVERN.VEIJT SECURITIES IN EYSTrLi OPEN MARKET ACCOUNT ON APRIL 1, 1939
(amounts in thousands of dollars)
___ 1 2 .„ ____ 26.
412
920
_
>
C
5r
1
j
* §
rn Q
723,028
7,146
24,199
72,365
21,253
15,537
22,681
21,253
56,435
191,322
721,957
206,907
253,398
134,227
116,422
287,127
124,174
77,844
132,140
102,282
216,215
,564,015
183,006
7 2 1 /6 3
205,359
257,92a
133,524
118,.{03
230,300
119,323
80,454
132,093
106,418
216,043
+1,043
-4,526
+703
-1,981
+6,327
+4,351
-2,610
+42
-4,136
+172
-2,706
—
i
>
U)
C/I
1° *-
2,564,015
♦3,316
o'o
R e p r o d u c e d fr o m th e U n c l a s s i fi e d / D e c l a s s i f i e d H o l d i n g s o f th e N a t i o n a l A r c h i v e s
_________ ^
D E C L A S S IF IE D
Authority £ . .0 - 123 5 % ^
7)w.
Hr. Allan Sproul,
fir s t' Vice President,
Fed#r#I Reserre Borne of
Hew lork, Bew lork.
0 #*r
Hr#
New l o r k ,
S prou lt
There 1* enclosed the statement of changes in alloca
tions of th# Systam Open Market Account necessary on April X
on the basis of the estimates of w tslitgif expenses, sod d ivi
dends shown*
estinating current expense# and currant earning#,
In
exclusive of earning* on Gorernaenta, anounts for the five
•o n tha ending
basis*
February
haTe been multiplied
by
2-4/10 a# a
% ese estimate# of current expense# have been adjusted
by adding #70,000
deducting
ad d itloo atl
at
St*
Louis
#180,000 a t A tla n t a
amounts at
•xpeoted increases
ment for the year*
made in Tie#
28
of
in
H .
and #90,000
and
Louis
$70,000
and
depreciation
JUnsas
at
Kansas
Cltgr
at Chicago*
and
The
C ity a re in
riew of
on f i x e d machinery #cd
equip
The adjustments at Atlanta and Chicago were
unusually large anoucte reported for
fu r n i t u r e
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q*
E x p lan atio n o f Computation of Items In d ic a t e d
R e a llo c a t io n o f System Open Market Account
A p r i l 1, 1939
A-l
2.1, times current expenses October-February, adjusted as follows:
Atlanta— $180,000 deducted on account of unusual charges for
"Furniture and equipment" and "Repairs and alterations" in
November and December 1933.
Chicago— $70,000 deducted on account o f u nu su al charges f o r
’’F u rn itu re and equipment" and "D e p r e c ia t io n " in December
1938.
S t . L o u is — 170,000 added to co v er estim ated in c r e a s e in "De
p r e c ia t io n " (s e e correspondence w it h Mr. M a r t in ).
Kansas C ity — 190,000 added to co ver estim ated in c r e a s e in
" D e p re c ia t io n " due to i n s t a l l a t i o n o f new e le v a t o r s and
power plan t#
B -2
A c t u a l ea rn in g s to March 22.
E stim ates o b ta in ed from New York by phone, March 22.
B -3
O btained from New Y ork by phone, March 22.
D-
A c t u a l r a t e used 1.00951358
E-
D iv id e n d s accru ed on F e b ru a iy 28 p lu s
a t F ebruary 28.
(275/365 X 1 .3 3 9 9 *)
5% o f
p a i d - i n c a p i t a l stock
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..C* 1235%
/
HEC’D IN FILES SECTION
^
APR 11 1939 K
Fed eral R eserve Bank
of
N e w Yo r k
March 22,^1939.
Mr. E. L. Smead,
Chief, Division of Bank Operations,
Board of Governors of the Federal
Reserve System,
Washington, D. C.
Dear Mr. Smead:
Referring to yoyr letter of September 28, 1938>
and to our subsequent conversations, Mr. S. A. Miller,
Manager, Securities Department, has been studying the
quarterly adjustments of participations of the Federal
reserve banks in the System Open Market Account. He is
not very optimistic about reducing the size of these ad
justments so long as the present principle governing
participations in the Account is maintained, but he is
ready to talk to you about the whole matter. If and when
you want to have a conference, I am sure that he can arrange
to go to Washington at some mutually convenient time.
Personally, I do not think the question is one of
prime importance and I assume that you feel the same way
about it, but, of course, if a better system than the one we
no?/ have can be devised, we should want to adopt it.
Allan Sproul,
Manager, System Open
Market Account.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* \2fl58
*■
I'D IN FILES SECTION
^
Fe
d e r a l
Re
s e r v e
Ba
n k
i
>3
OF
S t. L o u i s
March 20, 1939.
Mr* E. L. Smead, C hief,
D ivision of Bank Operations,
Board of Governors o f the
Federal Eeserve System,
Washington, D. C.
Dear Mr. Smead:
For your inform ation, I enclose copy
o f le t t e r Mr. M artin addressed to Mr. Sproul,
Manager, System Open Market Account, under date
o f March 13> 1939.
Yours very tr u ly .
APR 1 2 19?°
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..Q* 1235%
COPY.
March 13, 1939.
Mr. Allan Sproul, Manager,
System Open Market Account,
Federal Re serve Bank of New York,
New 2ork, N. Y.
Dear Mr. Sproul:
The Board of Governors of the Federal
Reserve System has approved the recommendation of our
Board of Directors that we be authorized to spend not
more than $175,000.00 for air conditioning the four
buildings occupied by this bank and its branches. We
have employed an engineer who is wording on the plans
and specifications and the installations, we understand,
v/ill be completed about July 1.
In keeping with the accounting instructions
from the Board of Governors of the Federal Reserve
System, tu© expenditure will be capitalized and depre
ciated monthly, which will result in added operating
expense for the latter part of the year of approximately
$75,000.00.
We are bringing tnis information to your
attention in advance of the reallocation of securities
which v/ill take place on April 1.
Very truly yours,
(Signed) WM. McC. IdaRTIN
President.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
i K 'W ifs
TM
I*"* T
rx h i I
M
vv APR 1 2 1939
3
^ #
*• </ V5.
S '
V, !
Jt?9
<r
^Federal R eserve Bank
of
N e w Yo r k
March 17, 1939.A
Dear Mr. Smead:
In a l e t t e r dated March 13., Mr. Wm. McC. M artin
a d v ised me, in advance o f the q u a r t e r ly r e a llo c a t i o n o f se
c u r i t i e s i n the System Open Market Account, on A p r i l 1, o f
an a d d i t i o n a l expense o f ap proxim ately |75,000 to be in c u rre d
by the F e d e r a l R eserve Bank o f S t . L o u is d u rin g the l a t t e r p a r t
r
o f the y e a r , in conn ection w ith an ex p en d itu re o f not more than
$175,000 f o r a i r c o n d itio n in g the b u ild in g s occupied tjy t h e bank
and i t s
bran ch es.
In case you have not been f u l l y inform ed i n t h i s r e
g a rd , I am e n c lo s in g a copy o f the above-m entioned l e t t e r ,
to
g e th er w ith a copy o f my r e p l y , dated March 16.
Yours f a i t h f u l l y ,
^
—
-
ig e r, System Open
Market Account.
Mr. E. L . Smead,
C h ie f, D iv is io n o f Bank O p e ra tio n s ,
Board o f Governors o f the F e d e ra l
Reserve System,
W ashington, D.C.
TO*
V
£
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
V2358
COPY
FEDERAL RESERVE BANK
OF ST. LOUIS
March 15, 1959,
Mr. A lle n S p ro u l, Manager,
System Open Market Account,
F e d e r a l R eserve Bank o f New York,
New Y o rk , New Y o rk .
D ear Mr. S p ro u l:
The B oard o f Governors o f the F e d e ra l R eserve System
has approved the recommendation o f our Board o f D ir e c t o r s th a t we
be a u th o rize d to spend not more than $175,000 f o r a i r C o n d itio n in g
the fo u r b u i ld i n g s occupied by t h i s bank and i t s bran ch es.
We
have employed an e n g in e e r who i s w orking on the p la n s and s p e c if i c a t i o n s
and the i n s t a l l a t i o n s , we u n derstan d, w i l l be completed about
J u ly 1.
In k eepin g w ith the acco u n tin g in s t r u c t io n s from the
Board o f Governors o f the F e d e ra l R eserve System, the exp en d itu re
w i l l be c a p i t a li z e d and d e p r e c ia te d monthly, which w i l l r e s u l t
in added o p e r a t in g expense f o r the l a t t e r p a r t o f the y e a r o f
ap proxim ately $75,000.00.
We a re b r in g in g t h i s in fo rm atio n to y ou r a t t e n t io n in
advance o f the r e a llo c a t i o n o f s e c u r i t ie s which w i l l take p la c e
on A p r i l 1.
Very t r u ly y o u rs,
(S ig n e d )
Wm. McC. M a rt in ,
P r e s id e n t
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
• y,
W ise.
1 4 0 A 15M 3 -3 8
FEDERAL RESERVE B AN K OF N E W YORK
Sarah 16, 1939.
Mr* 1ft* McC. Martin,
troaldant, 7*4«r*l Bae«rTa
Bank of St. Louis,
it . Louie* Mo.
Soar Sr. Martini
Thla w ill acknowledge receipt of your le tte r o f X&reh 13§ ad
vising M| In advance o f tho quarterly reallocation o f aeeurltiea la tho
Syatea Open Market Account, on April 1 , of A additional ozponao of
apprexiaately f75,000 to be incurred b y ro u r bank during tha latto r part
of tha year, In connection with an MpeMttwcA of not nor# than 1175,000
fo r a ir conditioning tha bulldinge/^ccupled byymtr bank and branohea,
Bader tho preaant pr^oedmk for ataarterSy^ reallocation af
participations In tha Syatew 0pea l(ki^t^coouxitf tha figure* covering
eetiaatcdand actual earning*, I ej^**eea>s^vid*od*, and charge* or addi
tions to net earning* of>he^parw e b*nk*Xare aaseafelad for tha 6m h
alttee by tha offlea of/the
of Governor® of tha federal Baeerve
Syatea. l«iB | to tha faot that ybqhave^received instruction* froa tha
Board with reepect to toe acccmattrc^proeedure covering tha expenditure,
I t«««aa that tha aatter a^ould automatically ha taken into consideration
at tha tlaa tha next realisation of participation* ia effected.
Sowever, In ordar to bo oartain that Hr* Saead, &t Washington*
la fu lly inforaed concerning the propoaad apaolal expenditure of your bank,
wa have oallad tha aattar to hla attention.
lour* faithfully,
Allan Sproul,
Manager, fiystea Opaa
VMvWV* ASQiWi#
SAMfAS(H)
FOr’
I B S*>
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ . 0 * 1235B
KS.CD IN FILES SECTION
JAN 3
•
F ed eral R eserve Bank
of
N e w Yo r k
December 29, 1938,
Dear Mr. Smead:
i
We have your l e t t e r o f December 27ja n d have today sent
to the R eserve banks a copy o f the computation showing the a d ju s t
ments to be made in p a r t i c i p a t io n s in the System Open M arket
Account as o f January 1 , pu rsu ant to the p la n adopted a t the
m eeting o f the F e d e r a l Open Market Committee on November 30,
1957.
A copy o f the l e t t e r o f t r a n s m it t a l and two c o p ie s o f
the com putation a re en clo sed h e re w ith .
Yours
All*
Manager, System Open
M arket Account
Mr. E. L . Smead, C h ie f,
D iv is io n o f Bank O p e ra tio n s ,
Board o f Governors o f the
F e d e r a l R eserve System,
W ashington, D. C.
E n c l.
1939
1
3 V
K
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
Copy o f s im i la r l e t t e r sen t to P r e s id e n t o f each F e d e r a l R eserve bank,
December 28, 1958.
Dear Mr. Young:
I n accordance w ith my tele gram o f to d ay , I
en c lo se
h e rew ith computation o f the readju stm en ts to be made on
January 3 a s o f January 1 o f the p a r t i c i p a t io n s o f the
F e d e r a l R eserve banks i n the System Open M arket p r o t f o l i o .
Yours f a i t h f u l l y ,
A lla n S p ro u l
M anager, System Open
M arket Account
H on orable Roy A. Young, P r e s id e n t ,
F e d e r a l R eserve Bank o f B oston ,
B o sto n , M ass.
CONFIDENTIAL
REALLOCATION CF U. S. SECT7? ^IES V ! SYS'?7&. OPEN KARKZT ACrxm VT OF JfiW J APT 1, 1939
(E a rn in g s on s e c u r i t ie s estim ated a t 1*313 Per cent
System
Boston
New
[ P h i l a - C le v e York | dolph ii . land
R ic h
mond
per annum)
r ......
[A tla n ta
1
-
S t•
Louis
Chicago
A - Expenses
(l)
Minn
Kansas
e a p o lis . C i^ r _
D a lla s
San
F ran o iso o
i
Estim ated c u rren t
exp en ses, 1939
28,803
2,121^
7# 3142
2,305
2,857
1.692
1,78U
121
350
206
137
186
27,019
2,003
6,992
2,099
2,720
• 1.506
1,375
3# 216
l# l 406
995
1#720
1#263
2*506
191
28
82
1914
61
163
1,202 •
2*325.
* • - E a rn in g 8
( 1 ) E stim ated c u rre n t earn
in g s , 1939 (e x c lu s iv e o f
ea rn in g s on G o v 't s )
C - Exoess of A - l over B-l
D - A llo c a t i o n r e q u ir e d (o n b a s is
o f 1 . 313 # earn in gs r a t e on
G o v 't s ) t o produce ea rn in g s
equal t o WC*
2,057*807
1 • Eatinated dividends 1939
.
(j
8,067
- Allocation o f rem ainder o f
System holdings ($2,561*# 015,000
less #2,057#807#000) on
506,208 .
basis of *E*
G » -T o t a l a l l o c a t i o n o f G o v 'ts
( • D » p lu s * F " )
-Present a llo c a t i o n s
I -Change in a llo c a t i o n s
152 , 552. 532,521
565
3 #062
I42
1,333
3#022 ■
159,863 207,159 lH+#699 *101,5^3 230,160
733
809
300
269
807
1#378
1014, 9 5 1 '
237
913 . 1#526'
69 *5 3 6 - 116,222 .
17k
253
91*5te* 177*075
257
621
>
C
&•
O
35*h5h
192,1142 li5,996
50,765
18,825 16,880
50,61*0
114,872
1Q918
15#8?6
114,872
38,968
1
1
|
t g!
m p;
"o >
Ifi:
2,56U,015
188,006 72l+#663 205,859 257#92l4 133#52li 118J^03 280,800 119#823
80,1*51* 132#098
106,148
216,010
2,5614-#015
192,971 815,1422 222,761 257,820 120,321 1014,521 276,389 106,791
56#815 113#2ii9
9l*#258
202,697
+14,1411 +13,032 +23,639 +18,8149
+12,160
+13»3l|6
-14,965 -9 0 ,7 5 9 -1 6,90 2
+IOI4 +13#203 +13,882
fo Ef
~ jw
>rwji:
w:
o.
R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s
D E C L A S S IF IE D
Authority £ ..0 * ^ .35% ^
?'D IM FILES SE&TION
JAN 5
Decisbtr 27. 193S
Ur. i lli r i Sproul,
F irst Vice President,
Federal Reaerre Bank of Sew York,
New York, law York
Baar Mr* Sproul»
There Is inclosad a etatenant prepared from aral labia
infarmatioo ahowin^ aatisatad expensea of each Fadaral Beaarra bank fo r 1939 and changes 1 b allocations necwaaary in tha
Systam accowit aa o f January 1# 1939# o» the baais of these
eatiHates.
The oai* sioc fr o * tha computation o f the item prior
service contributions to Retirement Syst«a has, of course#
materially affected tha result*
In estlaatin^ 1939 expenses,
figuraa for the fiv e months July through SoracAwr of the curran'
yaar have been used aa a basis with an
of 360,000 in
expenses a t the Federal Eeaerre Back of Kanaaa City to conrer an
anticipate! increase in depreciation reserres.
?ery tru ly your®,
S. L. Snead, Chief,
DiTiaioc of Baak Operationa.
1939
HKALLOC.ITION or « . 8. SECURITIES Ut SYSTEM o m KABKET ACC0TJ1T 01 JASUAHT 1, 1959
(■•rallies m ••ourlti** t i t t e t d at 1*313 par aant par u n a )
Boston
8 y»t*»
A * Ixp*fti«i
{1 ) 5 «tim t*d mtrront
oxpanaoa* 1939
0 * Sk«h» of A»X onr B»1
T
995
1.780
1*263
2*508
550
806
157
186
ip
191*
28
82
19U
61
I 83
^ 2,003 6,998
8,099
2,780
1.506
1#333
3,022
1*378
913
1*526
1*202
2*325
69.536 116.822
91. 5 W
121
35,1*54
0. -Total allooation of Oer'ts
San
Fran*itoo
1*1*06
- Allooation of raaalodar ef
B y tttm holdings (t2.56b.015/H0
lass $2,057,807,000) s d
506, 208'
tesla of *8*
X -Chang* in allocations
Dalla*
3*216
565
H.-Praasnt allooation*
Minn- Kama*
•ap o lii ct^r .
1*375
8,067"
(»T>* plus *F»)
St*
Louis
1*69®
D • Allooation raquirad (aa t e ili
af 1*3X3^ aaruing* rata «
Owr*ts) ta pradnea aarslngs
aqual to *c*
2.057.8C7/158.558 538.581 159.063 807.159 1U*,699 »J U *3
B * Sstiaatad t lt U r a d i 1999
Chleago
2,857
l#78U y
27#019
2.1211 7. 31*8
Atlanta.
8.305
26,803 y
i * » B m in g i
(1 ) Kitiaaatad ourrant darn
ing*, 1959 (•x e lu air* of
aaralngc oa 0 o r*t«)
"Httr T O " fila r*York
dolphli 1 land
2,561**015 v
3. 06e
733
192, 11*8 1*5.996
809
50,765
300
869
830.160 10i*,951
807
857
x n ,m
171*
853
837
681
lt »1 8
15.876
lit. 878
38.96*
188,006 781*.663 205,859
857,981*
80.1*51* 132.098
106.1*18 216,01*3
815. 1*88 822.761
257.820
56.815 113.81*9
94,258 288.697
-i*,965 -90.759 - 16,908
♦lot*
♦83,639 *18,81(9
2.5614,015 ' 192,971
♦12.160
*13.31*6
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q*
EXPLANATION OF THE BASIS FOR COMPUTING ITEMS INDICATED
A-l
2.4- of current expenses July-November 1938
plus f60,000 at Kansas City for expected increase in
normal depreciation (fixed machinery and equipment)
B-l
2.4 of current earnings, exclusive of earnings on
Government securities, July-November 193S.
D
E
-Rate used obtained by telephone from Mr. Miller
December 27, 1938.
6 percent of paid-in capital stock on December 21, 1933.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
Fed
eral
Reser
ve
12.358
Bank
O F
*»
Ka
n sa s
C
it y
I
December 5, 1938,
AIR MAIL
Mr. E. L . Smead, C h ie f,
D iv isio n o f Bank O p eratio n s,
Board o f Governors o f the
F e d e ra l R eserve System ,
Washington, D.C.
Dear Mr. Sneed:
Under d ate o f November £9.1 wrote to H r, A llan S p ro u l, a s Manager
o f the System Open Market Account, re q u e stin g th a t c o n sid e ra tio n be given
to some unusual exp en d itu res we are about to make when f ig u r in g r e a llo c a t io n s
o f p a r t ic ip a t io n s a s o f Jan u ary 1 , 1939.
I arr t h i s morning in r e c e ip t o f h is
re p ly in which he s t a t e s th a t under the p resen t procedure f o r q u a rte rly r e a l
lo c a t io n s o f p a r t i c i p a t io n s , the f ig u r e s coverin g estim ated and a c tu a l earn
in g s , exp en ses, d iv id e n d s, and ch arges o r a d d itio n s to net earn in g s o f the
re se rv e banks, are assem bled by the Board o f Governors o f the F e d e ra l R eserve
System f o r the Committee.
He s u g g e s t s , th e r e fo r e , th a t I a s c e r t a in whether
you have been f u l l y informed concerning the proposed s p e c i a l e xp en d itu res o f
t h i s bank.
Our d ir e c t o r s and the Board o f Governors, have approved an expen ditu re
o f approxim ately #175,000 to cover the i n s t a l l a t i o n o f e ig h t new au tom atic
e le v a to r s in our b u ild in g , c o n tr a c ts f o r which have been sig n e d .
In a d d i
t io n , we have under c o n sid e ra tio n the i n s t a l l a t i o n o f a power p la n t f o r the
m anufacture o f our own e l e c t r i c i t y a t a c o st o f from f 65,000 to $ 7 5 ,0 0 0 .
I t i s "orobable th a t la r g e payments w ill be made on th e se c o n tra c ts e a r ly next
y e ar and we unaerst&nd th a t under the accou n tin g manual in s t r u c t io n s we would
be p r iv ile g e d to charge o f f ap p roxim ately $90,000 on th e new e le v a t o r s during
the y e a r.
As to the power p la n t, we un derstand th e e n tir e exp en ditu re could
be c a p it a liz e d sin c e t h i s i s an a d d itio n r a th e r than a replacem en t.
I t i s hoped th a t you w ill g iv e c o n sid e ra tio n to th e se exp en d itu res
wben essem b lin g fig u r e s f o r u se o f the Open Market-Committee in making the
■next r e a llo c a t io n o f open m arket p a r t i c i p a t io n s .
I t w ill be a p p re c ia te d a ls o i f you w ill l e t me have your views as
to the accoun tin g procedure we should fo llo w in connection ■with th e se expen
d it u r e s .
We have given c o n sid e ra tio n to the s e t t in g up o f a l i a b i l i t y item ^
FiS to the e le v a to r s and making p ro v isio n s f o r r e se r v e s b e fo re the c lo s e o f
th is year.The only reaso n I can see why t h i s might not be a p p ro p ria te i s
th a t e f t e r making p ro v isio n f o r the proposed prepayment o f p r io r s e r v ic e
l i a b i l i t y to the R etirem ent System , about vhich I wired you tod ay , our net
earn in gs w ill probably be exhausted and any such charge a s we are now d i s
c u ssin g would have to be made a g a in s t s u r p lu s .
i t i^ p o s s ib le th a t we may
not have s u f f i c i e n t earn in g s a f t e r payment o f d iv iden ds and s e t t in g a s id e
Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
FEDERAL
RESERVE
BANK OF
1235B
KANSAS^: IT \
•
•
•
•
the u su a l r e se r v e s to make th e prep a:,Trent o f p r io r s e r v ic e l i a b i l i t y in f u l l
vdthout a charge to s u r p lu s .
Any h elp you may be a b le to «:ive u s on th e se problems w ill be
a p p r e c ia te d .
S in ce th e se q u e stio n s w ill come up fo r d is c u s s io n a t our
d ir e c t o r s * m eeting on Thursday, December 8 , I w ill a p p re c ia te a te le g ra p h ic
r e p ly .
Yours very t r u ly ,
C. A» W orthington,
F i r s t V ice -P re sid e n t
CW:L
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
Mr. Smead
Quarterly allocation of
Mr* Tan Fossen
S&rstem account*
The procedure and formula adopted effective January 1 , 1938, for
the quarterly allocation of the Systea account provides fo r the allocation
in two steps, f i r s t , in an amount sufficient to cover the excess of expenses
for the year'over estimated earnings and profits on the sale of Government
securities to the date of allocation plus estimated earnings, other than on
Government securities, for the remainder of the yearj and second, in pro
portion to dividend requirements*
Inasmuch as the relative share which the various Federal Reserve
banks receive in the f i r s t and the second steps of the allocation d iffe r con
siderably, anything that materially changes the amount of Government securities
allocated in the fir s t step, as compared with the previous quarterly allocation,
w ill result in disproportionately large changes in individual allocations.
Estimates of expenses and of earnings other than on Governments
can be made with sufficient accuracy as not to cause any marked changes for
the quarter in the amount of securities allocated in the f i r s t step.
Profits
on the sale of Government securities and changes in the annual earning rate
cm the System account, however, are two factors, for which mo allowance can be
made, and liiich are lik e ly to cause marked fluctuations in participations.
Ob
viously profits realised on the sale of securities and an increased rate of
earnings both mould have the effect of decreasing the amount of securities
allocated in the f i r s t step and accordingly would result in an increase in the
participation of the Sew Tork and other banks that have a relatively large
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Mr* Smead - 2
paid-in capital.
Conversely, losses on the sale of Government securities or
a reduction In the earning rate would increase the amount of securities re
quired to be allocated in the f i r s t step and would reduce the participation of
the Sew York bank and other banks with a relatively high paid-in capital*
8
During the current year profits on Government securities have amounted
to approximately £8, 000,000 and the earning rate on allocation dates has varied
from a maximum of 1 .5 7 percent to a minimum of 1.26 32 percent.
The unforeseen
p rofit of about 18,000,000 on sales of Government securities is equivalent in
it s effect to an error of about 37 percent in the January 1 estimate of the
amoigpt of securities needed to cover the excess of expenses over earnings*
The
corresponding error on April 1 was about 24 percent and on July 1 about 7 percent*
As regards the earning rate, which now is 1*29 percent, an Increase in the rate
to 1.39 percent per annum would have the same effect on the allocation as m
error of over 8 percent in the estimated net excess of expenses over earnings,
and a reduction of the rate to 1.19 percent would have an approximately similar
effect.
I f the amount of securities in % ste® account were increased, additional
securities would be allocated to the Federal Reserve banks in accordance with the
second step in the previous allocation, i . e . , in accordance with dividend re
quirements.
Accordingly, an increase in earnings due to an increase in the Sys
tem account would increase a ll participations uniformly in proportion to dividend
requirements and would have no effect on the next reallocation,
tro fits on the
sales of Government securities, however, are distributed not in proportion to
dividend requirements but in proportion to average participations since July 1 ,
1936.
Under the formula now in use the f i r s t step in the allocation automatically
offsets the effect of not distributing profits during the preceding quarter in
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Mr* Smead * 3
accordance vith dividend requirements*
Where, as during the f i r s t and second
quarters of 1938, profits are substantial this results not only in reducing
greatly the n o w t of securities allocated in the f i r s t step but also changes
greatly the proportion thereof allocated to individual banks*
Differences
la total allocations may therefore be due as such to these differences in
step one as to those in step two previously referred to*
A number of possible modifications of the formula have been con
sidered with a view to obtaining a formula that would not produce such marked
changes in participations*
The simplest and most effective Means of avoiding
substantial changes in participations due to profits would be to disregard
profits in the allocation and in effect to make each quarterly allocation on
essentially the save basis as the January 1 allocation is made*
This procedure
would be somewhat undesirable9 however, in that i t would f a l l fa r short of
attaining the objective of equalising dividend coverage*
I t would not, further
more, eliminate fluctuations in participations due to changes in the annual
earning rate*
A
more satisfactory procedure, I believe, would be to combine steps
one and two of the present formula so as to make the f i r s t allocation in such
amount, i f possible, as to cover the excess of expenses and dividends over earn
ings (other than those on Governments after the allocation date) and profits*
By so doing the effect of a change in the earning rate would be largely
eliminated, Inasmuch as in the absence of such disturbing factors as profits
the percentage of the securities allocated in this stage allocated to each bank
would not vary greatly from quarter to quarter*
Any excess earnings could,
of course, be allocated as at present in proportion to dividends, and i f this
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.Q* 12358
Mr. Saead - A
were done r e m its would be identical with those under the present formula
whenever the earning rate was high enough to aalce an allocation under the second
step necessary.
I t does not appear, however, that distribution of earnings in
excess of expenses and dividends in proportion to dividend requirements has
anything to coaaend it#
A aore desirable procedure, of course, would be one
that would tend to equalize the position of the Federal Reserve banks in respect
to capital, surplus and reserves for contingencies*
There is rooa for a great
deal of difference of opinion as to what this should mean in actual practice
»n^| as to how the objective could best be achieved*
I t seeas to ae that the
logical thing to do would be to equalize insofar as possible the position of
the various Federal Reserve banks as regards the ratio of total deposits of
aeaber banks to the sub of the Federal Reserve banks* own paid-in cap ital, sur
plus and reserves fo r contingencies*
This is preferred because differences in
paid-in capital of the Federal Reserve banks re fle ct differences aerely In
capital and surplus of aeaber banks and the capitalisation of member banks in
soae Federal Reserve d istricts is auch greater in proportion to deposit lia b i
lit ie s than in other Federal Reserve d istricts*
I would recoaaend that after
expenses and dividends have been covered any securities reaaining be so allocated
as to give each Federal Reserve bank an aaount equal to five percent of it s divi
dend requirementb aerely as an insurance against shortcoaings in the estiaates
resulting in the unexpected failure of earnings to equal expenses and dividends,
and then to distribute any reaainder equally aaong a specified number, six
perhaps, of the Federal Reserve banks having the highest ratio of total deposits
of aeaber banks to the Federal Reserve banks* own paid-in capital, surplus,
and reserves for contingencies*
Attached is a revised forwola in accordance with the above recommendation.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.C* 12358
A*
Expanses aad dividends*
(1)
(2)
(3)
U)
B,
Estimated current expenses during year
Prior service contribution
Estimated annual dividend®
total
Earningbj
(1)
(2)
(3)
U)
Current earnings to latest available data
Estimated for remainder of yaar
(exclusive of earnings on Government®
after date of & location)
lei profit e& Soveraaents sold to date
Total
0*
Excess of k M
D.
Allocation required (os basis of current annual rate of
earnings on Governments) to furnish earninge equal to *&*
E.
Allocation of remainder of System account**
F.
total allocation (D * E).
*
over B(4)
Allocate to each bask an awaunt, If avail
able, sufficient to give additional earn
ings equal to 5 percent of estimated divi
dends and divide any remainder equally
among tha sis banks having the highest
ratio of total deposits of aeaber banks to
the sua of its own paid-in capital, surplus
and reserves for contingencies#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
" DECLASSIFIED
Authority fc.Q* VM58
|Rw OIK RtCOROS SECIluii
ALLOCATIONS OF SYSTEM OPEN MARKET ACCOUNl
APR 2 5 1968
(In thousands of dollars)
April 1,
1933
A.
July 1,
1933
Oct* 1,
1938
Jan, 1,
1939
Net change
Jan. 1, 1933
to
Jan. 1, 1939
CHANGES UNDER PRESENT FORMULA
Boston
New York
Philadelphia
Cleveland
-3,300
+6,300
-1,100
-7,200
+11,200
+34,300
+20,200
-5,600
-3,200
+35,300
-8,000
+17,600
-700
-114,900
-8,900
-12,400
+4,100
-39,000
+2,300
-7,600
Richmond
Atlanta
Chicago
St. Louis
+3,700
+4,000
-5,200
+4,700
-12,800
-200
+1,600
—4,800
-6,900
-6,700
—2,400
-7,600
+22,400
+7,400
+13,000
+19,600
+6,500
+4,500
+7,000
+11,900
Minneapolis
Kansas City
Dallas
San Francisco
+5,100
-7,500
-2,500
+2,800
-14,900
—6,000
-12,300
-10,700
-16,600
-5,400
+9,300
-5,200
+27,600
+23,100
+7,100
+16,500
+1,200
+4,200
+1,600
+3,400
B.
ESTIMATED CHANGES IF, ON APRIL 1, JULY 1, and OCTOBER 1,
SECURITIES R3&&INING AFTER EXPENSES AND DIVIDENDS ARE
COVERED ARE DISTRIBUTED IN PROPORTION TO ESTIMATED
EXPENSES AND DIVIDENDS.
Boston
New York
Philadelphia
Cleveland
-3,000
-7,800
-2,000
-7,700
+13,000
-700
+18,700
-7,500
-1,500
-7,400
-11,300
+17,600
—4,400
-23,000
-3,200
-10,200
+4,100
-39,000
+2,300
-7,600
Richmond
Atlanta
Chicago
St. Louis
+6,300
+5,300
-3,200
+7,000
-7,100
+3,300
+6,300
+900
+500
—2 ,800
+1,800
-300
+6,700
-1,300
+2,100
+4,300
+6,500
+4,500
+7,000
+11,900
Minneapolis
Kansas City
wallas
San Francisco
+6,800
-4,500
-1,200
+3,900
-11,300
+1,900
-10,000
-7,700
-12,500
+3,800
+14,200
-2,100
+18,200
+3,100
-1,400
+9,100
+1,200
+4,200
+1,600
+3,400
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £..()■ 12358
April 1,
1938
July 1,
1938
Oct. 1,
1938
Jan. 1,
1939
Net change
Jan. 1, 1938
to
Jan. 1, 1939
C. ESTIMATED CHANGES IF PROFITS ON SALES OF U.S. GOVERNMENT
SECURITIES ARE DISREGARDED (AS IS DONE ON JAN. 1
REALLOCATIONS) AND PRESENT FORMULA. OTHEMISE FOLLdfED.
Boston
New York
Philadelphia
Cleveland
-3,000
-21,600
-3,200
"-7,200
+12,100
-30,600
+15,300
-6,600
-2,200
-1,700
-10,500
+17,200
-2,800
+15,000
+700
-11,000
+4*,100
-39,000
+2,300
-7,600
Richmond
Atlanta
Chicago^
St. Louis
+7,900
+6,500
-800
+9, -400
-2,700
+6,200
+10,500
+6,300
-800
-3,200
+1,600
-1,100
+1,900
-5,000
-^4,300
-2,600
+6,500
+4,500
+7,000
+11,900
Minneapolis
Kansas City
Dallas
San Francisco
+8,4-00
-2,300
+200
+5,800
-7,000
+6,500
-6,200
-3,900
-11,800
+1,400
+13,200
-2,000
+11,600
-1,300
-5,500
+3,500
+1,200
+4,200
+1,600
+3,400
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..C* 12358
n
M r?-
tp
2_
/< c _
a
(& **■ •* f T *
JA/Iv j £ ^ *
H
s
6
ar>
J0
^
P
7<X^T^
$
a
\o
i\
to .S C O jB S S K X
APR 2 51968
iu k
li> '
i
M
a
>
‘f* Ji ^r.,4
I
*rf
r
-
v
CHANGES IN PARTICIPAT IONS OF FEDERAL RESERVE BAMS
IN SYSTEM.? OPEN MARKET ACCOUNT
Federal
Reserve
Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Reallocations required by
present approved procedure
Estimated changes
Approximate changes
January 1, 1939
October 1, 1938
FOR PILES
I A M gtone
[
Estimated changes
on January 1, 1939* if
no reallocation is made
on October 1* 1938*
+ 29,000,000
-9 ,o c o ,o o o
+18,000,000
-11,000,000
-112,000,000
-8,000,000
*12,000,000
- f c , 000, 000
-83,000,000
-17,000,000
+5,000,000
-6,000,000
-6,000,000
-2,000,000
-6,000,000
+22,000,000
+7*000,000
+13,000,000
+19,000,000
+16 , 000,000
+1,000,000
+11,000,000
+13*000,000
-16,000,000
- 14, 000,000
+10,000,000
+27,000,000
+22,000,000
+ 7#000,ooo
+16,000,000
+11,000,000
+18, 000,000
+17,000,000
+12,000,000
-13,000,000
-5 ,0 0 0 ,ooo
♦Changes on October 1, 1938, if made, combined with subsequent changes on
January 1, 1939, would equal the changes necessary on January 1, 1939*
as shown below, in the event that no reallocation was made on October 1, 1938.
as
bw
ov^
E
-«
O
w cr,
CQ OO
63
.1 IN_
I
28,695
2 ,5 2 1
3 1,2 1 6
2 ,1 7 5
179
'2 / 5 5 +
7.336
639
* 7,9 75
2,1+38
193
2 ,6 3 1
2,763
1,6 77
220
157
*279® " 1783U
StV
Atlanta Chioago
Louis
3,21+0
1 ,3 1 7
91+
333
1,1+11 ~ 37573
1,1+15
11+5
1,560
I Minn
e ap o lis
1,007
83
1,090
Kansas
Dallas
City
1,665
171
1,836
1.15U
109
” 1,2 5 3
San
Francisoo
2,508
198
2, 7 o5“
IDeclassified
ses
( 1) Estimated ourrent expenses#
1938
(2) Prior service contributions
(3)
Total
System
(Amounts in thousands of dollars) ___
Phi la - |Cleve-~ RichHew
Boston
delphia[ land
mond
York
Reproduced from the Unclassified
REALLOCATION OF UNITED STATES SECURITIES IN SYSTi-M OPEN MARKET ACCOUNT ON OCTOBER 1 , 1938
Earnings on Seourities estimated at 1«297& per annum
,v>£
C« Excess of B-1+ over A-3
Estimated dividends, 1938
E« Allocation required (on
of
1«29£ earnings rate on Gov'ts)
to produoe earnings Oct*-Dec#
equal to *D* minus "C"
b
a
s
G. Total allocation of Gov'ts
(•E " plus "F ")
H* Present allocations
I* Change in allocations
139
379
218
lhk
133
1+3
212
to
83
195
66
167
26,111+
1,931
7,682
2 ,2 12
2 ,5 12
1,3 7 2
1,12 0
2,81+7
1,18 2
831+
1,278
961
2 .18 3
573
2,230
10,291
671
J.1'0 1
787
3*hhi
I422
1,9 27
3142
IV 505
899
3,958
371
1,59 3
271
1,18 6
1+01
17371+
313
1731*0
693
1+.690
289
2 ,3 16
1+70
I460
93
91+
385
33
98
38
77
337
8,017
561+
3,057
735
799
298
267
790
231+
171+
250
236
613
7.973
“ 15T906T *
>
&
&
i s
F« Allocation of remainder of
System holdings (|2 , 56I+, 015, 000
less |1,0 2 3# 222,000) on
of "D*
b
1,8 19
a
s
Holdings of the National Archives
B* Earnings
( 1 ) Estimated current earnings,
1938 (exclusive of earnings
on Gov'ts)
(2) Estimated earnings on Gov’ ts
to Sept* 30
(3) Net p ro fits on Gov'ts to
Sept* 28
(I*)
Total
2 .
1 , 023,222
al+,576 227,895
81,501 1 Oil, 260 63,01+8
53,206 121+, 558 6 1,8 18
23.371+
65,201
itB.901
81*, 884
!
ii
M
i
« es
i s
1.51*0.793 108,395 587,527 H a ,260 153,560
57,273
5 1 ,3 1 5 15 1,8 3 1
l+i+,973
33.1*1+1
1+8, Oi+8 U5.357 1 1 7 ,8 1 3
2, 56I+, 015* 19 2,9 71 815.1*22 222,761 257,820 12 0 ,32 1 10l+,521 276,389 106,791- 56 ,815 113.21+9 9l*»258- 202,697'
2 , 561+, 015 196,203 780, ll+7. 230 ,771 21+0,262 127,221+. 1 1 1 ,1 9 6 278,831 111+,1+U. 73.1+30- 118,631* 81*.963- 207,9l»6M
-3 .2 3 2 +35,275
-8 ,0 10 +17,558
-6,903
-6 ,675
- 2.I4I42 -7,620 -16 ,6 15
-5 .5 «
■*9.295
, V: i
- 5 #2l(9
'
* w!
rn Q
'o >
o
in
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority E..C* 12358
A P R ! 91968
F ed eral R eserve Bank
of
Ne w Yo rk
September 29, 1958*
Dear Mr. Saead:
Receipt is acknowledged of your letter of September 28,/
nil iii ni»mwr«iwwn».... wmjiM
M
wimnifUK'iiNul/
enclosing computation showing adjustments to be made in the par
ticipations in the System Open Market Account on October 1, pur
suant to the plan adopted at the meeting of the Federal Open Mar
ket Committee on November 50, 1957,
Two copies of the computation showing the adjustments
to be made are enclosed herewith together with a copy of telegram
which was sent to each of the banks today and a copy of the letter
of transmittal which was sent with the computation.
I note that you have been studying, without reaching any
conclusions, the matter of large fluctuations in allocations on
quarterly dates.
When I have had a chance to become familiar
with this problem I shall be glad to discuss the subject with you.
Veiy
Alii
Manager, System Open
Market Account
Ends. (4)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Following telegram sent to each Federal Reserve Bank as indicated below:
Under the plan for reallocation of government securities adapted
by the Federal Open Market Conmittee Uoveiaber S0f 1957, a readjustment of
participations in government securities held in the System Account is called
for on October 1.
The computations showing adjustments to be made in par
ticipations of the several Federal Reserve banks is being sent to all Reserve
Banks today.
increase
These computations indicate an decrease
in your participation on October 1*
of _ _ _ _ _ _ _ _ _ _ _ _ _
We shall advise you on October 1 the de
tailed entries to be made on that date#
SPR0UL
XIICRKASB
Xoung
Sinclair
Fleiaing
Leach
He*ton
Schaller
Martin
Peyton
Hamilton
McKinney
Day
Boston
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
rntjQ+m
.Q.,,
# 1 7 ,558,000
-0 —
-0—0—
-0—0—■
-39 ,2 9 5 ,0 0 0
—0—
DECREASE
$3,232,000
3 ,0 1 0 ,0 0 0
«()•
8 ,9 0 3 ,0 0 0
6 ,6 7 5 ,0 0 0
2 ,4 4 2 ,0 0 0
7 ,6 2 0 , OCX)
16,615,000
5 ,3 3 2 ,0 0 0
-0 —
5,249,000
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLA8SJF1ED
Authority
1235%
Similar le tte r sent to rresident of each Federal Reserve tfank except Hew York
Septesber t9 , 1958*
Dear lr * Yotmgs
U accordance with agr telegram of today, I enclose
herewith coafntatioa of the roedjnstaeate to be made, m
October 1 , of the participations of the Federal Reserve
beaks ia the % it« a Open Market Account*
▼ery truly yotirs,
Allen Sproul
Manager, % a tm Opm
Market Jkcoomt
Honorable 8cy A. Young, Freeldeot,
Federal Keserve Beak of Boston,
Boat n, &*se«
fe e l.
m /m
REALLOCATION OF UNITED STATES SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON OCTOBER 1 , 1938
Earnings on Securities estimated at 1»29$ per annum
[ Sy«t “
A. Expenses
(1) Estimated ourrerrt expenses#
1938
(2) Prior servioe contributions
(3)
Total
1,665
171
1,836
h5
212
Uo
83
195
66
lo7
1,3 7 2
1,120
2,8U7
1,18 2
8314
1,278
961
2,18 3
I422
179^7
3142
1,50 5
899
3,958
371
1,59 3
271
1,188
iTWU
91+
385
33
98
38
77
337
267
790
2314
1714
250
236
613
53,206 1214,558
6 1 , 81d
23,371+
05,201
148,901
5 1 ,3 1 5 151*8 31 . kk*973
3 3 ,^ 1
148, 0*48 U5,357 117 ,8 13
133
2,212
2 ,5 12
2,230
10,291
671
5,101
787
3,V*3
289
2 ,316
U70
I460
56U
3,057
735
799
139
379
218
26,1114
i,9 3 i
7,682
7*973
573
C* Excess of B-lj. over A-3
U,690
D* Estimated dividends* 1938
8,017
2,508
1,15U
198
109
1,263 ‘ 2,70^
1,007
83
1,090
Ibh
1,8 19
San
Francisco
1,U 5
li*5
l,56o
1 ,3 1 7
2 ,1 7 5
179
~sW 5S
_____________ _____.
^ " '“ ’MDallas
leapolla l City \______
3*2Uo
9h
33,3
"
37573
1 J 4I I
1,677
2,763
220
157
2,953 ~ 1783U
2,1+38
7 ,336
193
639
'77975 " 2 7 6 3 1
28,695
2 ,5 2 1
" l i ; 216
B« Earnings
(1) Estimated current earnings,
1938 (exclusive of earnings
on Gov*ts)
(2) Estimated earnings on Govfts
to Sept* 30
(3) Net profits on Gov*ts to
Sept* 28
(I4)
Total
_
ohieaeol St*
S
(Amounts in thousands of dollars)
-----rTeiw
|FhSTa-TcT£Ve- I
jB o a to n J ^
|d«lphia_[ land
mond . J
93-
298
Uoi
693
313
i , 3Uo “ S.oWT
b* Allocation required (on basis of
1.2 9 $ earnings rate on Gov’ ts)
to produce earnings Oct»-Dec*
equal to "D1* minus ”0"
1 , 023,222
F* Allocation of remainder of
System holdings ($2,5614,015,000
less | 1 , 023, 222, 000) on basis
of 11D"
1 , 51+0,793 108,395 587,527 141,260 153,560
G* Total allocation of Gov’ ts
("E" plus **FW)
2,56U ,015*192,971 815, i|22 222,761 257,820 120 ,321 10U, 521 270,389 106,791- 56,815 113,2^9
9^4,258 2 0 2 ,6 9 7
H* Present allocations
2,56U,015 196,203 780,1147.230,771 21+0,262 127,2214-111,196 278,831 l l i ^ l l . 73,1430 118 ,6 31
8^,963 207,9U 6
I* Change in allocations
—
8U,576 227,895
- 3,232 +35,275
81,501 10*4,260 63,0148
- 8,010 +17,558
57,273
-6,903
-6,675
-2,1442
-7,620 -16 ,6 15
-5-382
+9,295
8I4, B8I4
-5 ,2U 9
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.O-
S
M
^
r *
f
i r
F
e
j n
s
d
S
t
e
Y
r a
i o
l
p
e
R
r o a X
P
r e
e s e r v
s
e p
t e m
b
e r
2
8
,
1 9
r e p
a
r e d
e
e n
3 6
*
f r
o
#
i d
e
e
n
t ,
B
e a k
c
l o
o
f
B
o v
Y
o
s t a
t e
r k
,
e
n
timr York, H. I .
D
e a r
H
r *
T
'
U
b
m
h
s h
a n
i n
S
p
r o
e r e
o w
k
f o
r
t h
e
S
i s
i n
g ’
1 9
3
y
d
s
h
u
r i n
a
q
o p
y
u
y o
t o
a
t o
r t e
t h
u
g
a
t o
8
s t i m
,
h
e o m
r
a
t e
s
r l y
d
a
a
a
a
*
t t a
e
a
r
l y
a
t e d
e
n
a n
t
1
r .
f a
s o
u
s s h
s
d
a
t o
s *
r
d
u
i z ^
n
e
c h
M
s o
t e
d
r
a v e
s
a
c c o
t t e
s
a
s a
A
t h
i s
t
e
l a
e d
l )
i n
s t s n
l a
I
u
a
V
s
y
e
t e
a
a
r n
g e s
i n
g
^
i n
a n
t h
r *
H
n
m
a n
a
e
b
l l o
a
s
s e
t h
s
w
i t h
t h
t
t h
e
m
a r k e d
t ,
b
s
u
n
t
o
X
t
s
r e a
s h
o
d
a
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d
do
n
p
c
a f c t e s o %
F o e
h a m
t
s o
r e
e a e h
o
f
O
a
s e
f
t h
e
a
t e
d
J o n
o
b
f l u
l d
m
j e
c
t ,
c
t u
a
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t g r
e d
I *
s c l o
f
s
w
l i k
s
e
s
r k
I
f
c o
t o
b
F
c t o
1 9
3
s
f o
r m
l e
*
t h
o
s
s s
i b
i a
n
c l u
d
i s o
d
,
a
s i o
u
s s
l e
d
e r
2
5 *
t e
b
e
a
p
n
i l a
s t i m
m
t i o
e
a
o
n
e
v
s e s
o
a
a
e
i v
i s i o
I * .
n
S
o
f
o
s a
B
a n k
C
- O
h
i e
p
t n
r a
l
n
e
1
f o
r
l e
s
c e
a
e
-
e
r
t e
s s a
r y
s *
8
,
l l o
n
I
s
u
o
c
a
l a
f
t i o
s
w
i t h
t h
e
s a
*
D
X
p
t i o
s o
c h
u
x
a
f ,
e r a t i o n
* .
t a
t e
m
t h
m
f i n
n
d
i n
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s
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f c j e
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i t h
R&ALLOCATIOH OF UNITE-) STAtES SECKKITIES 1M STST.P o m m MARKET ACCOUNT OS OCTOBBB 1, 1938
Warnings on Seeurities estimated at 1*29^ per anman
System
IV Expenses
( 1 ) Estimated current expenses#
1938
(2) Prior service contributions
(3)
Total
Earnings
( l) ^stisaated current earnin s,
1930 (exclusive of oamings
on Gov*ts)
(2) Est3»ated earnings on 0©v*ts
to Sept. 30
(3) Net profits on Gcrr^ts to
Sept* 28
(ii)
Total
Boston
Jtew
York
g t ; - - MinnFh ila-~ e i s w - i "Tfch -"'
Atlanta j Chicago
eapolis
delphia land ] mond
Louis
2,1+38
7,336
26,695 7 2 ,1 7 5
2 ,5 2 1 /
193
639
179
" ^ r n f i T S - 5 3 5 5 .i s m "'"§ 7 6 31
2,763
220
1,6 77
157
1,"15T
Kansas
Dallas
c i «y
San
Francisci
3,2iiO
1 ,3 1 7
333
9*t
i . i j i " T .^ I T
l,i4X5
11*5
1*560
i,oor
83
!,<£&
1.605
171
1. 8&
I . I 5U
109
1,26 5
2,508
198
£,706
liO
83
195
66
167
139
379
218
H4I1
133
U5
218
1 ,9 3 1
7,682
2 ,2 12
2,5X2
1,3 7 2
1,12 0
2,81,7
1,18 2
83lt
1.27 8
961
2 ,18 3
2,230
573
7,9 73 '
“ 5530 S- ™ n r , w " t e s s t
dTt
y,T$T
78?
li2g
...i ; w
31*?
899
17555" "37§ 5t
371
271
2*3
1.5 * 6
693
it im
1*01
■ ” lysTC
i,a i 9
26,1114 '
c. Excess of B-I4 ever A-3
it*690
289
2 ,3 16
k7Q
I460
93
9*t
385
33
98
38
77
337
D. Estimated dividends# 1938
8.017
56ii
3,057
735
799
29a
267
790
231*
nh
250
236
613
8 1,50 1 10^,260
63,c^8
53.206 121*, 558 6 1,8 18
23,37it 65.201
1*8,901
81*, 881*
l,5i*o ,79 3'108,395 587,527 lla#260 153,560
57,273
5 1 .3 1 5 15 1.8 3 1
33.W4I
Allooation required (aa basis of
l*290t earnings rate on Oov *ts)
to produce earnings Got*-Dec*
equal to *0* minus WC*
P. Allocation of remainder of
System holdings ( 1 2 ,5 ^ # 015# 000
less #1 , 023, 222, 000) on basis
of *D*
0* Totalallocation of Gov fts
{*£" plus *?*)
H* Present allocations
I . Change in allocations
1,CB3,222
8^,576 227,895
iik,973
2,56i4,0 15'l92.971 815,1422 222,761 257*820 120 ,321 10t*,521 276,389 106,791
2 , 56i+, 0 15' 196,203 780,11*7 230 ,771 2140,262 127,2214 1 1 1 ,1 9 6 278,831 1114,1+11
— .
-3 ,2 3 2 ♦35,275
-8 ,0 10 +17*558
- 6,903
-6 .675
-2,Wl2
i»8,0l*8 1*5.357 1 17 ,8 13
56.815 Il3.2it9
9U.258 202,697
73.it30 118 ,6 31
8U.963 2C7,9li6
-7,620 -16 ,6 15
-5.382
♦9,295
-5.2ij9
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
V235B
• ^0 IN RECORDS SECTION
PARTICIPATION OF FEDERAL RESERVE
BANKS I N SYSTEM OPEN L-ARK3T ACCOUNT
APR.l 9 1968
_ _ 33_ 3, 3 / 3
The procedure fo llow ed in a llo c a t in g p a r t ic ip a t io n s in the System
Open Market Account p ro v id es f o r r e a llo c a t io n s a s o f Jan u ary , A p r il, J u ly ,
and October 1 s t o f each y e a r .
The form ula now u sed f o r a l lo c a t in g p a r t ic ip a t io n s in the System Open
Market Account among the tw elve F e d e ral R eserve banks p ro v id e s, among o th er
th in g s , t h a t each F e d e ral R eserve bank s h a l l be a l l o t t e d s u f f i c i e n t s e c u r i
t i e s to produce earn in g s equal to i t s expenses and oth er fix e d c h a rg e s, and
th a t any s e c u r i t i e s then rem aining u n d istrib u te d be a llo c a t e d to the F e d e ral
R eserve b ark s on the b a s is o f d iv id en d req u irem en ts.
Sin ce p r o f i t s on s e c u r i t i e s sin c e January 1 , 1936, have been excep
t io n a ll y l a r g e , approxim ately $ 7 ,8 0 0 ,0 0 0 , e arn in g s to d ate have been s u f f i c i e n t
to cover a l l o f the expenses o f th e F e d e ra l R eserve banks f o r the ca le n d ar
y e a r 1938 and p a r t o f accrued d iv id e n d s.
A cco rd in gly , under the e x is t in g
form ula th e s e c u r i t i e s in th e System Account would be r e a llo c a te d among the
F e d e ral R eserve banks a s o f October 1 in the p ro p o rtio n o f dividen d r e q u ir e
ments o n ly .
At the beginn ing o f the y e ar the s e c u r i t i e s in th e Account were
a llo c a t e d , a s s t a t e d above, on the b a s i s of expenses and then d iv id e n d s,
and sin c e fo r th e l a s t q u a rte r
o f the y e a r th ey would, under the form ula,
be a llo c a te d on the b a s i s o f div id en d requirem ents only, i t i s apparent th a t
i f the expenses o f a given bank bear a h igh er r a t i o to th e t o t a l expenses o f
the System than i t s dividen d requirem ents b e ar to the t o t a l dividen d r e q u ir e
ments o f the System , i t would g e t a s u b s t a n t ia l d e cre ase in i t s p a r t ic ip a t io n
in the Account f o r the l a s t q u a rte r o f the p re se n t y e a r .
Beginning Jan uary 1 , 1939, the s e c u r i t i e s in the Account w i l l a g a in
be r e a llo c a t e d among th e F e d e ra l R eserve banks on th e b a s i s o f expense and
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
dividen d req u irem en ts, and presum ably a s in th e p a s t , -without making allow
ance a t t h a t tim e f o r p o s s ib le p r o f i t s during th e y e a r .
The a tta c h e d s t a t e
ment shows the approxim ate changes which, on the b a s i s of the e x is t in g
approved form u la, should be made a s o f October 1 , 1938, in the p a r t ic ip a t io n s
o f th e tw elve F e d e ral R eserve banks i n the System Account, and e stim ate d
changes in a ll o c a t i o n s a s o f January 1 , 1939, (a) i f the r e a llo c a t io n i s
made a s o f October 1 , and (b) i f the r e a llo c a t io n i s n ot made a s o f October 1*
I t i s ap paren t from th e attach e d statem en t th a t
i f th e r e a llo c a t io n
i s made a s o f October 1 the changes in p a r t ic ip a t io n s a s o f Jan u ary 1 , 1939*
w i l l be much l a r g e r th an th ey would be a t th a t tim e i f no r e a llo c a t io n i s
made on October 1 .
In the circu m stan ce s, and sin c e th e re i s no p a r t i c u l a r
p o in t in a ll o c a t i n g s e c u r i t i e s among th e F e d e ral R eserve banks on the b a s is
of dividen d requirem en ts on ly, a s would be the c a se i f th e October 1 , 1938,
r e a llo c a t io n i s made, i t may be w e ll to co n sid e r whether any fu r th e r r e a l l o c a
tio n o f s e c u r i t i e s in the System Account should be d e fe rre d u n t i l January 1 ,
1939.
I f i t i s thought a d v isa b le not to make any r e a llo c a t io n a s o f October 1 ,
1938, i t presum ably w i l l be n e c e ssa ry f o r th e F e d e ra l Open Market Committee
to tak e th e m atter up w ith each F e d e ral R eserve bank.
Attachment
9/22/38 .
CHANGES IN PARTICIPATIONS OF FEDERAL RESERVE BANKS
IN SYSTEM OPEN MARKET ACCOUNT
Federal
Reserve
Bank
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St# Louis
Minneapolis
Kansas City
Dallas
San Francisco
Reallocations required by
present approved procedure
Estimated changes
Approximate changes
January l f 1939
October lf 1938
Estimated changes
on January 1, 1939, if
no reallocation is made
on October 1^ 1938a- ..
....
-43,000,000
+29,000,000
-9,000,000
+18,000,000
-#1,000,000
-112,000,000
-8,000,000
-12,000,000
-44,000,000
-83,000,000
-17,000,000
+5,000,000
-6,000,000
-6,000,000
-2,000,000
-6,000,000
+22,000,000
+7,000,000
+13,000,000
+19,000,000
+16,000,000
+1,000,000
+11,000,000
+13,000,000
-16,000,000
-4,000,000
+10,000,000
-5,000,000
+27,000,000
+22,000,000
+7,000,000
+16,000,000
+11,000,000
+18,000,000
+17,000,000
+12,000,000
-x-Changes on October 1, 1938, if made, combined with subsequent changes on
January 1, 1939, would equal the changes necessary on January 1, 1939,
as shown below, in the event that no reallocation was made on October 1, 1938*
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority £ ..()« 12.35B
RATIO OF EACH FEDERAL RESERVE BANK’S REQUIREMENTS
FOR EXPENSES AND PRIOR SERVICE CONTRIBUTIONS AND
FOR DIVIDENDS TO SUCH REQUIREMENTS FOR THE SYSTEM AS A WHOLE
Federal
Reserve
Bank
Percent to System Total
Expenses and
Dividend
Prior Service
Requirements
Contributions
7.5
7.0
25.5
38.1
Philadelphia
8.4
9.2
Cleveland
9.6
10.0
Richmond
5.9
3.7
Atlanta
4.5
3.3
Chicago
11.4
9.9
St. Louis
5.0
2.9
Minneapolis
3.5
2.2
Kansas City
5.9
3.1
Dallas
4.1
2.9
San Francisco
8.7
7.7
100.0
100.0
Boston
New York
TOTAL
CHANGES IN PARTICIPATIONS IN SYSTEM OPEN MARKET ACCOUNT RESULTING FROM RE
ALLOCATION OF SECURITIES ON DATES INDICATED
(in thousands o f d o l l a r s )
co
of.)j— --- —---------- -- — ~
F e d e ral R eserve
©1
Bank
j
r° j
Boston
A p ril 1,
1938
Ju ly 1,
1938
- 3,277
+ 11,241
150
+ 6,301
+ 34,292
+ 9,635
- 5,243
- 1,082
+ 20,243
+ 4,458
-13,613
+ 3,44-7
- 7,161
-
2,501
+ 7,907
- 3,837
+ 1,901
+ 3,682
- 12,755
+
832
+10,753
- 2,117
- 4,778
+ 3,955
219
Chicago
-
5,174
- 7,523
- 7,128
+
- 5,151
S t . L o u is
- H,118
+
245
- 7,451
+ 1,995
♦
M inneapolis
+
4,110
- 5,279
- 5,366
*
237
+
Kansas C ity
+
2,928
+
- 5,352
+
6,841
- 7,477
-
D a lla s
+
7,067
- 5,671
+
884
+
36
- 2,484
- 12,320
San F ran cisco
+
1,913
+
- 2,807
-
6,130
+ 2,822
- 10,708
O ctober 1,
1936
Jan u ary 1,
1937
A p ril 1,
1937
January 1,
1938
+ 12,477
+ 1,4-88
+ 1,617
+ 1,445
New York
- 15,318
+ 7,017
+35,535
-
P h ila d e lp h ia
-
2,191
-14,213
C leveland
♦
9,975
Richmond
-
A tla n ta
746
72
399
i
5,616
+
1,592
4,7m
-
4,809
5,130
-■ H,945
5,996
Prepared for Mr* Sinead September 1938.
\X
X
CHARGES IS PAmCIPATK»S Ili SISTSM 0PI8 MARSFT ACCOUKT RF80LTI8G FHOM Kh~
ALLOCATION OF 8BCDBZTZES OK DATES IKDICATSD
(In thousands of dollars)
Federal Reserve
Bank
October 1 ,
____ 1936
January 1 ,
1937
April 1 ,
__ .... 1937 „
January 1 ,
1938
April 1 ,
_.1938
July 1 ,
1938
Boston
♦ 12 ,4 7 7
♦ 1,488
♦ 1 ,6 1 7
♦ 1,4 4 5
- ,3 ,2 7 7
♦ 1 1 ,2 4 1
Sew Tork
- 15,318
♦ 7 ,0 17
♦35,535
-
150
♦ 6,301
♦ 34,292
Philadelphia
-
2 ,19 1
-1 4 ,2 1 3
♦ 9,635
- 5,243
- 1,082
♦ 20,243
Cleveland
♦
9,975
♦ 4,458
-1 3 ,6 1 3
♦ 3,447
- 7 ,1 6 1
-
Kichwwtd
*
2,50 1
♦ 7,907
- 3,837
♦ 1,9 0 1
♦ 3,682
- 12 ,7 5 5
Atlanta
+
332
♦10,753
- 2 ,1 1 7
- 4,778
♦ 3,955
219
Chicago
-
5,174
- 7 ,5 2 3
- 7,12 8
♦
- 5 ,1 5 1
♦
1,59 2
6 1. Louis
- 1 4 ,1 1 8
*
245
- 7 ,4 51
♦
♦ 2,742
-
4,809
Minneapolis
♦
4 ,HQ
- 5,279
- 5,366
♦
237
♦ 5,130
— 14,945
Kansas City
♦
2,928
♦
- 5,352
♦ 6,841
- 7,4 77
-
Balias
♦
7,067
- 5,6 71
♦
♦
36
- 2,484
- 12,320
Sm Francisco
♦
1,9 1 3
♦
- 2,807
- 6,130
♦ 2,822
- 10,708
Prepared, f o r Mr.
Smead
746
72
September 1938.
884
399
5,616
5,996
? 32?
; o v
f
M A
■ie-f
oj CO
II iX
' w oo tO
COMPARISON OF ESTIMATED CURRENT EXPENSES (MADE IN CONNECTION WITH REALLOCATION OF
SYSTEM OPEN MARKET ACCOUNT AS OF DATES INDIGATED) WITH ACTUAL CURRENT
EXPENSES
r—
i ■'tQ,
f
B <C
“O Or
ieral Reerve Bank
35 Si
Cfl «
3 U*
\{J
Reproduced from the Unclassified
Percenib to actual i"or 1938**
esti[.mated as of
July 1 ,
Jan. 1 ,
April 1 ,
1938
1938
1228 _
98.8
98.6
97.7
97.8
100.9
98.0
99.1
New York
106.3
10 1.0
9 7 .1
97.0
9 8.1
10 1.4
10 2.4
100.0
Philadelphia
104.6
100.8
99.8
100.7
99.1
100.2
99.8
100.0
Cleveland
97.3
10 1.7
10 8.7
102.0
97.5
10 5.8
102.6
100.0
Richmond
10 0 .1
98.7
100.8
100.0
98.0
10 5.5
105.6
100.0
Atlanta
97.3
98.2
109.0
10 7.8
97.4
10 3.9
105.6
10 3.9
Chicago
10 3.4
100.6
106.8
102.6
97.5
10 2.2
99.9
100.0
) St, Louis
1 1 3 .4
10 1.3
10 5.4
10 1.5
9 5 .1
98.8
1 0 1 .1
100.0
Minneapolis
9 8 .1
10 3.4
10 5 .1
99.5
95.3
105.9
109.5
10 1.5
Kansas City
95.2
99.8
99.9
97.9
98.4
106.9
100.6
100.0
Dallas
92.6
1 0 1 .1
99.3
100.8
94.2
1 1 2 .5
10 7 .1
100.0
San Francisco
99.3
100.7
10 3.9
10 2.4
10 1.6
10 1.6
10 1.6
100.0
Total
10 1.3
100.6
10 1.9
10 0 .1
97.9
102.9
10 2 .1
100.2
J
IDeclassified
■
Percent to actual for 1937
estJmated as of
April 1 , 1 July 1 ,
Jan, 1 ,
1937
I 1937*
1937
92.3
\ Boston
'a £
0
1
<
Holdings of the National Archives
Percent to actual for
1Q36 estimated as of
June 30, 1 Oct. 1 ,
I
1936
1936
* Date qf proposed reallocation
* * On fiv e 'months1 basis*
*\
Prepared for
M
r ,
Smead September
} £5
|h 4
fO
i K
CD
I w co fO
Vjs^
*N I
w
? H _.
I &« *-» t<)
I ?
IS “O
$ <•*3f
I?
*o
i ieral ReW
■ro
k
Bank
(
Perceni i to actual for 1938**
esti .mated as of
Jan. 1 ,
July 1 ,
April 1 ,
1938
1 9 2 8 .....
____ i m
.....
1
j
5
\
98.6
97.7
97.8
100.9
98.0
99.1
New York
106.3
10 1.0
9 7 .1
97.0
9 8.1
10 1.4
10 2.4
1QQ.0
Philadelphia
104*6
100.8
99.8
100.7
99.1
100.2
99.8
100.0
Cleveland
97.3
10 1.7
108.7
102.0
97.5
10 5.8
102.6
100.0
Richmond
10 0 .1
98.7
100.8
100.0
98.0
10 5.5
105.6
100.0
Atlanta
97.3
98.2
109.0
10 7.8
97.4
10 3.9
105.6
10 3.9
Chicago
10 3.4
100.6
106.8
102.6
97.5
102.2
99.9
100.0
S t. Loui8
1 1 3 .4
10 1.3
105.4-
10 1.5
9 5 .1
98.8
1 0 1 .1
100.0
9 8 .1
103.4-
10 5 .1
99.5
95.3
105.9
109.5
10 1.5
>
Io
<£
r*
Kansas City
95.2
99.8
99.9
97.9
98.4
106.9
100.6
100.0
Dallas
92.6
1 0 1 .1
99.3
100.8
94.2
1 1 2 .5
10 7 .1
100.0
San Francisco
99.3
100.7
10 3.9
102.4-
10 1.6
10 1.6
10 1.6
100.0
Total
10 1.3
100.6
10 1.9
100.1
97.9
102.9
102.1
100.2
* Date of proposed reallocation
* * On fiv e months* basis.
Prepared for Mr. Smead Septeaker 1938.
■1
DECLASSIFIED
\
Percent to actual for 1937
estimated as of
Jan. 1 , j April 1 , 1 July 1 ,
1937
J
1937
j 1937*
98.8
Minneapolis
\
Percent to iictual for
1936 estimai ;ed as of
June 30,
Oct. 1 ,
......
........ 1.936 ____ ...... 1?36
92.3
Boston
1
COMPARISON OF ESTIMATED CURRENT EXPENSES (MADE IN CONNECTION WITH REALLOCATION OF
SYSTEM OPEN MARKET ACCOUNT AS OF DATES INDIGATED) WITH ACTUAL CURRENT
EXPENSES
cenptgnw or n n u t o onom m m (u n a om ens* n a m u o cm o « or
num ora u a o s acoowt a or boss noicrne) ixtb ienuu. cm iu t
m in i
P
f
i
t
• *
e
t
r v
o
l
a #
B
n
o
1 9
~
J
k
r e
a
o * t o m
8
* v
F
h
I o
i l «
r k
d
*
l p
h
i i i
t
t i S
u
i i c
t o
M
1
B
M
1 6
3
0
t
u
,
O
c
«
S
«
.
A
t l o
N
a
K
S
t *
L
o
*
i *
I»> t»
M
B
l *
m
C
i t y
*
F
r * »
c i »
T
o
l
t a
c o
1 6
*
r e p
a r e d
f o
r
. *
1 0
b
i . 4
io o .«
0
, 1
9
7
. 3
1 0
3
U
3
U
. l
0
1
. ?
* 6
9
* 1
e t o
u
l
t o
r
1 9
1 7
F
t e T
A
p
r
i l
1
1 9
1 7
9
* 7
7
,
1
1
M
r
* »
m
97*0
7
9
t
*
M
m
9
J a m
1
* a
1 0
0
a
1 0
1 * 4
1 0
2
* 6
* o
1 0
5
* 5
1 0
5
* 6
100*0
1 0
5
* 6
1 0
3
* 9
99*9
1 0
0
. 0
0
1 0
0
* 0
9
S
. #
. 3
1 0
5
* 9
* 4
9
. 0
1 0
1 0
5
5
* 4
. 1
9
9
9
97*9
9
* 9
1
9
9
* 3
1 0
0
* #
. 7
1 0
3
. 9
1 0
2
. X
1 0
0
101*9
95*1
* 5
9
3
8
,
5
9 #
94.2
m
. 1
hU
yroyeawl m i U m i U c i
f l l » M*th»* U l l t ,
1 9
. 0
. #
101*5
e r
0
5
1 0
b
1 0
1 0
101*3
t e m
* 0
7 * 5
* 2
e p
0
9
2
* 6
1 0
. 0
1 0
0
4
2
7 * 5
1 0
* 1
1 0
9
, 3
9
io#*7
* 6
1
^
#
9
9 * - ®
1
3
#
* #
2
1 0
1 9
1
9
1 0
0
l y
9
io6.a
1 0
a
* 2
106,4
. 3
..............
f
J
0
* 9
9
o
1 0
3
9
r
* 1
1 0
1 *
l
9
7 * 4
1 0
u
i l
9
9
. *
r
* 7
* #
2
M
p
0
7
9
A
1 0
1 0
. 4
m
* 9
1 0
3
ostaMii for 193i*#
t o
j
9
* t
t i *
r t j L
,
i
9 #
#
M
«
99»#
99*#
S
7
9 #
7
,
w
* 0
. 2
a d
3
1
t o
t i
0
5
M
U
•
1 0
9
S
«
f t t
•
loo.i
*
r .
r t o
9«*7
9
H
o
1 9
101*0
•
**
P
J
. 3
1 0
P
,
6
U
H a sn ^ i
r
1 0
t a
& !* * «•
1
9
)
1
i
f o
t .
1 9
w iw tt >in
S l o h M
l
A
*
9
6
7 * 9
1
1
. 1
100*0
1 0
9
* 5
101*5
106*9
1 0
0
* 6
1 0
112*5
1 0
7
* 1
1OO.0
1 0
1 0
1
. 6
100*0
1 * 6
102*9
102a
1 0
0
0
* 0
. 2
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority fc.Q* 12358
0,
Fe d e r a l R e s e r v e B a n k
DIVISION OF
BANK OPERATIONS
o f N ew Y o rk
June 27, 1938,
Dear Mr. Sinead:
We have your letter of June 25 ^and have today sent to
the Reserve banks a copy of the computation showing the adjust
ments to be made in participations in the System Open Market
Account as of July 1, 1938, pursuant to the plan adopted at the
meeting of the Federal Open Market Committee on November 30,
1957.
A copy of the letter of transmittal is enclosed here
with.
We note that you will make a further study of the
formula now used.
Very truly yours,
W. ft. Burgess
Manager, System Open
Market Account
Mr. E. L. Smead, Chief,
Division of Bank Operations,
Board of Governors of the
Federal Reserve System,
Washington, D. C.
Encl.
JN
0
A
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
Similar letter sent to Presiuent of each Federal Reserve Bank as follows*
rHotffcon: '
Philadelphia
Cleveland
Richmond
Atlanta
$U, 241,000+
20,245,000+
5,616,000—
12,755,000219,000San Francisco
$ 1,592,000
4.809.000
14.945.000
5.996.000
12.520.000
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
$10,708,000 -
+
-
June 27, 1938.
D
e a r
H
r ,
H
a
r r i s o
n
i
In connection with the plan for 7Hllo<sttlM of goveraaont
s
e
c
u
r
i t i e
s
adopted by the Federal Open Harket Committee at its
m
e
e
t i f t f
on November SO, 1957, a copy of the computation showing the adjustments
to be made in participations as of July 1, 1958 ia being sent to all
Beserve banka,
A cojgr of this statement is enclosed herewith, which indicates
that your participation in the ^rstem Open Market Account will be in
creased $54,292,000,
Changes in allocations are somewhat more marked than usual snd
are due in no email part to the size of profits which the %-stea ban re
ceived on governments since January 1.
To the extent that earning# ex
ceed expenses they are allocated in accordance with dividend requirement#
which are somewhat differently distributed among the reserve banks than
the requirements for earnings.
We shall advise you on July 1 the detailed entries to be made
on that date,
truly yours,
W, E, Burgess
Manager, ^jrstem Open
Harket Account
Ir* George L, Harrison, President,
Federal Beserve Bank of Hew Tork,
Sew fork, If. Y,
Encl.
mm m
REALLOCATION OF UNITED STATES GOVERNMENT SECURITIES IN SYST13K1! OPEN MARKET ACCOUNT ON JULY 1, 1938
Earnings on securities computed at 1.2 6 32 percent per annum
'Amounts in thousands of dollars)
*
1
J*
—
.
—
I
A* Expenses
( 1) Estimated current expenses,
1938
( 2 ) i-'rior service contributions
(3)
Totsi
B. Earnings
( l) Estimated current earnings,
1938(exclusive of earnings
on Gov'ts)
(2) Estimated e5rTHr~s on Gov’ ts
to June 30
(3) Net p ro fits on Govt’ s to
June 2I4
(h)
Total
C. Excess of A—3 over B-1+
V
llooation required (on basis of
1,2632^ per annun earnings rate
on Govts) to produce earnings
July-Decenbar equal to "C"
I
28,662
2 ,5 2 1
3 1* 18 3
2 ,17 8 *
179
2 ,35 7
1,78 9
—
Tc**- IdelpMa
land | mond
2,1*81
193
2,67^
2,708
220
2,928
1,6 7 5
157
1,8 3 2
137
376
227
lWi
17,9 87
1,30 9
5,209
1,1431
6,67 h
26,/+50
h!9
1,9 2 5
1,861+
l+,733
1+32
71+3,259
67,81+0
7.0 5
\
---------------------------------------------------------------------------
7 ,350
639
7,989
E. Ratio of estimated dividend re
quirements for ye^r to systen total 100.00
F. Allocation of remainder of System
holdings (12,561+, 015 less
#71+3,259*000) on basis of "E"
I Fh il a - j C l e v e - I Rich-
—
Atlanta Chicagoj
1 ,3 2 1
91+
i*t. I Minn- Kansas
Lpul8 jeapolis _C«3L. Dallas
San
F
r a
n
c
i s c o
l,l45
3 ,^ 5 1
333
3s i m
1,1*10
11+5
1*555
83
1,096
1,65U
171
1,825
1,111
109
1,220
13 1
39
227
35
51+
191
68
160
1 ,7 5 1
968
767
1,966
819
601
902
691
1 ,5 2 3
659
2,551+
353
1,1*52
287
1,0 93
751+
2,91+7
3 11
1 ,16 5
227
882
336
262
1 , 1+29 1,0 2 1
580
7,Uf9
562
2,270
5^0
hok
37k
380
322
637
390
216
8U*800 63,1+1+3 58,732
59,671+
38.19
9 .19
9.97
1,8 20 ,756 12 8 ,36 3 695#3^7 16 7,328 18 1,5 2 9
3 .7 1
67,550
1,015
50,566 1 00,033 61,21+5 33,920
3.33
9.82
2.92
2 .1 7
60,631 178,798 53,16 6 39 ,510
2,506
198
TTm 1
2.263
199
1*1*3
6 2 ,18 ? 3 1 ,2 5 1
69,56#
396
3 .1 0
2 .9 5
7.60,
56,1+1+1+ 5 3 ,7 12
13 8 .5 W
( «*p«* + wpw)
2 ,5 6 k ,015 196,203 780,11*7 230 ,771 21*0,261 127,221* 1 1 1 , 1 9 7 278,831 U l^Jjll 73.U30 118 ,6 3 1 8l*,963
20T.9U6
H.; Present allocations
2 ,5 6 1 ,0 1 5 I8t*,962 71*5,855 210 ,528 21*5*877 139,979 111,1* 16 277,239 119,220 88,375 12l*,687 97,263
218,^51*
G# Total allocation of Gov'ts)
I* Change in allocations
+1 1 , 21*1 +31**292 +20,21*3
-5 ,6 16 -1 2 ,7 5 5
-2 19
+1,592 -1*,809-il*, 9l*5 - S 996 -12,320
-10 ,W
1
■
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
(U
June 25, 193S
Mr. I. B. Matteson, Asst. Vice President,
Federal Reserve Bfmx of Hew York,
New toric,
1.
Dear Mr. Mattesom
In accordance with our understanding over the telephone
this morning, there is enclosed a copy of our « ilculation on the
■Reallocation of United States Government Securities in System Open
Market Account on July 1, 1938*.
Changes in allocations are somewhat more sarked than
usual and Mr. fan Fossesn advises me that they are due in no small
part to the larger profits which the System has received on Govern
ments sines January 1.
For example, tha expenses of your hank are
about 25 percent of th« expenses for tiie Systea as a whole, whereas
the dividend requirements for your bank amount to about 38 percent
of the requirements for the System as a whole.
Consequently, under
the preseat formula the more earnings exceed expenses the larger
your relative participation in the System account.
I hope 'to have
Mr. Van Fossen do some work on the formula during the coming months
and if he is able to develop anything which would reduce somewhat
the marked fluctuations in allocations on quarterly dates, we shall
take the matter up with Dr. Burgess.
Very truly yours,
ELS/jbs
fu
REALIA CATXOF OF imiTlv-i STATLS G0VERTOHT SfcCTFRITILS IK SY^'wi-’ OPEII MAKJCL? ACr0ir:T
OH JtLY
1 , 1938
Earnings on securities computed at 1.2632 percent per annum
(Amounts in thousands of dollars)
P h ila <5ieve-]Wiolvt e r * Vinn- K ansas
7System
~ 1 7 ~B oston
7 — jr Tyork
sr
A tla n ta Chicago
delphia land j mond
Louis eapolis City
A# Expenses
(1) Estimated current exponses#
1938
( 2 ) P rio r s e r v ic e c o n trib u tio n s
(3)
Total
B. Earnings
(1) Estimated current earnings,
193B(©xolusiv© of earnings
on Gov*ts)
'(2) i-stimated earnings on Oo'v’ts
to June 30
(3) Net profits on Govt’s to
June 2l+
(k)
Total
<
C* Excess of A-3 over B-1+
i** Allocation required (on hasis of
1,2632$ per annum earnings rate
on >ovts) to produce earnings
Jui^-'Deoembsr equal to nCn
28,662
7,350
639
7,989
2JM
193
31,183
2,1?8
179
2,35?
1.789
137
376
227
17,987
1,309
5,209
6 ,6 7 k
26,1*50
t79
1,661+
1,925
i4,733
1*32
71+3,259
67*61*0
2 ,5 2 1
Sat to of estimate'! dividend requirenents for year to system total 100.00
7* Of?
1 M 9
1,675
198
2,706
ik k
131
39
227
35
1.1,81
1,751
968
767
1,966
819
601
902
691
1,523
562
2.270
659
353
267
7%
311
227
336
262
580
2,551*
I#l452
1,093
2 *9 k 7
1,165
882
1,1+29
1,021
2,263
322
637
390
216
39o
199
kk3
50 ,5o6 100,033 61,21*5 33*920 62,167 31,251
69,568
J fk
360
Bli,S00 63.U*3
56,732
99,671+
9*19
9.97
3*71
167,$2B
181,529
67,550
38*19
2,508
1,Ij15
ltd.
rM
1.1U
1 ,$ 5 2
157
1,321
San
ra n o isc o
3,251
333
375W
2 ,6 7 l
2,708
220
2*928
D a lla s
9k
3*33
9.82
1,U0
lli5
1.555
1,015
83
1,096
1.65U
1*825
109
1,220
51*
191
68
160
2.92
2.17
171
3,10
2*95
7*60
A ll 00ation of remainder of System
holdings (12,5614,015 less
I7t3,259,000) on basis o/3 «s»
00ation
(i* total all
£nr.n + if'«o i|
60,631 178,796 53,166 39,510
5o,iM 53,712
136,378
127.?2 h 111,197 278,^31 Ult.1.11 73 . 1-30 118 ,o 31 814,963
207,91,6
2,561.,015 1014,962 7fc5.855 210,526 81,5,(77 139,979 111.1,16 277,239 U & 220 8P..375 121*,<327 97,283
218,651,
+1,592 4,,f?09 -il*9h$ -5.9 9 6 -12,320
- 10,708
of Gov’ts)
Prosent allocations
Change in allocations
1,820,756" 126,363 &5,5l7
2 . 561.,015 196.2-3 7 PO.1 J47 230,771 22. 0.261
—
m .e ljl +3J4,fe92 +P0.PI.3
-5 ,6 16 -12 ,7 5 5
-819
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..O* 12358
Footnotes to statement on reallocation of Govern
ment securities July 1, 1933.
A, (1)
Estimated current expenses, 1933 a/
B. (2)
Estimated earnings on Gov’ts, to June 30 b/
D. Allocation required (on basis of 1.2632$ per annum earnings
rate on Gov’ts.) to produce earnings July-I'ec. equal to "C” c/
Ratio of estimated dividend requirements for year to System total cl/
a/
2.4 of current expenses Janusry-May, less *,.19,000 at Boston
to adjust for estimate of salaries on monthly basis while
payment is made weekly, plus *.50,000 at Atlanta for renairs
and alterations to bank building, and plus $15,000 at
Minneapolis for furniture and equipment.
b/
Actual January 1 ~ June 26 plus estimated for remainder of
June (obtained by phone from Mr. Behrens at .New York, June
2 1 ),
c/
Actual rate used .63679$ (1&C/365 of 1.2,632$)
d/
Based on dividends accrued January-May plus 3.5$ of paid-in caoital
stock, May 31.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority fc.O* llfl58
Fe d e r a l R e s e r v e B a n
o f N ew Y o rk
March ta , 19 53.
Bear Mr* Sbteads
In accordance with telephone conversation today, we have
sent to the reserve hanks a copy of the computation showing the
adjustments to be made In participations in the System Open Market
Account as of April 1 , 1958, pursuant to the plan adopted at the
meeting of the Federal Open Market Committee on Hovember SO, 19 37.
A coggr of the le tte r of transmittal i s enclosed herewith*
Veiy tru ly yours,
Y* & Burgess
Manager, System Open
Market Account
Mr* B* L. Snead, Chief,
Division of Bank Operations*
Board of Governors of the
Federal Reserve SJystem,
Washington, D* C.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
March
1938.
Dear Mr. Sinclair*
la connection with the p lm fo r reallocation o f government
seoarltle# adopted bf tho Federal Open Market Gomnittee at It# »o*t-
tug cm love®bar 30, 19 57, a copy o f the c©spoliation showing tho adJastaent# to be a*de In participation# a# o f A pril l f 1 $ M i» being
sent to a ll Reserve bank#*
A copy of th is atateaent 1# enclosed herewith, whloh in
dicates that your participation la the %*tea
OpmMarket Account
w l H be decreased tX,0$£,OOO«
«e shall wire you on April 1 the detailed entries to be
nade cm 'that date*
Veiy truly your#,
f* E* Burgees
Manager, %#taa Oped
Market Account
Hr* John 8* Sin clair, President,
Federal Reserve Bank of Philadelphia,
Philadelphia, Penn.
REALLOCATION Oi? UNITED STATES GOVERNMENT SECURITIES IN SYSTEM OPEN MARKET ACCOUNT ON APRIL 1 , 1938
EARNINGS ON UNITED STATES GOVERNMENT SECURITIES COMPUTED AT 1.39 8 7* PER ANNUM.
(Amounts In thousands of dollars)
System
"A" - Expenses
1 . Estimated for 1938
2. Prior service con
tributions
3.
Total
B" - Earnings
1 . Estimated January to Dec,
(except on Gov'ts)
2. Earnings on Gov'ts.Jan-Feb.
3 . Estimated March earnings
on Gov'ts
A. P ro fits on Cov1 t s .Jan-Maich23
5*
Total
"C" - Excess of "A "(3) over
•B»(5)
New York
Phila
delphia
Cleve
land
Richmond Atlanta Chicago
S t.
Louis
Minne
apolis
Kansas
City
D&llas
San
Francisco
29,215
2 ,15 4
7 ,5 2 7
2,475
2,778
1,76 8
1,3 4 2
3,248
1,426
1,095
1,664
1,19 0
2,548
2 ,5 2 1
31,736
1TO
2 ,333
639
8,166
193
2,668
220
2,998
157
1,9 2 5
9Z.
1,4 36
333
3 ,5 8 1
1A5
1 ,5 7 1
83
1,17 8
17 1
1,8 3 5
109
1,299
198
2,746
1,989
6,288
162
462
438
1 ,8 1 3 .
310
519
139
620
154
334
64
264
233
693
41
281
53
204
19 1
324
77
245
12 7
529
3,085
2.818
226
202
890
255
238
304
278
129
121
340
319
138
131
100
96
159
1 L2
120
111
14 ,18 0
1,0 52
3,926
1 ,3 2 2
1,3 a
164
1A9
801
578
1,5 8 5
591
453
816
553
260
246
1 ,16 2
17 ,5 5 6 .
1 ,2 8 1
4,240
1,3 4 6
1,6 5 7
1 ,1 2 4
858
1,996
980
725
1,0 19
746
1,5 8 4
402,353 12 7,728
157,240
106,662
81,420 189,410
92,997
68,999
96,698
70,791
15 0 ,313
38.25*
9 .2 2 *
9.87*
3 .7 1 *
3.3 4 *
9.78*
2.9 2*
2.18%
3 .11*
2.95*
7.6 1*
343,502
82,800
88,637
3 3 ,3 1 7
29,995
87,829
26,223
19 ,5 7 7
27,929
26,492
68,3a
"D" - Gov'ts required (on basis
of 1.3987% earnings rate)
to pr*oduce earnings April
- Dec, equal to "C*
1,6 6 5 ,9 7 1
•E " - Ratio of dividend require
ments Of each bank to
System to tal
Boston
100*
"F" - Allocation o f remainder of
System holding* ($2,564,015,000
l e u $1,665,971,0 0 0 ) on bMia
of *E"
898,8*4
12 1,5 6 0
7.06*
63,402
■G" - TotAl allocation of
Gov'ts ("D* & «F")
2,564,0 15
184,962
745,855 210,528
245,877
139,979
1 1 1 , 4 1 5 277,239
119 ,2 2 0
88,376 12 4 ,6 2 7
97,283
218,654
"H* - Present allocations
2,564,0 15
188,239
739,554 2 11,6 10
253,038
136 ,2 9 7
107,460 282,390
114 ,4 7 8
83,246 132 ,10 4
99,767
215,932
■I" - Change in allocation
—
-3 ,2 7 7
-1,0 6 2
-7 ,16 1
+3,682
-5 ,15 1
+4,742
-7 ,4 7 7
-2,484
+2,822
+6,30 1
+ 3,955
+ 5,130
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
1235%
IN FILES SECTION
j
.IPR 1
193D
3 ^ C
b il 3 0
Kerch 2% I<m
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r «
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reax & ocatiok of uxitsd states ooyiaiaim securities ia system o p m makket accouht on april i,
of
rVv*
Reproduced from the Unclassified
EARMMQS* Gii UNITED STATES TMVERHSIEKT SECURITIES COMPUTED AT 1*3987* ?ER ASIiUH.
(Amounts In thousands of dollars)
T Boston (He* Tort |2 ff£ »i £ S T
Systea
29,215*
2 ,15 4
3 1,7 3 6 -'
......a 39 n .JLi3_2 ,3 3 3 • 8,166 * 2,668 ■
5 * .
T
o
t a
l
*C* - Excess of *A*(3) over
*B«{5)
2,77*
2,475
1,76$
1,3 4 2
3,248
1,4 2 6
438
1 ,8 1 3
310
519
139
620
3,085 ‘
2.818 •
226
OQS
890
255
238
304
278
14*180 •
1,0 52 •
3,926 • 1,3 2 2 *
1,3 4 1*
17 ,5 5 6 :
1*28 1 ‘
4,240 . 1 ,3 4 6 .
1,6 5 7 •
340
219
578 • 1,5 8 5 *
1,996 .
858.
1 ,1 2 4 •
2,548
1,299 •
2,746 •
77
245
12 7
529
19 1
324
San
Francisco
120
260
100
138
159
1 3 1 .......3$. ....m ___ ......m ..... . ....... 246, .
1 ,1 6 2 •
816 *
553 .
453*
591.
129
12 1
164
..... 1X9
801 •
1,190
53
204
41
281
233
693
64
264
154
334
162
462
1,664
1,095
____,“ -2~
1 ,5 7 1 * 1 , 1 7 8 ’ 1*835 *
dm ...... JLxt__ _____ 34-—__ JLU_
1,9 2 5 . 1,4 36 . 3 ,58 1 •
2,998 •
1,989 ‘
6,288 '
Balias
725 • 1,0 19 .
980 •
74 6 .
1,58 4 •
*B* - Gov1 ts required (on basis
of 1.3957S6 earnings rate)
’
i P
T
l l l
&
?
,
6
6
5
, 9
7
1
'•
*E* - Ratio of dividend require
ments Of each bank to
System to tal
100^
)
*F* -. Allocation of remainder of
System holdings ($2,564,015,000
less $1,>65,971,000)
898,044 •
of «t«
121 560
,
7
'
, 0
6
63,402
*
4
0
3
2
9
, 3
, 2
5 3
5
*
1 2
7
9
, 7
. 2
2
2
3
*
1 5
7
, 2
4
0
9 . 8 7 5 1
'
106 662
,
3
'
. 7
W
343,502* 82,8CK)*
88,637
3 3 ,3 1 7
3
1 , 4
3
. 3
2
4
0
%
29,995
1 8
9
9
, 4
. 7
1 0
5
?
9
2
2
, 9
. 9
9
2
7
*
87,829
26,223
S
* , 7 9
2
. I S
9
*
19 ,5 7 7
9
6
3
, 6
. 1
9
1
8
*
27,929 '
TO,791
15 0 ,313
2.95*
7.6 1*
26,492
68,341 •
•0* - TotAl allocation of
Gov’ts («D* * *F»)
2,564,015 ‘ 184,962
745,855 210,528
245,377
139,979
1 1 1 ,4 1 5 277,239
119,220
*3,376 124,627
97,283
218*654
■H* - Pi^sent allocations
2 ,5 6 4 ,0 15 ‘
188,239
739*554 2 11,6 10
253,038
136,297
107,460 282,390
114,478
33,246 132,10 4
99,767
a * * 832
-1,0 8 2
-7 ,1^
♦3,682
•5 ,1 5 1
♦4,742
-7 ,4 7 7
-2,484
*1* * Change in allocation
Holdings of the National Archives
*B* * laming#
1* Estimated January to Bee*
{ except oa Gov’ ts)
2* Earnings on Gov#ts«Jai*~Feb.
3 , Estimated March earnings
on Gov’ %d
4* Profits on Covf ts.Jan-Mapdi 9%
7 ,527
Kansas
] ” g £ ....Stiff
IDeclassified
*A* - Expenses
1 0 Estimated for 1938
2. Prior service con-*
tributioas
3.
Total
Atlantajchlcgo j
—
.
-3 ,2 7 7
♦6,301
♦3,955
♦ 5,130
*
!
®!
P P :
a >
\n
(O Ki
^ >>s-<
qti
t*3
% O'
:
.-:
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
£ ..Q «
1 2 .3 5 * 8
J -
*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
REC’D in f i le s section
MAR 11 m s '
.. ^
Mr. Sntesd
Messrs. Van Fossesn end Daniels
Reference is aade to your »e»orandu» of January 14, 1933, to Mr. ¥an
Fossen, requesting that we give consideration to *uestions referred to in let
ters froa Mr. Leach, Sir. Sinclair, and Mr. Peyton on the formula to be used
for reallocations of the System Account.
The Presidents of the Federal.Reserve
banks were requested in Mr. Morrill **» letter of Deceaber 6, 1937, to subnit
their views regarding the proposed forwila to be used in saaking reallocations.
In their replies three of the Federal fieserve banks made suggestions as follows*
Philadelphia
That the amount payable to the Secretary of the Treasury
under Section l^S be included in the ordinary charge-offs
in arriving at tha expenses for formula purposes.
Richmond
a. That the net debit or credit of profit and loss, except
losses on bills and securities and miscellaneous assets,
be used in arriving at item *C* in the fonault*, and
b. That earnings, expenses and losses on industrial loans
be excluded from the forwula.
Minneapolis
That the formula include (1) provision for recognised losses or
reserves for recognized losses end interest accrued to the
Secretary of the Treasury for funds advanced for industrial
loans end (2) recoveries on charge-offs, and exclude profits
or losses on {System Account sales.
The case for excluding earnings and expen&es of 13b operations has been
covered in Mr. Ven Fossen*s Memorandum of December 15, 1937, and It is recommend
ed thet this b e done.
Aside froa* suggestions relating to adjustments in the
formula because of industrial loan operations there were only two suggestions
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..O* 12358
Mr. Saead - 2
1.
That all profit «nd loss items be included in the estimates ex
cept year—end losses on bill8 and securities snc miscellaneous
assets, &nd
2*
That profits and losses on Government securities be exeluded*
Consideration has been given at various times to including estimates
of profit and loss items in asking the reallocations.
The basis used for the
reallocation on June 1, 1936, gave consideration to estimated "nora&l chargeoffs find fixed charges" and in arriving at the September 30, 19%, sllocations
net expense of other reel estate was included in the estimates.
During 1937
the basis used for the reallocations gave consideration to prior service con
tributions, net profits on seles of securities end assessments for the Board’s
building*
Theoretically, the case is cleer for considering #11 profit end loss
items, except those relating to 13b operations, in arriving at the estimates
of net earnings required by the various Federal Reserve bisnks.
It is believed,
however, th^t as a matter of 'r&ctieo no benefit would result fro® doing so.
In the first place such iteas »r© difficult to estimate*
Secondly, excluding
prior service contributions, net profits on sales of securities, end assessments
for the Board*s building, profit and loss items have been and will probably
continue to be relatively small, and In addition the credit and debit itatt^tend
to offset one mother.
During 1937, excluding the three profit md. loss items
which were considered in the reallocations, the net debit for the System of
profit and loss items was less than 1/2% of currant expenses, and the only
individual banks having a net debit or net credit greater than
5% of current
expenses were Chicago, because of the large credits for releases from prior
service contributions and Board building assessment reserves, and Atlanta, be
cause of the large reserve set up at the end of the year for building improve
ments.
R ep rod uced from the U nclassified / D ecla ssified H oldings of the N ational A rchives
“
r
d e c l a s s if ie d
-
Authority
12-35%
■
I
1
f c r *
U
f l b a a d
b
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D E C L A S S IF IE D
Authority fc.Q* 1235%
F orm V. R . 131
V
^ F ^ C ^ R A t FULjj^^yE S Y S T E M
Office Correspondence ^
T o ______
M
From.
Mr-^Smaad
\
r .
V
a n
F
o
a s a n
1
/
____________
Subject
In connection with letters to I r . Leach, Mr. Sin clair, and Mr. Peyton
regarding allocations of participations in the*Syste» Open Maiket Account,
I would appreciate I t i f 70a and Mr. Daniels w ill g±Te the questions re
ferred to "in these le tte rs praspt consideration and give me your views
thereon.
I think i t would also he helpful i f we prepared a menorantitm promptly
on relationships between surplus accounts and contingent reserves, as
requested by the Board.
DigitizedfeJUL
for FRASER
FOR FILES* 1
I< B. Smith'
Reproduced from the Unclassified IDeclassified Holdings of the National Archives
D E C L A S S IF IE D
Authority
1235%
Ur-* Hngh keach, trmMm%9
Federal Eeserve Beak of Richmond,
Virginia
DeiO* Ei‘* uBixChl
Keferenee is made to your le tte r o f Deceaber 21 In. regard
to the proposed foranla fo r determining allocation© la tbe System
0pfca
Account
Jaan&ry 1, 1933*
b
e g i n
n
i &
g
Mr. Sme&d tiacus&ed ilt h you over the telephone the reai
wms for and against taking into- consideration income, expenses,
j
losses, and payment© to the Secretary of the Treasury in connee■ /
tie©. utth Industrial advance# and caamitaents in determining parJ
tlcipatio&& of the various Federal Reserve books in th© System
I
Account. While i t was agreed to sake no change in the procedure
1
at thie tim*f i t is- radarstood that the setter w ill be thoroughly
|
reviewed and ®h©nld industrial advances and coas&itaenia outs t id in g ’ j
eontim e to decline, i t f i l l probably be advitable to disregard
'j'.
a l l income, expenses, losses, m& payments to the Secretary of tha .; f;
TrefiUs&iry in connection
th industrial advances and eowdtnanta
; \j
In determining participations in the Systeat Account m of A pril 1,
'I
J
1938.
^
lour suggestion that it night be desirable to awend the
foiwola b o m to t&ic© lato account the net debit* or net credit*
in the currant profit sad loss acco-oat is noted aad will receive
careful c m atderation before the next reallocation.
fery truly yours,
Chester Morrill, Secretary,
Federal Open Market Comaittee.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..O* 12358
January 14 , 1938
Hr* Im S* S in cla ir, President,
Wmieral Reserve Beak of Philadelphia,
Philadelphia, Pennsylvania
Dear Mr* Sin clairi
Reference i s Bade to your le tte r of December 18 ia regard to
the proposed formula fo r determining allocations la the System Op«a
laik et Account beginning January 1 , 1938*
Mr. Smead discussed with you over the telephone tha reasons
fo r and. against talcing into consideration lncoae, aaspeases, losses,
and payments to tha Secretary o f the Treasury ia connection *Lth ia duatrial advances and eomssltaeats in determining participations o f the
various Federal Reserve banks in the System Aecount*
While i t eas
agreed to sake no change ia the procedure at this time, i t i s understood
that the aatter *111 be thoroughly reviewed aid should industrial ad
vances aad commitments outstanding continue to decline, i t * 1 1 1 prob
ably be advisable to disregard a ll income, expenses, losses, and paymeats to the Secretary o f the Treasury in connection i&th industrial
advances and coaaitmeats ia determining participations in the Systsm
Account as o f A pril 1, 1938*
Chester M orrill, Secretary,
Federal Opea Market Coaaittee
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E..O*
January
14., 1938
Hr. J . H* Peyton, President*
Feders1 Heserve Bank of Minneapolis,
Minneapolis, Minnesota
B
e
a
r
I r
*
P
e y t o
n
*
Befersnce la nade to your le tte r o f December 14 la regard to the
proposed procedure for handling transactions in th# Systesi Open Market
Account beginning ■January 1 # 1938.
It is noted that you suggest that the forsmla. include provision
for recognised losses or reserve® for recognized losses end interest ac
crued to the Secretary of the Treasury for funds advanced for industrial
loans, and that profit# or louses on sales from the Systaa Account be
oaitted*
Ia estimating earnings and expenses of th# Federal Reserve banks
for the purpose of allocating participation# in th# Systea Open Market
Account it ha# been, the practice to include all known md regularly re
curring charges, tut no- attest haa bean nade to include special reserve#
or charge-offs tfilch are aad# at the md of the year on. the basis of the
information them elating* Under this procedure all known profits and loss## on sales of Govenmtmi securities which affect all Federal Eeserve
banks la relatively the same proportion are Included in the calculations.
Careful consideration has b##n given froa time to time to th# d esirability
of including in the fonsula provision for losses and r##erv#s for loss##
which it is customary for the banks to set up at the end of the year,
but owing to the d iffic u ltie s involved in such procedure md particularly
in treating all banks alike, the decision has always
against it#
adoption. In the ca## of noet bank#, at least, vk&% additional r#s«rv#
will be needed is not detersined un til about th# end of the y#ar and,
consequently, no provision can b# aade for #uch r#serves in the figure#
us#d In determining participations in the System Account. Account could,
of course, be tak«* of actual loss## charged off, and further considera
tion will be given to your suggestion# in thi# respect.
With r#sp##t to Including provision for payment# to the Secretary
of the Treasury under Section 13b in determining participations in the
System Account, i t i s , o f course, Impossible for us to t e l l in advance
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority
Hr.
1235B
* . Peyton ~ #2
what reserves a Federal Reserve bank is likely to set aside at the end of
the year on Industrial advances, which largely determines what the payment
to the Secretary o f tie Treasury w i n tie and, accordiagly, i t would be
impossible to sake intelligent provision fo r mmh payments in our calcula
tions, It is quite provable, however, that approximately the m m result#
as those you have in mind could be obtained by leafing out o f the net earn
ings calculation all income, expense®, losses, and payments to the Seeretaiy
o f th* Treasury in connect!on with industrial advances and commitments.
I f industrial advancs# m& commitments continue to decline, i t is quite
probable that better v a u lts w ill ba obtained if such income, expenses,
losses, and patents aye Quitted froa the estimates tised in determining
participations in the ftrste* Account* This matter will receive careful
consideration and i t is expected that a decision with respect thereto will
be reached before A p ril 1, 1938, the time o f the next reallocation o f
participations in the Syatera Account*
Very truly yours.
Chester Morrill, Secretary,
Federal Open Market Conaittef*
January 4, 1938.
Ur. ?u R. Burgess, Vice President
Federal Heserre Bank of Sew Tork
Mew Xork, t*ew lork
Dear Dr. Burgess*
In connection with our telephone conversation with respect
to reallocation of participations in the System Open Market
Aocount, there are inclosed copies of the letters we received
fro® ;;ne Federal He serve Banks of Philadelphia* Richaaond* and
(v1
aad a copy of the letters we have drafted with respect
to the suggestions contained therein.
It will be appreciated if
you will go over these letters and make any changes in them which
fat H you think advisable.
tA )K
\
Ho suggestions for changes ia the forsula were aade by any
other federal Reserve banks and, accordingly, it ia not necessary
for the secretary of the coaaibtec to address letters to the® at
this time.
Sincerely yours,
V'
E* I*. S m ad, Chief,
Civision of Bank Operations,
\
|nclosures«
PAW
P ^ J U 1)1-
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Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
12358
/EDk«AL ftKME&VK
of m r n m m m
I r e c d ih files section
I—
4 0
— -
1
Mr. Chester Morrill, Secretary,
of &o*sraors
B
o a r d
F
e
d
e
o
r a
l
R
e s e r v
e
S
y
s
f
t e
t i »
a
,
Washington, D* C.
Bear Sr# Horrllli
^ Sudor dat« of leoosbtr
191?, you m\ml% »Proposed
Accounting frmmSmm tor Handling transaction* in Syate» Open Market
Acomiat Bfglnaittg January t$ %9 M m§ *ad request tbet we review It and
advise yoo of any views ini night like to bave eotsldored before tbs
prooed-mm reooanended. ia tbe report Is pmt into offset*
On Pag# 3 yoa state
of m several Federal resorvt banks
will b* «ad* quarterly a# of Jmanary
of m f e ye?sr, ia. accordaaoo with th#
that adjusttteata m i partioipatio»s
ia tfes Systea 0p#a tiar^et Account
1, April 1, July 1, tal ©otober I
foilowlisg formula*
•ixpeiiseii
I* Istiaated currant expenses during the year
2. Prior service contributions
3. total*
Aa used by m m auditors and a* defined by the Board ♦Ksti*Bted current
expenses tfuriae tbo year* wo^ld iaclmd© no looses, Would it oot be
fairer to word tiais *lstlaai#d carremt expenses during the year after
i»clading provisioo for roooiaised losses or reserve* for recognised
losses a M ■Interest accrued to tfe* Secretary of the Treasury for funds
advanced for industrial loans*, leaving out profit# or leases oa Systea
Aooouat tales* As an offset, recoveries oa charge-offs should be in
cluded in tS* earnings for tbat year*
Qa Fage J* water lamiiifs, *iot profit o» goveroaents
sold to date* set t*p as aa addition to earnings doe# not tee* to ms
as sound* 'ft bellow that ail principal profits or losses scorned froa
tbm purchase or sale of Systes Accouot boads should be credited or
charged directly to reserve account or surplus account so. tbe yearly
earnings of a Federal reserve bank would not fee affected by either
principal profits or losses*
Capital losses of tfc&s character.should
b# absorbed by reserves, surplus, or capital* If profits froa the
System Account are to be considered in figariag tbe yearly profit, then
losses tmm- W m sale of *s ets froa the Systea Account afaould logically
be considered
yet sueft is not the procedure outlined*
Tory truly years,
(Signed) J, *# Peytott
JSPiB
j
@FedFRASER