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FORTY-FIFTH

ANNUAL REPORT
of the

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

COVERING OPERATIONS FOR
THE YEAR




LETTER OF TRANSMITTAL

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,

Washington, June 24, 1959
T H E SPEAKER OF THE HOUSE OF REPRESENTATIVES.

Pursuant to the requirements of Section 10 of the Federal Reserve
Act, as amended, I have the honor to submit the Forty-fifth Annual
Report of the Board of Governors of the Federal Reserve System.
This report covers operations for the year 1958.
Yours respectfully,




W M , M C C . MARTIN, JR.,

Chairman.

CONTENTS

TEXT OF REPORT
Introduction
Recession and Recovery
Federal Reserve action to combat recession
Broader effects of monetary action
Changing expectations
Moderation of Federal Reserve policy
Regulation of margin requirements
Situation at close of 1958
Changes in Gold Reserves
Gold and the balance of international payments
Gold and the United States monetary system
Gold and Federal Reserve policy
Demand and Supply of Funds in 1958
,
Credit demands
Government
Business
Consumers
International capital transactions
Credit supplies
Consumer saving
Institutional lenders
Bank credit
Digest of Principal Federal Reserve Policy Actions, 1958
Record of Policy Actions—Federal Open Market Committee
Record of Policy Actions—Board of Governors
Bank Supervision by the Federal Reserve System
Examination of Federal Reserve Banks
Examination of member banks
Federal Reserve membership
Bank holding companies
Trust powers of national banks
Acceptance powers of member banks
Foreign branches and foreign banking and financing corporations
Inter-Agency Bank Examination School
Legislation
Defense Production Act




iii

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32
72
89
89
89
90
90
91
91
92
93
94
94

Purchase of Government obligations by Federal Reserve Banks...
Alaskan Statehood
Real estate loans by national banks
Small Business Investment Act
Bank Holding Company Act
Reserve Bank Operations
Loan guarantees for defense production
Volume of operations
Earnings and expenses
Holdings of loans and securities
Foreign and international accounts
Bank premises
Board of Governors—Income and Expenses
TABLES
1. Statement of Condition of the Federal Reserve Banks (in detail),
Dec. 31, 1958
2. Statement of Condition of Each Federal Reserve Bank at End of
1958 and 1957
3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1956, 1957, and 1958
4. Federal Reserve Bank Holdings of Special Short-Term Treasury
Certificates Purchased Directly from the United States, 1953-58
5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1954-58
6. Earnings and Expenses of Federal Reserve Banks during 1958. .
7. Earnings and Expenses of Federal Reserve Banks, 1914-58
8. Member Bank Reserves, Reserve Bank Credit, and Related Items,
End of Year 1918-58 and End of Month 1958
9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31,
1958
10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1958
11. Federal Reserve Bank Discount, Interest, and Commitment Rates
(in effect Dec. 31, 1958)
12. Member Bank Reserve Requirements
13. Maximum Interest Rates Payable on Time Deposits
14. Margin Requirements
15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950, Dec. 31,
1958
16. Principal Assets and Liabilities, and Number of All Banks, by
Classes, Dec. 31, 1958 and 1957




iv

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94
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95
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97
98
99
100
101

106
108
112
113
113
114
116
118
120
121
122
123
123
124

124
125

17. Member Bank Earnings, by Class of Bank, 1958 and 1957
18. Analysis of Changes in Number of Banking Offices during 1958
19. Number of Banking Offices on Federal Reserve Par List and Not
on Par List, Dec. 31, 1958
20. Open Market Transactions of the Federal Reserve System during
1958

Page
126
127
128
129

FEDERAL RESERVE DIRECTORIES AND MEETINGS
Board of Governors of the Federal Reserve System
Federal Open Market Committee
Federal Advisory Council
Federal Reserve Banks and Branches

132
133
134
135

Map of Federal Reserve Districts
Index

153
154




OF THE FEDERAL RESERVE SYSTEM

The year 1958 brought vigorous recovery from a brief but sharp
recession in economic activity in the United States. From a low point
in early spring, output of goods and services rose rapidly and, by
year-end, gross national product in current dollars exceeded and in
real terms was close to earlier peaks. As is characteristic of early
phases of recovery movements, employment rose less rapidly than
output, and unemployment remained relatively high. Abroad, economic expansion was resumed at the end of 1958 after temporary
interruptions in many countries.
The Federal Reserve adapted its policies to the changing economic environment by fostering bank credit expansion during the
recession early in the year and by moderating the availability of
funds in the last five months as economic activity gained momentum. Demands for credit remained slack early in 1958 and interest
rates continued to decline. In the last half of the year, when private
and public demands for credit were rising, particularly those of the
Federal Government to finance the large current deficit, interest
rates rose sharply.
Consumer and wholesale prices, after rising somewhat early in
the year, were fairly stable during most of 1958. Stock prices, however, rose rapidly throughout the year.
RECESSION AND RECOVERY

At the beginning of 1958, economic activity in this country was
receding. Contraction in output and employment was general, and
unemployment was rising at a disturbing pace. No one could be
sure how far the downward adjustment would go, or how long it
would last.
Even at that time, however, some were beginning to view the
outlook more optimistically. In January, corporations, taking advantage of easier conditions and lower interest costs in financial



2

ANNUAL REPORT OF BOARD OF GOVERNORS

markets, were offering an appreciable volume of new issues in anticipation of future needs for funds, and to refund shorter term debt.
State and local governments were bringing to market bond issues
that had been deferred earlier, and were stepping up the pace of
bond offerings to provide for public works.

SELECTED ECONOMIC

INDICATORS

1947-49=100
INDUSTRIAL
PRODUCTION

160

NONAGRICULTURAL
EMPLOYMENT

- 140

NONMANUFACTURING

140

- 120

MANUFACTURING^^

120

- 100
v, 1

140

CONSUMER PRICES

1

1

WHOLESALE

1

1 ..

MATERIALS

S^y^sJ?

120

^

140

PRICES

- 120
CS*'^'-

FINISHED GOODS

FOODS

100

,.

1954

'56

'58

I
I
1954

l l
'56

100

I ..
'58

NOTE.—Seasonally adjusted series, except for prices. Bureau of Labor Statistics
data for employment and prices and Federal Reserve data for production.

Farmers continued to foresee favorable output and price conditions in agriculture and were bidding up further the prices of farm
land. Bankers, with slackened customer demand for credit and
strengthened reserve positions, were bidding more aggressively for
investments. By February, bankers were accelerating expansion of the




FEDERAL RESERVE SYSTEM

3

assets and deposits of their institutions, thus increasing more rapidly
the economy's stock of cash balances and raising its over-all liquidity.
By the early part of the second quarter, personal income and
consumer spending had ceased to decline and, in fact, were rising
slightly. Production and employment turned upward soon after.
Whether these developments, though encouraging, foreshadowed
wide revival in activity was not known at the time; not until summer
did the current flow of information and reports provide substantial
confirmation that general economic recovery was under way.
From that stage on, currently available data reflecting market
trends, production, and employment showed that recovery was both
broadly based and vigorous. At year-end, eight months after recovery
had set in, total output approximated the peak of 1957 and it was
growing with increasing momentum.
FEDERAL RESERVE ACTION TO COMBAT RECESSION

Federal Reserve policy began to move in a counter-recession direction in late October of 1957. At that time, the System began to shift
its open market operations toward supplying reserves more liberally
to the banking system. In November, it reduced the discount rates on
member bank borrowings from the Reserve Banks. As the stream of
factual information verified the emergence of recessionary trends,
Federal Reserve actions and policies became more aggressive, and
discount rate, open market, and reserve requirement instruments
were actively applied in complementary fashion to foster ease in
credit markets and encourage bank credit and monetary expansion.
From late fall 1957 through April 1958, there were four reductions in Federal Reserve Bank discount rates, from 3^2 P e r c e n ^ to
1% per cent. Through continuing open market operations from
late fall of 1957 to early summer of 1958, the Reserve System supplied the commercial banks with some $2 billion of reserve funds.
Through three successive reserve requirement reductions in late
winter and early spring of 1958, the System released for the use
of member banks about $1.5 billion of their required reserves.
The total amount of reserve funds supplied by the Federal Reserve
System over the nine months November 1957-July 1958 was enough
to enable member banks to reduce their discounts at the Reserve
Banks from $800 million to about $100 million, to offset sales of




4

ANNUAL REPORT OF BOARD OF GOVERNORS

gold to foreign countries amounting to about $1.5 billion, and to
finance a commercial bank credit expansion of almost $8 billion.
Monetary expansion from February through July stimulated by
this Federal Reserve action was at an exceptionally rapid rate—
at an annual rate of 13 per cent for all deposits, including time and
demand deposits. For the active money supply, that is, demand
deposits and currency, the rise was at an annual rate of 8 per cent.
After the shift in Federal Reserve policy in the summer, expansion in
the active money supply slackened, and for the year as a whole it
amounted to about 4 per cent.
BROADER EFFECTS OF MONETARY ACTION

Although the immediate impact of Federal Reserve policy was on
commercial banks, it clearly had broader effects upon the economy
generally. For one thing, since commercial banks are direct participants in some degree in all important credit markets, expansion in
bank lending and investing activities intensified competition among
all lenders for the acquisition of the available supply of creditworthy loans and securities. This widened access of all potential borrowers to credit funds. It also worked to reduce the cost of financing
to borrowers generally—businesses, farmers, consumers and home
buyers, and all levels of government.
Another effect of the credit ease was a greater willingness on the
part of banks and other lenders to make new loans to business
customers and to renew outstanding credits. This permitted the
orderly run-off of excess business inventories accumulated in the
preceding boom. It also facilitated the completion of business programs of plant and equipment expansion begun in that period.
With a $6 billion reduction in business inventory holdings and a
significant cutback in fixed investment programs during the recession, business loans outstanding declined only $1.5 billion in the
year ending September 1958. The ability of businesses to maintain their bank borrowing and also to borrow more readily in
capital markets not only cushioned downward pressures on investment spending but helped many companies to minimize cutbacks
in their working force and payrolls, to maintain dividends, and to
strengthen liquidity positions.
In housing markets, the easier conditions broadened the avail-




FEDERAL RESERVE SYSTEM

5

ability of mortgage funds. Discounts were reduced on FHA and
VA mortgages subject to ceiling interest rates, and interest rates
on new conventional mortgages fell. As bank credit expansion
gained in momentum, banks participated in mortgage investment
more actively than at any time since the boom housing year of 1955.
The increased availability of mortgage funds at lower cost, together
with the maintenance of personal income, was promptly reflected in
a step-up of builder activity in constructing new houses.

GROSS NATIONAL
Billions

of

PRODUCT

dollars, annual rates
500

300

TOTAL

260

460
CURRENT

DOLLARS

420

I

\r
1954

DOLLARS

I

I

220

I

GOVERNMENT

380

-

INVESTMENT

<^--

340

40
RESIDENTIAL

1 1
1954

300

'56

'58

I1954

CONSTRUCTION

I

I
'56

'58

NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. "Investment" includes producers' durable equipment, private construction other
than nonfarm residential, change in business inventories, and net exports of goods
and services.

In the consumer instalment credit area, the increased availability
of funds made it possible for lenders to meet sound demands for
credit more readily, thus bolstering lagging demand for consumer
durable goods. On some transactions, terms were eased and, in
addition, new credit plans were developed and extended. Easier




6

ANNUAL REPORT OF BOARD OF GOVERNORS

credit conditions permitted lenders to be more liberal in granting
renewals and extensions of time for repayment of outstanding
credit. Thus, the volume of repossessions and credit losses was less
than would otherwise have been the case, with benefits to both borrowers and lenders.
Increased availability of funds also had an impact on State and
local government financing. In some cases, the lower cost of financing encouraged States and municipalities to borrow in order to
finance capital projects. Lower market rates also enabled certain
State and local governments that had a ceiling on interest rates to
return to the market. The increase in annual rate of spending by
State and local governments from the summer of 1957 to the summer
of 1958 was a billion dollars more than in the preceding year.
These observable effects of easier monetary conditions which developed from efforts to combat recession were, of course, important
and salutary. They are not to be overly stressed, however, for
monetary action is always only one element in Government counterrecession policy. In turn, Government policy is always only one
element in the total economic scene. Businesses, individuals, and
State and local governments, in the light of their own circumstances,
were taking actions to adjust and adapt their situations and to
redirect their energies. Their actions undoubtedly shaped the recovery and gave it momentum. Restraint of inflationary pressures
during the preceding boom undoubtedly contributed to an underlying
economic situation favorable to recovery and made the economy responsive to these monetary and other anti-recession actions.
CHANGING EXPECTATIONS

Achievement of monetary ease to combat recession so promptly
and amply was not without its problems. One of the most acute
was the build-up of prices in the bond market as speculators counted
on continuing business recession, credit ease, and still higher bond
prices. Psychological reactions and expectations always play a role
in swings in economic and financial developments, but they were
of particular importance in financial markets in the summer of 1958
as the economic outlook rapidly changed from one of a continuing
recession to one of early, vigorous recovery.
At that time, the improved economic outlook led to a sharp




FEDERAL RESERVE SYSTEM

7

change in expectations in regard to renewed inflationary pressures
and a turnabout in the trend of interest rates. A much larger Federal deficit loomed up than had been estimated, as well as the crisis
and threat of military action in the Middle East. Concern about
the drain of gold from the nation's monetary reserves through sales
of gold to the industrial nations of Europe was a further cause of
uncertainty. The fact that the Canadian Government announced
a major refunding operation at sharply higher interest rates was
also a complicating factor.
In these circumstances, heavy market sales by holders of United
States Government securities in anticipation of higher interest rates
sharply depressed bond prices. Initially, this selling stemmed from
temporary holders who had bought in anticipation of a continued
rise in Government securities prices. Some of these holdings had
been acquired with funds borrowed on thin margins in connection
with the Treasury's June financing operations. In this financing, investors had exchanged the major portion of maturing issues for 6%year bonds rather than for the 11-month certificates also included in
the exchange offering. In many cases, selling was forced because the
margins vanished as securities prices declined.
Prices of Government securities continued to decline under pressure of steady liquidation and the reluctance of investors to purchase
market offerings in view of changed prospects for credit demands
and inflationary threats. During the period from June 19 through
July 9, the Treasury purchased nearly $600 million of the bonds
previously taken in the exchange, retiring about three-fourths of
these and placing the remainder in Treasury investment funds. On
July 18, the Federal Open Market Committee concluded that the
market situation had become disorderly and decided to intervene
temporarily in the medium- and long-term sectors of the Government securities market. This action was within the framework of the
Committee's established operating rules. From July 18 to July 23 the
System purchased $1.2 billion of securities involved in a Treasury
refinancing, largely "when issued" securities, and a small amount of
other notes and bonds.
Thereafter, as market conditions became more orderly, no further
Federal Reserve open market transactions were effected outside the
usual area of short-term Government securities. During late July




8

ANNUAL REPORT OF BOARD OF GOVERNORS

and early August, sales of Treasury bills by the System together
with other factors affecting reserves more than absorbed the redundancy of reserves that threatened to result from Federal Reserve
intervention in the Government bond market.
MODERATION OF FEDERAL RESERVE POLICY

By August, there was clear evidence in current statistics that recovery in economic activity and production had gained considerable
momentum and was likely to go forward without serious setback.
Moreover, in view of the strength of consumer demand, appreciable
further decline in business inventory holdings and capital outlays was
no longer likely.
About this time, inflationary expectations began to spread. The
abrupt upward shift of interest rate levels in central money markets,
while precipitated by liquidation of speculative positions in Government securities, reflected in part investor demand for an interest
premium to cover the risk of a depreciating purchasing power of
invested funds. There was a large shift by investors, including institutional investors such as pension funds, in the allocation of newly
available funds to common stocks instead of fixed interest obligations, with hedging against inflation a frequent explanation of the
change in investor policy. Large current and prospective demands
for credit by the Federal Government, State and local governments,
and home purchasers also influenced the rising cost of borrowed
funds. In the stock market, the volume of trading was expanding
rapidly and the rise in stock prices reduced the yields on common
stocks below the yields on high-grade corporate bonds.
In the light of the rapidly changing economic situation, in most
respects highly encouraging but with inflationary and speculative psychology spreading, the Federal Reserve, during the summer, began
to move away from its anti-recession policy of low discount rates,
high excess reserves, and reductions in reserve requirements.
System open market operations after midsummer supplied only
a portion of the reserves needed to meet rising credit demands and
to offset the reserve drain of a continued gold outflow. As a result,
member banks drew down their excess reserves somewhat and at the
same time increased their borrowings from the Federal Reserve
Banks. Such borrowing was made much more costly when Reserve




FEDERAL RESERVE SYSTEM

RESERVES AND BORROWINGS
Billions of dollars
2.0

BORROWINGS

A/
/

r
EXCESS RESERVES

1.0
1954

1956

1958

NOTE.—Monthly averages of daily figures for member banks. Net reserve position
indicates excess reserves minus borrowings.

Bank discount rates were raised in the late summer from 1% p e r
cent to 2 per cent, and in midautumn to a level of iy2 p e ^ cent.
From late summer through the end of the year, bank credit and
the money supply continued to expand but at a rate much reduced
from earlier in the year. Some seasonal expansion in business loans
was supplemented by a rapid growth of real estate loans. On the
other hand, bank holdings of short-term United States Government
securities rose only moderately despite a substantial increase in the
supply of such securities to finance the Treasury's deficit. With
business sales and liquidity showing rapid rise, the higher interest
rates that developed in the market helped to attract a substantial
volume of funds of nonbank investors, especially business corporations, into the purchase of the new short-term Treasury issues. As
a consequence, the Treasury was able to finance most of its deficit




10

ANNUAL REPORT OF BOARD OF GOVERNORS

outside the banking system, and at the same time banks were able
to meet private credit demands accompanying economic recovery,
with only a moderate further growth in total bank credit and money.
REGULATION OF MARGIN REQUIREMENTS

In addition to its broader monetary responsibilities, the Federal
Reserve is directed by law to prescribe margin requirements to
guard against excessive use of credit for purchasing or carrying stock
market securities. By providing a means of dealing directly with
this volatile type of credit, margin requirements serve as a specialpurpose supplement to the general instruments of Federal Reserve
action. Since the flow of credit into the stock market tends to fluctuate with general business conditions, changes in margin requirements
are usually correlated with policy actions that affect general credit
availability.
Following the stock market decline in the early fall of 1957, total
credit to customers for purchasing and carrying stock market securities declined by about 5 per cent and was back to about the level
outstanding in mid-1955. With this indication of abatement of
credit use in the stock market, the Board of Governors, early in
January 1958, reduced the required margin from 70 to 50 per cent.
With the increasing activity and rise in stock prices accompanying economic recovery, stock market credit rose sharply, reaching
by July a level about 20 per cent above the volume at the beginning
of the year. In view of the rapid rise in credit to finance trading in
or temporary ownership of stocks, and the emerging investment psychology favoring purchase of stocks as an inflation hedge, the Board,
early in August, restored the required margin to 70 per cent. As
outstanding stock market credit continued to rise following this
action, the Board, in mid-October, raised the required margin to
90 per cent.
SITUATION AT CLOSE OF 1958

Monetary policy during the autumn aligned monetary conditions
more closely with developments in the economy. Consumer spending
on durable goods and housing continued to expand and was reflected
in high levels of output of household durable goods, in a more than




FEDERAL RESERVE SYSTEM

11

seasonal pickup in auto production, and in a rise in housing starts
to the highest level in recent years. Business inventory policies were
switching from liquidation toward accumulation, and there was a
widespread, though small, upturn in capital expenditures. At the
same time, Federal, as well as State and local government spending,
was expanding rapidly in accordance with budgetary authorizations
adopted earlier.
In financial markets moderate curtailment of credit availability
and higher interest rates helped to dampen speculative excesses then
developing, to restrain and spread out the volume of new corporate
and municipal securities financing, and to facilitate the financing of
the large Federal deficit outside the banking system. The reduction
of corporate and municipal securities financing followed some anticipatory borrowing by these issuers earlier in the year when long-term
interest rates were lower. At the turn of the year, there was a large
calendar of authorized but unissued State and local government
securities.
Total economic activity, measured in real terms, had nearly regained its earlier peak. The active money supply had risen about 3y2
per cent above its pre-recession level, and holdings of other liquid
assets, including time deposits, were up sharply. The financial basis
for further growth was established.
CHANGES IN GOLD RESERVES

Developments in international trade and finance in 1958, and
especially the decline in United States gold reserves, brought to
public attention the interdependence of events in free market economies here and abroad. At the end of the year, announcement by
a dozen European countries of the restoration of external convertibility for their currencies testified to the postwar renewal of Europe's
economic and financial strength.
Unlike most components of domestic demand, external demand
for United States exports failed to turn up during 1958. Exports
of goods and services, which in the previous cyclical expansion had
increased from $18 billion in 1954 to an annual rate of $27 billion
in the first half of 1957, remained throughout 1958 at the level of
$23 billion to which they had fallen early in the year.
The position of the United States in world trade is unique, in that




12

ANNUAL REPORT OF BOARD OF GOVERNORS

it is the leading exporter of manufactured products and at the same
time the most important exporter of crude and semi-finished materials and fuels. Like other exporters of primary products, the
United States was affected by worldwide recessions in steel and
textile industries, which checked its previously swollen exports of
coal, scrap metal, steel, and raw cotton. Like other exporters of
manufactures, this country was affected by cyclical adjustments of
demand, not only in other industrial countries, but also in the less
industrialized countries whose international earnings had fallen.

U . S . BALANCE OF PAYMENTS
Billions of dollars

-

TOTAL
PAYMENTS
FROM U.S.

EXPORTS OF GOODS /
- AND SERVICES S^

_s«er-^/
-•»'
S'
N^/****—'

/

ry

-

/

IMPORTS OF GOODS
AND SERVICES
-_ 4

,,illl
i

Him li. nil 1
NET TRANSFERS OF
GOLD AND DOLLARS
1
1
!

1954

6

I
1956

3
1

I

1958

NOTE.—Department of Commerce seasonally adjusted quarterly data. Total payments from the United States include imports of goods and services, remittances,
Government nonmilitary grants and loans, and net U. S. private capital outflow.
Exports of goods and services exclude military transfers under aid programs. Net
transfers of gold and dollars include gold purchases from the United States and net
increases in foreign holdings of short-term assets in the United States and of U. S.
Government long-term securities. Exports in first quarter of 1954 adjusted to include,
and exports in second quarter to exclude, shipments delayed by port strike in
March 1954.




FEDERAL RESERVE SYSTEM

13

Moreover, United States export trade in manufactures became
subject to increasingly effective competition from Europe and Japan,
areas whose capacity for exporting had greatly increased. And while
United States demand for imported raw materials was relatively low
in 1958, demand for imported consumer goods continued to increase.
One consequence of developments such as these was that the
surplus of exports over imports of goods and services was much
smaller than in 1957, and fell far short of matching the large continuing outflow of private loans and investments and of Government loans and grants. The export surplus was only moderately
larger than in the years immediately preceding the 1956-57 upsurge,
but the capital outflow was much larger. In its total balance of
international payments—on current and capital account—the United
States thus had an unusually large deficit in 1958. It is the purpose
of this section of the Annual Report to indicate how gold movements were related, on the one hand, to this deficit, and, on the
other hand, to the functioning of the United States monetary system.
GOLD AND THE BALANCE OF INTERNATIONAL PAYMENTS

A deficit in a country's balance of international payments (an excess
of payments to foreigners over receipts from foreigners) involves
the transfer of international means of payment from domestic to
foreign holders. In relations between the United States and foreign
countries or international institutions, two kinds of international
means of payments are used: gold and liquid dollar assets. The
United States Treasury sells gold to, and purchases gold from, foreign monetary authorities for the settlement of international transactions at the fixed price of $35 an ounce, plus or minus a commission charge of one-fourth of one per cent. Dollar assets are
freely transferred between United States holders and foreign monetary authorities or (as far as foreign countries' exchange regulations
permit) private persons. Liquid dollar assets held by foreigners
include deposits with the Federal Reserve Banks and other banking
institutions, holdings of Treasury bills and other United States Government securities, and, to a smaller extent, holdings of bankers'
acceptances and other short-term dollar claims.
In 1958, a major part of the $3.4 billion deficit in the United




14

ANNUAL REPORT OF BOARD OF GOVERNORS

States balance of international payments was settled in the form
of gold. The amount of net gold sales to foreigners during the
year, $2.3 billion, was larger than in any other 12-month period
with the exception of the period immediately following the outbreak of the Korean war in 1950.
Some of the factors accounting for the large deficit in the United
States balance of international payments have already been discussed. The reason why a large fraction of that deficit was settled
in gold lies primarily in the regional distribution of the balanceof-payments surpluses of foreign countries.
The practices of foreign monetary authorities vary widely in regard to the proportion of their reserves held in the form of gold on
the one hand, or dollars or other foreign exchange on the other.
Some countries, such as the United Kingdom, Belgium, the Netherlands, and Switzerland, have for many years held most of their
official reserves in the form of gold, and have held liquid dollar
assets only insofar as they were needed for working balances. Most
other European nations also have held a substantial part of their
reserves in gold.
In 1958 the countries that experienced the greatest gain in reserves were highly industrialized countries, including many European countries. This development was the consequence of the slowdown in economic expansion throughout most of the free world
and of the relatively greater decline in export earnings for rawmaterial producing countries than for industrial countries other than
the United States.
Sales of gold to the four countries that generally take practically
all of their reserve gains in the form of gold (the United Kingdom,
Belgium, the Netherlands, and Switzerland) accounted for threefourths of United States net gold sales in 1958; sales to three other
industrial countries (Austria, Italy, and Japan) accounted for virtually all the rest.
Within the year 1958, net gold sales were largest in the second
quarter, and gradually declined during the third and fourth quarters. This decline in the gold component of balance-of-payments
settlements did not reflect a decline in the balance-of-payments deficit itself.




FEDERAL RESERVE SYSTEM

15

GOLD AND T H E UNITED STATES MONETARY SYSTEM

A balance-of-payments deficit for the United States means, in the
first instance, a transfer of liquid assets from domestic to foreign
residents or monetary authorities. This transfer need not affect
total bank assets or liabilities in the United States as long as the
deficit is settled exclusively by transfers of dollar assets. For example, if a United States deficit is settled by the transfer of dollar
deposits to residents of foreign countries and then to their monetary authorities, no change in total deposits with United States banks
occurs. If foreign monetary authorities receiving dollars then invest
in money market paper, such as United States Treasury bills, unless
the bills are purchased from banks the effect generally will be simply
a decrease in domestic nonbank holdings of bills accompanying the
increase in foreign holdings, with the volume of bank deposits remaining unchanged.
If transfers of dollar assets to foreign monetary authorities are
followed by sales of gold to them, further monetary effects of a
somewhat more complicated kind occur. Under the monetary system of the United States, gold is both a means of international
payments and the ultimate reserve basis of the United States money
supply. Movements of gold directly affect the money supply, the
reserves of commercial banks, and the reserves of the Federal Reserve Banks.
The great bulk of the gold holdings of the United States (at the
end of 1958, $20.0 billion out of a total of $20.6 billion) is held
in the Treasury as security against a corresponding amount of gold
certificates issued to the Federal Reserve Banks. These gold certificates owned by the Reserve Banks, together with their holdings of
United States Government securities, advances to member banks,
and other assets, serve as backing for Reserve Bank liabilities. Under the Federal Reserve Act, holdings of gold certificates must be
not less than 25 per cent of Federal Reserve note and deposit liabilities; actually the amounts held greatly exceed this minimum. Federal Reserve deposit liabilities represent primarily reserves that the
member banks are required to hold against their own deposits.
Member bank deposits in turn are a major component of the
country's money supply.
The way in which the money supply, member bank reserves, and




16

ANNUAL REPORT OF BOARD OF GOVERNORS

Federal Reserve Bank reserves are affected by international transfers of gold may be explained by describing the consequences of a
gold sale by the United States to a foreign monetary authority. (A
sale of gold by a foreign monetary authority to the United States
Treasury would have exactly the opposite effects on bank deposits,
member bank reserves, and gold certificate holdings of the Federal
Reserve Banks.) In preparing to buy gold, the foreign authority
usually accumulates funds in its account with the Federal Reserve
Bank of New York, either by selling money market paper or by
transferring funds from deposits with commercial banks. In either
case, the immediate effect is a reduction in commercial bank deposits,
generally those of member banks, and along with this a reduction in
member bank reserves.
When the foreign authority purchases gold from the Treasury, it
transfers funds from its foreign account with the Federal Reserve
Bank of New York to the Treasury's account with the Federal Reserve Bank. (This is usually done through the intermediation of
the Stabilization Fund of the Treasury, which handles these transactions through its fiscal agent, the Federal Reserve Bank of New
York.) The Treasury in turn uses the proceeds in most cases to
redeem a corresponding amount of gold certificates owned by the
Reserve Banks. The effects of the transaction thus include, first, a
reduction in money in the form of bank deposits; second, a drain on
member bank reserves; and, third, a reduction in the gold certificate
reserves of the Federal Reserve Banks.
GOLD AND FEDERAL RESERVE POLICY

Gold movements and the underlying developments in international
trade and payments are among the elements of the economic situation constantly under review in the determination of monetary policy.
In the administration of policy, the effects of gold movements upon
member bank reserves are of immediate importance, since changes
in member bank reserves usually have further multiple effects upon
the money supply through bank credit contraction or expansion. The
Federal Reserve takes into account the impact upon member bank
reserves of gold transactions and of all other factors that affect
those reserves, including changes in currency in circulation, movements in Treasury deposits at the Reserve Banks, and fluctuations




FEDERAL RESERVE SYSTEM

17

in Federal Reserve float. When, as in early 1958, the combined
effect of such factors on member bank reserves would be in a direction contrary to policy objectives, the Federal Reserve takes offsetting action.
In the first seven months of the year, Federal Reserve policy was
aimed at adding substantially to member bank reserves. Gold sales,
however, were draining about $1.5 billion of reserves, and this
drain was offset only in small part by other factors affecting reserves. In order to complete the offset, and in addition to ease reserve positions and provide for monetary expansion, member bank
reserve requirement percentages were lowered, releasing $1.5 billion
of reserves, and additional reserve funds were supplied through
open market operations.
In the latter part of the year, continued although reduced sales of
gold further drained bank reserves. Also, the rise in currency in
circulation drained more reserves than were supplied by the rise in
Federal Reserve float. Since in this period the Federal Reserve was
moderating the availability of reserves, only part of the contractive
impact of these and other factors upon the reserves of member banks
was offset through open market operations. Member banks provided
the rest of the reserves needed for deposit expansion through borrowing from the Federal Reserve Banks.
Over the year as a whole, the ratio of gold certificate reserves
of the Federal Reserve Banks to their note and deposit liabilities
dropped from 46.3 per cent to 42.1 per cent, but it remained well
above the statutory minimum of 25 per cent. There was a moderate
increase in liabilities for Federal Reserve notes in circulation. Deposit liabilities of the Reserve Banks declined; the increase in required reserves of member banks brought about by growth in their
deposits was more than offset by the lowering of member bank
reserve requirement percentages.
DEMAND AND SUPPLY OF FUNDS IN 1958

Total public and private debt rose more in 1958 than in 1957,
although much less than the record postwar growth in 1955. Record
postwar expansion of commercial bank credit provided a large part
of the funds to absorb this rise in debt, but funds available for investment from nonbank sources also rose.




18

ANNUAL REPORT OF BOARD OF GOVERNORS

Availability of funds in relation to demand changed considerably
over the year, mainly in response to shifts in the business outlook
and in Federal Reserve policy. In the first half of 1958, when business and consumer demands for credit were slack and the availability
of bank reserves increased, funds seeking outlets pressed against demand and interest rates declined. Total bank credit rose contraseasonally as banks increased their holdings of securities. In the last
half, when the availability of bank reserves was more restricted,
vigorous economic recovery, together with a large Federal Government deficit, generated additions to demands for financing and interest rates rose sharply. Expectations of still more active credit demands and of possible creeping inflation tended to make lenders
reluctant to invest in fixed interest obligations, especially on longer
term, and accentuated the rise in interest rates. The channeling of
an increased volume of available funds into stocks, also in response
to expectations of inflation, was a further factor of upward pressure
on interest rates.
CREDIT DEMANDS

Credit growth in 1958 reflected mainly increased borrowing by all
levels of government. Rising Federal expenditures and reduced tax
revenues resulted in a large cash deficit, in contrast with a small
surplus in the previous year. State and local governments increased
their outstanding debt more than in 1957.
Private debt expanded further, but the annual rate of growth
continued the downtrend that had prevailed since 1955. Business
borrowing fell off substantially, reflecting reduced plant and equipment outlays and heavy inventory liquidation. Consumer indebtedness for the purchase of goods and services declined during the year,
reflecting principally a decrease in automobile purchases. Mortgage
financing of residential properties, however, showed an accelerated
increase. Outstanding farm mortgage debt also continued to rise and
other loans to farmers by banks went up nearly one-fourth.
Government. The Federal Government had a cash deficit of $7.3
billion in calendar year 1958, a sharp change from the surplus of
$1.2 billion in 1957 and of $5.5 billion in the preceding year. Federal
expenditures were about $6 billion higher in 1958 than in 1957 and
cash receipts nearly $3 billion lower. The decline in revenue, mainly




FEDERAL RESERVE SYSTEM

19

in corporate and individual income taxes, reflected the impact of
recession on corporate profits and personal incomes.
Increased Federal spending was concentrated in the second half
of the year when outlays rose substantially. About $4 billion of the
1958 increase was in unemployment benefits and other social security payments, but military, highway, and agricultural expenditures
also rose.
As a result of Treasury borrowing to cover the deficit, outstanding
public debt rose $8 billion in 1958, the largest calendar year increase
since World War II. A small part of this increase occurred in the
first half of 1958, when the Treasury used the proceeds of this borrowing, together with its seasonal cash surplus, to build up its cash
balance in anticipation of a larger than seasonal deficit later in the
year. In the last half of 1958, the Treasury financed its $12.6 billion
cash deficit through net cash borrowing of $7.7 billion and a reduction in the Treasury balance of $4.9 billion.
Marketable debt rose $11.4 billion, or $3.4 billion more than total
public debt, offsetting a decline of that amount in nonmarketable
issues. About two-thirds of the marketable debt increase was in
issues maturing in five years or more. A $14.5 billion increase in
these issues in the first half of the year, mainly in connection with
refunding operations, was offset in part by a $7.2 billion decline in
the last half as the passage of time carried some issues into shorter
maturity ranges. Net redemptions of savings bonds continued, but
were in much smaller volume than in 1957. The volume of special
issues to Government funds and other nonmarketable debt also
declined in large part because of payments in excess of receipts in
the old-age and survivors insurance and unemployment trust funds.
State and local governments continued to increase their expenditures, as in previous years. Their needs for long-term funds, primarily to finance schools, highways, and other public works, were
increasing, and these governments sold a record volume of bonds
to obtain new capital. The volume of financing was heaviest during
the first half of the year when State and local governments responded to the lower level of interest rates by accelerating the
financing of construction programs, funding shorter term debts, and
undertaking some financing deferred in 1957. Despite a record
volume of bond sales, amounting to $7.7 billion, the backlog of
authorized but unsold bond issues increased during the year.




20

ANNUAL REPORT OF BOARD OF GOVERNORS

INTEREST RATES
Per cent

H

"I

,

'

1954

J COMMERCIAL PAPER
,

OPEN MARKET

1956

,

1958

NOTE.—Market yields, weekly averages of daily figures. Treasury bills, market
yields on 90-day bills. Long-term U. S. Government, yields on bonds maturing or
callable in 10 years or more. Commercial paper, rate on prime 4- to 6-month open
market paper. Yields on corporate and State and local government bonds, from
Moody's Investors Service.

Market rates of interest on United States Government and State
and local securities declined further in the early months of 1958
following a sharp drop in the fall of 1957. Rates on Treasury bills
and intermediate-term issues fell much more than rates on bonds,
and the spread between short- and long-term Treasury issues reached
a postwar record around midyear. The smaller drop in long-term
rates resulted in part from the continuation of a substantial volume




FEDERAL RESERVE SYSTEM

21

of bond issues by corporations and State and local governments,
as well as by the Federal Government.
During the summer, rates rose sharply from their spring lows,
reflecting the rapid economic turnaround and the growing realization that the Federal cash deficit would be large, together with a
mounting fear of inflation. After early October, rates on Treasury
issues were relatively stable despite substantial Federal net cash
borrowing. Rates on State and local securities fell off somewhat in
late 1958, owing in large part to the small volume of new issues,
and at year-end were about one-third of a percentage point below
their 1957 peaks.
Business. The decline in business investment that began late in
1957 continued through the first three quarters of 1958. Outlays for
new plant and equipment fell one-fifth over this period and inventory
liquidation was substantial. In the fourth quarter of the year, spending for fixed capital edged upward and liquidation of business inventories ceased. For 1958 as a whole, total business investment was
one-fourth smaller than in 1957.
Funds available to business corporations from current operations
took a sharp drop in the first half of 1958. While depreciation
allowances continued to rise, retained earnings fell almost twothirds. In the last half of the year, corporate profits rose sharply
and in the fourth quarter the volume of funds available from retained earnings and depreciation allowances reached a new peak.
For the year as a whole, these internal funds were only 7 per cent
smaller than in 1957.
The volume of external financing by business was considerably
smaller in 1958 than in any of the previous three years of business
expansion although much larger than in the recession year 1954.
Growth in outstanding securities of corporations was one-tenth less
than in 1957 but more than in any previous year. Business loans at
commercial banks, however, declined slightly in contrast with increases of roughly $2 billion in the previous year and $6 billion in
1956 and 1955.
The pronounced shift in external financing from banks to securities markets evident in 1957 continued in 1958, induced in part
by the somewhat reduced level of long-term interest rates that
prevailed in the first half of the year. In the last quarter, following




22

ANNUAL REPORT OF BOARD OF GOVERNORS

the onset of vigorous recovery and a sharp rise in interest rates,
securities market financing fell off and demands for bank loans
strengthened.
Most of the decline in new securities financing was in issues of
manufacturing and sales finance companies. Capital outlays of
manufacturing corporations were at greatly reduced levels, and sales
finance companies had less need for new funds in view of the
decline in borrowing on automobiles by consumers and dealers.
Public utility and communication companies reduced their expenditures for plant and equipment and their securities financing only
moderately. A sizable increase in new issues by investment companies reflected in part the establishment of new investment companies.
Business loans at commercial banks fell off more than usual
during the first seven months of the year, mainly in response to
inventory liquidation and the funding of some short-term loans
through sale of long-term securities in the capital market. Business
loans rose over the remainder of the year, mainly because of seasonal borrowing and renewed borrowing by public utilities, which
had reduced bank indebtedness over most of the first three quarters.
Outstanding mortgage debt on multi-family and commercial construction, part of which represents borrowing for business purposes,
rose more in 1958 than in any other recent year. A large part of
this increase, however, was for construction of apartment buildings.
With funds from current operations and external financing reduced less than total spending for fixed capital and inventories in
1958, corporations added to their holdings of cash and United
States Government securities. Most of the additions were in the
last quarter, when a sharp rise in corporate profits brought them
close to pre-recession highs. At year-end, corporate liquidity, as
measured by the ratio of these liquid assets to total current liabilities,
was higher than at any time since the end of 1955.
Consumers. The pace of growth in consumer indebtedness slackened in 1958. The increase for the year in residential mortgage and
consumer credit totaled $10.7 billion, about the same as in 1954 but
much below the $18.9 billion rise in 1955. Almost all the 1958 increase was in residential mortgages, which expanded one-fifth more
than in 1957. Outstanding consumer credit for the purchase of goods




FEDERAL RESERVE SYSTEM

23

and services changed little in 1958, as liquidation of debt early in
the year was about offset by later expansion.
Housing starts, which were at a reduced level in the first quarter
of 1958, rose at a rapid rate over the remainder of the year, reaching a seasonally adjusted annual rate of 1.4 million in the last quarter. Of the 1.2 million starts for the year, privately financed units
totaled more than 1.1 million, 15 per cent more than in 1957 and
the largest number since 1955. Apartment units accounted for a
larger proportion of the starts in 1958 than in other recent years.
Reflecting the large number of sales of existing houses as well
as of new houses, mortgage debt outstanding on nonfarm 1- to
4-family houses rose about $10.2 billion to almost $118 billion in
1958 compared with an increase of $8.6 billion in 1957. Nearly
three-fourths of the increase was in conventional mortgages and
the remainder in FHA-insured mortgages; both types rose much
more than in any previous year. VA-guaranteed mortgage debt
declined for the first time on record, reflecting for the most part a
further drop in volume of new loans to the lowest level since 1949.
Yields on home mortgages declined along with other market rates
of interest in the first half of 1958. In late 1957, when yields on
competitive capital market investments were declining sharply, mortgage yields had shown little change. These mortgages continued to
be attractive to investors. The emergency housing legislation enacted
in the spring of 1958 provided additional stimulus to home mortgage
financing by authorizing the Federal National Mortgage Association
to buy $1 billion of FHA-insured and VA-guaranteed mortgages on
new low-cost housing, by eliminating discount controls on Government underwritten mortgages, and by raising the interest rate ceiling
on VA-guaranteed mortgages from 4^2 to 4% per cent. After midyear, when other market rates of interest rose sharply, mortgage
yields rose only moderately.
Reflecting these and other developments, seasonally adjusted
applications for FHA insurance and requests for VA appraisals on
new homes began to mount in April, reached a peak in September,
and then fell off. FHA applications for the year were the highest
since 1950, and VA appraisal requests were up nearly 50 per cent
from the low level of 1957.
Outstanding short- and intermediate-term consumer debt changed




24

ANNUAL REPORT OF BOARD OF GOVERNORS

little in 1958, after increasing in every earlier postwar year. A
marked decline in instalment debt on automobiles in 1958 was
offset by increases in other types of instalment debt and in noninstalment debt. Extensions of credit on sales of new cars were far
below the levels of other recent years. Extensions of personal loans
and other consumer goods credit, after a downturn early in the year,
increased gradually to levels above those prevailing at the end of
1957. Extensions of automobile credit also rose in the last quarter
of 1958 but remained below 1957 levels. Repayments of instalment
debt were stable throughout the year. Instalment credit terms on
some transactions were eased and new credit plans were developed
and extended.
International capital transactions. The net outflow of United
States private capital in all forms was about $300 million less in
1958 than in 1957, but this moderate decline was accompanied by
substantial shifts in composition of the flows of investments and
loans. The outflow for direct investment in affiliates abroad was
about half the 1957 amount, a decline of more than $900 million,
reflecting in part the completion of certain large capital expenditure
programs. Net new security issues in the United States by foreign
and international borrowers, however, reached a postwar record level
of $900 million in 1958, twice as much as in 1957. Offerings by
Canadian corporations and local governments and by the International Bank for Reconstruction and Development were unusually
large, particularly in the first half of the year when interest rates in
the United States were relatively low, and the volume of other
foreign issues also was at a record level. The net outflow of bank
loans and commercial credits was little changed; persistence of foreign credit demands was associated in part with balance-of-payments
difficulties in some of the less industrialized countries.
These and other capital transactions, together with current transactions between the United States and the rest of the world, enabled
foreign monetary authorities to acquire $2.3 billion of gold from
the United States while foreign holdings of liquid dollar assets
increased by $1 billion. Most of this increase was in time deposits
of foreign banks at United States commercial banks. Foreign holdings of Treasury securities showed no net change. They declined
during the first half of the year, when bill yields fell below the




25

FEDERAL RESERVE SYSTEM

time deposit interest rate, but rose in the last half when the trend
of interest rates was reversed.
CREDIT SUPPLIES

The flow of loanable funds rose in 1958 following declines in
1956 and 1957. The bulk of the increase was in commercial bank
credit, which expanded in response to increased availability of bank
reserves by the postwar record amount of $15 billion. A major component of the growth in loanable funds was a postwar record rise in
commercial bank time deposits. Individuals also continued to accumulate savings in other financial forms at a high rate. Activation of
idle cash balances, which had occurred in other recent years, when
interest rates were rising, apparently did not continue in 1958.

BANK LOANS AND INVESTMENTS
ALL COMMERCIAL BANKS

Billions of dollars
180

TOTAL
160

140

100
LOANS

1954

1956

AAJ
1958

NOTE.—Figures are partly estimated. Data exclude interbank loans and are for last
Wednesday of month, except for June and December call dates.




26

ANNUAL REPORT OF BOARD OF GOVERNORS

Consumer saving. Saving by consumers in financial form—the
increase in their financial assets less the increase in their indebtedness—continued at a high level during 1958 after rising substantially in the previous two years. Consumer accumulation of funds
through savings institutions and banks was at record rates, while
saving through the acquisition of marketable securities was at a
much lower rate than in 1957. Indebtedness of individuals to purchase securities, however, rose sharply in 1958, while that for the
purchase of residential real estate and goods and services, discussed
earlier in this report, rose by a moderate amount.
Deposits in mutual savings banks and shares in savings and loan
associations, which had been increasing by relatively stable amounts
in the past few years, grew at a more rapid pace in 1958. The total
of savings and time deposits at commercial banks also rose more than
in other recent years, although growth in the last half of the year was
much below the rapid rate of the first half. This change in rate of
growth was due in large part to a shift of business and State and
local government funds out of Treasury bills and other liquid assets
into time deposits in the first half and a reversal of that flow in the
second half in response to movements in market rates of interest on
these alternative investments.
Growth in savings deposits at commercial banks is estimated to
have remained above the high 1957 rate over most of the year,
though dropping off toward the year-end. Individuals supplied funds
to other financial intermediaries, such as life insurance companies
and pension funds, at a somewhat higher rate in 1958 than in the
previous year.
Individuals accumulated securities at a much lower rate in 1958
than in the previous two years. They made smaller net purchases
of State and local government securities and corporate bonds, and
they also reduced their holdings of United States Government securities. Net redemptions of United States savings bonds were at a much
slower pace than in the previous year, but the decline in holdings
of other Treasury issues offset the previous year's rise.
Consumer net borrowing to purchase securities showed a marked
rise of about $1 billion in 1958 in contrast with a decline of about
$500 million in the previous year. Most of the increase was in
customer debit balances with New York Stock Exchange member




FEDERAL RESERVE SYSTEM

27

firms covering the purchase of corporate stocks. There was also considerable borrowing for speculative purchases of United States Government securities in connection with the June Treasury financing,
but these loans were rapidly liquidated following the sharp decline
in bond prices in midsummer.
Institutional lenders. The flow of funds to institutional lenders
increased in 1958. Growth in assets of life insurance companies was
nearly one-sixth more than in 1957, but savings capital of savings
and loan associations rose one-fourth more and deposits at mutual
savings banks two-fifths more than in 1957.
Reflecting the increased demand for mortgage loans and the
relatively high yield on mortgages in relation to other investments
over much of 1958, institutions increased their holdings of mortgages substantially more in 1958 than in 1957, while their holdings
of business securities rose less. The growth in mortgage holdings
of mutual savings banks in 1958 was $670 million larger than in
1957, while the rise in business securities was $200 million less.
Savings and loan associations, which invest primarily in mortgages,
increased their holdings over $1.3 billion more in 1958 than in
1957. Life insurance companies, whose new investments largely
reflect previous forward commitments, increased their commitments
for mortgages sharply during the year, but their acquisitions of
mortgages did not rise until late in the year. Mortgage portfolios
of these companies expanded $400 million less than in 1957. Their
holdings of business securities rose about as much as a year earlier,
and, for the first time since 1946, their holdings of United States
Government securities rose, contrasting with substantial reductions in
other recent years.
Bank credit. Loans and investments at commercial banks rose
$15 billion in 1958, about half again as much as the previous postwar
record growth in 1954. In response to a continued policy of credit
ease, almost three-fifths of the increase occurred during the first half
of the year, a period when bank credit usually declines. About $1.5
billion of the increase in this period was a direct offset to reductions
in reserve requirements. In the latter part of the year, as economic
recovery gained momentum and reserve availability was restricted,
bank credit expanded at little more than the usual seasonal rate.
With loan demands generally slack throughout the year, most of




28

ANNUAL REPORT OF BOARD OF GOVERNORS

the credit growth was in holdings of United States Government
securities, which rose by a postwar record amount of $8 billion.
Investments in other securities, mainly State and local government
issues, also rose by a record $2.5 billion.
Loan growth in 1958 totaled only $4.3 billion, slightly more than
in 1957 but much less than in most other postwar years. Real estate
loans, which rose in record volume in the last half of the year, accounted for about half of the total loan growth. Agricultural
loans also showed a large increase. As already indicated, business
loans declined a little over the year, although growth in the last
quarter was about in line with seasonal expectations.
Deposits at commercial banks rose by a postwar record amount

DEPOSITS
ALL COMMERCIAL BANKS
Billions of dollars

DEMAND
SEASONALLY

60

50

40

1954

1958

NOTE.—Last-Wednesday-of-month figures partly estimated by Federal Reserve,
except for time deposits in June and December, which are call report data. Demand
deposits exclude collection items, and both series exclude interbank and U. S. Government deposits. Demand deposits are for all banks in the United States.




FEDERAL RESERVE SYSTEM

29

of $12.6 billion, more than twice as much as in 1957. Time deposits
accounted for almost three-fifths of this total, with a record growth
of $7.0 billion. Demand deposits adjusted, which went down by a
small amount in the previous year, also rose substantially. Treasury
deposits, however, rose only slightly.
The active money supply—demand deposits and currency held by
the public—rose about 4 per cent in 1958, the largest increase
since 1951. On a seasonally adjusted basis, most of the increase
occurred between the end of January and the end of July, when
bank credit was expanding at a rapid rate. Turnover of demand
deposits declined in the first half of 1958 and rose in the last half
to a level approaching the postwar peak reached in the third quarter
of 1957.
Reserve positions of member banks over the year reflected the
course of Federal Reserve policy, easing in the first half and tightening in the last half, but changed little on balance. There were,
however, substantial changes in several major factors affecting reserves. Required reserves declined about $500 million, as deposit
growth absorbed about $1 billion of the $1.5 billion of funds released through reductions in reserve requirements early in the year.
System acquisitions of United States Government securities also
supplied about $2.1 billion of reserves. Reserves were absorbed over
the year mainly by a $2.2 billion gold outflow and a $500 million
increase in currency in circulation.
The principal Federal Reserve policy actions during the year are
summarized on the following pages, and are described more fully in
the records of policy actions of the Board of Governors and of the
Federal Open Market Committee appearing elsewhere in this report.




30

ANNUAL REPORT OF BOARD OF GOVERNORS
DIGEST O F PRINCIPAL FEDERAL RESERVE POLICY ACTIONS,

1958

Action

Purpose of action

January

Limited net reduction in holdings of
U. S. Government securities to $900
million, more than half of which represented securities held under repurchase agreement at end of year. Member bank borrowings declined to an
average of $450 million.

To ease reserve positions by
absorbing only part of the reserves made available by
seasonal factors affecting
bank reserve positions.

Tanuary

Reduced margin requirements on
loans for purchasing or carrying listed
securities from 70 to 50 per cent of
market value of securities.

To recognize that dangers of
excessive use of credit for
stock market speculation had
subsided, since stock prices
and the volume of credit in
the stock market had declined
to levels near or below those
prevailing at the time of the
previous increase in requirements.

JanuaryFebruary

Reduced discount rates from 3 to 2%
per cent at 11 Reserve Banks.

February

Reduced reserve requirements on demand deposits from 20 to 19V2 per
cent at central reserve city banks; from
18 to 17^2 per cent at reserve city
banks; and from 12 to IIV2 per cent
at country banks, thus freeing an estimated $500 million of reserves.

Period

March

Reduced discount rates from 2% to
2 lA per centl at 11 Reserve Banks and
from 3 to 2 A per cent at one Reserve
Bank.

March

Reduced reserve requirements on demand deposits from 19V2 to 19 per
cent at central reserve city banks;
from 17% to 17 per cent at reserve
city banks; and from 11% to 11 per
cent at country banks, thus freeing an
additional $500 million of reserves.

FebruaryMid-April

Purchased about $450 million of U. S.
Government securities. Member bank
borrowings declined further to an
average of about $180 million.

April

Reduced reserve requirements on demand deposits from 19 to 18 per cent
(in two stages) at central reserve city
banks and from 17 to I6V2 per cent at
reserve city banks, thus freeing a total
of about $450 million of reserves.

April-May

Reducedc ediscount rates from 2lA to
1% P e r n t at all Reserve Banks.

Mid-April-June

Purchased outright about $1.7 billion
net of U. S. Government securities.
Member bank borrowings declined
further to an average of $100 million
at the end of June.




To reduce further the cost of
borrowing from the Reserve
Banks and increase further
the availability of bank reserves in order to encourage
bank credit and monetary
expansion conducive to resumed growth in economic
activity.

To supplement reserve requirement actions in further
increasing the availability of
bank reserves.

To supplement previous actions to encourage bank
credit and monetary expansion and resumed growth in
economic activity and to offset current gold outflow.

31

FEDERAL RESERVE SYSTEM

Period

Action

Purpose of action

Julyearly August

Bought a small volume of U. S. Gov- To correct disorderly condiernment securities other than short- tions in the Government securities market, to facilitate
term issues and a large amount of
securities involved in a Treasury re- the Treasury refinancing,
financing. Promptly thereafter reduced and then to recapture the
bank reserves created by the
Treasury bill holdings substantially.
earlier securities purchases.

August

Raised margin requirements on loans
for purchasing or carrying listed securities from 50 to 70 per cent of
market value of securities.

To help prevent an excessive
use of credit for purchasing
or carrying securities. The
volume of credit in the stock
market and stock prices were
advancing sharply and were
at or near the highest levels
since World War II.

August-early
September

Made little change in holdings of
U. S. Government securities. Member bank borrowings increased to an
average of more than $400 million
in early September.

Open market action not taken
to offset drains on reserve
funds reflecting bank credit
and monetary expansion resulting from seasonal factors and the sharp upturn in
economic activity.

AugustSeptember

Raised discount rates from l3/4 to 2
per cent at all Reserve Banks.

To keep discount rates in an
appropriate relationship with
market rates and to increase
the cost of borrowing by individual banks from the Reserve Banks in case of increasing demands for bank
credit.

October

Raised margin requirements on loans
for purchasing or carrying listed securities from 70 to 90 per cent of market value of securities.

To help prevent an excessive
use of credit for purchasing
or carrying securities.

Late Octoberearly November

Raised discount rates from 2 to 2lh
per cent at all Reserve Banks.

To bring discount rates into
closer alignment with open
market rates.

Mid-NovemberDecember

Increased system holdings of U. S.
Government securities about $900
million, including securities held under repurchase agreement. Member
bank borrowings rose to average of
$560 million in December.

To meet part of reserve needs
associated with seasonal factors and a further moderate
outflow of gold.




32

ANNUAL REPORT OF BOARD OF GOVERNORS
RECORD OF POLICY ACTIONS
FEDERAL OPEN MARKET COMMITTEE

The record of policy actions of the Federal Open Market Committee is presented in this report pursuant to the requirements of
Section 10 of the Federal Reserve Act. That section provides that
the Board of Governors of the Federal Reserve System shall keep
a complete record of the actions taken by the Board and by the
Federal Open Market Committee upon all questions of policy relating to open market operations and shall record therein the votes
taken in connection with the determination of open market policies
and the reasons underlying the actions of the Board and the Committee in each instance. Section 10 also provides that the Board
shall include in its Annual Report to the Congress a full account
of the actions taken during the preceding year, both by the Board
and by the Federal Open Market Committee, with respect to open
market policies and operations and with respect to the policies
determined by the Board.
The record of policy actions of the Federal Open Market Committee is prepared on the basis of the minutes of the meetings of
that Committee, as approved by the Committee, and sets forth the
policy decisions reached together with a resume of the reasons
therefor. Many policy decisions are by unanimous vote of the Committee members, but the emphasis on specific reasons for preferring
a particular line of policy may vary from individual to individual.
There are times when individual members of the Committee may
concur in a concept of policy action formed by a majority because
it moves generally in the direction that they believe to be called for,
even though their views may differ considerably from those of
other members of the Committee as to the degree of movement
that is desirable. When a member records a dissent from an action
of the majority of the Committee, the dissent may reflect a variety
of factors, such as a fundamental disagreement with the direction
of policy action as indicated in the directive, or a fundamental disagreement with the emphasis attached to a particular objective as
indicated in the directive.
It should be noted that the policy directive adopted at a meeting
of the Federal Open Market Committee is usually in general terms




FEDERAL RESERVE SYSTEM

33

and that, without changing the wording of the directive, the Committee may from time to time modify considerably the emphasis
to be placed on operations designed to implement the general policy. The shadings of opinion that enter into the formation of a
policy decision provide the Manager of the System Open Market
Account (who attends the meetings of the Committee) with a
guide to be used in the conduct of open market operations within
the framework of the policy directive adopted at that meeting.

*

*

*

The policy directive of the Federal Open Market Committee that
was in effect at the beginning of 1958 was the one that had been
approved at the meeting on December 17, 1957. This directive
called for open market operations with a view, among other things,
to cushioning adjustments and mitigating recessionary tendencies in
the economy. It was issued to the Federal Reserve Bank of New
York as the Bank selected by the Committee to execute transactions
for the System Open Market Account and directed that Bank:
(1) To make such purchases, sales, or exchanges (including replacement
of maturing securities, and allowing maturities to run off without replacement) for the System Open Market Account in the open market or, in the
case of maturing securities, by direct exchange with the Treasury, as may
be necessary in the light of current and prospective economic conditions
and the general credit situation of the country, with a view (a) to relating
the supply of funds in the market to the needs of commerce and business,
(b) to cushioning adjustments and mitigating recessionary tendencies in the
economy, and (c) to the practical administration of the Account; provided
that the aggregate amount of securities held in the System Account (including commitments for the purchase or sale of securities for the Account) at
the close of this date, other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the
Treasury, shall not be increased or decreased by more than $1 billion;
(2) To purchase direct from the Treasury for the account of the Federal
Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such
amounts of special short-term certificates of indebtedness as may be necessary
from time to time for the temporary accommodation of the Treasury, provided that the total amount of such certificates held at any one time by the
Federal Reserve Banks shall not exceed in the aggregate $500 million.
(3) To sell direct to the Treasury from the System Account for gold




34

ANNUAL REPORT OF BOARD OF GOVERNORS

certificates such amounts of Treasury securities maturing within one year as
may be necessary from time to time for the accommodation of the Treasury;
provided that the total amount of such securities so sold shall not exceed
in the aggregate $500 million face amount, and such sales shall be made
as nearly as may be practicable at the prices currently quoted in the open
market.
The Federal Open Market Committee met 31 times during 1958.
Of these meetings, 19 were held in Washington and 12 were held
by means of telephone conference arrangements in which some members were located outside Washington. In five of the meetings
held by telephone conference, policy decisions were reached, while
the other seven telephone conference meetings did not involve proposals for new policy actions but were for the purpose of discussing
operations being conducted within the limits of policy actions previously taken. The policy actions taken by the Committee during
the year are set forth in the following pages by date of meeting.
January 7, 1958
Authority to effect transactions in System Account.
No change was made in the Committee's policy directive that
specified that operations should be with a view, among other things,
"to cushioning adjustments and mitigating recessionary tendencies
in the economy."
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson,
Shepardson, Szymczak, and Williams. Votes against this action:
none.
Domestic economic activity continued to be characterized by general cyclical recession, with contraction in output at a pace comparable to that experienced in the 1948-49 and 1953-54 recessions.
Gross national product in the fourth quarter of 1957 had decreased
about $6 billion, annual rate, largely associated with inventory
liquidation, while industrial production for December was estimated
at 137, seasonally adjusted, compared with 147 a year earlier and
with the narrow range of 143-146 that prevailed during the period
from January through September 1957. The market for new automobiles had been disappointing to producers, with sales off sig-




FEDERAL RESERVE SYSTEM

35

nificantly from a year earlier, while repossessions on instalment
sales had reached high ground and still seemed to be edging upward. However, other sales at retail picked up sharply in the latter
half of December, after having started the month slowly, and department store sales, seasonally adjusted, reached a new high in
that month. Construction activity in December continued at record
levels, with increases in residential construction again offsetting declines in the industrial area, but unemployment rose further in that
month to around 5 per cent of the total labor force. Wholesale
prices showed little change in December, remaining at about the
average that had prevailed since midyear, while consumer prices
were reflecting advances in services and meat prices.
In the financial area, two developments had occurred since the
reduction in Federal Reserve Bank discount rates in November.
One of these was a sharp decline in interest rates and the other was
some seasonal increase in bank loans and investments, which represented a turnaround from the contra-seasonal decreases shown for
October and November. The Federal Reserve System had supplied
over $1 billion of reserves to the banking system during the six
weeks prior to the end of the calendar year, and those reserves had
contributed to credit expansion as well as currency expansion a little
in excess of seasonal estimates. In brief, recent policies designed to
cushion adjustments and mitigate recessionary tendencies in the
economy had established the basis for maintaining the privately
owned money supply.
Analysis of the data on economic activity indicated that the
current recession was attributable largely to a decline in business
plant and equipment expenditures, aggravated by an inventory
cycle. It was not apparent, however, whether those influences were
likely to spread to consumer spending and thus produce a cumulative recession. There was uncertainty as to the probable speed of
inventory adjustment, particularly by manufacturers, and there was
also uncertainty as to the amount and timing of the expected increase in defense spending, although it did not seem probable that
this would be a significant factor for several months. In view of
the wide range of possible ways in which the recession might develop, it seemed prudent to assume that the next upturn might be
a fairly long way off, to be preceded either by a continuing gradual




36

ANNUAL REPORT OF BOARD OF GOVERNORS

decline or perhaps by a sideways movement after the current decline
had run its course. The shift in System credit policy in the fall of
1957 had made it clear that open market operations were being
directed toward assuring an adequate volume of credit for all potential borrowers with economically sound credit needs, but on the
other hand System policy had not gone to the point of trying to
bring about an excessive volume of free reserves.
In concluding that no change should be made in the policy directive, the Committee agreed that a slight easing in the reserve positions of banks would be desirable and that operations in the System
Open Market Account should be conducted with sufficient latitude
to permit this development to take place within the limits of the
directive.
January 28, 1958
Authority to effect transactions in System Account.
The Committee made no change at this meeting in the wording
of the directive to the Federal Reserve Bank of New York, which
called for operations in the System Open Market Account directed
toward cushioning adjustments and mitigating recessionary tendencies in the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson,
Shepardson, Szymczak, and Williams. Votes against this action:
none.
Economic decline had acquired a definite momentum at the time
of this meeting, and further decreases in production, employment,
and other measures of activity were in prospect. It appeared that
the industrial production index for January would show a decline
of 2 or 3 percentage points from December, which would put it
about 8 per cent below the early 1957 level, and unemployment
claims were continuing to increase.
The declines in activity during recent months had been traceable
primarily to adjustments in the capital goods area, and it was
pointed out that readjustments in this particular area might take




FEDERAL RESERVE SYSTEM

37

considerable time. Installation of much new capacity during the
past few years had eased the supply situation enough so that for
some time there had been less incentive for buyers to maintain inventories and, at this time, they were being reduced. While inventory adjustments could occur fairly quickly, the rapidity of adjustment in both the inventory and capital goods areas would partly
depend on changes in other demands, including consumer demands,
State and local government demands, defense demands, and foreign
demands.
The free reserve position attained thus far by member banks had
been of moderate size, and monetary expansion, which had paused
in the latter part of 1957, had not yet been resumed. Demand for
bank loans now appeared to be showing a slackening drift, reflecting a larger than seasonal decline in business loans and also liquidation of dealers' positions in Government securities financed with
bank credit in December. A large Treasury financing operation was
expected shortly, and, although there were prospects that reserve
availability would expand in coming weeks owing to further seasonal decline in deposits and to a reduction in Treasury cash balances, it was suggested that it would be desirable to continue
through open market operations at least the present degree of reserve availability until indications of monetary expansion appeared.
Some members suggested a more aggressive easing immediately,
believing that could be done without disturbance to the forthcoming
Treasury financing. Such a policy would be consistent with the reduction in discount rates to the 2% per cent level that had been
made at several of the Federal Reserve Banks just prior to this
meeting.
In all the circumstances, the Committee concluded that, even
though the level of economic activity was continuing to decline,
there should be no change at this meeting in the policy of supplying
reserve funds in a manner that would cushion adjustments and
mitigate recessionary tendencies in the economy and that, in view of
the desirability of having an "even keel" during the period of the
Treasury financing, open market operations should be directed
toward maintaining approximately the same condition in the money
market that had existed immediately prior to this meeting.




38

ANNUAL REPORT OF BOARD OF GOVERNORS

February 11, 1958
Authority to effect transactions in System Account.
The Committee again renewed without change the policy directive that placed emphasis upon operations in the System Account
with a view to cushioning adjustments and mitigating recessionary
tendencies in the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Allen, Balderston, Bryan, Leedy, Mills, Robertson,
Shepardson, Szymczak, and Williams. Votes against this action:
none.

Recession in general activity had continued during the month of
January and signs of leveling out were not yet at hand. The declines were again general, but they were greatest in durable goods
and related industries. The length of the work week had fallen to
the lowest level of the postwar period, and by mid-January unemployment had risen close to the postwar peak of 4.7 million that
prevailed in February 1950. Manufacturers' new orders for December showed a 2 per cent drop from November and were down I1/}
per cent over the year, with new orders for durable goods running
a fifth below the previous year. Business inventory liquidation had
continued in December, mainly concentrated in durable goods manufacturing, but despite such liquidation the stock-sales ratio rose
further to the highest level in a decade. January retail deliveries of
new automobiles were some 20 per cent lower than deliveries in the
previous month or in January 1957. Preliminary estimates suggested
a further decline in gross national product for the first quarter of
1958 of from $4 to $5 billion, annual rate, putting total product
back to the level of the first quarter of 1957. Exports in December
were down sharply after two months of stability. Favorable factors
included total construction activity, which continued at close to
record levels in January, and total retail sales including those at
department stores.
While business loans at city banks were liquidated in a recordbreaking amount during January, the banks had increased their
holdings of securities since the end of November. As a result, total
loans and investments rose more in December and decreased less
after the turn of the year than they did in 1957 or 1956. Time de-




FEDERAL RESERVE SYSTEM

39

posits at city banks advanced even more sharply in January 1958
than in the same month of the previous year. New security issues
by State and local governments were proceeding in record-breaking
volume, with some issues which were deferred in 1957 now being
brought to the market. Short-term interest rates had declined to the
lowest levels since early 1955, while long-term rates had been somewhat firmer during the past two or three weeks. Reserves to cover
credit demands had been abundantly supplied through market factors and System operations. Additions to System holdings of
Government securities had been much larger in December than
usual, while the January decline was smaller than usual. The result
was that the reserve position of member banks had shifted from
net borrowed reserves of over $300 million during the last week of
November to free reserves of over $200 million in the past two
weeks. Projections indicated that free reserves might fluctuate
around this level during February and increase sharply, though
temporarily, in the first half of March unless offset by System
operations.
It was the view of the Committee that the policy that it had been
following had resulted in placing the System in a quite appropriate
posture. If later on there were clear indications that the recession
was spiraling, more drastic action might be required. Accordingly,
for the present it was felt that the Committee should continue to
follow an "even keel policy tipped on the side of ease." In these
circumstances, no change was made in the existing policy directive.
March 4, 1958
1. Review of continuing authorities or statements of policy.
This being the first meeting of the Federal Open Market Committee after the new members elected by the Federal Reserve Banks
for the year beginning March 1, 1958 had assumed their duties, the
Committee reviewed and reaffirmed all continuing statements of
policy and authorities for operations. These included the following:
a. It is not now the policy of the Committee to support any pattern of
prices and yields in the Government securities market, and intervention in
the Government securities market is solely to effectuate the objectives of
monetary and credit policy (including correction of disorderly markets).




40

ANNUAL REPORT OF BOARD OF GOVERNORS

Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Shepardson, Szymczak, and Vardaman. Votes against this
action: none.
b. Operations for the System Account in the open market, other than repurchase agreements, shall be confined to short-term securities (except in the
correction of disorderly markets), and during a period of Treasury financing
there shall be no purchases of (1) maturing issues for which an exchange is
being offered, (2) when-issued securities, or (3) outstanding issues of comparable maturities to those being offered for exchange; these policies to be
followed until such time as they may be superseded or modified by further
action of the Federal Open Market Committee.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak,
and Vardaman. Vote against this action: Mr. Hayes, Vice
Chairman.
Mr. Hayes stated that he would vote to approve the statement if
the qualifying phrase, "as a general rule," were inserted after
"shall" in the second and fourth lines.
c. Transactions for the System Account in the open market shall be entered into solely for the purpose of providing or absorbing reserves (except
in the correction of disorderly markets), and shall not include offsetting
purchases and sales of securities for the purpose of altering the maturity
pattern of the System's portfolio; such policy to be followed until such time
as it may be superseded or modified by further action of the Federal Open
Market Committee.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak,
and Vardaman. Vote against this action: Mr. Hayes, Vice
Chairman.
Mr. Hayes stated that he would vote to approve the action if the
word "solely" were deleted from the second line and "primarily"
substituted therefor, and if the phrase "as a general rule" were inserted after "shall" in line three.
2. Authority to efEect transactions in System Account.
Clause (b) of paragraph (1) of the directive was changed at this




FEDERAL RESERVE SYSTEM

41

meeting to provide that, among other things, open market transactions would be with a view "to contributing further by monetary
ease to resumption of stable growth of the economy/' The Committee also deleted from the directive the paragraph authorizing the
sale direct to the Treasury from the System Open Market Account
for gold certificates of such amounts of Treasury securities maturing
within one year as might be necessary from time to time for the
accommodation of the Treasury up to an aggregate amount of $500
million face amount.
Votes for these actions: Messrs. Martin, Chairman, Hayes,
Vice Chairman, Balderston, Fulton, Irons, Leach, Mangels,
Mills, Shepardson, Szymczak, and Vardaman. Votes against
these actions: none.

During recent weeks, business activity had shown indications of
deepening recession. A further decline during February indicated
that the Board's index of industrial production for that month
would be about 10 per cent under the mid-1957 high. Employment
had continued to decline and unemployment to rise. Preliminary
data from a survey of plans for plant and equipment expenditures
during 1958 pointed to a decrease for the year of 10 per cent,
whereas a similar survey made in the fall of 1957 indicated a decline
of 7 per cent. Although the housing market appeared to be holding
fairly strong, the over-all summary of economic conditions at the time
of this meeting was described as one of little cheer.
The volume of free reserves had increased during late February,
reflecting among other factors a reduction in reserve requirements
ordered by the Board of Governors of the Federal Reserve System.
At the same time the Committee authorized by telegram the maintenance of a somewhat higher level of free reserves than had been
contemplated at the February 11 meeting.
In the market, an expansion in the total volume of bank credit had
taken place during February. Business borrowing had been sharply
reduced in the past 90 days, but the banks, supplied with ample
reserves, had expanded holdings of securities and loans on securities,
particularly in February, in contrast with the customary seasonal
reduction at that time.
The Committee's discussion of the situation disclosed considerable




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ANNUAL REPORT OF BOARD OF GOVERNORS

feeling that the policy directive should reflect a more positive approach to recovery than was embodied in the wording calling for
"cushioning adjustments and mitigating recessionary tendencies in the
economy." Agreement was reached on the change indicated, namely,
that during the period following this meeting open market operations should be with a view to "contributing further by monetary ease
to resumption of stable growth of the economy."
The Committee also discussed whether the discount rates at the
Federal Reserve Banks should be reduced further from the prevailing
level of 2% per cent, concluding that the matter should take its
course at the respective Federal Reserve Banks.
Elimination from the directive of the third paragraph authorizing
the sale direct to the Treasury from the System Open Market Account for gold certificates of Treasury securities up to an aggregate
of $500 million resulted from the belief that under current circumstances, including the action taken by the Congress to increase the
national debt limit from $275 to $280 billion, such an authorization
was not likely to be used.
March 25, 1958
Authority to effect transactions in System Account.
The Committee renewed without change the directive approved at
the meeting on March 4, 1958, which called for transactions in the
System Open Market Account with a view, among other things, to
contributing further by monetary ease to resumption of stable growth
of the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, Szymczak, and Vardaman. Votes against
this action: none.
Economic information presented to the Committee indicated a likelihood that industrial production during March would fall below the
rate for February, which was 130 per cent of the 1947-49 average.
The February figure represented a decline from 135 in December
1957 and 145 last August, which meant that in the six months from
August to February industrial production had declined a little more
rapidly than in the corresponding periods of early recession in 1948-




FEDERAL RESERVE SYSTEM

43

49 and 1953-54. Employment had continued to decline in both manufacturing and nonmanufacturing lines, with the decrease particularly
marked in durable goods industries. Unemployment had risen sharply to 5.2 million in February, the number of workers on part time
had increased further, and the number working overtime had continued to decline. Meanwhile, however, both consumer and wholesale prices were appreciably higher in February than in December,
reflecting principally higher prices of food products and higher
charges for services. Inventory liquidation was proceeding at a rather
rapid pace, while business outlays for plant and equipment were
continuing downward, with no turning point yet in sight. Although
consumer buying had been well sustained, the February figures on retail sales were below the same month last year and it appeared that
this trend might be continuing in March.
In the securities markets, stock prices had moved up irregularly and
high-grade corporate bond prices had declined slightly since late January. A more than seasonal reduction in bank loans to business had
accompanied declines in economic activity and business inventories,
but the banks had been increasing their investments since late in the
fall of 1957 and total bank credit outstanding had increased at a
season when a decrease is usual. Corporations had obtained large
amounts of new capital, and borrowing by the Treasury and other
Government entities had been large.
There had been a fair degree of stability in activity abroad. Although the leveling off in activity overseas had had a disproportionate impact on exports from this country, the major part of the downward adjustment in exports appeared to have been completed. Thus
far, the recession in the United States had had only a limited impact
on the industrialized European countries.
The record of free reserves and short-term interest rates since the
last Committee meeting suggested that the degree of ease desired by
the Committee had been achieved. However, there was at the same
time an occasional tendency for a feeling of relative tightness to
develop temporarily in the money centers. The commercial banks,
generally speaking, seemed to have adequate reserves at their disposal
for the expansion of credit, but it appeared that the reduced level of
liquidity which came about in the late stages of the 1955-57 boom
might still be exerting some dulling effect on their attitudes toward




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ANNUAL REPORT OF BOARD OF GOVERNORS

lending. Accordingly, it was regarded by some as questionable
whether the commercial banking system would be an active instrument in fostering recovery until it had attained substantially greater
liquidity.
In the last 130 days the System had moved on a broad front to
establish a condition of credit ease. Aside from open market operations making reserves more readily available, the discount rates of the
Federal Reserve Banks had been reduced in several steps from 3^2
per cent to 2% per cent, the latest reduction having been effected in
the period since the last meeting of the Committee. In addition,
there had been two reductions totaling one percentage point in member bank reserve requirements against demand deposits, the more
recent of which became effective for central reserve and reserve city
banks on March 20, 1958, and would become effective for other
member banks on April 1, 1958. The present posture of Federal
Reserve policy was one of ease and it was the view of the Committee
that it should continue to be such. Discussion brought out the comment that, although further discount rate reductions might possibly
seem logical in view of the level of the Treasury bill and other money
market rates, a change on the eve of a Treasury financing might incite undesirable speculation in the Government securities market.
While making no change in the existing policy directive, the Committee concluded that operations in the System Account should be
directed toward maintaining a slightly larger volume of free reserves
and money market conditions slightly easier than had been achieved
since the last meeting of the Committee.
April 15, 1958
Authority to effect transactions in System Account.
This meeting of the Committee resulted in a decision to continue
without change the policy directive calling for operations designed
to contribute further by monetary ease to resumption of stable growth
of the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Robertson, Shepardson, and Szymczak. Votes against this action: none.

Data available to the Committee indicated some slowing down in




FEDERAL RESERVE SYSTEM

45

the pace of decline for total output and employment, some leveling
out in trade, and maintenance of construction activity at close to
record levels in value terms. In contrast, there were some developments of an expansive character in finance. While the picture domestically therefore appeared as one of more diversity or crosscurrents
than earlier in the year, the over-all drift of the economy nevertheless
was still plainly downward. Current statistics offered only slight basis
for the hope that the saucering-out phase of the recession was at
hand. After allowances for seasonal influences, the labor market
continued to show further weakening, while surveys of business plans
for plant and equipment expenditures reflected a further substantial
projected cutback for 1958 as compared with 1957. The industrial
production index for March was estimated to have declined two
points further to 128, and preliminary April information indicated
further output curtailment, much along the lines of the March pattern but with the possibility of some slowing. Retail trade, seasonally
adjusted, was estimated to have been off another one per cent in
March, manufacturers* sales and orders continued to show declines,
with the fall-off much sharper in durable goods than in nondurable
goods lines, and business inventory liquidation was believed to have
continued in March at quite a sharp rate. At the same time, prices
at wholesale and in consumer markets had risen further to late
March, putting the indices a full one per cent above the December
1957 level.
In the financial area, total credit extended by commercial banks
had apparently continued to expand during recent weeks, mostly in
the form of short-term liquid assets. Savings of consumers held in
financial form seemed to be increasing, while consumer debt had
been decreasing. Business loans at banks had increased less than at
this time in other recent years but corporate issues for new capital
continued at a high level, as did new issues of State and local governments, and the Federal Government had become a net borrower. Deposits at banks had increased, on a seasonally adjusted basis. Shortand medium-term interest rates had shown further declines with wide
variations, reflecting changes in liquidity, while long-term rates,
under the influence of continued heavy borrowing in capital markets,
remained firm.
Nearly $1 billion of reserves had been released by reductions in




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ANNUAL REPORT OF BOARD OF GOVERNORS

reserve requirements of member banks since February 26 and an additional $250 million had been supplied by System open market operations through April 9. Reserves had been absorbed by an increase in
required reserves of about $200 million resulting from growth in
deposits, a rise in currency in circulation, foreign operations, consisting principally of gold withdrawals amounting to about $400
million, and changes in float and other factors. Free reserves in the
aggregate had averaged somewhat in excess of $500 million. Although country banks appeared to be well supplied with reserves,
banks in New York and Chicago, and probably in some other cities,
had experienced wide fluctuations in their reserve positions and had
borrowed heavily in the Federal funds market. It appeared that a
substantial amount of additional reserves might need to be supplied
by the Federal Reserve System in the next few weeks in order to
maintain a condition of ease conducive to further credit and monetary expansion.
Reports at this meeting indicated that the directors of some of the
Federal Reserve Banks had been giving serious consideration to the
establishment of a discount rate lower than the existing 2*4 per cent
rate. With the recent Treasury financing now completed, it appeared that those Reserve Banks might act to establish a lower rate
rather quickly. A further reduction in the reserve requirements of
member banks was seen as a possible means of providing the additional reserves that would otherwise have to be supplied by open
market operations during the next few weeks in order to maintain
the present level of free reserves. If the reduction were concentrated
at central reserve and reserve city banks, it would also have a tendency to relieve pressure that occasionally developed in the money
centers. Taken together, it was suggested that such actions on the
discount rate and reserve requirements would clearly confirm the
current easing posture of monetary policy and reinforce the policy
objective of assisting the recovery of the economy.
The Committee was of the view that there was no reason to change
its policy directive at this time. Free reserves had averaged slightly
higher during the period since the last meeting of the Committee
than during the preceding three-week period, and it was agreed that
this general level should be maintained. It was noted, however, that
if action should be taken in the near future on both the discount




FEDERAL RESERVE SYSTEM

47

rate and reserve requirements, the level of free reserves would tend
to become relatively incidental, as long as the free reserve position
did not decrease to an extent that might make it appear as though
the System was reversing policy.
May 6, 1958
Authority to effect transactions in System Account.
The policy directive calling for operations to contribute further by
monetary ease to resumption of stable growth of the economy was
again renewed at this meeting.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Fulton, Irons, Leach, Mangels, Mills, Robertson, Shepardson,
Szymczak, Vardaman, and Treiber. Votes against this action:
none.
Although some statistical evidence suggestive of a slowing of economic decline had been accumulating, most of the information available to the Committee at the time of this meeting indicated that the
recession was still deepening and that a bottom was yet to be established. Among other things, the index of industrial production was
estimated to have dropped another two points to 126 in April, manufacturers' sales and new orders were off again in March to about the
same extent as in February, business inventory liquidation in March
was found to have amounted to a further $700 or $800 million, seasonally adjusted, and estimates of new construction outlays had recently been revised downward due to lower private expenditures.
Unemployment in April decreased less than seasonally, initial claims
for unemployment insurance were still running at quite high levels,
and the number of continued claims of those unemployed for 15
weeks or more was double that recorded in earlier postwar recessions.
At the same time, the average of wholesale prices was holding stable
and the average of consumer prices was still rising.
Since the preceding meeting of the Committee, there had been a
further reduction to 1% per cent in the discount rates of most of the
Federal Reserve Banks along with a further reduction of one-half
percentage point in reserve requirements against demand deposits at
central reserve and reserve city banks, while open market operations
had been such as to maintain free reserves generally exceeding $500




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ANNUAL REPORT OF BOARD OF GOVERNORS

million. Financial developments during this period were influenced
by the additional availability of bank reserves and by the activities of
banks in endeavoring to put their available funds to use. Demands
on capital markets continued heavy. In the five weeks ended April
30, banks in leading cities showed a further increase of over $2.5
billion in total loans and investments, and it appeared that during
the five months since the end of November, a period in which bank
credit usually declines, total loans and investments of all commercial
banks may have increased by $7 billion or more. The increase in
April reflected almost wholly additions to holdings of United States
Government securities, particularly the new Treasury five-year notes.
Demand deposits adjusted at city banks increased during the five
weeks prior to April 30 by about $1,200 million, compared with a
growth of $750 million in the same period of 1957, while time deposits continued to increase at a much faster pace than the previous
year.
The pattern of economic and financial developments caused the
Committee to conclude that the prevailing policy of ease should be
continued and that no change should be made in the outstanding
policy directive.
May 27, 1958
Authority to effect transactions in System Account.
The Committee again continued without change the policy directive providing for operations in the System Account with a view to
contributing further by monetary ease to resumption of stable growth
of the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Fulton, Irons, Leach, Robertson, Shepardson, Szymczak, Vardaman, and Deming. Votes against this action: none.

The composite of current economic indicators reported at this meeting suggested that the recession in economic activity had been leveling off and that a bottom to the decline might be in the making. The
decline in industrial production, over all, seemed to have been
checked in May, and a number of other indicators, including retail
sales, personal income, residential building, and new orders received
by durable goods manufacturers, likewise appeared to have stopped




FEDERAL RESERVE SYSTEM

49

receding or to have risen slightly. While inventory liquidation had
probably been continuing in the aggregate, some key material markets suggested a lessening in such liquidation. Also, although initial
and continued unemployment compensation claims were still very
high, the trend was indicative of a little firmer labor market. March
figures for exports had risen from February, while imports continued
to be well maintained at the moderately reduced level of the first two
months of the year. In agriculture, the income outlook was quite
favorable. Capital market activity had been well sustained and banking developments were in the direction of a strengthening of business
and individual liquidity positions. As to prices, a degree of flexibility
in the area of industrial commodities seemed to be emerging gradually, especially at the wholesale level.
The Committee recognized that each of the favorable factors
needed qualification and that a number of other factors in the current
situation raised questions about the imminence of recovery. Furthermore, there were reports of a substantial speculative interest in the
Treasury issues maturing in June, a factor that suggested the need
for close attention in view of the forthcoming Treasury refunding
operation. On balance, therefore, it seemed prudent to view the forthcoming period as one of gradual testing, with the realization that on
the basis of past cyclical patterns the period of testing might last for
some time.
Short-term interest rates recently had declined to new low levels
while long-term rates, after declining somewhat in April, rose slightly
in early May. New security financing by corporations and by State
and local governments continued in large volume. Recent figures
showed that total loans and investments of all commercial banks
increased by about $4 billion in April—a larger growth than had
previously been estimated—thus bringing the total increase since the
end of November 1957 to above $8 billion. Marked increases occurred during April in both loans and investments at country banks
and in holdings of investments by city banks, where declines in
business loans were offset by increases in loans on securities. In May,
the decline in total loans and investments at city banks had been
smaller than usual at that time. Demand deposits adjusted and
currency outside banks showed a seasonally adjusted increase of $900
million in April following similar increases in February and March,




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ANNUAL REPORT OF BOARD OF GOVERNORS

with the result that the total at the end of April was the largest since
July 1957 and was equal to the total at the end of April 1957. Time
deposits, other than interbank, were about $7 billion larger than at
the same time in 1957, while interbank and United States Government deposits had also risen to higher levels than a year earlier. In
addition to the growth in the volume of deposits, the rate of turnover
of demand deposits had increased in April, contrary to the usual
seasonal trend, and was about the same as in April 1957. Free reserves held close to $500 million during May, substantial drains on
reserves attributable to the continued gold outflow and to a larger
than seasonal increase in currency in circulation having been largely
offset by additional reserves supplied through open market operations
and other factors.
Estimates presented to the Committee indicated that reserve needs
would be rather large in June and the first half of July, arising in
part from seasonal factors and from a larger than usual increase in
Treasury deposits at banks. Therefore, in the absence of System action free reserves might generally average much less than the levels
that had prevailed recently.
In the light of these estimates and related factors, including the
imminent and sizable Treasury financing operation, the Committee
considered how best to implement and maintain the current posture
of monetary ease without further depressing Treasury bill rates. It
was the consensus that no change should be made in the language of
the policy directive and that operations in the System Account should
be directed toward maintaining an even keel over the ensuing period.
In terms of approach, this contemplated that the Account Management would place emphasis on the tone and action of the market and
the course of credit developments.
June 17, 1958
Authority to effect transactions in System Account.
The directive was renewed without change, continuing the policy
of contributing further by monetary ease to resumption of stable
growth of the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Fulton, Irons, Leach, Mangels, Mills, Robertson, and
Szymczak. Votes against this action: none.




FEDERAL RESERVE SYSTEM

51

Economic information available for this meeting was generally on
the encouraging side and was confirmatory of the report at the May
27 meeting that bottoming out of recession was in fact occurring.
However, analysis of the data suggested that the haze obscuring the
outlook had not suddenly lifted, and that it was the better part of
wisdom not to conclude as yet that a recovery pattern had definitely
taken form. On the other hand, it could not be denied that there was
a possibility that an accelerating recovery movement was now
shaping up.
High levels of consumer and Government demands seemed to be
roughly offsetting recessionary forces generated in the investment
area of the economy. Heavy demands on capital markets, including a
Treasury bond offering for cash, had been met in part by substantial
expansion in bank holdings of securities and loans on securities. Additional reserves had been supplied by System purchases of securities,
but on balance free reserves had been somewhat lower than in May.
The money market had continued relatively easy until the week of
this meeting, but with the mid-June needs for funds for taxes, dividends, and other payments, and with settlement for the recent Treasury offering of securities, it seemed clear that substantial financing
needs would have to be met by the banking system during the next
two or three weeks which would include the July 4 holiday demand
for currency.
Despite the encouragement expressed by most Committee members regarding the business outlook, it did not appear that the time
had arrived for backing away from the Committee policy of outright
monetary ease or for creating a public impression that the Committee
might be backing away from it. There was general agreement that
over-all Federal Reserve credit policy should not be changed at this
time and that, during the next three weeks, the System should stay
about where it was. However, a minority suggested that, apart from
open market operations, it might be desirable for some of the need
for additional reserves during the immediate future to be met by a
further reduction in reserve requirements for member banks. Another
and contrasting variation from the general view was that reserves had
been supplied in over-generous amounts during the past two months
and that further injections to maintain the recent level of around




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ANNUAL REPORT OF BOARD OF GOVERNORS

$500 million of free reserves would abet speculation in the Government securities market and create excessive liquidity.
Consideration of the foregoing factors resulted in a decision that
at this meeting the Committee should make no change in Federal
Reserve credit policy and that for the next three weeks no action
should be taken to cause the tone of the market to get materially
easier or tighter.
July 8, 1958
Authority to effect transactions in System Account.
No change was made at this meeting in the Committee's directive
calling for open market operations with a view, among other things,
to contributing further by monetary ease to resumption of stable
growth of the economy.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, Szymczak, and Vardaman. Votes against
this action: none.

A summary of the economic data presented at this meeting was
that performance of the economy in May and June had been better
than had been anticipated. The index of industrial production over
those two months had risen two points, and final data might show the
rise to be three points. Gross national product for the second quarter
was currently estimated to be at least moderately higher than in the
first quarter. Whether an abrupt turnabout of activity was taking
place or whether the extended improvement merely reflected a temporary rebound of production that had been far below consumption
was yet to be determined. However, the odds seemed to favor more
than a rebound improvement.
An important feature of the recent strengthening was that it represented a composite of small improvements over a wide range of activities, rather than dominant activity in one or two areas. One big
uncertainty in the situation was the possibility of cyclical downturn
in European business activity and of a new surge in inflationary
forces in the Latin American and Far Eastern countries. However,
the evidence at this time did not warrant the inference that European
recession was likely to become a force affecting adversely United




FEDERAL RESERVE SYSTEM

53

States and world trade developments, although it was apparent that
developments in those markets would require close observation in
the months ahead.
On the financial side, the most striking development since the June
17 meeting had been severe pressure on the Treasury bond market.
The underlying feature had been the large commitments in Treasury
bonds made by temporary holders, many for pure speculation, induced by expectations of further declines in interest rates, and the
attempt to close out those commitments at a time when the money
market was under adverse pressure because of exceptionally heavy
seasonal liquidity demands. This had called for exceptional amounts
of Federal Reserve credit, and the increase in required reserves in the
five weeks ending July 2 had been one of the largest on record for a
period of that length. System open market operations had supplied
$1.4 billion of additional reserve funds, and purchases of Government securities for Treasury investment accounts had been made, notwithstanding which interest rates rose. The Treasury bond market
had been notably weak under the influence of the closing out of speculative commitments, and yields on such securities had risen sharply.
In addition to the present disturbed atmosphere of the Government
bond market, it was noted that important Treasury financing operations were in prospect between this and the next meeting of the
Committee.
While some members of the Committee felt that the likelihood of
a rapid upturn in economic activity argued for less ease, the Committee reached the conclusion that, on balance, there should be no
change in policy at this time and that the directive should be renewed
in its existing form calling for continued monetary ease.
July 18, 1958
Authority to effect transactions in System Account.
The Federal Open Market Committee authorized the Federal Reserve Bank of New York to purchase for the System Open Market
Account in the open market this afternoon $50 million or less of
Government securities at the discretion of the Manager of the System
Open Market Account on scale wherever the Manager deemed it
appropriate in order to steady the market.




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ANNUAL REPORT OF BOARD OF GOVERNORS

Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Shepardson, and
Szymczak. Mr. Vardaman, who was not present at the meeting,
when informed of the action stated that he concurred. Votes
against this action: Messrs. Mills and Robertson.

Authority was granted to the Federal Reserve Bank of New York
to purchase for the System Open Market Account in the open market,
without limitation, Government securities in addition to short-term
Government securities.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mills, Robertson,
Shepardson and Szymczak. Mr. Vardaman, who was not present
at the meeting, when informed of the action stated that he concurred. Votes against this action: none.

The action set forth in the first paragraph of this entry was taken
at a meeting of the Federal Open Market Committee, held by telephone conference in the early afternoon of July 18, and was based on
a report by the Manager of the System Open Market Account that a
condition was developing in the Government securities market which,
in his judgment, was close to a disorderly condition although it had
not yet actually reached that point. His recommendation was that
purchases of securities during the afternoon of $50 million or less be
authorized for the purpose of steadying the market. After considering the recommendation in the light of the existing conditions in the
market and of the Committee's continuing operating policy providing
that open market operations shall be "solely to effectuate the objectives of monetary and credit policy (including correction of disorderly markets)," the Committee authorized the purchase of Government securities as indicated.
Messrs. Mills and Robertson voted against this authorization on
the ground that at this time no one contended the market was disorderly and therefore there was no basis for intervention. In addition, they felt that the proposal to enter the market on a limited basis
(as distinguished from action sufficiently massive to do the job) was
unwise and would do very little to restore confidence in the market.
Furthermore, they felt that if later there should be a disorderly market, the correction of it would have been seriously handicapped by




FEDERAL RESERVE SYSTEM

55

temporizing and fluttering around the edges of the market with
minor purchases at this time.
As the System Account was starting to put this authorization into
effect, further developments in the market caused the Manager of the
Account to report (again by telephone conference) that he would
now have to call the market disorderly. After consideration of the
Manager's detailed report covering these developments, the Committee approved by unanimous vote the action set forth in the second
paragraph of this entry, which authorized the purchase of Government securities in the open market, without limitation. It was understood that the authorization was made for the purpose of correcting a disorderly market and included the purchase of "rights"
and when-issued securities, purchase of which was precluded during
a period of Treasury financing under one of the Committee's continuing policies, last renewed at the meeting on March 4, 1958. In
taking this action, the Committee also authorized the immediate release of an announcement reading as follows:
In view of conditions in the United States Government securities market,
the Federal Open Market Committee has instructed the Manager of the
Open Market Account to purchase Government securities in addition to
short-term Government securities.

July 23, 1958
Authority to effect transactions in System Account.

The Committee authorized the Federal Reserve Bank of New York
to engage in a transaction that would include an offsetting purchase
and sale of securities in the amount of $30 million for the purpose
of altering the maturity pattern of the System's portfolio.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, Szymczak, and Vardaman. Votes against
this action: none.
The purpose of this action, taken during a telephone conference
meeting, was to permit the System Account to complete a specific
transaction for a foreign account in a manner that would result in
adding to the amount of System Account holdings of Treasury bills
that would mature on July 31, 1959. Thus, the Committee would be




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ANNUAL REPORT OF BOARD OF GOVERNORS

in position to let these bills run off at that time and to help absorb
the large volume of reserves that would be released to the market on
August 1 because of purchases for System Account on a when-issued
basis of new Treasury certificates due to be issued on that date. These
purchases had been made under authorization by the Committee on
July 18 of purchases for the purpose of correcting a disorderly
market.
The foregoing action was recognized as a departure from the Committee rule, in effect since December 1953, prohibiting "swap" transactions. It was authorized only because of the unusual circumstances
of the past few days and because it was deemed desirable to have as
large a runoff of bills as possible within the next few days when
large amounts of reserves would be released to the market.
July 24, 1958
Authority to effect transactions in System Account.
The Committee terminated the authority given to the Federal Reserve Bank of New York on July 18, 1958 to purchase for the System Open Market Account in the open market, without limitation,
Government securities in addition to short-term Government
securities.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, Szymczak, and Vardaman. Votes against
this action: none.

The Government securities market had steadied in the period since
July 18, when, because of disorderly conditions then existing in the
market, the Committee had authorized the purchase of Government
securities in addition to short-term securities. Accordingly, at this
telephone conference meeting, the July 18 authorization was terminated with the understanding that, if conditions in the market should
seem to require it, another meeting of the Federal Open Market Committee would be called to consider what, if any, further action should
be taken.




FEDERAL RESERVE SYSTEM

57

July 29, 1958
Authority to effect transactions in System Account.

The wording of the Committee's directive was changed at this
meeting to delete the clause that had been in effect since March 4,
1958, and which called for operations that would contribute further
by monetary ease to resumption of stable growth of the economy, and
to replace that clause with an instruction to the Federal Reserve Bank
of New York that operations for the System Account were to be with
a view, among other things, to recapturing redundant reserves.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, and Vardaman. Votes against this action: none.

At this meeting reports of economic developments made it reasonably clear that April had marked the recession trough and May the
first month of revival in economic activity. Evidences accumulating
for June and July confirmed the broad range of increased industrial
output that had been reported at the July 8 meeting of the Committee. In addition to the statistical data, indications of improvement in
business sentiment suggested that an uptrend in economic activity
might now be under way. The growing evidences of business improvement, together with the possibility that the degree of monetary
ease prevailing in recent months might produce a very rapid expansion in bank credit and the money supply, raised the question whether
the Committee should consider some modification of the degree of
ease that had developed in recent months.
During the two weeks preceding this meeting, System operations
had been largely concerned with correcting disorderly developments
in the Government securities market, rather than with current economic and credit needs. This was in accordance with the authorization given by the Committee at a special meeting on July 18 to purchase Government securities without limitation for the purpose of
correcting a disorderly market.
In the five-day period from July 18 to July 23, the System Account had purchased $1.2 billion of securities, largely when-issued
securities involved in the Treasury financing, but also a small volume
of other notes and bonds. These purchases had been made under the




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ANNUAL REPORT OF BOARD OF GOVERNORS

specific authorization given on July 18 and within the general framework of the Committee's continuing operating policies that had been
in effect since 1953, and which were last reaffirmed on March 4,
1958. Payment for the securities involved in the Treasury financing
would result in a substantial rise in the volume of member bank reserves on August 1, over and above the level that had been maintained during the past seven or eight months, and the Committee
gave consideration to what would be the effect of such a substantial
increase in the availability of reserves. In light of the evidence of
improvement in the economic situation, which suggested that the
directive that had been in effect since March 4 was no longer appropriate, and in view of the decision of July 24 that the need for action to correct a disorderly condition in the Government securities
market had passed, the conclusion was reached that for the next three
weeks the problem for the Committee would be one of absorbing the
redundant reserves that would be entering the market, in so far as
that could be done consistently with an orderly market in Government securities. Thus, the Committee modified its directive in the
manner indicated to require that operations be conducted with a view
to recapturing redundant reserves that were expected to be released
to the market on August 1.
August 4, 1959
Authority to effect transactions in System Account.
The Committee agreed that for the present, having recaptured redundant reserves, the policy to be followed with respect to operations
for the System Open Market Account should be one of keeping from
having redundant reserves.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Irons, Leach, Mangels, Mills, Shepardson, Vardaman, Allen,
and Treiber. Votes against this action: none.
The recapture of redundant reserves having been effected, pursuant
to the policy directive issued at the meeting on July 29, 1958, this
action (taken in a meeting held by telephone conference) was for
the purpose of giving the Federal Reserve Bank of New York and
the Manager of the System Open Market Account an indication as




FEDERAL RESERVE SYSTEM

59

to general policy to be followed until the next meeting of the
Committee.
August 19, 1958
Authority to effect transactions in System Account.
The policy directive of the Federal Open Market Committee was
changed at this meeting by adopting wording for clause (b) of
paragraph ( l ) to provide that, among other things, transactions be
with a view "to fostering conditions in the money market conducive
to balanced economic recovery." This wording superseded that
adopted at the meeting on July 29, which called for operations with
a view "to recapturing redundant reserves" and which was supplemented by the action taken on August 4 designed to keep from
having redundant reserves return.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Fulton, Irons, Leach, Mangels, Shepardson, Vardaman, and
Treiber. Votes against this action: none.

Information presented at this meeting showed that vigorous revival
in domestic economic activity was taking place. Similarly, in Canada
revival appeared to be under way. In Europe, production trends had
been mixed, with contractions, where occurring, apparently associated
with inventory adjustment.
In the United States the Board's index of industrial production
through July had risen at least seven points or 6 per cent, from April,
and it seemed possible that late data might raise the amount of advance. Regional reports bore out the national trend, although some
important areas of the country were still not experiencing much recovery and the total number of unemployed persons nationally remained disturbingly large.
Domestic financial developments since late July included further
expansion in bank credit, which had risen by $7 billion in the first
seven months of the year. Financial markets had been influenced by
the stream of economic data and corporation reports indicating that
vigorous recovery was under way; by indications and rumors that
Federal Reserve policy might be shifting away from ease (the Board
of Governors of the Federal Reserve System had increased margin
requirements for purchasing and carrying listed securities from 50




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ANNUAL REPORT OF BOARD OF GOVERNORS

per cent to 70 per cent, effective August 5, 1958); and by a flow of
banking, monetary, and Treasury deficit data pointing to a sharp increase in the cash balance position of the economy.
In considering policy, the Committee was faced with the fact that
the large Federal Government deficit would have to be financed during a period characterized by broadly spread revival of productive
activity and incomes and an abnormal expansion in privately held
cash balances, and by the emergence of an inflationary psychology in
the stock market and other financial markets that could easily spill
over into commodity and real estate markets. Notwithstanding the
substantial numbers of unemployed persons, the data presented indicated that the rate of expansion in the money supply in the immediate
future should be tempered and that operations for the System Open
Market Account should move in the direction of lower free reserves
without seriously disrupting the Government securities market. The
fact that seasonal influences would be working in this direction
through the Labor Day week end suggested that, without too much
pressure, the System Account might be able to move in the direction
of the elimination of free reserves by the time of the next meeting.
In terms of the policy directive, the objectives sought by the Federal Open Market Committee were encompassed in the amended
wording of clause (b) to provide that operations should be with a
view, among other things, "to fostering conditions in the money
market conducive to balanced economic recovery." This wording of
the directive may be compared with that in effect from the March 4,
1958 meeting until July 29, which called for open market operations
"contributing further by monetary ease to resumption of stable
growth of the economy/' and which had been temporarily inoperative
from July 18 to July 24 in view of the special authority to make purchases for the purpose of correcting a disorderly condition in the
Government securities market.
In its discussions of the policy directive the Committee also considered the market structure of interest rates, noting that the discount
rate of the Federal Reserve Bank of San Francisco had been increased
from 1% per cent to 2 per cent effective August 15, 1958. The
reasons for this rate increase, which are presented in the section of
this report dealing with policy actions of the Board of Governors of
the Federal Reserve System, were reviewed at this meeting, and the




FEDERAL RESERVE SYSTEM

6l

rate increase was considered to be consistent with the action taken by
the Open Market Committee in deciding to move toward reduced
reserve availability.
September 9, 1958
Authority to effect transactions in System Account.
The directive of the Committee was renewed without change, continuing the policy of fostering conditions in the money market conducive to balanced economic recovery.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, Szymczak, and Vardaman. Votes against
this action: none.

Since the August 19 meeting of the Committee, reserve availability
had declined steadily with a minimum of disturbances in the Government securities market. Despite the reduction in reserve availability,
the market had been more calm during the past few days than at any
time since June. A better tone also had developed in the market for
corporate and municipal bonds.
Economic data presented showed that domestic recovery in output,
income, and consumption had been vigorous and that it held promise
of continuing to be vigorous over the period ahead. The August
index of industrial production was estimated to have moved up two
points further, with the widespread gains in output extending
through durable goods and nondurable goods lines.
Financial developments of recent weeks had included those associated with an upward adjustment of interest rates—long-term,
medium-term, and short-term. Several Federal Reserve Banks had
brought their discount rates up to the 2 per cent level made effective
at the Federal Reserve Bank of San Francisco on August 15. It was
difficult to judge the extent to which the rise in interest rate levels
reflected a basic shift in credit demands relative to supply of savings,
and the extent to which they reflected the influence of the recent shift
in System policy to less availability of reserves, but each had exerted
an influence. The aggregate amount of credit supplied during the
year had been large and prospects pointed to an increase in private
borrowing along with the heavy Treasury deficit.




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ANNUAL REPORT OF BOARD OF GOVERNORS

Discussion of recent developments showed differences of views as
to the certainty of continued economic recovery and as to the degree
to which credit policy should move toward further limitation of reserve availability over the next several weeks. There was general
agreement, however, that for the immediate future, during which
another Treasury financing operation would occur, operations for the
System Account should aim at maintaining substantially the same
tone in the money market as prevailed at the time of this meeting.
This objective could be sought within the wording of the directive
that had been adopted at the meeting on August 19, which called for
operations fostering conditions in the money market conducive to
balanced economic recovery, and the directive was thus renewed
without change.
September 30, 1958
Authority to effect transactions in System Account.
At this meeting, the directive was again renewed without change,
thus continuing the policy adopted on August 19, 1958, of fostering
conditions in the money market conducive to balanced economic
recovery.
Votes for this action: Messrs. Martin, Chairman, Balderston,
Fulton, Irons, Mangels, Mills, Robertson, Shepardson, Szymczak, Erickson, and Treiber. Votes against this action: none.
Since the preceding meeting of the Committee, discount rates at
additional Federal Reserve Banks had been raised to a uniform level
of 2 per cent. An even situation had been maintained in the money
market, which had been generally firm. At the same time, financial
markets appeared to be discounting possible inflationary developments. Thus, with re-emergence of inflationary expectations, stock
and bond yields developed a relationship similar to that which prevailed for a brief period in mid-1957, when a psychology of creeping
inflation was also dominant in financial markets.
At this meeting, the Committee considered in detail the currently
developing economic situation, with its rapid expansion in industrial
production while unemployment figures remained relatively high. In
the face of uncertainties as to whether the recovery would be sustainable, monetary policy was discussed in terms of the recent sharp rise




FEDERAL RESERVE SYSTEM

63

in interest rates, which some considered to be excessive in view of
the basic supply and demand factors in the credit market. Considering the importance of curbing inflationary and speculative developments before they gained headway, attention was focused on the
extent to which expansion of the money supply should be limited at
this time as a means of carrying out the Federal Reserve's responsibility for maintaining in a growing economy reasonable stability of
the value of the dollar as well as in employment. One suggestion
was that the appropriate course would be to permit further expansion
of credit and the money supply only on terms that would indicate the
System's continuing awareness of potential inflationary risks and its
determination to prevent them from stimulating speculative excesses
in the use of credit. The conclusion reached by the Committee was
that operations in the immediate future should try to maintain an
even keel in the market and that no change in the policy directive was
necessary. This was based on the view that no further increase at
this time in the degree of restraint was favored, nor on the other
hand was there a desire to ease the market from its present position.
October 21, 1958
Authority to effect transactions in System Account.
No change was made at this meeting in the Committee's directive
that policy should be directed toward fostering conditions in the
money market conducive to balanced economic recovery.
Votes for this action: Messrs. Balderston, Chairman pro tern,
Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak,
and Treiber. Votes against this action: none.
Continuing economic recovery was reported at this meeting. Gross
national product for the third quarter was estimated at $440 billion,
up $11 billion from the second quarter. Industrial production into
October was rising further and broadly, new construction activity in
September had been close to record levels, employment was rising
and unemployment declining, and personal incomes were rising.
Wholesale price averages had been stable for several months with
easing of farm product prices offsetting strengthening tendencies in
industrial materials and rises in some fabricated items. Latest news
from abroad indicated some extension of recession in the principal




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ANNUAL REPORT OF BOARD OF GOVERNORS

industrial countries with, however, activity still fairly high in most
such areas.
Bank credit expansion in recent weeks had been larger than in the
corresponding period of 1957 but less than in some other years. In
capital markets, a shift from fixed return assets to equities seemed to
be continuing. Margin requirements on listed securities had been increased effective October 16, 1958. Slackened monetary expansion
along with Treasury deficit financing and general economic recovery
had been possible because of previously accumulated liquidity. Further monetary expansion other than seasonal had not been needed to
finance economic recovery. However, the total of economic events and
the prospective borrowing needs of the Federal Government indicated
a likelihood of growing credit demands in the near future. In addition, an outflow of gold was persisting. It was estimated on the basis
of customary seasonal currency and deposit growth, and with some
allowance for a further gold outflow, that from the time of this meeting to the end of 1958 there would be a need for additional bank
reserves totaling about $1.3 billion, a need that could be met mainly
through open market operations without varying the degree of restraint on credit expansion.
At this meeting, the Committee reviewed in detail the level and
structure of interest rates and considered the credit actions that would
help keep investment and saving in balance. The discount rates of the
Federal Reserve Banks currently were out of line with market rates,
and the suggestion was made that an increase in discount rates would
be desirable in order to remove the incentive for member banks to
obtain reserves by borrowing at the Reserve Banks instead of by
selling securities in the market.
The conclusion of the Committee was that in present circumstances
it would be undesirable to aim toward a greater degree of restraint
on reserve availability through open market operations, especially if
an increase in discount rates at the Federal Reserve Banks were to be
made at the same time. The directive was, accordingly, again renewed with its provision for open market operations that would
foster conditions in the money market conducive to balanced
economic recovery.




FEDERAL RESERVE SYSTEM

65

November 10, 1958
Authority to effect transactions in System Account.
The Committee again reaffirmed its policy of fostering conditions
in the money market conducive to balanced economic recovery.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Balderston, Fulton, Irons, Leach, Mangels, Mills,
Robertson, Shepardson, and Szymczak. Votes against this action: none.
During the three weeks preceding this meeting, in which seasonal
demands for credit were present, the System Open Market Account
had been fairly active in supplying reserve funds to the market with
a view to achieving the objectives agreed upon by the Committee at
the meeting on October 21, namely, the maintenance of about the
same degree of restrictive pressure in the market that had existed at
the time of that meeting. Free reserves had averaged somewhat less
than $100 million, and the money market atmosphere had been
generally firm. During this period, the discount rates of all Federal
Reserve Banks had been increased from the 2 per cent level to 2 ^
per cent—a rise that conformed to the prevailing money market rate
structure and appeared to have caused no further adjustment in the
market.
Economic indicators at the time of this meeting were still rising,
although there was more diversity than had been shown in late summer and early autumn and the over-all rate of rise seemed to have
slowed somewhat. The October industrial production index was estimated to have risen one index point, a smaller rise than had been
projected earlier. On the other hand, construction activity had gone
up in October to an all-time high, with advances shown in all major
categories of private construction as well as public construction. Data
for United States exports during September had shown a sharp fall,
but imports had risen. Stability to modest recession in activity in
Europe was reported, along with a leveling out in Canadian recovery.
The unevenness shown by economic indicators in recent weeks was
occasioning in various quarters re-appraisals of the outlook, with
some toning down of optimistic projections because of inability to
foresee forces that would convert recovery into a period of expansionary boom. However, the more moderate rate of rise was believed by




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ANNUAL REPORT OF BOARD OF GOVERNORS

some to provide a better basis for expansion than if the rapid autumn
rise had continued.
Sharp increases that had occurred in productivity during the past
three months were being reflected in corporate profits and not in
lowered industrial prices, and they thus provided support to demands
for wage increases. There appeared to be little prospect for abatement of the persistent upward pressures on industrial prices notwithstanding the existence of unused resources, including considerable
plant capacity not being utilized and substantial numbers of unemployed persons. Under these circumstances, a monetary policy on the
side of restraint appeared to be appropriate and it did not appear
that such restraint would retard sound recovery and growth in the
economy.
The conclusion of the Committee was that the System Account
should seek during the period immediately ahead to maintain conditions in the market about as they were at present, believing that the
moderate degree of restraint that had existed for the past several
weeks was appropriate under the circumstances and that it could be
applied within the terms of the directive to the Federal Reserve Bank
of New York that had been in effect since August 19.
December 2, 1958
Authority to effect transactions in System Account.
The Committee made no change at this meeting in the directive
that had been in effect since August 19, 1958, which contemplated a
policy directed toward fostering conditions in the money market conducive to balanced economic recovery.
Votes for this action: Messrs. Martin, Chairman, Hayes, Vice
Chairman, Fulton, Irons, Leach, Mangels, Mills, Robertson,
Shepardson, and Szymczak. Votes against this action: none.

During the three weeks preceding this meeting, the System Account had provided additional reserves to the market and member
bank borrowing from the Federal Reserve Banks had risen on some
days in the past week to more than $1 billion. These supplies of
reserve funds had been sufficient to meet seasonal growth in currency
and an increase in required reserves, although free reserves had declined to a nominal level.




FEDERAL RESERVE SYSTEM

67

Recovery in domestic economic activity was continuing on a broad
basis although, as indicated at the November 10 meeting, there recently had been indication of a slowing in the rate of expansion. The
weight of statistical evidence continued on the side of fairly well
sustained momentum upward. More recently, some indication of improvement in the unemployment situation had been evident, and the
number of labor market areas classified as substantial surplus areas
had been reduced during November. Over all, it was apparent that
the domestic recovery that had shown up during the summer months
had now gone far enough to be on the verge of a new expansion
period, with the possibility that the rise in activity would carry major
indexes of activity into new high ground.
Developments in the financial area had shown no particularly
striking features during the past month, although gyrations in the
stock market had continued. Bond yields had declined somewhat in
November, while short-term money rates had continued to rise. Although expansionary forces in the credit area had not been vigorous
during recent weeks, the basis for renewed expansion continued to
exist in the broadening economic recovery and the continuing
Government deficit.
The policy discussion by the Committee pointed to some increase
in the degree of restraint that should be exerted, with the proviso
that due consideration must be given to the financing problems of the
Treasury. It was suggested that there was enough flexibility within
the Committee's general policy to allow seasonal forces to exert an
influence in the direction of some further reduction in reserve availability, perhaps moving in the direction of net borrowed reserves.
The Committee's conclusion contemplated letting market developments tend to increase restraint within limits consistent with the
policy directive which, as renewed at this meeting, continued to provide for open market operations "fostering conditions in the money
market conducive to balanced economic recovery."
December 16, 1958
Authority to effect transactions in System Account.
The Federal Open Market Committee changed its policy directive
at this meeting by adopting wording for clause (b) of paragraph




68

ANNUAL REPORT OF BOARD OF GOVERNORS

( l ) to provide that, among other things, transactions be with a view
"to fostering conditions in the money market conducive to sustainable
economic growth and stability." It was the Committee's view that at
this time the emphasis should be on preventing expansion at an
unsustainable rate.
Votes for this action: Messrs. Martin, Chairman, Fulton,
Irons, Leach, Mangels, Mills, Robertson, Shepardson, and Szymczak. Votes against this action: Mr. Hayes, Vice Chairman.
Since the recession's low in April 1958, recovery in economic activity had been remarkably good. Gross national product, personal income, retail trade, residential construction activity, manufacturers'
new orders, industrial production, freight carloadings, and various
other economic indicators had increased about as much in that sevenmonth period as in the corresponding seven-month periods of cyclical
recoveries following earlier postwar contractions. The decline had
been somewhat deeper during the recent recession than in the preceding two recessions, but it had been briefer and the subsequent
recovery more rapid than in other postwar and prewar cycles. Even
though peak activity levels had not been re-attained at the time of
this meeting, they were sufficiently close at hand to direct attention
to the problems to be considered in a period of renewed economic
expansion.
Money and credit markets had been calm during the month preceding this meeting in the face of the vigorous economic recovery,
the rather heavy financing operations of the Treasury, the liquidity
demands customary at this season of the year, and a moderate tightening of bank reserve positions. Interest rates had fluctuated moderately, close to the increased levels reached earlier in the autumn.
Firming of rates during the two weeks immediately preceding this
meeting had not been as great as customary in December. In the first
half of 1958, when reserves were freely available, total loans and
investments of member banks had expanded sharply. Since midyear,
a period in which availability of reserves had been reduced, loans
and investments of New York City banks had declined, those of reserve city banks had increased only slightly, and those of country
banks had expanded by much larger amounts than in the corresponding period of either of the two preceding years. In total, bank credit




FEDERAL RESERVE SYSTEM

69

since midyear had shown further expansion and by a greater than
seasonal amount. Reserves to provide the basis for this credit had
been largely supplied through System open market operations since
August, when the volume of free reserves had been reduced sharply.
The discussion at this meeting of economic and financial developments indicated a consensus favoring a move in open market operations towards somewhat greater restraint, but a very moderate move
in that direction. A majority of the Committee also felt that the policy
directive that had been adopted at the meeting on August 19, and
which had continued in effect since that time without modification,
should be changed to delete the word ''recovery" and to put emphasis on preventing expansion at an unsustainable rate. Specifically,
it was felt by a majority of the Committee that the instruction to conduct System Account operations "conducive to balanced economic
recovery" was somewhat out of date, and there was agreement on a
modification in clause (b) of the first paragraph of the directive to
provide for operations with a view "to fostering conditions in the
money market conducive to sustainable economic growth and stability." Within this wording, it was believed that a move toward somewhat greater restraint on the availability of reserves would be
appropriate.
In voting against the change in wording of the directive, Mr.
Hayes expressed himself as feeling that a move toward further restraint was premature at this stage of the recovery and might suggest
to the public a policy of progressive tightening and set off an exaggerated market reaction. Apart from questioning the desirability of
further restraint at this time, Mr. Hayes suggested that, if the Committee believed that policy should be more concerned with a developing threat of inflation than with recovery and that it should make a
major effort to prevent such inflation by credit restraint, the directive
should be made clear on that particular point.

The Open Market Committee's directive in effect at the beginning
of 1958 called for operations with a view to cushioning adjustments
and mitigating recessionary tendencies in the economy. This was
changed at the March 4 meeting to provide that transactions should
be with a view to contributing further by monetary ease to resump-




70

ANNUAL REPORT OF BOARD OF GOVERNORS

tion of stable growth of the economy. The next change in the directive was made on July 29, but during the period July 18 to July 24
the terms of the instruction adopted March 4 were temporarily superseded when the Committee gave a special authorization for the
System Account to purchase Government securities, without limitation as to amount or maturity, for the purpose of correcting a disorderly condition in the Government securities market. That special
authority having been terminated on July 24, the directive was modified at the meeting on July 29 to specify that operations should be
with a view to recapturing redundant reserves that were expected to
be released to the market August 1. A further instruction adopted
on August 4, by which time the redundant reserves had been recaptured, called for keeping from having redundant reserves return. At
the August 19 meeting, the directive was changed to provide for
operations fostering conditions in the money market conducive to
balanced economic recovery. This wording remained unchanged until
the meeting on December 16, when it was modified to an instruction
that operations be with a view to fostering conditions in the money
market conducive to sustainable economic growth and stability. The
form in which the directive was in effect at the end of 1958 provided
an instruction to the Federal Reserve Bank of New York, until otherwise directed by the Committee;
(1) To make such purchases, sales, or exchanges (including replacement
of maturing securities, and allowing maturities to run off without replacement) for the System Open Market Account in the open market or, in the
case of maturing securities, by direct exchange with the Treasury, as may be
necessary in the light of current and prospective economic conditions and
the general credit situation of the country, with a view (a) to relating the
supply of funds in the market to the needs of commerce and business,
(b) to fostering conditions in the money market conducive to sustainable
economic growth and stability, and (c) to the practical administration of
the Account; provided that the aggregate amount of securities held in the
System Account (including commitments for the purchase or sale of securities for the Account) at the close of this date, other than special short-term
certificates of indebtedness purchased from time to time for the temporary
accommodation of the Treasury, shall not be increased or decreased by more
than $1 billion;
(2) To purchase direct from the Treasury for the account of the Federal
Reserve Bank of New York (with discretion, in cases where it seems de-




FEDERAL RESERVE SYSTEM

71

sirable, to issue participations to one or more Federal Reserve Banks) such
amounts of special short-term certificates of indebtedness as may be necessary
from time to time for the temporary accommodation of the Treasury; provided that the total amount of such certificates held at any one time by the
Federal Reserve Banks shall not exceed in the aggregate $500 million.




72

ANNUAL REPORT OF BOARD OF GOVERNORS
RECORD OF POLICY ACTIONS
BOARD OF GOVERNORS

January 15, 1958
Reduction in margin requirements.
Effective January 16, 1958, the supplements to Regulation T, Extension
and Maintenance of Credit by Brokers, Dealers, and Members of National
Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of
Purchasing or Carrying Stocks Registered on a National Securities Exchange,
were amended to reduce the margin requirements from 70 per cent to 50 per
cent, these requirements to be applicable both to purchases of securities and
to short sales.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, and Shepardson. Votes against this action:
none.

For several months prior to this date common stock prices had
been moving within a narrow range at a level approximately onesixth below the peak reached in July 1957, and at this lower range
the yields on stocks were restored to a point below those available
on high-grade corporate bonds. The price movement was accompanied by a substantial reduction in stock market credit outstanding
which, at the end of 1957, was estimated at about $3.6 billion, 10
per cent less than in mid-1957 and 5 per cent less than in April
1955 when the margin requirements were raised to 70 per cent.
With the downward trend of general economic developments resulting in a series of rather discouraging business and financial
reports, stock market behavior reflected a psychology of caution.
Although the historical record suggested the probability of some
increase in customer debit balances following a margin reduction,
it did not appear that such action at this time would be any great
stimulant to stock market activity. Instead, the reaction of investors
seemed likely to depend largely on their appraisal of the over-all
economic situation.
In these circumstances, a 70 per cent margin requirement could
no longer be justified on the grounds given when that level was
placed in effect, namely, potential excessive speculative activity and
potential undue use of credit to finance such activity.




FEDERAL RESERVE SYSTEM

73

January 21, 1958
Reduction in rates on discounts and advances by Federal Reserve
Banks.
Effective January 22, 1958, the Board approved action by the Board of
Directors of the Federal Reserve Bank of Philadelphia establishing a rate of
2% per cent (a reduction from 3 per cent) on discounts for and advances to
member banks under Sections 13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Martin, Balderston, Mills, and
Shepardson. Votes against this action: Messrs. Szymczak and
Robertson.
Pursuant to the policy established by this action, the Board subsequently
approved, effective on the dates indicated, the same rate for the following
Federal Reserve Banks:
New York
Cleveland
Richmond
Chicago
St. Louis
Kansas City
Boston
Atlanta
Minneapolis
Dallas

January
January
January
January
January
January
January
January
February
Februarv

24,
24,
24,
24,
24,
24,
28,
28,
7,
14,

1958
1958
1958
1958
1958
1958
1958
1958
1958
1958

Effective the same dates, the Board approved for the respective Federal
Reserve Banks a rate of 3^4 per cent on advances to member banks under
Section 10 (b) of the Federal Reserve Act. In addition, the Board approved
changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act and
on industrial loans and commitments under Section 13b.
(In accordance with the provisions of the Federal Reserve Act, the Federal
Reserve Banks establish, subject to review and determination of the Board of
Governors, rates on discounts and advances to member banks at least every
14 days and submit such rates to the Board for consideration. Prior to this
date, no changes involving new policy had been made in these rates since
those referred to on pages 68-70 of the Board's Annual Report for 1957.)

Factual information available to the System by mid-January verified the emergence and progression of recessionary trends. Industrial production and employment continued to decline, while unem-




74

ANNUAL REPORT OF BOARD OF GOVERNORS

ployment was rising at a disturbing pace. Declining gross national
product was associated closely with a reduction in business plant
and equipment expenditures aggravated by inventory liquidation,
despite which manufacturers' stock-sales ratios were rising
significantly.
Federal Reserve policy had started to shift in a counter-recessionary direction in late October and early November 1957 when open
market operations began to supply reserves more liberally to the
banking system. In mid-November the discount rate was reduced
from 3 ^ to 3 per cent. The response of the financial area to the
shift in policy was reflected in a sharp decline in interest rates and
a substantial increase in bank credit. The interest rate decline,
which extended to yields on securities and open market paper but
was not yet pronounced in bank loan or mortgage rates, occurred
most markedly in yields on securities issues that previously had
risen most, particularly medium-term Treasury issues and State and
local government issues.
With the accumulating evidence of recessionary tendencies, a
further decrease in the discount rate was deemed an appropriate
step in the execution of System policy designed to encourage credit
and monetary expansion. In addition to placing the rate in closer
alignment with rates on short-term market instruments, including
the Treasury bill, the move had the effect of encouraging member
banks to make any temporary reserve adjustments through
borrowing rather than through credit liquidation.
Governor Szymczak's negative vote reflected administrative rather
than economic or financial considerations. With the discount rate
reduction in November 1957 having been announced just before the
announcement of a Treasury refunding operation, he was apprehensive that a second such occurrence might create the impression
of a pattern likely to be followed. Accordingly, he would have
preferred to relax through the medium of open market operations
for the time being and to defer a discount rate change until after
completion of the forthcoming Treasury financing operation.
Governor Robertson's negative vote reflected his view that, with
the country having passed only recently through a period of strong
inflationary pressures which resulted in a substantial increase in
wholesale and consumer prices from which there had as yet been




FEDERAL RESERVE SYSTEM

75

no general downward readjustment, a move to ease too rapidly
might place a floor under existing price levels. As he saw it, a
reduction of the discount rate at this time would have no advantage
by way of creating more employment or a higher volume of production through the utilization of more bank credit. Instead, it
might tend to accentuate fears of a serious recession, or even depression, and thereby actually contribute to bringing about such a
situation. While the lower discount rate would affect interest rates,
he noted that it would not necessarily make additional reserves
available.
February 19, 1958
Reduction in reserve requirements of member banks.
The supplement to Regulation D, Reserves of Member Banks, was
amended to reduce reserve requirements with respect to net demand deposits
of member banks of the Federal Reserve System as follows:
Effective
February 27, 1958
February 27, 1958
March 1, 1958

For
Central reserve city banks
Reserve city banks
Banks not in central reserve
or reserve cities

Per cent
From 20 to 19^2
From 18 to 171/?
From 12 to l i y 2

Votes for this action: Messrs. Martin, Balderston, Szymczak,
Vardaman, Mills, and Shepardson. Votes against this action:
none.

This action released to member banks about $500 million from
required reserves. For central reserve city banks, about $125 million
of reserves were released, while for reserve city and country banks
the amounts were in the neighborhood of $195 million and $180
million, respectively.
At the time this action was under consideration, industrial production, employment, income, and retail sales were continuing on
a downward trend, while unemployment, on a seasonally adjusted
basis, had risen further. Although total bank loans and investments had increased, this reflected principally larger holdings of
Government securities. Business loans had continued to decline.
The reduction of reserve requirements was complementary to
steps being taken actively by the Federal Reserve System through




76

ANNUAL REPORT OF BOARD OF GOVERNORS

the use of other policy instruments to foster conditions of credit
ease during a period of deepening recession and thus to increase the
willingness and ability of the banking system to expand credit. The
freeing of reserves tended in the direction of reducing the cost of
financing to borrowers and widened the access of potential
borrowers to credit funds.
March 6, 1958
Reduction in rates on discounts and advances by Federal Reserve
Banks.
Effective March 7, 1958, the Board approved action by the Boards of
Directors of the Federal Reserve Banks of New York, Philadelphia, and
Chicago establishing a rate of 2 ^ pe*" cent (a reduction from 2% per cent)
on discounts for and advances to member banks under Sections 13 and 13a of
the Federal Reserve Act.
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Vardaman, Mills, and Shepardson. Votes against this action:
none.
Pursuant to the policy established by this action, the Board subsequently
approved, effective on the dates indicated, the same rate for the following
Federal Reserve Banks:
Atlanta
Boston
San Francisco
Cleveland
Richmond
St. Louis
Kansas City
Dallas
Minneapolis

March 10, 1958
March 11, 1958
March 13, 19581
March 14, 1958
March 14, 1958
March 14, 1958
March 14, 1958
March 14, 1958
March 21, 1958

Effective the same dates, the Board approved for the respective Federal
Reserve Banks a rate of 2% per cent on advances to member banks under
Section 10 (b) of the Federal Reserve Act. In addition, the Board approved
changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act
and on industrial loans and commitments under Section 13b.
deduction from 3 per cent.




FEDERAL RESERVE SYSTEM

77

In early March economic activity was continuing to recede. The
decline in industrial production had by this time carried to a point
10 per cent below the peak reached in the summer of 1957, inventory liquidation continued to be substantial, particularly in durable
goods lines, and retail trade had worsened perceptibly. With substantial cancellations of previously approved appropriations reported, the prospective level of business plant and equipment expenditures for 1958 was around 10 per cent lower than expenditures during 1957. Unemployment on a seasonally adjusted basis
was estimated to be running at about 6.7 per cent of the labor force,
a rate comparable to that reached in 1949. The composite of available economic information suggested the possibility that the current
recession might develop to be less moderate in extent or duration
than either the 1948-49 or the 1953-54 recessions.
Reflecting to a large extent Federal Reserve policy of providing
a generous supply of reserves, member banks had been able not
only to get substantially out of debt at the Reserve Banks but also
to expand credit contrary to usual seasonal trends. In the face of
a net liquidation of business loans, this expansion was being accomplished by placement of funds in securities and in loans on securities. Bank purchases of securities were providing funds directly or
indirectly to the United States Treasury to meet the growing deficit
incidental to the recession, as well as to State and local governments
and corporations borrowing in capital markets and to borrowers on
home mortgages. Due to the easier reserve position of banks and
the resulting increase in the availability of lendable funds relative
to current demands, there was a sharp further decline in short-term
interest rates and the rate on Treasury bills had fallen to around
per cent.
In these circumstances, the action to reduce the discount rate to
per cent was not of particular immediate significance from the
standpoint of member bank borrowing. However, it brought the
discount rate into better alignment with short-term interest rates,
reflected the general attitude of System policy at this stage of the
recession, and tended toward a position that would afford the System
greater flexibility of adjustment to future developments.




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ANNUAL REPORT OF BOARD OF GOVERNORS

March 18, 1958
Reduction in reserve requirements of member banks.
The supplement to Regulation D, Reserves of Member Banks, was
amended to reduce reserve requirements with respect to net demand deposits
of member banks of the Federal Reserve System as follows:
Effective
March 20, 1958
March 20, 1958
April 1, 1958

For
Central reserve city banks
Reserve city banks
Banks not in central reserve
or reserve cities

Per cent
From 19V2 t o *9
From 17*/2 to 17
From Hl/2 to 11

Votes for this action: Messrs. Martin, Balderston, Vardaman,
Mills, Robertson, and Shepardson. Votes against this action:
none.
This action released about $490 million from required reserves,
with the pattern of distribution approximately as follows: central
reserve city banks $125 million; reserve city banks $190 million; and
country banks $175 million.
This second reduction of reserve requirements, viewed in association with earlier discount rate changes and the provision of reserves
through open market operations, reflected furtherance of a System
policy designed in its over-all aspects to foster ease in credit markets
as the course of recession carried major business indices to lower
levels. Taken together, the succeeding steps of Federal Reserve
policy enabled member banks further to reduce their discounts at
the Reserve Banks, served to offset the reserve drain involved in a
continuing outflow of gold from the United States, and offered the
means of financing a substantial commercial bank credit expansion.
With the release of required reserves, member banks were able not
only to meet seasonal loan demands but at the same time to continue
adding to their holdings of United States Government securities.
April 17, 1958
Reduction in reserve requirements of member banks.
The supplement to Regulation D, Reserves of Member Banks, was
amended to reduce reserve requirements with respect to net demand deposits
of member banks of the Federal Reserve System as follows:




FEDERAL RESERVE SYSTEM

Effective
April 17, 1958
April 24, 1958
April 24, 1958

For
Central reserve city banks
Central reserve city banks
Reserve city banks

79

Per cent
From 19 to 18l/2
From 18y2 to 18
From 17 to l6l/ 2

Votes for this action: Messrs. Martin, Szymczak, Mills,
Robertson, and Shepardson. Votes against this action: none.

The effect of this action, the third in a series of reductions in reserve requirements, was to release about $450 million from required
reserves. For central reserve city banks the reduction which became
effective April 17 released about $130 million of reserves, and the
reduction effective April 24 released approximately the same
amount. For reserve city banks, the effect was to free about $190
million of required reserves.
Nearly $1 billion of reserves had been released by the two preceding reductions in reserve requirements, and additional reserves
had been supplied by System open market operations during the
past several weeks. However, a substantial part of the reserves
thus provided had been absorbed by increased requirements resulting from a contra-seasonal growth in bank deposits, a larger than
seasonal increase in currency in circulation, foreign operations
(principally gold withdrawals), and float and other factors. In addition, free reserves of member banks had increased to a level
deemed consistent with Federal Reserve policy objectives at this
particular stage and depth of the recession. In view of the likelihood of a further gold drain, a prospective increase in required reserves resulting from payment by banks for a new Treasury issue,
and an indicated increase in demand deposits of at least seasonal
magnitude, it was estimated that some $300 million additional reserves would have to be supplied within the near future to maintain
a condition of ease conducive to further credit and monetary
expansion.
This action was taken in recognition of the prospective need for
additional reserves and to relieve pressures that were appearing on
the reserve positions of central reserve and, to a somewhat lesser
extent, reserve city banks. Some members felt that the existing situation afforded an opportunity to reduce the level of reserve requirements at a time when such action was consistent with credit policy




80

ANNUAL REPORT OF BOARD OF GOVERNORS

and at the same time further to enlarge the area of flexibility for
System action should it become necessary at some future date to
institute a policy of credit restraint in the light of changed economic
conditions.
April 17, 1958
Reduction in rates on discounts and advances by Federal Reserve
Banks.
Effective April 18, 1958, the Board approved actions by the Boards of
Directors of the Federal Reserve Banks of New York, Philadelphia, Chicago,
St. Louis, and Minneapolis establishing a rate of 1% per cent (a reduction
from 2^4 p e r cent) on discounts for and advances to member banks under
Sections 13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Martin, Szymczak, Mills,
Robertson, and Shepardson. Votes against this action: none.
Pursuant to the policy established by this action, the Board subsequently
approved, effective on the dates indicated, the same rate for the following
Federal Reserve Banks:
Boston
Atlanta
Cleveland
Richmond
Kansas City
San Francisco
Dallas

April
April
April
April
April
May
May

22,
22,
25,
25,
25,
1,
9,

1958
1958
1958
1958
1958
1958
1958

Effective the same dates, the Board approved for the respective Federal
Reserve Banks' a rate of 2 ^ p e r c e n t on advances to member banks under
Section 10 (b) of the Federal Reserve Act. In addition, the Board approved
changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act
and on industrial loans and commitments under Section 13b.
By mid-April, data becoming available to the System suggested
some slowing in the pace of decline of output and employment.
There were, in fact, developments in certain segments of the economy such as to create the impression of more diversity of trends
than had been the case earlier. Nevertheless, the sum of statistical
evidence indicated that the general movement continued to be one




FEDERAL RESERVE SYSTEM

81

of downward drift. In reflection of a System policy of ease, there
had been a rapid expansion of bank credit while short- and mediumterm interest rates had declined further and reached their lowest
levels since early 1955.
This further action served to narrow the discrepancy between the
discount rate and money market rates, including the Treasury bill
rate, and provided assurance to member banks of a ready availability of funds at the lower rate in the event of need. The concurrent actions on the discount rate and on reserve requirements placed
monetary policy clearly in the posture of doing everything possible
to assist in the turnaround and recovery of the economy.
August 4, 1958
Increase in margin requirements.
Effective August 5, 1958, the supplements to Regulation T, Extension and
Maintenance of Credit by Brokers, Dealers, and Members of National Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on a National Securities Exchange,
were amended to increase the margin requirements from 50 per cent to 70
per cent, these requirements to be applicable both to purchases of securities
and to short sales.
Votes for this action: Messrs. Martin, Balderston, Vardaman,
Mills, and Shepardson. Votes against this action: none.
By this date there was clear statistical evidence that recovery in

economic activity and production had gained considerable momentum and was likely to go forward. The recovery was accompanied
by a rise in stock prices sufficient to carry common stock yields below
yields on bonds of the same companies, and by a sharp increase in
the volume of stock market credit which by July had reached a level
some 20 per cent higher than at the beginning of the year. In view
of this rapid rise in credit and the re-emergence of an investment
psychology favoring the purchase of stocks as a hedge against potential inflation, which would be a particular inducement to borrowing
for the purpose, the margin requirements were restored to the 70
per cent level that had prevailed prior to the middle of January.




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ANNUAL REPORT OF BOARD OF GOVERNORS

August 14, 1958
Increase in rates on discounts and advances by Federal Reserve
Banks.
Effective August 15, 1958, the Board approved action by the Board of
Directors of the Federal Reserve Bank of San Francisco establishing a rate
of 2 per cent (an increase from 1% per cent) on discounts for and advances
to member banks under Sections 13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Martin, Balderston, Vardaman,
and Shepardson. Votes against this action: none.
Pursuant to the policy established by this action, the Board subsequently
approved, effective on the dates indicated, the same rate for the following
Federal Reserve Banks:
Dallas
Atlanta
Kansas City
Chicago
Minneapolis
New York
Cleveland
Richmond
St. Louis
Philadelphia
Boston

August
August
August
September
September
September
September
September
September
September
September

22, 1958
26, 1958
29, 1958
5, 1958
5, 1958
12, 1958
12, 1958
12, 1958
12, 1958
19, 1958
23, 1958

Effective the same dates, the Board approved for the respective Federal
Reserve Banks a rate of 2l/2 per cent on advances to member banks under
Section 10 (b) of the Federal Reserve Act. In addition, the Board approved
changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act and
on industrial loans and commitments under Section 13b.
Increasing evidence of vigorous economic recovery on a broad
front was visible by the early part of August. By July, the seasonally
adjusted index of industrial production had risen six points from
the low of 128 reached in April, with the improvement in output
diffused through durable and nondurable goods industries. Construction activity, already quite strong, increased further in July as private
housing starts rose for the fifth successive month and attained a
seasonally adjusted rate close to 1.2 million units, almost 15 per cent
higher than the rate a year earlier. Personal income in June was back




FEDERAL RESERVE SYSTEM

83

nearly to the level of August 1957, and it was estimated to have
reached further ahead in July. In the first six months of the year,
farm income had attained its highest level since 1953, and on the
basis of crop and marketing prospects it seemed likely to rise further
in the months ahead. Wholesale prices, advancing since mid-June,
had by August exceeded the peak reached in March 1958, and
consumer demand was strong.
The improved economic outlook and the prospect of a large Federal deficit for the current fiscal year led to a sharpening of expectations with regard to a renewal of inflationary pressures and to a reversal in the trend of interest rates. The yield on Treasury bills
rebounded strongly from the low point reached in June and by the
first part of August was in the neighborhood of 11/2 per cent.
In view of these developments, System open market operations had
been modified so as to supply only a portion of the reserves needed
to meet rising credit demands and offset the reserve drain of a continued gold outflow. As a result, member banks were obliged to
draw down their excess reserves and to begin to increase their borrowings at the Federal Reserve Banks. The discount rate adjustment
made such borrowings more costly.
October 15, 1958
Increase in margin requirements.
Effective October 16, 1958, the supplements to Regulation T, Extension
and Maintenance of Credit by Brokers, Dealers, and Members of National
Securities Exchanges, and Regulation U, Loans by Banks for the Purpose of
Purchasing or Carrying Stocks Registered on a National Securities Exchange,
were amended to increase the margin requirements from 70 per cent to 90
per cent, these requirements to be applicable to both purchases and short
sales.
Votes for this action: Messrs. Balderston, Szymczak, Mills,
and Shepardson. Votes against this action: Mr. Robertson.

Following the increase in margin requirements from 50 per cent to
70 per cent early in August, common stock prices continued their
upward climb in a heavy volume of trading activity and had now
registered a further advance of about 8 per cent. By October this
price movement had carried common stock yields to a level more
than half a percentage point below the average yield on high-grade




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ANNUAL REPORT OF BOARD OF GOVERNORS

corporate bonds. After a pause in August, stock market credit likewise resumed its upward thrust and latest estimates placed the
volume of total customer credit at above $4.3 billion. In addition,
the number of open margin accounts was reported to have increased
considerably from June to September.
Prevalent psychology, favoring equities, including those of a speculative character, as a medium of investment in preference to fixedincome obligations, appeared to reflect not only growing public confidence in continued business improvement but apprehension as to an
intensification of inflationary pressures. In light of the developments
in the market, the margin requirements were increased to 90 per cent
at this time pursuant to the Board's statutory responsibility for administering those requirements with a view to preventing the excessive use of credit for purchasing or carrying registered stocks.
Governor Robertson voted against this action for the following
reasons:
(1) Under withdrawal and substitution rules in effect at that time,
a customer selling securities in a margin account was free to purchase
an equal market value of securities or to withdraw the margin
currently required on such a purchase. Thus, if he sold $1,000 of
securities, he could replace them with a $1,000 purchase of securities,
or he could withdraw $700 in cash under a 70 per cent margin requirement or $900 under a 90 per cent margin requirement. Consequently, Governor Robertson felt, the increased margin requirements would apply in practice only to new extensions of credit and
not to the turnover of credit already in the market. It would fail,
he believed, to reach the most important aspect at that time of the
"excessive use of credit" and would therefore be a relatively futile
and ineffective action, the psychological effect of which might be the
reverse of that intended.
(2) Also because of the then existing withdrawal and substitution rules, the increased margin requirements would unjustifiably enlarge the inequity as between customers who could continue to trade
on lower margins and new customers subject to higher margins.
(3) The higher margin requirements, coupled with the existing
withdrawal and substitution rules, would tend to encourage a weakening of margin accounts and create dangers of cumulative forced
selling in undermargined accounts if stock prices should fall.




FEDERAL RESERVE SYSTEM

85

October 23, 1958
Increase in rates on discounts and advances by Federal Reserve
Banks.
Effective October 24, 1958, the Board approved action by the Boards of
Directors of the Federal Reserve Banks of Philadelphia, Richmond, St. Louis,
Minneapolis, and Dallas establishing a rate of 2 ^ p e r cent (an increase from
2 per cent) on discounts for and advances to member banks under Sections
13 and 13a of the Federal Reserve Act.
Votes for this action: Messrs. Balderston, Szymczak, Robertson, and Shepardson. Votes against this action: none.
Pursuant to the policy established by this action, the Board subsequently
approved, effective on the dates indicated, the same rate for the following
Federal Reserve Banks:
Atlanta
Cleveland
Chicago
Boston
Kansas City
San Francisco
New York

October 28,
October 30,
October 31,
November 4,
November 4,
November 6,
November 7,

1958
1958
1958
1958
1958
1958
1958

Effective the same dates, the Board approved for the respective Federal
Reserve Banks a rate of 3 per cent on advances to member banks under Section 10 (b) of the Federal Reserve Act. In addition, the Board approved
changes at some of the Banks in rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act
and on industrial loans and commitments under Section 13b.
During the period since the previous discount rate increase in
August, the economy had continued its trend toward recovery, with
further advances in industrial production, construction activity, retail
sales, and personal income. Although average wholesale prices
showed stability, prices of basic industrial materials were moving
upward. Currency in circulation, bank credit, and deposits each reflected a seasonal rise. Short-term interest rates, which began to
advance rapidly after midyear, continued that trend, reflecting in part
substantial cash borrowing on the part of the Treasury in the form
of short-term securities and also anticipation of further growth in
credit demands. By the middle of October, the yield on three-month




86

ANNUAL REPORT OF BOARD OF GOVERNORS

Treasury bills had risen to a level around 2% per cent. Seasonal
monetary needs were estimated to require a further growth of over
$4 billion in total bank credit by the end of the calendar year, while
the Treasury was scheduled to undertake shortly a series of financing
operations that would involve, through the end of the year, borrowing additional cash of around $4 billion and refunding some $12
billion of outstanding securities. Other pressures also tending to influence the trend toward a higher structure of interest rates included
growing apprehension concerning potential inflationary developments
and a continued tendency to shift from fixed-return assets to equities.
With the discount rate having fallen substantially out of line with
short-term money market rates, and with influences present such as to
suggest the probability of a further distortion of the normal relationship, the increase in the rate served to produce a better alignment
and at the same time recognized existing trends in the money market
and the economy generally.
November 12, 1958
Amendment to Regulation K, Corporations Doing Foreign Banking
or Other Foreign Financing under the Federal Reserve Act.
Effective November 12, 1958, Regulation K was amended by deleting
Section 10 (c) (2) and the reference thereto contained in Section 3(b).
Votes for this action: Messrs. Martin, Balderston, Szymczak,
Mills, Robertson, and Shepardson. Votes against this action:
none.
Section 10 (c) of Regulation K, as revised January 15, 1957, contained a provision that "no Financing Corporation hereafter organized shall have a name which is similar to the name of, or identifies
the Corporation with, any bank in the United States with which such
Financing Corporation is affiliated." Section 3(b), relating to names
of corporations organized under Section 25 (a) of the Federal Reserve
Act, contained a reference to the aforementioned provision of Section 10 (c).
In the light of experience with the administration of the revised
Regulation K, the Board concluded that the provision in question was
unduly restrictive and unnecessary in the public interest. Pursuant to
Section 3(b), the name of any corporation organized under Section




FEDERAL RESERVE SYSTEM

87

25 (a) continued to be subject to the approval of the Board of
Governors. Further, the same section also provides that in no case
shall the name of such a corporation resemble the name of any other
corporation to an extent that might result in misleading or deceiving
the public as to the corporation's identity, purpose, connections, or
affiliations. In addition, the name of any corporation organized under
Section 25 (a) shall, so far as practicable, indicate the nature of the
business contemplated and shall include the word "international,"
"foreign," "overseas," or some similar word. No financing corporation is permitted to have the word "bank" or "banking," or any
similar word, as part of its name.
December 18, 1958
Actions incident to admission of Alaska to Statehood.
Effective upon issuance by the President of the United States of a proclamation admitting Alaska to Statehood, which proclamation subsequently was
issued on January 3, 1959, the Board readjusted the Federal Reserve districts so as to include the State of Alaska in the Twelfth District, and within
that District included Alaska in the Territory of the Seattle Branch of the
Federal Reserve Bank of San Francisco. Effective the same date, certain
amendments were made to several regulations of the Board to correct
language rendered inappropriate by the admission of Alaska to Statehood.
Votes for this action: Messrs. Martin, Szymczak, Mills, and
Robertson. Votes against this action: none.

Section 2 of the Federal Reserve Act provides that the Federal
Reserve districts, as created originally by the Reserve Bank Organization Committee, may be readjusted from time to time by the Board
of Governors of the Federal Reserve System, not to exceed 12 in all.
Section 19 of the Alaska Statehood Act amended the aforesaid Section 2 to provide that "when the State of Alaska is hereafter admitted
to the Union the Federal Reserve districts shall be readjusted by the
Board of Governors of the Federal Reserve System in such manner
as to include such State/' In anticipation of a Presidential proclamation admitting Alaska to Statehood, the Board therefore took action
to include Alaska in the Twelfth Federal Reserve District coincident
with the date of the proclamation.




88

ANNUAL REPORT OF BOARD OF GOVERNORS

Regulations relating to branches of Federal Reserve Banks, which
are prescribed under the authority of Section 3 of the Federal Reserve
Act, provide that no change shall be made by any Federal Reserve
Bank in the territory included within the district served by any of its
branches except with the prior approval or upon the direction of the
Board of Governors. Pursuant to these regulations, the Board provided that the State of Alaska, upon admission to the Union, be
included in the territory of the Seattle Branch of the Federal Reserve
Bank of San Francisco.
Certain technical changes in a number of Board regulations were
made, effective the same date, because the admission of Alaska to
Statehood rendered the existing language inappropriate. The regulations affected included G, Collection of Noncash Items; H, Membership of State Banking Institutions in the Federal Reserve System;
J, Check Clearing and Collection; and U, Loans by Banks for the
Purpose of Purchasing or Carrying Stocks Registered on a National
Securities Exchange.




FEDERAL RESERVE SYSTEM

89

BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM

Examination of Federal Reserve Banks, The Board's Division
of Examinations examined each of the 12 Federal Reserve Banks
and their 24 branches during the year as required by law. In conjunction with their annual examination of the Federal Reserve Bank
of New York, the Board's examiners also made a detailed audit
of the accounts and holdings of the System Open Market Account
maintained at that Bank, and rendered a report thereon to the Federal
Open Market Committee. The techniques and procedures employed
by the Board's examiners were surveyed and appraised by a private
firm of certified public accountants during the course of the examination of a Federal Reserve Bank of its selection.
Examination of member banks. Although authorized to examine
all member banks, both State and national, as a matter of practice
neither the Federal Reserve Banks nor the Board of Governors
examines national banks since the Comptroller of the Currency is
directly charged with that responsibility by law. Reports of examinations made by the Comptroller are furnished the respective Federal
Reserve Banks and made available to the Board of Governors.
Likewise, because all member banks are insured, the Federal Deposit
Insurance Corporation is empowered to make special examinations
of national banks and State member banks. However, such examinations have been rare and have been made only in anticipation of
financial assistance by the Corporation in a rehabilitation program
or where a member bank desired to continue as an insured bank
after withdrawal from membership in the System. Reports of examination of both national banks and State member banks are made
available to the Federal Deposit Insurance Corporation.
State member banks are subject to examinations made by direction of the Board of Governors or of the Federal Reserve Banks by
examiners selected or approved by the Board of Governors. The established policy is to conduct at least one regular examination of each
State member bank, including its trust department, during each calendar year, by examiners for the Reserve Bank of the district in which
the bank is situated, with additional examinations if considered desirable. Here again, in order to avoid duplication and to minimize
inconvenience to the banks examined, wherever practicable joint
examinations are made in cooperation with the State banking au-




90

ANNUAL REPORT OF BOARD OF GOVERNORS

thorities or alternate examinations are made by agreement with State
authorities. The 1958 program for the examination of State member
banks was practically completed, since only 9 of the 1,734 banks were
not examined during the calendar year.
Federal Reserve membership. The 6,312 banks that were members of the Federal Reserve System at the end of 1958 accounted for
47 per cent of the number and held 85 per cent of the deposits of
all commercial banks in the United States. State member banks
accounted for 20 per cent of the number of all State commercial
banks and held 66 per cent of the deposits of these banks.
The 4,578 national and 1,734 State member banks comprising
Federal Reserve membership reflected declines of 42 and 39, respectively, from the previous year-end. This continuing decline was
largely due to consolidations and mergers; other reductions include
15 State member banks that withdrew from membership, and one
national bank that became a nonmember bank. The decrease was
partly offset by 19 newly established national and two newly established State member banks, the admission of seven nonmember
banks to membership, and the conversion of three nonmember banks
into national banks.
The total number of member bank offices increased as a result of
both the conversion of merged banks into branches and the establishment of de novo branches. At the end of the year member banks
were operating 6,700 branches, 535 more than at the close of 1957.
Detailed figures on changes in the banking structure for the year
1958 are shown in Table 18 on page 127.
Bank holding companies. During 1958, pursuant to Section
3 ( a ) ( l ) of the Bank Holding Company Act of 1956, the Board
approved one application for prior approval of action to become a
bank holding company, and denied three such applications, the
latter three being involved in a proposal that would have resulted
in one continuing bank holding company. Pursuant to Section
3 (a) (2) of the Act, the Board approved the acquisition by three
bank holding companies of voting shares of four banks and denied
one application for such acquisition with respect to one bank. Under
Section 4 ( c ) ( 6 ) of the Act, the Board, after a hearing, denied a
request for a determination that certain subsidiaries of a bank holding company were so closely related to the banking activities of the




FEDERAL RESERVE SYSTEM

91

holding company system as to be a proper incident thereto and as
to make it unnecessary for the prohibitions of Section 4 to apply in
order to carry out the purposes of the Act; one such request was
approved. During the year the Board issued four certifications in
accordance with the tax provisions of the Act (Internal Revenue
Code, Sections 1101 and 1103). To provide necessary current information, annual reports for the year 1957 were obtained from
registered bank holding companies.
During 1958, pursuant to the Banking Act of 1933, the Board
authorized the issuance of five voting permits for general purposes
and 13 permits for limited purposes to holding company affiliates
of member banks. In accordance with established practice, a number
of holding company affiliates were examined during the year by
examiners for the Federal Reserve Banks in whose districts the
principal offices of the holding companies are located.
Section 301 of the Banking Act of 1935 provides that the term
"holding company affiliate" shall not include, except for the purposes
of Section 23A of the Federal Reserve Act, any organization which
is determined by the Board not to be engaged, directly or indirectly,
as a business in holding the stock of, or managing or controlling,
banks, banking associations, savings banks, or trust companies.
During the year the Board made such determinations with respect to
seven organizations.
Trust powers of national banks. During 1958, 42 national banks
were granted authority by the Board to exercise one or more trust
powers under the provisions of Section 11 (k) of the Federal Reserve Act. This number includes the grant of additional powers
to five banks which previously had been granted certain trust powers.
One additional national bank acquired trust powers as a result of
consolidation. Trust powers of 31 national banks were terminated
by voluntary liquidation, consolidation, merger, or conversion. At
the end of 1958, there were 1,722 national banks holding permits
to exercise trust powers.
Acceptance powers of member banks. During the year the
Board approved applications of two member banks, pursuant to the
provisions of Section 13 of the Federal Reserve Act, for increased
acceptance powers. One member bank was granted permission to
accept commercial drafts or bills of exchange to an amount not




92

ANNUAL REPORT OF BOARD OF GOVERNORS

exceeding at any time, in the aggregate, 100 per cent of its paid-up
and unimpaired capital stock and surplus, and the application of one
member bank was approved for limited permission to accept drafts
or bills of exchange drawn for the purpose of furnishing dollar
exchange as required by the usages of trade in Brazil.
Foreign branches and foreign banking and financing corporations. Under the provisions of Section 25 of the Federal Reserve
Act, the Board approved during 1958 seven applications made by
member banks for permission to establish branches in foreign countries and overseas areas of the United States. One member bank
opened a branch in Bayamon, Puerto Rico; and another opened
branches in Asuncion, Paraguay, and Valencia, Venezuela. The
Valencia branch had been authorized by the Board in 1957. One
member bank closed one of its branches in London.
At the end of 1958, seven member banks had in active operation
a total of 119 branches in 27 foreign countries and overseas areas
of the United States. Of the 119 branches, three national banks
were operating 93 and four State member banks were operating
26. The branches were distributed geographically as follows:
Latin America
Argentina
Brazil
Chile
Colombia
Cuba
Mexico
Panama
Paraguay
Peru
Uruguay
Venezuela
Continental Europe
Belgium
France
Germany
England

62
10
10
2
4
21
3
5
1
1
1
4
5
1
3
1
10

Near East
Egypt
Lebanon
Saudi Arabia
Far East
Hon
g Kon£
India
a

an

J P
Philippines
Singapore
Thailand
United States Overseas Areas.
Canal Zone
Guam
Puerto Rico
Total

4
1
2
1
20
1

2
10

5
1
1
18
4
1
13
119

There was no change in 1958 in the list of corporations organized
under State laws which operate under agreements with the Board
pursuant to Section 25 of the Federal Reserve Act relating to investment by member banks in the stock of corporations engaged




FEDERAL RESERVE SYSTEM

93

principally in international or foreign banking. The head offices in
New York of the three "agreement" corporations were examined
in 1958 by examiners for the Board of Governors. One corporation
operates a branch in France; one has an English fiduciary affiliate;
and one operates two agencies at the New York International Airport, has a branch in England, owns all the stock of a bank organized
under the laws of, and operating in, Liberia, and owns all the stock
of a bank organized under the laws of, and operating in, the Union
of South Africa. The investment in the latter bank was authorized
by the Board and the bank opened in Johannesburg in 1958.
During 1958 one corporation was chartered by the Board under
the provisions of Section 25 (a) of the Federal Reserve Act to engage
in international or foreign financing, making a total of five corporations engaged in international or foreign banking or financing in
active operation at the end of the year, two of which are regarded
as "Banking Corporations" and three as "Financing Corporations."
The home offices of these five corporations are located in New York
City, and four were examined during the year by examiners for the
Board of Governors. Three corporations have no subsidiaries or
foreign branches; one has a branch in France and an English fiduciary
affiliate which has a branch in Canada; and one operates branches
in France, Germany, Guatemala, Lebanon, and Singapore (with
branches in Hong Kong and the Federation of Malaya authorized
by the Board in 1958 but not opened by the end of the year)', and
owns substantially all of the stock of a bank organized under the
laws of, and operating in, Italy.
In 1958, examiners for the Board of Governors examined the
Singapore, Colony of Singapore, and Beirut, Lebanon, branches of a
foreign banking corporation, and the Japanese and Beirut, Lebanon,
branches of a State member bank. The London branches of another
State member bank were surveyed at the head office of the bank in
New York by examiners for the Board of Governors.
Inter-Agency Bank Examination School. During 1958, two
sessions of the School for Examiners and four sessions of the School
for Assistant Examiners were held. The Inter-Agency Bank Examination School is conducted in Washington by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance
Corporation, and the Office of the Comptroller of the Currency.




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ANNUAL REPORT OF BOARD OF GOVERNORS

Since the Inter-Agency School was established in 1952, the various
sessions have been attended by 1,064 men, representing the three
Federal bank supervisory agencies, the State Banking Departments
of California, Connecticut, Indiana, Louisiana, Maine, Michigan,
Mississippi, Montana, New Hampshire, New Jersey, New York,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, and Virginia, the Treasury Department of the Commonwealth of Puerto
Rico, and one foreign country.
LEGISLATION

Defense Production Act. The Defense Production Act of 1950,
Section 301 of which is the basis for guarantees of loans for defense
production, which would have expired June 30, 1958, was amended
and continued in force until the close of June 30, I960, by the Act
of June 28, 1958.
Purchase of Government obligations by Federal Reserve Banks.
The authority of the Federal Reserve Banks under Section 14 (b)
of the Federal Reserve Act to purchase and sell direct or fully
guaranteed obligations of the United States directly from or to the
United States, which would have expired on June 30, 1958, was
extended until June 30, I960, by the Act of June 30, 1958.
Alaskan Statehood. The Alaskan Statehood Act of July 7, 1958
amended Section 2 of the Federal Reserve Act to provide that upon
admission of Alaska to Statehood the Federal Reserve districts should
be readjusted so as to include such State, and to require national
banks in any new State to become members of the Federal Reserve
System within 90 days after admission of such State into the Union.
Pursuant to the requirements of this amendment, the Board subsequently readjusted the Federal Reserve districts so as to include the
State of Alaska in the Twelfth Federal Reserve District effective
January 3, 1959.
Real estate loans by national banks. Section 24 of the Federal
Reserve Act was amended by the Act of July 18, 1958 so as to make
the limitations and restrictions of that section on real estate loans
by national banks inapplicable to loans made to established industrial or commercial businesses in which the Small Business Administration cooperates through agreements to participate on an immediate
or deferred basis.




FEDERAL RESERVE SYSTEM

95

Small Business Investment Act. Section 13b of the Federal Reserve Act, authorizing working capital loans and commitments by
the Federal Reserve Banks for industrial or commercial businesses,
was repealed by the Small Business Investment Act of 1958, approved August 21, 1958, to become effective one year after the date
of enactment of that Act. The same Act provided for payment by
the Federal Reserve Banks to the United States within 60 days after
the date of its enactment of amounts previously paid by the Secretary of the Treasury to the Federal Reserve Banks under the provisions of Section 13b of the Federal Reserve Act. In addition, the
Act of August 21, 1958 made stock of small business investment
companies organized under that Act eligible for purchase by national banks and by other member banks and nonmember insured
banks to the extent permitted by State law, subject to certain limitations.
Bank Holding Company Act. The Board is required by Section
5(d) of the Bank Holding Company Act of 1956 to include in its
annual report to Congress any recommendations for changes in that
Act which, in the opinion of the Board, would be desirable. In a
special report submitted to Congress on May 7, 1958 the Board
recommended a number of amendments to the Bank Holding Company Act which would tend to clarify ambiguities in the law and
facilitate its administration. The Board continues to urge favorable
consideration of those amendments.
RESERVE BANK OPERATIONS

Loan guarantees for defense production. Under the provisions
of the Defense Production Act of 1950 as amended and the implementing Executive Orders, certain designated procurement agencies
of the Government are authorized to guarantee loans made by commercial banks and other private financing institutions to finance and
expedite production for national defense and to finance contractors
and subcontractors in connection with or in contemplation of termination of their defense contracts. The guaranteeing agencies are
the Departments of the Army, Navy, Air Force, Commerce, Interior,
and Agriculture, the General Services Administration, and the
Atomic Energy Commission.
The present program is a reactivation of the V-loan program




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ANNUAL REPORT OF BOARD OF GOVERNORS

utilized during World War II. In the making of guarantees, the
Federal Reserve Banks are authorized to act, on behalf of the
guaranteeing agencies, as fiscal agents of the United States, subject
to the supervision of the Board of Governors of the Federal Reserve
System; and the Board is authorized, after consultation with the
guaranteeing agencies, to prescribe rates and fees and forms and
procedures. The schedule of rates and fees was reviewed from time
to time by the Board and guaranteeing agencies but developments
during 1958 did not indicate the need for any changes.
During 1958, the guaranteeing agencies authorized the issuance of
40 guarantee agreements amounting to $193 million. On December 31, 1958, guarantee agreements outstanding covered credits
totaling $478 million, of which amount $310 million represented
actual loans outstanding and $168 million was available to borrowers
under guarantee agreements in force. Of the total credit available
to borrowers, including loans outstanding, 74 per cent on the average
was guaranteed. During the year, approximately $728 million was
advanced on V-loans, most of which are revolving credits.
From the beginning of the program in September 1950 through
December 31, 1958, 1,543 V-loans totaling $3,105 million were
authorized by the procurement agencies which may guarantee such
loans under the Defense Production Act of 1950. Of the total loans
authorized, 56 per cent of the number and 6 per cent of the amount
were less than $500,000 and 72 per cent of the number and 12 per
cent of the amount were less than $1 million.
Forty-two per cent of the number and 7 per cent of the amount of
loans authorized were to borrowers having assets of less than
$500,000; 57 per cent of the number and 12 per cent of the amount
were to borrowers having assets of less than $1 million.
Seventy-three per cent of the number and 19 per cent of the
amount of loans authorized were to borrowers having less than 500
employees.
Under the law as amended by the Defense Production Act amendments of 1958, authority for the V-loan program, unless further
extended, will terminate on June 30, I960.
Volume of operations. Table 5 on page 113 shows the volume
of operations in the principal departments of the Federal Reserve
Banks for the years 1954-58. Changes from 1957 were mixed, with




97

FEDERAL RESERVE SYSTEM

some activities decreasing and others increasing. Discounts and advances and currency received and counted declined. On the other
hand, checks (other than Government checks and Postal money
orders), coin, and transfers of funds increased and reached new
peaks; checks handled, however, increased less than in recent years.
Earnings and expenses. Current earnings, current expenses, and
the distribution of net earnings of each Federal Reserve Bank during
1958 are shown in detail in Table 6 on pages 114-15, and a condensed historical statement is shown in Table 7 on pages 116-17.
The table below summarizes the earnings and expenses and the distribution of net earnings for 1958 and 1957.
EARNINGS,

EXPENSES, AND DISTRIBUTION OF N E T EARNINGS
FEDERAL RESERVE BANKS, 1958 AND 1957

OF

[In thousands of dollars]
Item

1958

Current earnings.
Current expenses.

742,068
137,722

1

Deductions from current net earnings
Net additions or deductions (—)
Net earnings before payments to U. S. Treasury.

763,348
131,814

604,346

Current net earnings.
Additions to current net earnings

1957

631,534

454
330

2

1,580
8,721

124

-7,141

604,470

624,393

524,059
542,708
Paid U. S. Treasury (interest on F. R. notes)
21,197
20,081
59,214
61,604
Dividends paid
Transferred to surplus
1
Includes net profits of $157,000 in 1958 and $167,000 in 1957 on sales of U. S.
Government securities.
2
Includes a payment of $8,335,000 to Federal Reserve retirement system representing adjustment for revised benefits.

Current earnings of $742 million in 1958 were 3 per cent less
than in 1957, largely because lower discount rates coupled with
fewer borrowings resulted in a $20 million decrease in earnings
from this source. Earnings from United States Government securities were $1 million less than in the year before, reflecting a lower
average yield offset in part by a slight increase in average holdings.
Current expenses of $138 million were about 4 per cent above 1957.




98

ANNUAL REPORT OF BOARD OF GOVERNORS

Current net earnings amounted to $604 million, a decrease of 4
per cent from 1957.
The effect of profit and loss additions and deductions was minor,
leaving net earnings before payments to the United States Treasury
at about $604 million, a decrease of 3 per cent from 1957.
Statutory dividends to member banks amounted to $21 million,
or a rise of about $1 million over 1957, reflecting increases in capital and surplus of member banks with attendant increases in the
paid-in capital of the Federal Reserve Banks.
Payments to the United States Treasury as interest on Federal Reserve notes amounted to $524 million in 1958. This was 90 per cent
of net earnings after dividends and allowance for building up
surplus to 100 per cent of subscribed capital where surplus was
below that amount. This allowance is consistent with the provisions
of the franchise tax when it was in effect; for 1958 the allowance
for bringing surplus up to subscribed capital was $986,000 for two
Banks and for 1957 the total was $1,303,000 for one Bank. Total
payments to the Treasury as interest on Federal Reserve notes since
the policy of making such payments was begun in 1947 have
amounted to $3,517 million.
Net earnings of $59 million remaining after dividends and payments to the United States Treasury were added to surplus account.
On September 2, 1958, the Federal Reserve Banks repaid to the
Secretary of the Treasury the aggregate of $27,546,310.97 pursuant
to the provisions of Section 602 (a) of the Small Business Investment
Act of 1958. This resulted in the elimination of Section 13b surplus
in the amount of $27,542,653.50; the net difference of $3,657.47
was charged to Section 7 surplus. The amounts repaid had been
advanced by the Secretary of the Treasury under the provisions of
Section 13b of the Federal Reserve Act.
Holdings of loans and securities. Average daily holdings of
loans and securities during 1958 amounted to $24,983 million, $761
million more than during 1957; holdings of discounts and advances
decreased $555 million and holdings of United States Government
securities increased $1,302 million. The average rate of interest
earned on discounts and advances declined from 3.15 to 2.28 per
cent, reflecting the net effect of three reductions in the discount rate
in the first half of the year to a low of 1% per cent, and two subse-




99

FEDERAL RESERVE SYSTEM

quent increases resulting in a rate of 2 ^ per cent for the last two
months of the year. The average rate on Government securities
declined from 3.15 to 2.98 per cent. The accompanying table shows
holdings, earnings, and average interest rates on loans and securities
held by the Federal Reserve Banks during the past three years.
RESERVE BANK EARNINGS ON LOANS AND SECURITIES,

1956-58

[Dollar amounts in thousands]
Item and year

Total

Average daily holdings :x
1956
$24,563,390
1957
24,222,331
1958
24,983,185

Discounts
and
advances

Industrial
loans

Acceptances

U.S.
Government
securities

$833,297
850,097
295,250

$837
686
415

$20,662
25,142
38,904

$23,708,594
23,346,406
24,648,616

36
30
18

547
848
806

571,788
735,371
734,212

Earnings:
1956
1957
1958

595,396
763,041
741,781

23,025
26,792
6,745

Average rate of interest (per cent):
1956
1957
1958

2.42
3.15
2.97

2.76
3.15
2.28

1

4.26
4.37
4.45

2.65
3.37
2.07

2.41
3.15
2.98

Based on holdings at opening of business

Foreign and international accounts. Gold and dollar assets held
for foreign account at the Federal Reserve Banks increased $2,189
million in 1958, reflecting almost entirely net purchases of gold
from the United States by foreign monetary authorities. At the end
of the year holdings amounted to $12,115 million, representing
$7,668 million of earmarked gold, $3,695 million of United States
Government securities (largely Treasury bills), $272 million in
dollar deposits, $68 million of bankers' acceptances purchased
through Federal Reserve Banks, and $412 million of miscellaneous
assets. The latter item includes mainly dollar bonds issued by
foreign countries and international institutions.
The aggregate gold and dollar assets held for the International
Bank for Reconstruction and Development, the International Finance




100

ANNUAL REPORT OF BOARD OF GOVERNORS

Corporation, and the International Monetary Fund increased $508
million in 1958.
Accounts were opened for two central banks in Africa.
As in 1957, loans secured by gold collateral were of relatively
minor importance. A loan of $5 million outstanding at the beginning
of 1958 was repaid in January. New arrangements amounted to a
total of $43.3 million, of which $17.9 million was outstanding at
the end of the year. Loans on gold are ordinarily made to foreign
monetary authorities to assist them in meeting their dollar requirements for temporary needs.
The Federal Reserve Bank of New York, as depositary and fiscal
agent, continued to perform various services for the international
institutions mentioned above. As fiscal agent of the United States,
the Bank continued to operate the United States Exchange Stabilization Fund pursuant to authorization and instructions of the Treasury
Department. Also on behalf of the Treasury Department it continued the administration of foreign assets control regulations pertaining to assets in the United States of, and transactions with,
Communist China and North Korea and their nationals, and, until
revocation on May 1, of regulations involving certain assets of the
Egyptian Government and the Suez Canal Company.
Bank premises. During the year the Board authorized the construction of an addition to and alteration of the Federal Reserve
Bank building in Dallas. This program is planned to extend over
several years.
With the approval of the Board, properties adjacent to the present locations of the Federal Reserve Bank of Kansas City and the
Oklahoma City Branch were acquired for future expansion; an
annex building was purchased by the Federal Reserve Bank of San
Francisco; and a site for a new building was acquired for the New
Orleans Branch. The Board also authorized the acquisition of property adjacent to the Little Rock Branch for future expansion.




FEDERAL RESERVE SYSTEM

101

BOARD OF GOVERNORS—INCOME AND EXPENSES

The accounts of the Board for the year 1958 were audited by
the public accounting firm of Price Waterhouse & Co., whose certificate follows:
To the Board of Governors of the
Federal Reserve System
In our opinion, the accompanying financial statements present fairly the
assets, liabilities and fund balances of the operating fund and the property
and equipment fund of the Board of Governors of the Federal Reserve
System as of December 31, 1958, and the related assessments and expenditures for the year then ended, in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding year.
Our examination of the financial statements was made in accordance with
generally accepted auditing standards, and accordingly included such tests
of the accounting records and such other auditing procedures as we considered necessary.
Price Waterhouse & Co.
Washington 5, D. C,
February 6, 1959.




102

ANNUAL REPORT OF BOARD OF GOVERNORS
ASSETS, LIABILITIES AND FUND BALANCES
DECEMBER 31,

1958

ASSETS

Cash, exclusive of $173,898 representing withheld taxes
Miscellaneous receivables and travel advances
Stockroom and cafeteria inventories, at cost

$ 630,571
15,790
18,623

Total assets of operating fund

664,984

Property and equipment, at cost:
Land and improvements
Building
Furniture and equipment

792,852
3,878,710
561,758

Total assets of property and equipment fund

5,233,320

Total assets

$5,898,304

LIABILITIES AND F U N D BALANCES

Accounts payable and accrued expense
Fund balances:
Operating fund—
Balance December 31, 1957
Excess of expenditures over assessments for the year . .
Property and equipment fund—
Balance December 31, 1957
Expenditures for additions
Excess of cost of assets disposed of over trade-in allowances
Total liabilities and fund balances




$ 336,628

$ 329,503
1,147

328,356

5,149,575
87,961
(4,216)

5,233,320
$5,898,304

FEDERAL RESERVE SYSTEM

103

ASSESSMENTS AND EXPENDITURES
YEAR ENDED DECEMBER 31,

1958

ASSESSMENTS LEVIED ON FEDERAL RESERVE BANKS:

For Board expenses and additions to property and equipment
For expenditures made on behalf of the Federal Reserve Banks
Total assessments

$ 5,917,200
4,769,500
$10,686,700

EXPENDITURES:

For printing, issue and redemption of Federal Reserve Notes, paid
on behalf of the Federal Reserve Banks
$ 4,769,500
For expenses of the Board:
Salaries
$3,937,185
Retirement and insurance contributions
512,961
Traveling expenses
305,691
Professional and contractual services:
Economic surveys
294,140
Legal, consultant and audit fees
125,313
Other
17,631
Printing and binding
175,450
Telephone and telegraph
86,319
Postage and expressage
66,191
Equipment and other rentals
66,062
Operation of cafeteria, net
51,119
Heat, light and power
49,776
Stationery and office and other supplies
48,927
Repairs, maintenance and alterations
45,908
Books and subscriptions
16,940
Insurance
7,833
Miscellaneous, net
22,940
5,830,386
For property and equipment
Total expenditures
EXCESS OF EXPENDITURES OVER ASSESSMENTS FOR THE YEAR

87,961
$10,687,847
$

1,147

The Board's expenses for 1958 include (1) an expenditure of
$107,946 incurred in connection with the continuation of the Small
Business Financing Study which was undertaken in 1957 for the
information of the Federal Reserve System, the interested committees
of the Congress, and the public generally; (2) an expenditure of
$15,255 for Consumer Buying Intentions surveys requested by the
Bureau of the Budget and the Council of Economic Advisers on
November 21, 1957, and (3) an expenditure of $45,122 as a result
of the assignment to the Board of certain responsibilities under The
National Plan for Civil and Defense Mobilization and Defense
Mobilization Order 1-20.







TABLES

106

ANNUAL REPORT OF BOARD OF GOVERNORS

NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL)
DECEMBER 31, 1958
[Amounts in boldface type are those shown in the Board's weekly statement.

In thousands of dollars]

ASSETS
Gold certificates on hand:
Held by Federal Reserve Banks
Held by Federal Reserve Agents
Gold certificates due from U. S. Treasury:
Interdistrict Settlement Fund
Federal Reserve Agents' Fund

1,015,555
1,800,000
6,924,338
9,273,000

Redemption fund for Federal Reserve notes

937,919

Total gold certificate reserves
Federal Reserve notes of other Federal Reserve Banks
Other cash:
United States notes
Silver certificates
Standard silver dollars
National bank notes and Federal Reserve Bank notes
Subsidiary silver, nickels, and cents
Total other cash
Discounts and advances secured by U. S. Govt. securities:
Discounted for member banks
Discounted for others
Other discounts and advances:
Discounted for member banks
Foreign loans on gold
Total discounts and advances
Industrial loans
Acceptances:
Bought outright
Held under repurchase agreement
U. S. Government securities:
Bought outright—
Bills
Certificates
Notes
Bonds

19,950,812
476,993
30,678
243,540
7,401
630
54,225
336,474
45,963

100
17,900

2,250,450
18,649,726
2,867,565
2,483,771
26,251,512
95,000

Total U. S. Government securities
Total loans and securities
Due from foreign banks
Uncollected cash items:
Transit items
Exchanges for clearing house
Other cash items
Total uncollected cash items
Bank premises:
Land
Buildings (including vaults)
Fixed machinery and equipment
Total buildings
Less depreciation allowances
Total bank premises
Other assets:
Miscellaneous assets acquired account industrial loans..
Less valuation allowances
Net
Reimbursable expenses and other items receivable.
Interest accrued
Premium on securities
Deferred charges
Real estate acquired for banking house purposes.. .
Suspense account
All other




18,000

43,290
5,799

Total bought outright

Total assets

45,963

63,963
336

Held under repurchase agreement

Total other assets

19,012,893

26,346,512
.

26,459,900
15

5,320,702
201,404
108,578
5,630,684
92,284
39,428
131,712
60,987

22,911

70,725
93,636

25
25
2 ,941
136 ,756
1 ,656
1 ,726
2 ,297
625
640
146,641
53,095,155

FEDERAL RESERVE SYSTEM

107

NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL)
—Continued
LIABILITIES
Federal Reserve notes:
Outstanding (issued to Federal Reserve Banks)
29,057,573
Less: Held by issuing Federal Reserve Banks
1,011,229
Forwarded for redemption
174,321 1,185,550
Federal Reserve notes, net (includes notes held by U. S. Treasury and by
Federal Reserve Banks other than issuing Bank)
27,872,023
Deposits:
Member bank reserves
18,503,991
U. S. Treasurer—general account
358,364
Foreign
272,485
Other deposits:
Nonmember bank—clearing accounts
71,457
Officers' and certified checks
8,839
Federal Reserve exchange drafts
280
Reserves of corporations doing foreign banking or
financing
16,503
1
International organizations
43,424
Allother
250,348
Total other deposits
390,851
Total deposits
Deferred availability cash items
Other liabilities:
Accrued dividends unpaid
Unearned discount
Discount on securities
Sundry items payable
Suspense account
All other

19,525,691
4,335,126
123
17,301
4,012
79
168

Total other liabilities

21,683

Total liabilities
CAPITAL ACCOUNTS
Capital paid in
Surplus*
Other capital accounts:
Reserves for contingencies:
Reserves for registered mail losses
Allother

51,754,523
363,098
868,410
11,124
98,000

Total other capital accounts8
109,124
Total liabilities and capital accounts
53,095,155
Contingent liability on acceptances purchased for foreign correspondents
67,799
Industrial loan commitments
975
1
Includes International Bank for Reconstruction and Development, International Monetary
Fund, and International Finance Corporation.
3
8 Surplus (Sec. 13b) eliminated Sept. 2, 1958; see text, p. 98.
During the year this item includes the net of earnings, expenses, profits, etc., which are closed
out on December 31; see Table 6, pp. 114-115.




NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1958 AND 1957
[In thousands of dollars]
Total

Item
1958
ASSETS
Gold certificate account
Redemption fund for Federal Reserve
notes
Total gold certificate reserves. . .
Federal Reserve notes of other Banks. .
Other cash
i«i
O
00

Discounts and advances:
Secured by U.S. Govt. securities...
Other
Industrial loans
Acceptances:
Bought outright
Held under repurchase agreement. .
U.S. Government securities:
Bought outright
Held under repurchase agreement. .
Total loans and securities
Due from foreign banks
Uncollected cash items
Bank premises
Other assets
Total assets
1

1957

19,012,893 21,215,392
937,919

869,249

19,950,812 22,084,641

1958

1957

1958

888,156 1 ,010,595 5,277,367
56,043

198,412

943,827 1,066,638

5,475,779

55,671

Philadelphia

1957

1958

1957

Cleveland
1958

Richmond

1957

1958

1957

5,522,298 1,037,847 1,182,730 1,443,593 1,943,736 1 ,033,459 1,347,887
182,497

60,195

60,901

87,750

79,558

85,803

73,569

5,704,795 1,098,042 1,243,631 1,531,343 2,023,294 1,119,262 1,421,456

476,993
336,474

443,288
338,622

41,061
19,758

31,701
19,863

83,865
60,901

95,949
66,417

47,991
16,950

38,556
15,056

29,107
28,071

28,480
22,701

57,452
22,112

45,902
25,618

45,963
18,000
336

50,364
5,000
482

200
1,020
327

450
290
285

6,520
5,048

3,290
1,405

5,485
1,235

5,140
350
173

2,775
1,593

3,750
450

1,575
913

4,010
255

43,290
5,799

42,337
23,351

43,290
5,799

42,337
23,351

26,251,512 23,718,935 1,429,342 1,293,773
519,350
95,000

6,619,791 5,931,655 1,509,042 1,384,545 2,323,915 2,083,424 1,708,764 1,515,474
95,000
519,350

26,459,900 24,359,819 1,430,889 1,294,798

6,775,448 6,521,388 1,515,762 1,390,208 2,328,283 2,087,624 1,711,252 1,519,739
14
14
1
1,215,353 1,173,568 332,939 345,425 543,121 490,271 433,573 421,538
10,313
10,664
4,245
4,514
9,432
9,678;
6,654
6,996
36,477
55,349
8,181
12,740
12,768
19,340
9,479
14,058

15
15
5,630,684 5,494,735
83,763
93,636
223,584
146,641

405,506
4,705
7,884

467,096
5,010
11,971

53,095,155 53,028,467 2,853,631 2,897,078 13,658,140 13,628,134 3,024,111

After deducting $11,000 participations of other Federal Reserve Banks.




New York

Boston

3,050,131 4,482,126 4,681,389 3,359,785 3,455,308

LIABILITIES
27,872,023 27,534,791 1,630,425 1,638,156 6,512,632 6,500,863 1,751,391 1,738,756 2,571,638 2,624,653 2,135,757 2,188,221
Federal Reserve notes
Deposits:
771,057 777,422 5,570,787 5,716,993 863,417 874,741 1,344,045 1,486,691 764,580 801,083
Member bank reserves
, 18,503,991 19,033,795
30,221
4,656
45,778
29,422
68,734
22,996
47,161
358,364
480,810
21,009
U.S. Treasurer—general account..
38,077
35,306
23,870
20,915
30,690
11,985
17,391
272,485
356,342
13,395
16,215
Foreign
19,778 2 103,755 2 111,163
12,954
5,054
5,483
4,635
150,963
5,156
Other
,
390,851
246,284
2,202
4,013
3,106
307,036

Total deposits
Deferred availability cash items.
Other liabilities

19,525,691 20,117,231
4,335,126 4,070,844
21,683
14,948

807,663
338,324
1,069

838,383 6,016,884 6,047,853
717,766
344,347
755,659
5,367
549
5,376

906,641
275,287
1,253

941,786 1 374,670 1 ,568,642
279,334 413,145 371,626
1,484
1,853
623

810,622
343,293
1,130

870,791
327,773
587

51,754,523 51,737,814 2,777,481 2,821,435 13,290,551 13,271,849 2,934,572 2,960,499 4,361,306 4,566,405 3,290,802 3,387,372

Total liabilities
CAPITAL ACCOUNTS
Capital paid in
Surplus (Sec. 7)
Surplus (Sec. 13b)s
Other capital accounts..
Total liabilities
accounts

363,098
868,410
109,124

and

capital

Ratio of gold certificate reserves to
deposit and F. R. note liabilities
combined
Contingent liability on acceptances
purchased for foreign correspondents.
Industrial loan commitments

345,106
809,198
27,543
108,806

18,121
50,116
7,913

17,742
47,013
3,011
7,877

105,850
238,902

22,837

102,215
223,963
7,319
22,788

21,894
59,607
"8*, 038

21,192
55,923
4,489
8,028

34,246
76,643
9,931

32,514
71,550
1,006
9,914

16,439
44,846
7,698

15,695
41,236
3,349
7,656

53,095,155 53,028,467 2,853,631 2,897,078 13,658,140 13,628,134 3,024,111 3,050,131 4,482,126 4,681,389 3,359,785 3,455,308
42.1%

46.3%

38.7%

43.1%

67,799
975

76,114
1,109

3,864

4,414

45.5%

43.7%
4

19,119

4

41.3%

46.4%

38.8%

48.3%

38.0%

46.5%

21,398

4,678

5,327
26

6,034
35

6,849
77

3,458

3,881

FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes:
Issued to Federal Reserve Bank
by Federal Reserve Agent and
outstanding
29,057, 573 28 ,643,286 1,703,455 1,702,333 6,827,935 6,795,945 1,815,156 1,800,791 2,645,549 2 ,700,128 2 ,223, 439 2,266,546
Less held by issuing Bank, and
75,475
78,325
62,035
forwarded for redemption
315,303
295,082
73,030
64,177
87,682
73,911
63,765
1,185,550 1,108,495
Federal Reserve notes, net5

27,872,023 27,534,791 1,630,425 1,638,156 6,512,632 6,500,863 1,751,391 1,738,756 2,571,638 2,624,653 2,135,757 2,188,221

Collateral held by Federal Reserve
Agent for notes issued to Bank:
Gold certificate account
11,073,000 12, 273,000
650,000 700,000 2,920,000 3,270,000 640,000 640,000 920,000 1,130,000 725,000 945,000
5,140
5,285
25,393
12,299
Eligible paper
18,615,000 17, 165,000 1,150,000 1,150,000 4,000,000 3,600,000 1 ,200,000 1 ,200,000 1,750,000 1,600,000 1,530,000 1,350,000
U.S. Government securities
Total collateral.
2

29,713,393 29,450,299 1,800,000 1,850,000 6,920,000 6,870,000 1,845,285 1,845,140 2,670,000 2,730,000 2,255,000 2,295,000

After deducting $168,730,000 participations of other Federal Reserve Banks on Dec. 31, 1958, and $245,179,000 on Dec. 31, 1957.
8 Eliminated Sept. 2, 1958; see text, p. 98.
After deducting $48,680,000 participations of other Federal Reserve Banks on Dec. 31, 1958, and $54,716,000 on Dec. 31, 1957.
Includes Federal Reserve notes held by U.S. Treasury and by Federal Reserve Banks other than the issuing Bank.
4
6




NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1958 AND 1957—Continued
[In thousands of dollars]

Item

Atlanta

Chicago
1958

Minneapolis

St. Louis

1958

1957

1957

1958

Gold certificate account
Redemption fund for Federal Reserve
notes

864,742

830,921 3,326,227 3,805,144

753,490

167,634

157,090

44,661

Total gold certificate reserves.
Federal Reserve notes of other Banks.
Other cash

921,779
53,143
26,560

879,840 3,493,861 3,962,234
40,267
56,404
37,731
58,734
24,744
56,959

Discounts and advances:
Secured by U.S. Govt. securities.
Other
Industrial loans

4,765
805

1957

Kansas City

1958

1957

1958

908,740

458,383

390,876

748,339

43,349

22,463

22,171

43,533

798,151
23,287
26,513

952,089
17,588
25,649

480,846
17,588
8,664

413,047
23,008
8,359

1,600
662

250
185

430
9

120
24

1957

Dallas

San Francisco

1958

1957

843,470

721,519

808,001 2,459,771 2,620,994

41,597

29,845

791,872
11,317
14,662

885,067
10,162
12,492

751,364
28,333
14,687

18,408
798

6,909
190

750
931

1958

1957

ASSETS
57,037

48,919

3,050
225

3,885
2,560

8,750
710

28,495

84,915

75,060

836,496 2,544,686 2,696,054
21,148
43,582
36,659
12,829
38,862
47,935
14,565
260

2,005

200
560

Acceptances:
Bought outright
Held under repurchase agreement
U.S. Government securities:
1,335,756 1,228,570 4,585,614 4,140,164 1,070,904
Bought outright
Held under repurchase agreement

980,896

552,253

511,855 1,120,493 1,018,325 1,028,298

929,521 2,967,340 2,700,733

Total loans and securities.... 1,341,326 1,231,845 4,592,059 4,149,624 1,073,166 981,331

552,692

511,999 1,139,699 1,025,424 1,029,979

944,346 2,969,345 2,701,493

Due from foreign banks.
Uncollected cash items..
Bank premises
Other assets
Total assets.
6

Less than $500.




453,214
9,294
8,470

1
466,237
6,497
11,657

2
902,999
11,824
24,838

2
887,537
6,823
40,656

1
232,399
6,862
5,917

1
188,651
6,138
9,041

1
()
145,320 136,191 254,995
5,307
4,799
5,193
4,779
7,130
3,076
(6)

1
238,904
4,903
9,493

1
242,747
7,786
5,917

223,368
6,260
9,345

468,518
12,529
16,504

455,949
10,973
25,155

2,813,787 2,677,225 9,124,584 9,141,566 2,166,296 2,180,488 1,213,379 1,102,690 2,224,475 2,186,446 2,080,814 2,053,793 6,094,027 5,974,219

LIABILITIES
1,476,020 1,305,420 5,302,681 5,334,243 1,238,269 1,226,564
Federal Reserve notes
Deposits:
846,398 851,881 2,809,518 2,905,986 669,057 699,440
Member bank reserves
41,231
48,619
62,021
19,283
25,982
U.S. Treasurer—general account
32,479
15,345
48,422
8,695
12,617
10,575
33,605
Foreign
3,974
10,423
3,141
2,560
2,347
8,404
Other
Total deposits
Deferred availability cash items
Other liabilities
Total liabilities

891,799
380,576
1,080

912,431 2,900,146 3,026,852
398,917 721,508 594,080
492
3,967
2,475

700,176
174,787
792

740,599
163,043
439

598,279

494,826 1,101,081 1,077,385

798,613

748,184 2,755,237 2,657,520

419,895
24,459
5,640
961

433,491
18,515
8,184
1,336

817,730
38,271
9,165
3,279

804,111
41,690
12,958
3,436

969,769
30,630
12,220
2,778

996,223 2,657,738 2,685,733
51,234
30,532
30,868
26,320
38,192
17,732
47,001
44,726
2,167

450,955
129,777
933

461,526
113,263
628

868,445
200,590

862,195 1,015,397 1,046,990 2,782,293 2,799,183
195,229 196,451 190,958 405,729 374,508
480
572
2,672
1,252
710

2,749,475 2,617,260 8,928,302 8,957,650 2,114,024 2,130,645 1,179,944 1,070,243 2,170,964 2,135,289 2,011,171 1,986,704 5,945,931 5,832,463

CAPITAL ACCOUNTS
Capital paid in
Surplus (Sec. 7) 8
Surplus (Sec. 13b)
Other capital accounts..

18,371
39,474

16,562
36,192

49,665
132,159

762

6,467

6,449 ' '14,458

46,570
121,504
1,429
14,413

12,348
33,746
' *6,i78

11,577
31,586
521
6,159

8,387
20,785
" 4,263

7,426
19,697
1,073
4,251

14,848
32,935
5,728

13,781
30,533
1,137
5,706

20,684
43,436
5,523

19,405
40,871
1,307
5,506

42,245
95,761
10,090

40,427
89,130
2,140
10,059

Total liabilities and capital
accounts
2,813,787 2,677,225 9,124,584 9,141,566 2,166,296 2,180,488 1,213,379 1,102,690 2,224,475 2,186,446 2,080,814 2,053,793 6,094,027 5,974,219
Ratio of gold certificate reserves to
deposit and F. R. note liabilities
combined
Contingent liability on acceptances
purchased for foreign correspondents
Industrial loan commitments

39.7%

42.6%

47.4%

41.2%

48.4%

45.8%

43.2%

40.2%

45.6%

41.4%

46.6%

46.0%

49.4%

10,806
66

2,509

2,816

1,627

1,826

2,644
940

2,892
940

3,526

3,957

7,594

8,523

Federal Reserve notes:
Issued to Federal Reserve Bank
by Federal Reserve Agent and
outstanding
1,556,710 1,374,708 5,474,313 5,472,919 1,296,838 1,280,689
Less held by issuing Bank, and
forwarded for redemption
80,690
69,288 171,632 138,676
54,125
58,569

614,338

534,419 1,137,662 1,109,605

849,075

32,220

50,462

Federal Reserve notes, net 5 ... 1,476,020 1,305,420 5,302,681 5,334,243 1,238,269 1,226,564

598,279

494,826 1,101,081 1,077,385

798,613

748,184 2,755,237 2,657,520

300,000
18,508
850,000

283,000 1,300,000 1,500,000

38.9%
3,051

3,425

9,695

FEDERAL RESERVE NOTE
STATEMENT

Collateral held by Federal Reserve
Agent for notes issued to Bank:
Gold certificate account
475,000 425,000 2,200,000 2,500,000 430,000 450,000
250
1,600
Eligible paper.
1,100,000 1,000,000 3,400,000 3,100,000 935,000 895,000
U.S. Government securities
Total collateral.
1,575,000 1,425,000 5,600,000 5,600,000 1,366,600 1,345,250
8
6

16,059

39,593

36,581

44,684

157,866

154,815

200,000

130,000
425,000

300,000
6,909
820,000

313,000

425,000

575,000

525,000 1,700,000 1,500,000

625,000

555,000 1,168,508 1,126,909

888,000

808,000 3,000,000 3,000,000

Eliminated Sept. 2, 1958; see text, p. 98.
Includes Federal Reserve notes held by U.S. Treasury and by Federal Reserve Banks other than the issuing Bank.




792,868 2,913,103 2,812,335

NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL
RESERVE BANKS, END OF DECEMBER 1956, 1957, AND 1958
[In thousands of dollars]
Type of issue

Rate of
interest
(per cent)

Treasury bonds:
1956-58
1958 June
1958 Dec
1957 59
1956-59
1960 Nov
1961 Sept
1961 Nov
1959-62 June
1959-62 Dec
1963 Aug
1964 Feb
1965 Feb
1960-651
1966 Aug
1962 67
1963-68
1964-69 June
1964-69 Dec
1965-70
1966-71
1967-72 June
1967-72 Sept
1967-72 Dec
1969 Oct
1974 Nov
1978-83
1985 May
1990 Feb
1995 Feb

2V2
2%
2V2
2%
2M
2Vs
2%
2H
2M
3
2V8
2%

2XA
2XA
2Y2
2XA
2~A
2Y2
2%
2XA
2Y2
4
3%

3M
3K
3V2
3

Total certificates.. ..
Treasury bills
Repurchase agreements
Total holdings

1958

12,493

339,096
21,690

-339,096
-21,690

319,849
693,765

1957

-12,493

339,096
21,690

319,849
693,765

12,493

319,849
693,765

20,300
7,000
56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758

56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758

56,610
122,585
203,890
266,999
521,490
132,707
49,266
2,552
58,758

+20,300
+7,000

+5,200
+22,800

5,200
22,800

2%

-317,979

500,000

-500,000

2M

7,940,065

-7,940,065

13^

713,848

-713,848

1H
i y&
2

\y
\y2

3y2

33J
2,857,565

+2,857,565

10,000

+10,000

2,867,565

3%
4

9,153,913 +2,867,565

-9,153,913

5,012,000
5,920,699

-5,012,000
-5,920,699

3%

ip
2V8

2%
4 8
3%
iy5
2
1A
3Vs

*5,506*, 993
8,142,733
5,000,000

5,494,500
6,581,547
7,857,565

18,649,726 19,933,612 10,932,69

-5,494,500 +5,494,500
-6,581,547 +6,581,547
-7,857,565 +7,857,565
+5,506,993
+8,142,733
+5,000,000
-1,283,88

+9,000,913

+1,266,87

-737,697

305,10

-424,35

+214,250

26,346,512 24,238,285 24,914,73

+2,108,22

-676,447

2,250,450
95,000

983,573 1,721,27
519,350

* Partly tax-exempt.




Change during
1956

2,483,771 2,801,750 2,801,750

Total Treasury notes.
Certificates:
Feb. 15, 1957
Oct. 1, 1957
Feb. 14, 1958
Aug. 1,1958
Dec. 1, 1958
Feb. 14, 1959
Aug. 1,1959
Nov. 15, 1959

1957

2

Total Treasury bonds.
Treasury notes:
Mar. 15, 1957-A
Apr. 1, 1957-EA....
May 15, 1957-B
Aug. 1, 1957-D
Aug. 15, 1957-C
Oct. 1, 1957-EO....
Apr. 1, 1958-EA....
June 1, 1958-A
Oct. 1, 1958-EO....
Feb. 15, 1959-A
Apr. 1, 1959-EA....
Oct. 1, 1959-EO....
Nov. 15, 1959-B
Apr. 1, 1960-EA
May 15, 1960-A
Oct. 1, 1960-EO....
Apr. 1, 1961-EA
May 15, 1961-B
Aug. 1, 1961-A
Oct. 1, 1961-EO....
Feb. 15, 1962-A
Apr. 1, 1962-EA....
Aug. 15, 1962-B
Oct. 1, 1962-EO....
Nov. 15, 1962-C
Feb. 15, 1963-A
Apr. 1, 1963-EA...
Oct. 1, 1963-EO...

December 31
1958

112

NO. 4—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY
CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-581

[r millions of dollars]
II
Amount

Date
1953-Mar. 18
19
20
21
*22
23
24
25
26
June 5
6

*7
8

Date

Date

Amount

110 1953—June 9
104
10
189
11
189
12
189
13
333
*14
186
15
63
16
49
17
196
18
196
19
196
20
374
*21

Date

Amount

491 1953—June 22
451
23
358
24
506 1954—Jan. 14
506
15
506
16
999
*17
1,172
18
823
19
364
20
992
21
992
22
992
23

908
608
296
22
169
169
169
323
424
323
306
283
283

Amount

1954—Jan. *24
25
26
Mar. 15
16

283
203
3
134
190

1955)
1956 > no transactions
•
1957 )
1958—Mar. 17
18

143
207

* Sunday or holiday.
1
Under authority of Section 14(b) of the Federal Reserve Act. On November 9, 1953, the Reserve Banks sold directly to the U. S. Treasury $500 million of Treasury notes; this is the only use that
has been made under the same authority to sell U. S. Government securities directly to the United
States.
NOTE.—Interest rate M per cent through Dec. 3, 1957, and M per cent below prevailing discount
rate of Federal Reserve Bank of New York thereafter. Actual rate for 1958 purchases, 2 per cent.
For data for prior years beginning with 1942, see previous Annual Reports. No holdings on dates not
shown.

NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL
RESERVE BANKS, 1954-58
[Number in thousands; amounts in thousands of dollars]
1957

1958

1956

1955

1954

NUMBER OF PIECES
1
HANDLED

Discounts and advances: 2
Notes
discounted
and
advances made
Currency
received
and
counted
Coin received and counted...
Checks handled:
U. S. Govt. checks
Postal money orders
All other 3
Collection items handled:
U. S. Govt. coupons paid...
All other
Issues, redemptions, and
exchanges of U. S. Govt.
securities
Transfers of funds

14

25

23

21

4,547,668
9,574,474
388,541
295,350
3,085,185

4,631,676
9,089,460

4,466,739
8,610,821

4,282,562
8,430,796

4,384,270
8,382,024

469,158
324,161
2,974,940

539,359
342,313
2,822,589

503,516
347,351
2,643,549

481,408
354,368
2,512,985

13,564
20,429

12,546
19,308

11,997
17,813

12,301
16,368

12,753
15,443

193,665
2,426

207,246
2,302

198,519
2,123

191,922
1,960

191,112
1,808

10

AMOUNTS HANDLED

88,436,422
Discounts and advances 2 . . . .
41,306,072 114,469,820 109,665,475
22,871,449
Currency
received
and
29,596,570
29,104,496
27,461,048
29,926,319
counted
28,482,428
922,742
956,235
887,418
862,022
Coin received and counted...
810,278
Checks handled:
99,942,372 102,062,972 114,173,132 123,215,681 141,037,495
U. S. Govt. checks
5,796,279
5,297,341
5,941,097
5,814,754
Postal money orders
5,943,178
1,044,984,066 1 ,044,553,457 1,003,202,371 927,648,399 845,365,275
Allother 3
Collection items handled:
3,032,805
3,695,458
2,563,075
2,595,305
U. S. Govt. coupons paid..
2,209,045
5,663,684
5,758,976
5,495,317
Allother
5,354,604
5,085,695
Issues, redemptions, and
exchanges of U. S. Govt.
526,037,271 493,391,267 421,612,394 429,701,960 469,247,400
securities
1,643,532,069 1,345,185,037 1,233,509,550 1,091,608,891 1,038,100,606
Transfers of funds
1
2
8

Two or more checks, coupons, etc., handled as a single item are counted as one "piece."
Exclusive of industrial loans.
Exclusive of checks drawn on the Federal Reserve Banks.




113

NO. 6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1958
Item

Total

Boston

New York

Philadelphia

Cleveland

Richmond

Atlanta

Chicago

Minneapolis

Kansas
City

Dallas

$159,214

$607,852

$168,847

813

St. Louis

2,621

San
Francisco

CURRENT EARNINGS
Discounts and advances.... $6,744,474
Industrial loans and com21,843
mitments
805,781
Acceptances
U.S. Government securities. 734,211,830
284,220
All other
Total current earnings. . 742,068,150

14,696

$321,990

$840,189

3,002

$340,549 $1,592,055

$365,807

$667,053 $1,219,562

630

$243,498

79

$217,859

805,781
39,932,739 185,595,281 42,316,962 64,755,386 47,475,124 37,483,117 128,023,207 30,016,564 15,530,096 31,338,905 28,717,892 83,026,558
66,135
16,303
15,700
21,390
14,559
23,327
41,191
9,131
10,036
25,014
15,807
25,630
40,303,684 188,059,252 42,658,257 65,617,595 47,855,490 38,173,496 129,284,039 30,269,193 15,700,159 31,974,392 28,902,546 83,270,047

CURRENT EXPENSES
Salaries:
Officers
,
Employees
Directors' and other fees .. ,
Retirement contributions..
Traveling expenses
Postage and expressage
Telephone and telegraph..
Printing, stationery, and
supplies
Insurance
Taxes on real estate
Depreciation (building)
Light, heat, power, and
water
Repairs and alterations
,
Rent
,
Furniture and equipment:
Purchases
,
Rentals
All other
Interbank expenses
Subtotal
Federal Reserve currency.. .
Assessment for expenses of
Board of Governors
Total.
Less reimbursement for certain fiscal agency and
other expenses
Net expenses.




6,269,242
80,500,913
489,666
9,627,916
1,682,279
16,401,104
1,291,235

354,203 1,135,974
379,282
543,267
494,312
510,557
659,698
440,238
330,209
472,159
422,235
527,108
4,952,887 17,965,149 4,364,639 7,196,012 5,256,306 5,081,209 12,466,159 4,613,400 2,491,036 4,140,157 3,754,226 8,219,733
24,148
24,545
51,540
24,926
72,949
30,022
33,163
32,465
49,647
62,537
37,367
46,357
581,072 2,025,616
524,928
864,509
649,205
633,757
1,493,184
554,998
296,937
532,199
486,395
985,116
105,415
73,401
146,435
137,221
134,922
212,915
108,412
87,636
103,345
280,614
113,151
178,812
853,702 1,346,178 1,597,083 1,425,438 2,205,310
883,894
584,007
972,052
1,347,593 2,375,805
852,477 1,957,565
60,385
131,088
147,066
74,673
46,452
73,336
69,514
270,122
109,238
98,228
85,715
125,418

6,264,484
1,295,512
3,778,905
4,032,079

479,923
86,092
599,850
414,858

1,190,373
224,187
739,798
419,598

316,444
53,043
141,126
268,149

489,153
123,603
338,953
561,243

423,161
100,133
173,644
480,855

463,688
78,903
170,448
163,835

1,003,803
179,040
470,956
355,415

422,898
95,264
130,163
170,854

177,629
57,861
281,752
175,378

365,583
92,540
162,514
142,854

310,981
75,547
154,479
237,786

620,848
129,299
415,222
641,254

1,531,275
1,281,246
218,223

111,950
36,121
5,663

257,727
184,370
6,062

99,360
68,935
7,186

170,087
430,291
17,603

146,178
41,373
2,506

80,449
34,137
14,707

173,838
36,707
95,497

109,331
63,461
2,285

78,162
200,523
202

110,883
88,787
177

80,714
11,361
54,394

112,596
85,180
11,941

3,171,942
5,578,023
1,915,955

90,716
458,911
99,195
38,486

710,565
755,162
358,882
-452,014

71,372
360,508
91,776
46,112

252,288
445,216
367,904
60,898

135,984
399,243
100,702
-9,352

541,278
394,271
127,446
33,844

202,657
891,557
238,773
97,191

392,354
307,431
85,297
26,581

208,842
191,669
91,513
16,626

215,608
316,595
122,232
28,320

116,050
310,481
109,513
36,429

234,228
746,979
122,722
76,880

145,330,000
5,973,240
5,917,200

9,856,597 28,510,527 7,804,893 13,514,418 10,251,708 10,092,926 20,959,788 8,514,697 5,348,899 7,988,988 7,249,301 15,237,258
209,817
454,982
580,121
369,309
170,769
1,412,956
303,608
92,861
207,187
559,751
374,512 1,237,367
338,400

1,667,300

408,000

526,100

301,300

269,200

851,000

218,800

142,400

228,100

308,700

657,900

157,220,440 10,569,509 31,415,194 8,422,710 14,495,500 11,133,129 10,731,435 23,223,744 9,037,105 5,584,160 8,387,857 7,765,18816,454,909

19,498,784
137,721,655

1,044,022

3,276,185

994,319 1,879,716 1,083,025 1,456,523

3,266,108 1,218,556

604,932 1,395,922 1,137,382 2,142,094

9,525,487 28,139,009 7,428,391 12,615,784 10,050,104 9,274,911 19,957,636 7,818,549 4,979,227 6,991,936 6,627,80614,312,815

PROFIT AND LOSS
Current net earnings
Additions to current net
earnings:
Profits on sales of U.S.
Government securities (net)
All other
Total additions
Deductions from current
net earnings:
Reserves for contingencies
All other
Total deductions
Net additions

604,346,495 30,778,197 159,920,243 35,229,866 53,001,811 37,805,386 28,898,585 109,326,403 22,450,644 10,720,932 24,982,456 22,274,740 68,957,232

156,596
297,047

9,137
291

38,538
12,063

9,524
218

13,848
18,656

9,795
1,719

8,448
27,739

26,380
26,960

6,933
139,600

3,949
401

6,664
810

6,490
63,295

16,890
5,297

453,643

9,428

50,601

9,742

32,503

11,513

36,187

53,340

146,533

4,350

7,474

69,785

22,186

316,526
12,941

35,312
1,280

49,260
523

9,551
1,449

17,393
558

42,636
2,080

18,506
2,328

44,771
622

18,436
671

11,816
1,230

21,479
35

16,870
855

30,497
1,311

329,467

36,591

49,783

11,000

17,951

44,716

20,834

45,392

19,107

13,046

21,514

17,725

31,808

124,176

-27,164

819

-1,258

14,553

-33,203

15,353

7,948

127,425

-8,696

— 14,040

52,060

-9,621

Net earnings before payments to U.S. Treasury. . 604,470,670 30,751,033 159,921,062 35,228,608 53,016,364 37,772,183 28,913,937 109,334,351 22,578,070 10,712,236 24,968,416 22,326,80068,947,610
Paid U.S. Treasury (interest
5,551 33,129,772 24,584,472 95,789,048 19,675,908 9,212,206 21,696,020 18,620,110 59,832,314
on F. R. notes)
524,058,650 26,710,224 138,349,233 30,540,793 45,918
715,956
961,325 1,052,929 2,902,076
Dividends paid
21,197,452 1,073,009 6,199,722 1,294,403 1,995,760
861,731 1,196,810 2,467,275
476,455
Transferred to surplus (Sec.
59,214,569 2,967,800 15,372,107 3,393,412 5,102,053 3,681,086 3,276,536 10,643,227 2,186,206 1,023,576 2,410,665 2,509,879 6,648,022
Surplus (Sec. 7) Jan. 1.'.' .''. '. 809,197,680 47,012,677 223,963,199 55,922 ,772 71,550,353 41,236,411 36,192,075 121,503,625 31,586,344 19,696,549 30,532,901 40,871,083 89,129,690
Transferred from surplus
5,491
(Sec. 13b)
11,682 -26,515
64,874
-8,674
55,337 -17,089
135,411 -433,413
-9,906 -71,517
-3,657
290,661
Surplus (Sec. 7) Dec. 31

868,408,591 50,115,888 238,901,893 59,606,846 76,642,500 44,845,980 39,474,103 132,158,534 33,746,035 20,785,000 32,934,892 43,436,29995,760,623

NOTE.—Details may not add to totals because of rounding.




NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-58

Current
earnings

Bank and period

All Federal Reserve
Banks, by years:
1914-15
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949




$

Current
expenses

Net earnings
before payments to
U. S. Treasury1

Dividends
paid

Franchise tax
paid to U. S.
Treasury

Paid to U. S.
Treasury
(Sec. 13b)

2,173,252 $ 2,320,586 $
-141,459 $
217,463
5,217,998
2,273,999
2,750,998
1,742,774
16,128,339
5,159,727
9,582,067
6,804,186 $ 1,134,234
67,584,417
10,959,533
52,716,310
5,540,684
102,380,583
19,339,633
78,367,504
5,011,832
2,703,894
181,296,711
149,294,774
28,258,030
60,724,742
5,654,018
122,865,866
34,463,845
59,974,466
82,087,225
6,119,673
50,498,699
29,559,049
10,850,605
16,497,736
6,307,035
50,708,566
29,764,173
3,613,056
12,711,286
6,552,717
38,340,449
28,431,126
113,646
3,718,180
6,682,496
41,800,706
27,528,163
9,449,066
59,300
6,915,958
47,599,595
27,350,182
818,150
16,611,745
7,329,169
43,024,484
27,518,443
249,591
13,048,249
7,754,539
64,052,860
26,904,810
2,584,659
32,122,021
8,458,463
70,955,496
29,691,113
4,283,231
36,402,741
9,583,913
36,424,044
28,342,726
7,988,182
17,308
10,268 598
29,701,279
27,040,664
2,972,066
10,029,760
50,018,817
26,291,381
2,011,418
22,314,244
9,282,244
49,487,318
29,222,837
7,957,407
8,874,262
48,902,813
29,241,396
15,231,409
8,781 661
42,751,959
31,577,443
9,437,758
8,504,974
$
37,900,639
29,874,023
8,512 433
7 829 581
41,233,135
28,800,614
10,801,247
7,940,966
36,261,428
28,911,608
9,581,954
8,019,137
38,500,665
28,646,855
12,243,365
8,110,462
43,537,805
29,165,477
25,860,025
8,214,971
32,963,150
41,380,095
9,137,581
8,429,936
52,662,704
38,624,044
12,470,451
8,669 076
69,305,715
43,545,564
49,528,433
8,911,342
104,391,829
49,175,921
58,437,788
9,500,126
48,717,271
142,209,546
10,182,851
92,662,268
150,385,033
57,235,107
92,523,935
10,962,160
65,392,975
158,655,566
95,235,592
11,523,047
304,160,818
72,710,188
197,132,683
11,919,809
316,536,930
77,477,676
226,936,980
12,329,373

Paid to U. S.
Treasury
(interest on
F. R. notes)

Transferred
to surplus
(Sec. 13b)

Transferred
to surplus
(Sec. 7)

$

1,134,234
48 334 341
70 651 778
82 916
15 993
—659
2 545
—3 077
2 473
8 464
5 044
21 078
22,535

$

297,667
227 448
176,625
119,524
24,579
82,152
141,465
197 672
244,726
326 717
247 659
67,054
35,605 $ 75,223,818
166 690 356
193,145,837

_60 323

014
086
904
513
962
808
426
119
899
597

—2 297
—7 057
11 020
—916
6 510

724
694
582
855
071

27,695
102 880
67,304
—419,140
-425,653

607,422
352 524
2,616,352
1 862 433
4,533,977

-54,456
—4 333
49 602
135,003
201 150

17,617,358
570 513
3 554 101
40 237 362
48 409 795

262 133
27 708
86,772

81 969 625
81 467 013
8,366,350
18 522 518
21,461,770

1950
1951
1952
1953
1954

275,838,994
394,656,072
456,060,260
513,037,237
438,486,040

80,571,771
95,469,086
104,694,091
113,515,020
109,732,931

231,561,340
297,059,097
352,950,157
398,463,224
328,619,468

13,082,992
13,864,750
14,681,788
15,558,377
16,442,236

196,628,858
254,873,588
291,934,634
342,567,985
276,289,457

21,849,490
28,320,759
46,333,735
40,336,862
35,887,775

1955
1956
1957
1958

412,487,931
595,649,092
763,347,530
742,068,150

110,060,023
121,182,496
131,814,003
137,721,655

302,162,452
474,443,160
624,392,613
604,470,670

17,711,937
18,904,897
20,080,527
21,197,452

251,740,721
401,555,581
542,708,405
524,058,650

32,709,794
53,982,682
61,603,682
59,214,569

Total 1914-58... 7,290,667,465 2,137,240,408 5,096,306,434

430,484,212

149,138,300

152,423,577
296,775,403
478,460,584 1,381,677,841
143,402,176
336,825,931
197,099,010
454,540,038
140,092,135
293,740,235
118,543,553
251,612,569
299,672,903
829,293,388
117,440,862
211,215,314
72,211,504
127,580,626
115,323,102
213,462,848
97,073,850
194,268,704
205,497,152
505,313,536

27,237,886
141,938,107
34,963,745
42,423,567
18,550,484
16,810,537
52,729,477
14,862,779
10,088,105
15,279,567
16,991,022
38,608,934

7,111,395
68,006,262
5,558,901
4,842,447
6,200,189
8,950,561
25,313,526
2,755,629
5,202,900
6,939,100
560,049
7,697,341

7,290,667,465 2,137,240,408 5,096,306,434

430,484,212

149,138,300

Aggregate for each
Federal Reserve Bank,
1914-58:
Boston
451,967,149
New York
1,864,727,623
481,030,355
Philadelphia
658,534,350
Cleveland
437,868,817
Richmond
375,948,311
Atlanta
1,140,290,111
Chicago
334,241,001
St. Louis
201,789,760
Minneapolis
332,667,298
Kansas City
294,935,811
Dallas. .
716,666,880
San Francisco
Total
B
1
2

2

2,188,893 3,517,417,892

B-3,657

201,799,152
895,639,303
221,353,150
317,324,708
218,162,797
181,026,072
603,600,369
154,750,293
87,506,923
154,113,800
128,846,435
353,294,890

B+135,411

B-17,089

60,210,713
276,158,464
73,937,068
89,876,293
50,725,788
44,740,643
147,487,288
38,865,663
24,662,213
37,074,842
47,713,777
105,628,040

2,188,893 3,517,417,892

B-3,657

997,080,793

280,843
369,116
722,406
82,930
172,493
79,264
151,045
7,464
55,615
64,213
102,083
101,421

-433,413
+290,661
B—9,906
B-71,517

+5,491
B+11,682
B-26,515

B+64,874
-8,674
B+55,337

997,O8O,793

Revised.
Current earnings less current expenses, plus and minus profit and loss additions and deductions.
The $997,080,793 transferred to surplus was reduced by direct charges of $139,299,557 for contributions to capital of the Federal Deposit Insurance Corporation, $500,000
for charge-off on bank premises and $3,657 net upon elimination of surplus (Sec. 13b), and was increased by $11,131,013 transferred from reserves for contingencies, leaving a
balance of $868,408,591 on Dec. 31, 1958.
NOTE.—Details may not add to totals because of rounding.




NO. 8—MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—END OF YEAR 1918-58 AND END OF MONTH 1958
[In millions of dollars]

Reserve Bank credit outstanding

End of
year or
month

U.S. Government
securities

Total

DisAll
Held counts
under and Float other*
Bought repuradoutchase vances
right
agreement
239
300

1918.. .
1919...

I-*
»-*
00

239
300

1920.. .
1921.. .
1922. . .
1923...
1924...

287
234
436
134
540

1925...
1926. . .
1927. . .
1928. . .
1929...

375
315
617
228
511

1930.. .
1931.. .
1932...
1933.. .
1934...

729
817
1,855
2,437
2,430

686
775
1,851
2,435
2,430

43
42
4
2

1935...
1936...
1937.. .
1938.. .
1939...

2,431
2,430
2,564
2,564
2,484

2,430
2,430
2,564
2,564
2,484

1

1940.. . 2,184
1 9 4 1 . . . 2,254
1 9 4 2 . . . 6,189
1 9 4 3 . . . 11,543
1944.. . 18,846

2,184
2,254
6,189
11,543
18,846

1,766
2,215
287
2,687
234
1,144
436
618
80 ' " 5 4 '
723
536
320
4
367
8
643
312
637
3
560
582
57
197
31 1,056
632
488
23




199
201

Total

Gold
stock2

Deposits, other than
member bank reserves,
with F. R. Banks

Treasury
currency
outstanding8

Currency
in
circulation

Treasury
cash
holdings4

ForTreaseign
Other
ury
deposits deposits deposits

Other
Federal
Reserve
accounts 5

Member bank
reserves

Total

2,498
3,292

2,873
2,707

1,795
1,707

4,951
5,091

288
385

51
31

96
73

25
28

118
208

L.636
L,890

119
40
78
27
52

294
575
262
146
273
355
390

3,355
1,563
1,405
1,238
1,302

2,639
3,373
3,642
3,957
4,212

1,709
1,842
1,958
2,009
2,025

5,325
4,403
4,530
4,757
4,760

218
214
225
213
211

57
96
11
38
51

5
12
3
4
19

18
15
26
19
20

298
285
276
275
258

1,781
L,753
L,934
L,898
2,220

63
45
63
24
34

378
384
393
500
405

1,459
1,381
1,655
1,809
1,583

4,112
4,205
4,092
3,854
3,997

1,977
1,991
2,006
2,012
2,022

4,817
4,808
4,716
4,686
4,578

203
201
208
202
216

16
17
18
23
29

8
46
5
6
6

21
19
21
21
24

272
293
301
348
393

251
638
235
98
7

21
20
14
15
5

372
378
41
137
21

1,373
1,853
2,145
2,688
2,463

4,306
4,173
4,226
4,036
8,238

2,027
2,035
2,204
2,303
2,511

4,603
5,360
5,388
5,519
5,536

211
222
272
284
3,029

19
54
8
3
121

6
79
19
4
20

22
31
24
128
169

5
3
10
4
7

12
39
19
17
91

38
28
19
16
11

2,486
2,500
2,612
2,601
2,593

10,125
11,258
12,760
14,512
17,644

2,476
2,532
2,637
2,798
2,963

5,882
6,543
6,550
6,856
7,598

2,566
2,376
3,619
2,706
2,409

544
244
142
923
634

29
99
172
199
397

3
3
6
5
80

80
94
471
681
815

8
10
14
10
4

2,274
2,361
6,679
12,239
19,745

21,995
22,737
22,726
21,938
20,619

3,087
3,247
3,648
4,094
4,131

8,732
11,160
15,410
20,449
25,307

2,213
2,215
2,193
2,303
2,375

368
867
799
579
440

1,133
774
793
1,360
1,204

Required 6

Excess8

1,585
1,822

51
68

1,654

99

1,884
2,161

14
59

2,212
2,194
2,487
2,389
2,355

2,256
2,250
2,424
2,430
2,428

-44
-56
63
-41
-73

375
354
355
360
241

2,471
L.961
2,509
2,729
11,096

2,375
1,994
1,933
1,870
2,282

96
-33
576
859
1,814

226
160
235
242
256

253
261
263
260
251

5,587
3,606
1,027
I5,724
11
L,653

2,743
4,622
5,815
5,519
6,444

2,844
1,984
1,212
3,205
5,209

599
586
485
356
394

284
291
256
339
402

V t,026
12>,450
i: 5,117
i: ',886
Ut,373

7,411
9,365
11,129
11,650
12,748

6,615
3,085
1,988
1,236
1,625

1945.. . 24,262
1946... 23,350
1947.. . 22,559
1948. . .
23,333
1949. .. 18,885
1950... 20,778
1951. . .
23,801
1952. . .
24,697
1953. . .
25,916
1954.. . 24,932

20,725
23,605
24,034
25,318
24,888

1955. . .24,785
1956. . .
24,915
1957. . .24,238

24,391
24,610
23,719

1958—
Jan..
Feb. ,
Mar.,
Apr.
May,
June
July.
Aug.,
Sep..
Oct..
Nov.,
Dec.,

23,331
23,240
23,628
23,681
24,162
25,438
24,480
25,346
24,986
25,373
26,069
26,252

578
580
535
541
534

2
1
1
1
2

25,091
24,093
23,181
24,097
19,499

20,065
20,529
22,754
24,244
24,427

4,339
4,562
4,562
4,589
4,598

28,515
28,952
28,868
28,224
27,600

2,287
2,272
1,336
1,325
1,312

977
393
870
1,123
821

862
508
392
642
767

446
314
569
547
750

495
607
563
590
706

15,915
16,139
17,899
20,479
16,568

14,457
15,577
16,400
19,277
15,550

1,458
562
1,499
1,202
1,018

53
196
663
598
44

67 1,368
19 1,184
156
967
28
935
143
808

3
5
4
2
1

22,216
25,009
25,825
26,880
25,885

22,706
22,695
23,187
22,030
21,713

4,636
4,709
4,812
4,894
4,985

27,741
29,206
30,433
30,781
30,509

1,293
1,270
1,270
761
796

668
247
389
346
563

895
526
550
423
490

565
363
455
493
441

714
746
777
839
907

17,681
20,056
19,950
20,160
18,876

16,509
19,667
20,520
19,397
18,618

1,172
389
-570
763
258

394
305
519

108 1,585
50 1,665
55 1,424

29
70
66

26,507
26,699
25,784

21,690
21,949
22,781

5,008
5,066
5,146

31,158
31,790
31,834

767
775
761

394
441
481

402
322
356

554
426
246

925
901
998

19,005
19,059
19,034

18,903
19,089
19,091

102
-30
-57

70
160
95

217
763
122
924
137
765
156
797
965
144
758
41
868
94
805
555
860
255
788
407
1,026
717
64 1,296

24,352
24,330
24,570
24,672
25,313
26,283
25,477
26,739
26,130
26,675
28,006
27,755

22,784
22,686
22,394
21,996
21,594
21,356
21,210
21,011
20,874
20,690
20,609
20,534

,158
,169
,183
,196
,201
,203
,207
5,211
5,219
5,222
5,228
5,234

30,576
30,554
30,666
30,565
30,994
31,172
31,171
31,371
31,245
31,386
32,036
32,193

771
695
722
734
703
692
685
684
684
674
694
683

469
516
474
594
382
410
617
540
371
363
424
358

249
265
266
257
234
269
288
313
258
288
226
272

279
336
378
411
624
420
329
332
395
335
430
391

990
,151
,108
,050
994
,096
,039
,184
,122
,079
,038
,122

18,958
18,667
18,532
18,254
18,176
18,784
17,764
18,538
18,147
18,462
18,994
18,504

18,543
18,186
17,857
17,686
17,543
18,158
17,801
17,860
17,785
18,009
18,217
18,574

415
481
675
568
633
626
-37
678
362
453
777
-70

24,262
23,350
22,559
23,333
18,885

23,331
23,240
23,628
23,681
24,162
25,438
24,480
25,346
24,986
25,443
26,229
26,347

1
2
8

249
163
85
223
78

Comprises acceptances and industrial loans.
Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation.
The stock of currency, other than gold, for which the Treasury is primarily responsible—silver bullion at monetary value and standard silver dollars, subsidiary silver
and minor coin, and United States notes; also, Federal Reserve Bank notes and national bank notes for the retirement of which lawful money has been deposited with the Treasurer of the United States. Includes currency of these kinds held in the Treasury and the Federal Reserve Banks as well as that in circulation.
4
Gold other than that held against gold certificates and gold certificate credits, including the reserve against United States notes and Treasury notes of 1890, monetary
silver other than that held against silver certificates and Treasury notes of 1890, and the following coin and paper currency held in the Treasury: subsidiary silver and minor
coin,5United States notes, Federal Reserve notes, Federal Reserve Bank notes, and national bank notes.
The total of Federal Reserve Bank capital paid in, surplus, other capital accounts, and other liabilities and accrued dividends, less the sum of bank premises and other
assets.
8
These figures are estimated. Available only on call dates prior to 1929 (in 1920 and 1922, the call dates were December 29).
NOTE.—For description of figures and discussion of their significance, see Banking and Monetary Statistics, Sec. 10, pp. 360-66.




NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES
DECEMBER 31, 1958
Cost
Federal Reserve Bank or
branch

Net
book value

Land

Building
(including
vault) 1

Fixed machinery and
equipment

Total

,

$1,628,132

$5,929,169

$2,977,084

$10,534,385

$4,704,692

,
,

5,215,656
592,679
401,864

12,183,528
1,661,680
2,519,310

4,886,521
562,181
1,559,393

22,285,705
2,816,540
4,480,567

4,951,992
1,018,051
4,343,016

Philadelphia

1,884,357

4,839,506

2,130,561

8,854,424

4,245,333

Cleveland
Cincinnati
Pittsburgh

1,295,490
400,891
1,189,941

6,566,360
1,573,005
4,954,701

2,990,665
999,107
689,889

10,852,515
2,973,003
6,834,531

2,633,805
1,628,337
5,170,002

469,944
250,487
117,479

4,269,441
2,009,381
1,065,485

2,094,952
1,062,747
607,294

6,834,337
3,322,615
1,790,258

2,896,937
2,298,981
1,458,549

633,387
93,931
328,997
164,004
422,577
277,078

1,722,115
137,100
2,715,054
1,686,250
2,384,089
762,456

362,731
103,867
70,511
694,291

1,145,991
311,989
2,698,473
1,935,304

265,700

2,718,233
334,898
3,114,562
2,544,545
2,806,666
1,305,234

6,019,757
1,147,734

9,983,797
2,837,712

2,743,155
1,214,162

18,746,709
5,199,608

8,264,886
3,558,749

1,675,780
85,007
523,353
128,542

3,225,466
264,604
2,859,819
287,469

1,994,738
194,115
1,003,708
152,627

6,895,984
543,726
4,386,880
568,638

2,095,991
180,911
4,314,491
270,813

Minneapolis.. .
Helena

600,521
15,709

4,579,206
126,401

2,404,514
62,977

7,584,241
205,087

5,107,518
85,373

Kansas City...
Denver
Oklahoma City
Omaha

545,764
592,271
65,021
445,663

3,521,181
523,041
421,252
1,491,117

1,316,319
86,910
97,588
718,041

5,383,264
1,202,222
583,861
2,654,821

1,363,967
765,516
166,294
2,503,399

Dallas
El Paso
Houston
San Antonio...

686,243
262,477
629,768
448,596

2,019,797
787,728
2,218,557
1,400,390

466,692
393,301
570,847

3,172,732
1,443,506
2,848,325
2,419,833

1,373,037
1,388,422
2,775,083
2,249,906

San Francisco.
Annex
Los Angeles. . .
Portland
Salt Lake City.
Seattle

476,768
247,201
736,867
207,380
555,723
274,772

3,783,530
124,000
4,074,380
1,678,512
2,428,860
1,891,564

1,458,028
30,000
1,491,100
630,920
84,814
642,240

5,718,326
401,201
6,302,347
2,516,812
3,069,397
2,808,576

1,370,460
401,201
4,304,320
1,775,735
2,684,807
1,992,134

31,737,811 107,507,013

39,814,290

179,059,114

93,636,449

Boston
New York
Annex
Buffalo

Richmond
Baltimore
Charlotte

,

Atlanta
Annex
Birmingham
Jacksonville.. .
Nashville
New Orleans. .
Chicago
Detroit
St. Louis
Little Rock
Louisville
Memphis

Total.. .

2,806,666

395,318

OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES
Buffalo
Richmond
New Orleans
Kansas City
Oklahoma City
Houston
Los Angeles

Total

255,000
146,550

465,707

497,850
78,812
40,747

317,336
29,464

112,111

2,166,228

812,507

112,111

2
751,O5O
2
396,219
2

720,707
146,550
751,050
396,219
497,850
508,259
70,211

333,431
146,550
751,050
396,219
497,850
101,416
70,211

3,090,846

2,296,727

1
Includes expenditures incident to construction programs carried in unallocated accounts pending
completion of programs and subsequent allocation of costs to appropriate accounts.
2
Includes cost of building on property.




120

NO. 10—NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS
[December 31, 1958]

Boston
New York
Philadelphia.
Cleveland

Total
1

.

Number

.

.

Includes 697 part-time employees.




....

...

23

61
25
37

$323,500
1,091,750
333,000
509,056

1,284
3,774
1,002
1,598

$4,917,528
17,210,537
4,232,403
6,777,823

1,308
3,836
1,028
1,636

$5,276,028
18,362,287
4,595,403
7,321,879

35,000
35,000
50,000
35,000

...

Number

$35,000
60,000
30,000
35,000
.

Minneapolis
Kansas City.
Dallas
San Francisco

Total

Annual salary

..

Richmond
Atlanta
Chicago
St. Louis

Employees 1

Other officers

President

Federal Reserve Bank
(including branches)

35
37
41
32

459,400
473,400
592,950
413,900

1,350
1,382
2,792
1,106

5,132,649
5,004,215
11,962,093
4,357,352

1,386
1,420
2,834
1,139

5,627,049
5,512,615
12,605,043
4,806,252

35,000
35,000
35,000
35,000

22
33

631

1,043
987
1,932

2,413,878
4,025,473
3,729,064
7,909,486

654

29
39

283,750
439,400
368,900
482,000

1,077
1,017
1,972

2,732,628
4,499,873
4,132,964
8,426,486

$455,000

414

$5,771,006

18,881

$77,672,501

19,307

$83,898,507

Annual salaries

Number

Annual salaries

Annual salaries

NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES
In effect December 31, 1958. For changes during the year, see "Record of Policy Actions of Board of Governors.'*
[Per cent per annum]

Type of transaction

Boston

Discounts for and advances to member banks:
Advances secured by Government obligations and discounts of and advances secured by eligible paper
(Sees. 13 and 13a of the Federal Reserve Act)
Other secured advances (Sec. 10(b) of the Federal
Reserve Act)

New
York

Philadelphia

Cleveland

2Y2

2Y2

3

3

Richmond

Chicago

2Y2

2Y2

2Y2

2Y2

3

3

3

Discounts for and purchases from financing institutions
under Sec. 13b of the Federal Reserve Act:
On portion for which institution is obligated
On remaining portion
Commitments to make loans under Sec. 13b of the Federal
Reserve Act:
To industrial or commercial businesses
To financing institutions
1
2
3
4
5

3Y2

4-6

4-6

4-6

0
(3)

Y2-IY2
Y2-W2

Minneapolis

Kansas
City

Dallas

2Y2

2Y2

2Y2

2Y2

3

3

3

4-6

4r-6

4-6

3

Advances to individuals, partnerships, or corporations
other than member banks secured by direct obligations
of the United States (last paragraph of Sec. 13 of the
Federal Reserve Act)
Loans to industrial or commercial businesses under Sec.
13b of the Federal Reserve Act, direct or in participation
with financing institutions
3V2-6

St.
Louis

Atlanta

4-1}

4n

3^-5^

0)
(3)

0)

Y2-1}

San
Francisco

3

2%-SM

}4
3Y2-6

4-6
4-6
4-6

0)
(3)

(*)
(8)

0)
(8)

4-1}
4-1}

4-1}

4-1}
4-1}

Y2-1Y2
Y2-1Y2

Y2-1Y2
Y2-1Y2

Rate charged borrower by financing institution less commitment rate.
Rate charged borrower but not to exceed 1 per cent above the discount rate.
Rate charged borrower.
Twenty-five per cent of loan rate on disbursed portion; }4 per cent per annum on undisbursed portion.
Rate on disbursed portion; M per cent per annum on undisbursed portion of loan.
NOTE.—Maximum maturities. Discounts for and advances to member banks: 90 days for discounts and advances under Sections 13 and 13a of the Federal Reserve Act
except that discounts of certain bankers' acceptances and of agricultural paper may have maturities not exceeding 6 months and 9 months, respectively, and advances secured
by obligations of Federal intermediate credit banks maturing within 6 months are limited to maximum maturities of 15 days; 4 months for advances under Section 10(b).
Advances to individuals, partnerships, or corporations under the last paragraph of Section 13: 90 days. Industrial loans and commitments under Section 13b: 5 years.




NO. 12—MEMBER BANK RESERVE REQUIREMENTS
[Per cent of deposits]
Net demand deposits1
Effective date of change

1917—June 21
1936—Aug.
1937—Mar.
May
1938—Apr.

16
1
1
16

Central
reserve
city banks

Reserve
city banks

Time deposits

Country
banks

13

10

193^
22M
26
22M

15
17^
20
173^
20

22
21
20
19K
19
183^
18
19
20
19

13
14
13

18

12

1941—Nov. 1
1942—Aug. 20
Sept. 14
Oct. 3

26
24
22
20

1948—Feb. 27
June 11
Sept. 16, 24*
1949—May 1,5*
June 30, July 1*
Aug. 1, 11*
Aug. 16, 18*
Aug. 25
Sept. 1
1951—Jan. 11. 16*
Jan. 25, Feb. 1*
1953—July 1,9*
1954—June 16, 24*
July 29, Aug. 1*

22
24
26
24
""23y2""
23
22y2
22
23
24
22
21
20

1958—Feb. 27, Mar. 1*
Mar. 20, Apr. 1*
Apr. 17
Apr. 24

19^
19
183^
18

In effect Jan. 1, 1959

13
26

Country
banks

3

3

ioy2
12M
14
12

4^
5M
6
5

±y2
6
5

14

6

6

16
15
14
13
12

18

Present legal requirements:
Minimum
Maximum

7

Central
reserve and
reserve city
banks

7^

7H

6
5

6
5

6

6

5

5

11

5

5

7
14

3
6

3
6

113^
11

ioy2

10
20

1
Demand de*.
eposits subject to reserve requirements which, beginning Aug. 23, 1935, have been total
demand deposits minus cash items in process of collection and demand balances due from domestic
deposit
banks (also minus war loan and Series E bond accounts during the period Apr. 13, 1943-June 30, 1947).
* First-of-month or midmonth dates are changes at country banks, and other dates (usually Thurs.)
are at central reserve or reserve city banks.

NO. 13—MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS 1
[Per cent per annum]

Type of deposit

Nov. 1, 1933—
Jan. 31, 1935

Feb. 1, 1935—
Dec. 31, 1935

Savings deposits

Jan. 1, 1936—
Dec. 31, 1956

Effective
Jan. 1, 1957

23^

Postal savings deposits.
Other time deposits payable:
In 6 months or more
In 90 days to 6 months.
In less than 90 d a y s . . . .
i Maximum permissible rates for member banks established by Board of Governors in Regulation Q
which provides that rate paid by a member bank may not exceed maximum rate payable by State
banks or trust companies on like deposits under laws of State in which member bank is located Since
Feb. 1, 1936, maximum rates established by Federal Deposit Insurance Corporation for insured nonmember banks, under authority of the Banking Act of 1935, have been the same as those in effect for
member banks.




123

NO. 14—MARGIN REQUIREMENTS*
Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities
Exchange Act of 1934
[Per cent of market value]
Jan. 17,
1951Feb. 20,
1953
Regulation T:
For extension of credit
by brokers and
dealers on listed securities
For short sales
Regulation U:
For loans by banks on
stocks

Feb. 20,
1953Jan. 4,
1955

1955Apr. 22,
1955

Jan. 4,

Apr. 23,
1955Jan. 15,
1958

Jan. 16,
1958Aug. 4,
1958

Aug. 5,
1958Oct. 15,
1958

Effective
Oct. 16,
1958

75
75

50
50

60
60

70
70

50
50

70
70

90
90

75

50

60

70

50

70

90

1
Regulations T and U limit the amount of credit that may be extended on a security by prescribing a maximum loan value, which is a specified percentage of its market value at the time of the
extension; the "margin requirements" shown in this table are the difference between the market
value (100 per cent) and the maximum loan value. Changes on Feb. 20, 1953 and Jan. 4, 1955 were
effective after the close of business on these dates.
NOTE.—For earlier data, see Banking and Monetary Statistics, Table 145, p. 504, and Annual
Report of the Board of Governors for 1948, p. 77, and for 1953, p. 76.

NO. 15—FEES AND RATES ESTABLISHED UNDER REGULATION V ON LOANS
GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950
[In effect December 31, 1958]
Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan
Guarantee fee
(percentage of
interest payable
by borrower)

70 or less...
75
80

85
90
95

Over 9 5 . . .

Percentage of
any commitment
fee charged
borrower

10
15
20
25
30
35
40-50

Percentage of loan guaranteed

10
15
20
25
30
35
40-50

Maximum Rates Financing Institution May Charge Borrower
[Per cent per annum]

Interest rate
Commitment rate.




124

NO* 16—PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF ALL BANKS, BY CLASSES, DECEMBER 31, 1958 AND 19571
[In millions of dollars]
Mutual savings banks

Commercial banks
All
banks

Item

Member banks

Total2
Total

National

State

Insured
nonmember

Noninsured

Total

Insured

Noninsured

28,980
19,180
9,800
5,215
4,585

7,341
4,177
3,163
2,050
1,113

December 31, 1958
Loans and investments, total .
Investments
U. S. Govt. obligations . .
Other securities
. ..
Cash assets
Deposits, total
Other demand
Other time
Total capital accounts
Number of banks..

...

221,485
121,571
99,914
73,641
26,273
49,911
250,057
18,174
134,385
97,498
21,705

185,165
98,214
86,951
66,376
20,575
48,990
216,017
18,171
134,353
63,493
18,486

154,865
84,061
70,804
54,299
16,504
43,188
182,816
17,414
114,270
51,132
15,460

99,277
52,627
46,650
35,714
10,936
26,781
116,714
9,802
72,100
34,812
9,643

55,588
31,435
24,153
18,585
5,568
16,407
66,102
7,612
42,170
16,320
5,817

28,759
13,682
15,077
11,381
3,696
5,504
31,696

1,568
484
1,084
707
377
301

36,320
23,357
12,963
7,265
5,698
921

752

169

1,532

34,040

27,277

6,763

448

309
898

3
32

2
31

325
332

34,006
3,219

27,243
2,473

6,762
746

14,020

13,501

6,312

4,578

1,734

6,793

399

519

241

278

19,185
12,063
2,696

1

December 31, 1957
Loans and investments, total..
Loans
...
Investments
U. S. Govt. obligations.. .
Other securities
Cash assets

203,849
115,115
88,734
65,792
22,943
49,318

170,068
93,899
76,169
58,239
17,930
48,428

142,353
80,950
61,403
47,079
14,324
42,746

91,201
50,350
40,851
31,234
9,617
26,786

51,152
30,600
20,552
15,846
4,707
15,960

26,268
12,493
13,775
10,512
3,264
5,383

1,473
468
1,004
660
345
301

33,782
21,216
12,565
7,552
5,013
890

26,535
17,194
9,341
5,404
3,937
719

7,246
4,022
3,224
2,148
1,076
171

Deposits, total
Interbank.
Other demand... .
Other time
Total capital accounts

233,020
17,022
127,895
88,102
20,428

201,326
17,021
127,865
56,440
17,368

170,637
16,328
109,018
45,290
14,554

109,091
9,475
68,712
30,904
9,070

61,545
6,853
40,306
14,386
5,483

29,266
425
17,968
10,873
2,500

1,449
268
879
303
317

31,695
2
31
31,662
3,059

25,022
2
29
24,991
2,309

6,672

14,090

13,568

6,393

4,620

1,773

6,753

425

522

239

283

Number of banks
1
2

....

All banks in the United States, and one in Alaska and one in the Virgin Islands that became national members in 1954 and 1957 respectively.
Total for commercial banks excludes three member mutual savings banks.




1

6,671
751

NO. 17—MEMBER BANK EARNINGS, BY CLASS OF BANK, 1958 AND 1957
[Dollar amounts in millions]
Central reserve city banks
Total

Reserve
city banks
New York

Item
1958

1957

1958

1957

Earnings
$7,127 $6,771 $1,164 $1,136
On U. S. Govt. securi170
137
ties
1,266 1,168
47
411
61
339
On other securities
727
699
On loans
4,326 4,208
234
All other
225
1,123 1,056

Country
banks

Chicago
1958
$272

1957

1958

1957

1958

1957

$274 $2,835 $2,664 $2,856 $2,697

58
17
157
40

46
15
172
41

560
183

558
149

1,759 1,694 1,712

1,615

478
151
447

426
128
415

401

374

4,617 4,222
Salaries and wages
1,981 1,877
927
Interest on d e p o s i t s . . . . 1,123
All other
1,512 1,418

636
300
110
227

592
293
80
220

142
68
25
49

136
65
23
49

1,823 1,666 2,016 1,827
777
474
572

731
398
537

836
515
664

788
427
613

Net current earnings
before income taxes. . 2,510 2,549

Expenses

528

544

130

137

1,012

998

840

870

754
315

160
468

112
25

24
97

55
21

11
25

325
113

61
166

262
157

64
180

342

177

39

29

25

30

171

43

108

75

Profits before income
2 606 2,063
taxes
895
Taxes on net income. . . 1,148

576
276

442
209

140
69

93
41

1 053

849

490

385

837
313

679
260

1,457 1,169

300

233

71

53

563

464

524

419

646

604

160

152

26

24

258

242

202

186

16.6
1.32

18.1
1.42

9.7
.77

8.3
.65

9.3
.88

7.8
.73

9.9
.82

7.9
.64

2.45
5.35

2.53
5.32

2.39
4.40

2.46
4.54

2.37
4.47

2.36
4.56

Recoveries and profits1. . .
Losses and charge-offs2. . .
Net addition to valuation reserves

Net profits
Gash dividends declared3
(Per cent)
Ratios:
Net current earnings
before income taxes
toAverage total capital accounts
Average total assets..
Net profits to—
Average total capital accounts
Average total assets..
Average return on U. S.
Govt. securities
Average return on loans. .
1
2
8

16.4 18.2
1.55 1.70

Includes recoveries credited to valuation reserves.
Includes losses charged to valuation reserves.
Includes interest on capital notes and debentures.




126

18.4 20.6 18.1 19.2
1.51 1.65
1.35 1.42

15.0 16.5
1.16 1.26

.75

8.9
.66

9 4

8 0

2.45
5.39

2.53
5.30

2.49
5.94

2.57
5.91

10 1

.72

.61

NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 19581
Commercial and stock savings banks
and nondeposit trust companies
All
banks

Member
banks
Total

Number of banks, Dec. 31,1957R 14,090 13,568
Changes during 1958
New b a n k s '
Suspensions
Consolidations and absorptions:
Banks converted into branches.
Other
Liquidations:4
Voluntary
Other
Conversions:
National into State
.
...
State into national
Federal Reserve Membership: 5
Admissions of State banks
Withdrawals of State banks
Federal Deposit insurance: 6
Admissions of State banks
Net increase or decrease

+97
-8

-129
-25
-4
-1

Mutual
savings
banks

Nonmember
banks

National 1

State
member 2

Insured

4,620

1,773

6,753

425

+19

+2

+63

+13

-25
-5

-43
-10

-2
-1

+97
-8

-1

-126
-25

-56
-9

2

—3

-4
-1

NonIninsured 2
sured 2
239

Noninsured
283

-3

-i

-1

—1

+6

-3

+1
-3

+7

-6

-1

-42

-39

+15
+28
+40

-28
-26

+5
+2

-5

Number of banks, Dec. 31,1958 14,020 13,501 4,578

1,734

6,793

399

241

278

Number of branches and additional offices, Dec. 31,1957 7 . . 8,373 7,968 3,993

2,173

1,765

37

296

109

Changes during 1958
De novo branches
Banks converted into branches.. .
Discontinued
Interclass changes—net ^
Net increase

+113
+39
-12
+47
+ 187

+120
+20
-2
-30
+108

+1
+1

+14
+3
y

+13

-15
-70

+567
+129
-31
+665

-67

+306
+66
-16
+9
-8
+645 +348

+540
+126
-30

Number of branches and additional offices, Dec. 31,1958 7 .. 9,038 8,613
Number of banking facilities,
Dec. 31, 1957 9
Changes during 1958
Established
Discontinued
Interclass change
Net increase
...
Number of banking facilities,
Dec 31 1958 9

+9
4,341

2,360

1,873

c

-2

+ 11
120

39
305

236

236

185

27

24

+ 15
-3

+ 15
-3

+11
-3

+2

+12

+12

+8

+2
+1
+3

248

248

193

30

25

R
1

-1

+1

Revised.
Excludes banks and branches in United States territories and possessions except one national
bank in Alaska with no branches, and one in the Virgin Islands with one branch.
2
State member bank figures and insured mutual savings bank figures both include 3 member mutual
savings banks, not included in the total for "commercial banks." State member bank figures also
include one noninsured trust company without deposits.
8
Exclusive of new banks organized to succeed operating banks.
4
Exclusive of liquidations incident to the succession, conversion, and absorption of banks.
5
Exclusive of conversions of State member banks into national banks.
6
Exclusive of insured nonmember banks converted into national banks or admitted to Federal
Reserve membership, and vice versa.
7
Except banking facilities which are shown separately; see note 9.
8
For details of interclass branch changes, see Federal Reserve Bulletin, February 1959.
9
Banking facilities (other than branches) that are provided at military and other Government
establishments through arrangements made by the Treasury Department.




127

NO. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT
ON PAR LIST, DECEMBER 31, 19581
On par list

Total 2
Federal
Reserve District, State,
or other area
DISTRICT
Boston
New York 2 .. .
Philadelphia..
Cleveland....
Richmond....
Atlanta
Chicago
St. Louis
Minneapolis. .
Kansas City..
Dallas
San Francisco2

Member

Total

Not on par list
(nonmember)

Nonmember

Banks Branches Banks Branches Banks Branches Banks Branches Banks Branches
& offices
& offices
& offices
& offices
& offices
422
630

672
964
963
1,323
2,473
1,467
1,293
1,763
1,097

659

1,674
568
823
1,042
445
986
280
129
64
125

422
630

672
964
806
757
2,473
1,174
694
1,757
1,014

659

1,674
568
823
892
399
986

206
85
64

513
589
455
401
1,018
489
476
749

532

1,463
466
718
583
330
586

133
39
45

136
100

159
375
351
356
1,455
685
218
1,008

127
211

102
105
309
69

157
566

150
46

73
46
19

293
599
6

74
44

400

2,240

631
169

82

359

1,960

383
190

31
280

83
15

12
7

9,042

11,722

8,709

6,306

6,937

5,416

1,772

1,719

333

62
138
35
1,462
6
160
44
60
13
76
81
4

149
7
128
119
158
75
27
13
227
134
28
942

61
138
15
1,462
6
160
44
60
12
74
81
4

93
4
75
71
94
41
9
9
115
65
17
524

59
116
12
1,318
5
126
19
49
10
64
75
4

56
3
53
48
64
34
18
4
112
69
11
418

2
22
3
144
1
34
25
11
2
10
6

458
669
591
360
79
54
142
169
393
285
53
555
114
417
6
74
259
53
430
106
57
606
380
54

248
163
14
116
129
118
208
323
493
6
59
4
1
2

232
168
212
108
52
35
65
129
225
209
35
172
85
140

165
5
10
79
104
79
126
273
409
6
33
4
1
2

226
501
379
252
27
19
77
40
168
76
18
383
29
277

83

1

4

74
259
53
430
193
155
606
386
54

248
163
14
116
156
118
208
323
493
6
124
4
1
2
33
3
367
43
1,230
412
27
551
15
165

3
367
43
1,230
268
8
551
15
165

52
222
35
375
47
40
385
224
17

2
333
21
1,163
150
2
484
13
147

22
37
18
55
59
17
221
156
37

1
34
22
67
118
6
67
2
18

Pennsylvania.
Rhode Island.
S. Carolina.. .
S. D a k o t a . . . .
Tennessee. .. .

737
9
144
172
296
969

671
85
128
54
183
23

737
9
76
71
214
933

671
85
122
29
167
23

563
5
31
60
83
575

582
66
93
24
123
23

174
4
45
11
131
358

89
19
29
5
44

Vermont
Virginia
Washington. .
West Virginia.
Wisconsin. .. .
Wyoming. . . .
Alaska 22
Hawaii
Puerto Rico 2 .
V I 2

312
89
183
551
52
18
5
10
2

Arkansas
California....
Colorado
Connecticut. .
Delaware
Dist of Col...
Florida
....
Georgia
Illinois
Iowa,

• •

Kentucky....
Louisiana. . . .
Ivlaine
Maryland. .. .
Michigan
Minnesota
Mississippi. . .
Missouri . . .
Montana
Nebraska....
Nevada
N. Hampshire
New Jersey.
New Mexico..
New York .
N. Carolina...
N. Dakota. . .
Ohio
Oklahoma
Oregon

Texas
Utah

2,247

13,441

Total
STATE
Alabama . . . .

374

239
7

237
119
158
75
27
13
271
410
28
943
458
669
593
360
186
54
142
169
393
685
194
609
114
417
6

49
57

68
30

49
57

234
253

311
89
182
551
52
3
5
10
2

152
1
18
67
108
4

113

286
530

33

68
30

234
253
152
1
11
67
108
4

5

20
33

202
35
112
160
39
1
1

1

29

59
20

165
246
24
1
13
1

29
24

109
54
70
391
13
2
5
10
1

90

1

i()9

20

44
276

1
2

1

158
4
37
25
39
82
50

2
107

27

400
141
54

65

87
98

144
19

84
26

6

68
101
82
36

6
25
16

9
10

69
7

1
1

128

11
67
95
3

15

7

Comprises all commercial banking offices on which checks are drawn, including 248 banking
facilities. Number of banks and branches differs from Table 18 because of banks and trust companies
on which no checks are drawn, 3 mutual savings member banks, and banks in Alaska, Hawaii, Puerto
Rico, and the Virgin Islands.
2
Alaska and Hawaii, assigned to the San Francisco District for check clearing and collection purposes; Puerto Rico and the Virgin Islands assigned to the New York District.




128

NO. 20—OPEN MARKET TRANSACTIONS OF THE FEDERAL RESERVE SYSTEM
DURING 1958
[In millions of dollars]
U. S. Government
securities

Net change in
holdings
U.S.
Government
securities
and
acceptances

U.S.
Government
securities

January
February....
March
April
May
June
July
August
September.. .
October
November. . .
December

-932
-89
+385
+51
+485
+1,280
-969
+865
-364
+464
+784
+133

Total, 1958

+2,092

Month

Outright
transactions

Repurchase
agreements

Gross
market
purchases

Gross
market
sales

Cash
redemptions

-908
-91
+388
+53
+481
+1,276
-958
+866
-360
+456
+786
+118

100
185
472
204
627
1,276
300
1,534
167
584
996
309

317
86
60
26

171
190
24
125
147

502
668
512
54
289
119

756

+2,108

6,754

2,633

1,590

129

Gross
purchases

14
144
11
7

Gross
sales

989 1,509
370
370
265
265
308
308
312

NOTE.—Details may not add to totals because of rounding.




Bankers'
acceptances

312

Net
outright

Net
repurchases

-1

-23

+2
-2

+4

67

67

305
514
500

234
424
565

+8
+9

+6

3,630 4,054

+1

-18

A

FEDERAL RESERVE DIRECTORIES




AND MEETINGS

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
[December 31, 1958]
W M . MCC. MARTIN, JR., of New York, Chairman
C. CANBY BALDERSTON of Pennsylvania, Vice Chairman
M. S. SZYMCZAK of Illinois
A. L. MILLS, JR., of Oregon
J. L. ROBERTSON of Nebraska
CHAS. N. SHEPARDSON of Texas
ELLIOTT THURSTON, Assistant to the Board
WINFIELD W. RIEFLER, Assistant to the Chairman

Term Expires
January 31, 1970
January 31, 1966
January 31, 1962
January 31, 1972
January 31, 1964
January 31, 1968

WOODLIEF THOMAS, Economic Adviser to the Board
JEROME W. SHAY, Legislative Counsel

CHARLES MOLONY, Special Assistant to the Board
MERRITT SHERMAN, Secretary

KENNETH A. KENYON, Assistant Secretary
CLARKE L. FAUVER, Assistant Secretary
HOWARD H. HACKLEY, General Counsel

FREDERIC SOLOMON, Assistant General Counsel
DAVID B. HEXTER, Assistant General Counsel
G. HOWLAND CHASE, Assistant General Counsel
THOMAS J. O'CONNELL, Assistant General Counsel
RALPH A. YOUNG, Director, Division of Research and Statistics
FRANK R. GARFIELD, Adviser, Division of Research and Statistics
GUY E. NOYES, Adviser, Division of Research and Statistics
ROLAND I. ROBINSON, Adviser, Division of Research and Statistics
SUSAN S. BURR, Associate Adviser, Division of Research and Statistics
ALBERT R. KOCH, Associate Adviser, Division of Research and Statistics
KENNETH B. WILLIAMS, Associate Adviser, Division of Research and Statistics
LEWIS N. DEMBITZ, Research Associate, Division of Research and Statistics
ARTHUR W. MARGET, Director, Division of International Finance
J. HERBERT FURTH, Associate Adviser, Division of International Finance
A. B. HERSEY, Associate Adviser, Division of International Finance
ROBERT L. SAMMONS, Associate Adviser, Division of International Finance
ROBERT F. LEONARD, Director, Division of Bank Operations
JOHN R. FARRELL, Associate Director, Division of Bank Operations
GERALD M. CONKLING, Assistant Director, Division of Bank Operations
M. B. DANIELS, Assistant Director, Division of Bank Operations
ROBERT C. MASTERS, Director, Division of Examinations
C. C. HOSTRUP, Assistant Director, Division of Examinations
FRED A. NELSON, Assistant Director, Division of Examinations
GLENN M. GOODMAN, Assistant Director, Division of Examinations
HENRY BENNER, Assistant Director, Division of Examinations
JAMES C. SMITH, Assistant Director, Division of Examinations
LLOYD M. SCHAEFFER, Chief Federal Reserve Examiner, Division of Examinations
EDWIN J. JOHNSON, Director, Division of Personnel Administration
H. FRANKLIN SPRECHER, JR., Assistant Director, Division of Personnel Administration
JOSEPH E. KELLEHER, Director, Division of Administrative Services
GARDNER L. BOOTHE, II, Administrator, Office of Defense Loans
J. J. CONNELL, Controller, Office of the Controller
SAMPSON H. BASS, Assistant Controller, Office of the Controller
INNIS D. HARRIS, Coordinator, Office of Defense Planning




132

FEDERAL OPEN MARKET COMMITTEE
[December 31, 1958}
MEMBERS
WM. MCC. MARTIN, JR., Chamnan (Board of Governors)
ALFRED HAYES, Vice Chairman (Elected by Federal Reserve Bank of New York)
C. CANBY BALDERSTON (Board of Governors)

W. D. FULTON (Elected by Federal Reserve Banks of Cleveland and Chicago)
W. H. IRONS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas)
HUGH LEACH (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond)
H. N. MANGELS (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and
San Francisco)
A. L. MILLS, JR. (Board of Governors)
J. L. ROBERTSON (Board of Governors)
CHAS. N. SHEPARDSON (Board of Governors)

M. S. SZYMCZAK (Board of Governors)

OFFICERS
WINFIELD W. RIEFLER, Secretary
ELLIOTT THURSTON, Assistant Secretary
MERRITT SHERMAN, Assistant Secretary
HOWARD H. HACKLEY, General Counsel
FREDERIC SOLOMON, Assistant General

Counsel

J. DEWEY DAANE, Associate Economist
L. MERLE HOSTETLER, Associate Economist
ARTHUR W. MARGET, Associate Economist
H. V. ROELSE, Associate Economist
CHARLS E. WALKER, Associate Economist

OLIVER P. WHEELER, Associate Economist

WOODLIEF THOMAS, Economist

RALPH A. YOUNG, Associate Economist

AGENT
FEDERAL RESERVE BANK OF NEW YORK

ROBERT G. ROUSE, Manager of System

Open Market Account
During 1958 the Federal Open Market Committee met at least every three weeks, as
indicated in the Record of Policy Actions taken by the Committee (see pages 32-71
of this report).




133

FEDERAL ADVISORY COUNCIL
[December 31, 1958]
MEMBERS
District No. 1—LLOYD D. BRACE, President, The First National Bank of Boston, Boston, Massachusetts.
District No. 2—ADRIAN M. MASSIE, Chairman of the Board, The New York Trust
Company, New York, New York.
District No. 3—CASIMIR A. SIENKIEWICZ, President, Central-Penn National Bank of
Philadelphia, Philadelphia, Pennsylvania.
District No. 4—FRANK R. DENTON, Vice Chairman of the Board, Mellon National
Bank and Trust Company, Pittsburgh, Pennsylvania.
District No. 5—JOHN S. ALFRIEND, Chairman of the Board and President, National
Bank of Commerce, Norfolk, Virginia.
District No. 6—JOHN A. SIBLEY, Chairman of the Board, Trust Company of Georgia,
Atlanta, Georgia.
District No. 7—HOMER J. LIVINGSTON, President, The First National Bank of Chicago, Chicago, Illinois.
District No. 8—WILLIAM A. MCDONNELL, Chairman of the Board, First National
Bank in St. Louis, St. Louis, Missouri.
District No. 9—GORDON MURRAY, President, First National Bank of Minneapolis,
Minneapolis, Minnesota.
District No. 10—R. CROSBY KEMPER, Chairman of the Board and President, The
City National Bank and Trust Company of Kansas City, Kansas City, Missouri.
District No. 11—WALTER B. JACOBS, President, The First National Bank of Shreveport, Shreveport, Louisiana.
District No. 12—FRANK L. KING, President, California Bank, Los Angeles, California.
EXECUTIVE COMMITTEE
FRANK R. DENTON, ex officio
LLOYD D. BRACE

HOMER J. LIVINGSTON, ex officio
ADRIAN M. MASSIE
CASIMIR A. SIENKIEWICZ

OFFICERS
President, FRANK R. DENTON
Vice President, HOMER J. LIVINGSTON
Secretary, HERBERT V. PROCHNOW
Assistant Secretary, WILLIAM J. KORSVIK

Meetings of the Federal Advisory Council were held on February 17-18, May 19-20,
September 15-16, and November 17-18, 1958. The Board of Governors met with the
Council on February 18, May 20, September 16, and November 18. The Council is
required by law to meet in Washington at least four times each year and is authorized
by the Federal Reserve Act to consult with and advise the Board on all matters within
the jurisdiction of the Board.



134

FEDERAL RESERVE BANKS AND BRANCHES
[December 31, 1958]
CHAIRMEN AND DEPUTY CHAIRMEN OP BOARDS OF DIRECTORS

Federal Reserve Bank of—

Chairman and
Federal Reserve Agent

Deputy Chairman

Boston

Robert C. Sprague

Harvey P. Hood

New York

John E. Bierwirth

Forrest F. Hill

Philadelphia

Henderson Supplee, Jr

Lester V. Chandler

Cleveland

Arthur B. Van Buskirk

Joseph H. Thompson

Richmond

John B. Woodward, Jr.. . . Alonzo G. Decker, Jr.

Atlanta

Walter M. Mitchell

Harllee Branch, Jr.

Chicago

Bert R. Prall

J. Stuart Russell

St. Louis

Pierre B. McBride

J. H. Longwell

Minneapolis

Leslie N. Perrin

O. B. Jesness

Kansas City

Raymond W. Hall

Joe W. Seacrest

Dallas

Robert J. Smith

Hal Bogle

San Francisco

A. H. Brawner

Y. Frank Freeman

CONFERENCE OF CHAIRMEN
The Chairmen of the Federal Reserve Banks are organized into a Conference of
Chairmen which meets from time to time to consider matters of common interest and
to consult and advise the Board of Governors. A meeting of the Conference of Chairmen was held on December 4-5, 1958, and was attended by members of the Board of
Governors, and also by the Deputy Chairmen of the Federal Reserve Banks.
Mr. Hall, Chairman of the Federal Reserve Bank of Kansas City, was elected Chairman of the Conference and of the Executive Committee in December 1957. Mr. Smith,
Chairman of the Federal Reserve Bank of Dallas, and Mr. Mitchell, Chairman of the
Federal Reserve Bank of Atlanta, served with Mr. Hall as members of the Executive
Committee, Mr. Smith also serving as Vice Chairman of the Conference.
At the meeting held in December 1958, Mr. Smith was elected Chairman of the
Conference and of the Executive Committee. Mr. Mitchell was elected Vice Chairman
and a member of the Executive Committee, and Mr. Perrin, Chairman of the Federal
Reserve Bank of Minneapolis, was elected as the other member of the Executive
Committee.




135

136

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
DIRECTORS

Class A and Class B directors are elected by the member banks of the district. Class
C directors are appointed by the Board of Governors of the Federal Reserve System.
The Class A directors are chosen as representatives of member banks and, as a matter
of practice, are active officers of member banks. The Class B directors may not, under
the law, be officers, directors, or employees of banks. At the time of their election they
must be actively engaged in their district in commerce, agriculture, or some other industrial pursuit.
The Class C directors may not, under the law, be officers, directors, employees, or
stockholders of banks. They are appointed by the Board of Governors as representatives not of any particular group or interest, but of the public interest as a whole.
Federal Reserve Bank branches have either five or seven directors, of whom a majority are appointed by the Board of Directors of the parent Federal Reserve Bank and
the others are appointed by the Board of Governors of the Federal Reserve System.
District 1—Boston
Term
Expires
DIRECTORS

Class A:
Oliver B. Ellsworth
William D. Ireland
Arthur F. Maxwell
Class B.Harry E. Umphrey
Milton P. Higgins
Stanley M. Cooper
Class C:
Harvey P. Hood
Nils Y. Wessell
Robert C. Sprague

Dec. 31

President, Riverside Trust Company, Hartford,
Conn
1958
President, Second Bank-State Street Trust Company, Boston, Mass
1959
President, The First National Bank of Biddeford, Biddeford, Maine
I960
President, Aroostook Potato Growers, Inc.,
Presque Isle, Maine
1958
President, Norton Company, Worcester, Mass. 1959
Chairman of the Board, The Fafnir Bearing
Company, New Britain, Conn
I960
President, H. P. Hood & Sons, Inc., Boston,
Mass
1958
President, Tufts University, Medford, Mass.. . 1959
Chairman and Treasurer, Sprague Electric
Company, North Adams, Mass
I960
District 2—New York

Class A:
Howard C. Sheperd
Charles W. Bitzer
Cyrus M. Higley



Chairman of the Board, The First National
City Bank of New York, New York, N. Y. 1958
President, City Trust Company, Bridgeport,
Conn
1959
President and Trust Officer, The Chenango
County National Bank and Trust Company
of Norwich, Norwich, N. Y
I960

FEDERAL RESERVE SYSTEM

137

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.

DIRECTORS—Cont.
Class B:
Clarence Francis
Lansing P. Shield
Augustus C. Long
Class C:
Franz Schneider
John E. Bierwirth
Forrest F. Hill

Term
Expires
Dec.31
Director, General Foods Corporation, New
York, N. Y
1958
President, The Grand Union Company, East
Paterson, N. J
1959
Chairman of the Board, The Texas Company,
New York, N. Y
I960
Consultant to Newmont Mining Corporation,
New York, N. Y
1958
Chairman, National Distillers and Chemical
Corporation, New York, N. Y
1959
Vice President, The Ford Foundation, New
York, N. Y
I960
Buffalo Branch

Appointed by Federal Reserve Bank:
John W. Remington
President, Lincoln Rochester Trust Company,
Rochester, N. Y
1958
Leland B. Bryan
President, First National Bank and Trust Company, Corning, N. Y
1958
Vernon Alexander
President, The National Bank of Geneva,
Geneva, N. Y
1959
E. Perry Spink
President, Liberty Bank of Buffalo, Buffalo,
N. Y
1960
Appointed by Board of Governors:
Ralph F. Peo
Chairman and President, Houdaille Industries,
Inc., Buffalo, N. Y
1958
Raymond E. Olson
President, Taylor Instrument Companies,
Rochester, N. Y
1959
Daniel M. Dalrymple
Partner and Manager, Pomona Fruit Farms,
Appleton, N. Y
I960
District 3—Philadelphia
Class A:
Lindley S. Hurff
Geoffrey S. Smith
William B. Brosius
Class B:
Charles E. Oakes
R. Russell Pippin



President and Trust Officer, The First National
Bank of Milton, Milton, Pa
1958
President, Girard Trust Corn Exchange Bank,
Philadelphia, Pa
1959
President, National Bank of Chester County
and Trust Company, West Chester, Pa
I960
Chairman of the Board, Pennsylvania Power
and Light Company, Allentown, Pa
1958
Treasurer, E. I. du Pont de Nemours & Company, Wilmington, Del
1959

FEDERAL RESERVE SYSTEM

139

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Anthony Haswell
W. Bay Irvine

Dec. 31

President, The Dayton Malleable Iron Company, Dayton, Ohio
1959
President, Marietta College, Marietta, Ohio.. I960
Pittsburgh Branch

Appointed by Federal Reserve Bank:
Sumner E. Nichols
President, Security-Peoples Trust Company,
Erie, Pa
1958
Frank C. Irvine
President, First National Bank in Tarentum,
Tarentum, Pa
1959
Lawrence O. Hotchkiss
President, The First National Bank of Mercer,
Mercer, Pa
I960
Irving W. Wilson
Chairman of the Board, Aluminum Company
of America, Pittsburgh, Pa
I960
Appointed by Board of Governors:
Douglas M. Moorhead
Farmer, North East, Pa
1958
John T. Ryan, Jr
President, Mine Safety Appliances Company,
Pittsburgh, Pa
1959
John C. Warner
President, Carnegie Institute of Technology,
Pittsburgh, Pa
I960
District 5—Richmond
Class A:
(Vacancy)
Robert Gage
Denver L. Morgan

Class B:
L. Vinton Hershey
Wm. A. L. Sibley
Robert O. Huffman
Class C:
John B. Woodward, Jr

Alonzo G. Decker, Jr
D. W. Colvard




1958
President, The Commercial Bank, Chester,
S. C
1959
Executive Vice President and Cashier, The
Charleston National Bank, Charleston,
W. Va
I960
President, Hagerstown Shoe Company, Hagerstown, Md
1958
Vice President and Treasurer, Monarch Mills,
Union, S. C
1959
President, Drexel Furniture Company, Drexel,
N. C
I960
Chairman of the Board, Newport News Shipbuilding & Dry Dock Company, Newport
News, Va
1958
Executive Vice President, The Black & Decker
Manufacturing Company, Towson, Md
1959
Dean of Agriculture, North Carolina State
College of Agriculture and Engineering,
Raleigh, N. C
I960

138

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Bayard L. England
Class C:
Henderson Supplee, Jr
Lester V. Chandler
Walter E. Hoadley, Jr

Dec. 31

President, Atlantic City Electric Company, Atlantic City, N. J

1960

President, The Atlantic Refining Company,
Philadelphia, Pa
1958
Professor of Economics, Princeton University,
Princeton, N. J
1959
Treasurer, Armstrong Cork Company, Lancaster, Pa
I960
District 4—Cleveland

Class A:
King E. Fauver
John A. Byerly
Paul A. Warner
Class B:
Charles Z. Hardwick
George P. MacNichol, Jr
Joseph B. Hall
Class C:
Arthur B. Van Buskirk
Joseph H. Thompson
Aubrey J. Brown

Director, The Savings Deposit Bank and Trust
Company, Elyria, Ohio
1958
President, Fidelity Trust Company, Pittsburgh,
Pa
1959
President, The Oberlin Savings Bank Company, Oberlin, Ohio
I960
Executive Vice President, The Ohio Oil Company, Findlay, Ohio
1958
President, Libbey • Owens • Ford Glass Company, Toledo, Ohio
1959
President, The Kroger Co., Cincinnati, Ohio I960
Vice President and Governor, T. Mellon and
Sons, Pittsburgh, Pa
1958
President, The M. A. Hanna Company, Cleveland, Ohio
1959
Professor of Agricultural Marketing and Head
of Department of Agricultural Economics,
University of Kentucky, Lexington, Ky
I960
Cincinnati Branch

Appointed by Federal Reserve Bank:
William A. Mitchell
President, The Central Trust Company, Cincinnati, Ohio
Franklin A. McCracken
Executive Vice President and Trust Officer,
The Newport National Bank, Newport, Ky.
Roger Drackett
President, The Drackett Company, Cincinnati,
Ohio
Thomas M. Wolfe
President, The Athens National Bank, Athens,
Ohio
Appointed by Board of Governors:
Ivan Jett
Farmer, Georgetown, Ky



1958
1959
1960
1960
1958

140

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31
Baltimore Branch

Appointed by Federal Reserve Bank:
Stanley B. Trott
President, Maryland Trust Company, Baltimore, Md
John W. Stout
President, The Parkersburg National Bank,
Parkersburg, W. Va
James W. McElroy
President, First National Bank of Baltimore,
Baltimore, Md
J. N. Shumate
President, The Farmers National Bank of
Annapolis, Annapolis, Md
Appointed by Board of Governors:
Wm. Purnell Hall
President, Maryland Shipbuilding and Drydock Company, Inc., Baltimore, Md
Gordon M. Cairns
Dean of Agriculture, University of Maryland,
College Park, Md
Clarence R. Zarfoss
Vice President, Western Maryland Railway
Company, Baltimore, Md

1958
1958
1959
I960

1958
1959
I960

Charlotte Branch

Appointed by Federal Reserve Bank:
I. W. Stewart
Chairman of the Board, American Commercial
Bank, Charlotte, N. C
G. G. Watts
President, The Merchants & Planters National
Bank, Gaffney, S. C
Charles D. Parker
Vice Chairman of the Board and First Executive Vice President, First Union National
Bank of North Carolina, Charlotte, N. C . .
Ernest Patton
Chairman of the Board, The Peoples National
Bank of Greenville, Greenville, S. C
Appointed by Board of Governors:
T. Henry Wilson
President and Treasurer, Henredon Furniture
Industries, Inc., Morganton, N. C
William H. Grier
Executive Vice President, Rock Hill Printing
& Finishing Company, Rock Hill, S. C
George H. Aull
Agricultural Economist, Clemson College,
Clemson, S. C

1958
1958
1959
I960

1958
1959
I960

District 6-Atlanta
Class A:
William C. Carter
Roland L. Adams
W. C. Bowman
Class B.Donald Comer
Joseph T. Lykes



Chairman and President, Gulf National Bank,
Gulfport, Miss
1958
President, Bank of York, York, Ala..
1959
Chairman of the Board, The First National
Bank of Montgomery, Montgomery, Ala... I960
Chairman of the Board, Avondale Mills, Birmingham, Ala
1958
Chairman and Director, Lykes Bros. Steamship Company, Inc., Tampa, Fla
1959

FEDERAL RESERVE SYSTEM

l4l

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Pollard Turman
Class C:
Walter M. Mitchell
Harllee Branch, Jr
Henry G. Chalkley, Jr

Dec, 51

President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga

I960

Vice President, The Draper Corporation, Atlanta, Ga
1958
President, The Southern Company, Atlanta,
Ga
1959
President, The Sweet Lake Land & Oil Company, Lake Charles, La
I960
Birmingham Branch

Appointed by Federal Reserve Bank:
Robert M. Cleckler
President, First National Bank of Childersburg, Childersburg, Ala
E. W. McLeod
Chairman, First National Bank of Decatur,
Decatur, Ala
R. J. Murphy
Vice President, Citizens-Farmers & Merchants
Bank, Brewton, Ala
John C. Persons
Chairman of the Board, The First National
Bank of Birmingham, Birmingham, Ala....
Appointed by Board of Governors:
John E. Urquhart
Chairman, Woodward Iron Company, Woodward, Ala
Adolph Weil, Sr
President, Weil Brothers-Cotton, Inc., Montgomery, Ala
Selden Sheffield
Cattleman, Greensboro, Ala

1958
1958
1959
I960

1958
1959
I960

Jacksonville Branch

Appointed by Federal Reserve Bank:
Linton E. Allen
Chairman, The First National Bank at Orlando, Orlando, Fla
W. E. Ellis
Chairman and President, The Commercial
Bank and Trust Company, Ocala, Fla
James G. Garner
President and Chairman, Little River Bank
and Trust Company, Miami, Fla
C. B. McLeod
President, Bank of Crestview, Crestview, Fla.
Appointed by Board of Governors:
Harry M. Smith
President and Manager, Winter Garden Ornamental Nursery, Inc., Winter Garden, Fla.
McGregor Smith
Chairman of the Board, Florida Power and
Light Company, Miami, Fla
J. Wayne Reitz
President, University of Florida, Gainesville,
Fla

1958
1958
1959
I960

1958
1959
I960

Nashville Branch

Appointed by Federal Reserve Bank:
Stewart Campbell
President, The Harpeth National Bank of
Franklin, Franklin, Tenn



1958

142

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

C. L. Wilson

Chairman and President, The Cleveland National Bank, Cleveland, Tenn
Jo H. Anderson
President, Park National Bank of Knoxville,
Knoxville, Tenn
P. D. Houston, Jr
President, First American National Bank,
Nashville, Tenn
Appointed by Board of Governors:
V. S. Johnson, Jr
Chairman of the Board and President, Aladdin Industries, Inc., Nashville, Tenn
Frank B. Ward
Dean, College of Business Administration,
University of Tennessee, Knoxville, Tenn.
W. N. Krauth
President and General Manager, Colonial Baking Company of Nashville, Nashville, Tenn.

1958
1959
I960

1958
1959
I960

New Orleans Branch

Appointed by Federal Reserve Bank:
H. A. Pharr
President, The First National Bank of Mobile,
Mobile, Ala
(Vacancy)
J. Spencer Jones
President, The Citizens National Bank in
Hammond, Hammond, La
D. U. Maddox
President, The Commercial National Bank and
Trust Company of Laurel, Laurel, Miss
Appointed by Board of Governors:
G. H. King, Jr
President, King Lumber Industries, Canton,
Miss
E. E. Wild
Rice grower, Midland, La
Frank A. Godchaux, III
Vice President, Louisiana State Rice Milling
Company, Inc., Abbeville, La

1958
1958
1959
I960

1958
1959
I960

District 7—Chicago
Class A:
Nugent R. Oberwortmann
Vivian W. Johnson
Walter J. Cummings

Class B:
William J. Grede
William A. Hanley
G. F. Langenohl




President, The North Shore National Bank of
Chicago, Chicago, 111
1958
President, First National Bank, Cedar Falls,
Iowa
1959
Chairman, Continental Illinois National Bank
and Trust Company of Chicago, Chicago,
111
1960
President, Grede Foundries, Inc., Milwaukee,
Wis
1958
Director, Eli Lilly and Company, Indianapolis, Ind
1959
Treasurer and Assistant Secretary, AllisChalmers Manufacturing Company, Milwaukee, Wis
I960

FEDERAL RESERVE SYSTEM

143

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Class C.Robert P. Briggs
J. Stuart Russell
Bert R. Prall

Dec. 31

Executive Vice President, Consumers Power
Company, Jackson, Mich
1958
Farm Editor, The Des Moines Register &
Tribune, Des Moines, Iowa
1959
Winnetka, 111
I960
Detroit Branch

Appointed by Federal Reserve Bank:
Raymond T. Perring
President, The Detroit Bank and Trust Company, Detroit, Mich
Ira A. Moore
General Vice President, Old Kent Bank and
Trust Company, Grand Rapids, Mich
William A. Mayberry
President, Manufacturers National Bank of
Detroit, Detroit, Mich
Ernest W. Potter
President, Citizens Commercial & Savings
Bank, Flint, Mich
Appointed by Board of Governors:
C. V. Patterson
Executive Vice President, The Upjohn Company, Kalamazoo, Mich
J. Thomas Smith
President, Detroit Harvester Company, Detroit,
Mich
John A. Hannah
President, Michigan State University, East
Lansing, Mich

1958
1959
I960
I960

1958
1959
I960

District 8—St. Louis
Class A:
J. E. Etherton
Kenton R. Cravens
H. Lee Cooper
Class B:
S. J. Beauchamp, Jr
Harold O. McCutchan
Leo J. Wieck
Class C:
J. H. Longwell
Pierre B. McBride
Jesse D. Wooten



President, The Carbondale National Bank,
Carbondale, 111
1958
President, Mercantile Trust Company, St.
Louis, Mo
1959
President, Ohio Valley National Bank of Henderson, Henderson, Ky
I960
President, Terminal Warehouse Co., Little
Rock, Ark
1958
Executive Vice President, Mead Johnson &
Company, Evansville, Ind
1959
Vice President and Treasurer, The May Department Stores Co., St. Louis, Mo
I960
Director, Division of Agricultural Sciences,
University of Missouri, Columbia, Mo
1958
President, Porcelain Metals Corporation, Louisville, Ky
1959
Executive Vice President, Mid-South Chemical
Corporation, Memphis, Tenn
I960

144

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31
Little Rock Branch

Appointed by Federal Reserve Bank:
J. V. Satterfield, Jr
Chairman of the Board, The First National
Bank in Little Rock, Little Rock, Ark
Donald Barger
President, Peoples Exchange Bank, Russellville, Ark
J. W. Bellamy, Jr
President, National Bank of Commerce of Pine
Bluff, Pine Bluff, Ark
E. C. Benton
President, Fordyce Bank and Trust Company,
Fordyce, Ark
Appointed by Board of Governors:
Waldo E. Tiller
President, Tiller Tie and Lumber Company,
Inc., Little Rock, Ark
T. Winfred Bell
President, Bush-Caldwell Company, Little
Rock, Ark
Robert H. Alexander
Owner-operator, Land's End Plantation, Scott,
Ark

1958
1959
I960
I960

1958
1959
I960

Louisville Branch

Appointed by Federal Reserve Bank:
Magnus J. Kreisle
President, The Tell City National Bank, Tell
City, Ind
Merle E. Robertson
Chairman of the Board and President, Liberty
National Bank and Trust Company of Louisville, Louisville, Ky
W. Scott Mclntosh
President, State Bank of Hardinsburg, Hardinsburg, Ind
John G. Russell
President, The Peoples First National Bank &
Trust Company of Paducah, Paducah, Ky.. .
Appointed by Board of Governors:
J. D. Monin, Jr
Farmer, Oakland, Ky
David F. Cocks
Vice President and Treasurer, Standard Oil
Company (Kentucky), Louisville, Ky
Philip Davidson
President, University of Louisville, Louisville,
Ky

1958

1959
I960
I960
1958
1959
I960

Memphis Branch

Appointed by Federal Reserve Bank:
J. H. Harris
President, The First National Bank of Wynne,
Wynne, Ark
John K. Wilson
President, The First National Bank of West
Point, West Point, Miss
John E. Brown
President, Union Planters National Bank of
Memphis, Memphis, Tenn
Simpson Russell
President, The National Bank of Commerce of
Jackson, Jackson, Tenn



1958
1959
I960
I960

FEDERAL RESERVE SYSTEM

145

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

Appointed by Board of Governors:
Frank Lee Wesson
President, Wesson Farms, Inc., Victoria, Ark. 1958
John D. Williams
Chancellor, The University of Mississippi,
University, Miss
1959
S. L. Kopald, Jr
Executive Vice President, HumKo Division,
National Dairy Products Corporation, Memphis, Tenn
I960
District 9—Minneapolis
Class A:
John A. Moorhead
Harold N. Thomson
Harold C. Refling
Class B:
T. G. Harrison
J. E. Corette
Ray C. Lange
Class C:
John H. Warden
Leslie N. Perrin
O. B. Jesness

President, Northwestern National Bank of
Minneapolis, Minneapolis, Minn
1958
Vice President, Farmers & Merchants Bank,
Presho, S. D
1959
Cashier, First National Bank in Bottineau,
Bottineau, N. D
I960
Chairman of the Board, Super Valu Stores,
Inc., Hopkins, Minn
1958
President and General Manager, Montana
Power Company, Butte, Mont
1959
President, Chippewa Canning Company, Inc.,
Chippewa Falls, Wis
I960
President, Upper Peninsula Power Company,
Houghton, Mich
Director, General Mills, Inc., Minneapolis,
Minn
Agricultural Economist, St. Paul, Minn

1958
1959
I960

Helena Branch

Appointed by Federal Reserve Bank:
J. Willard Johnson
Financial Vice President and Treasurer, Western Life Insurance Company, Helena,
Mont
Geo. N. Lund
Chairman of the Board and President, The
First National Bank of Reserve, Reserve,
Mont
O. M. Jorgenson
Chairman, Security Trust and Savings Bank,
Billings, Mont
Appointed by Board of Governors:
Carl McFarland
Missoula, Mont
John M. Otten
Farmer and rancher, Lewistown, Mont



1958

1958
1959
1958
1959

146

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

District 10—Kansas City
Class A:
W. S. Kennedy
W. L. Bunten
Harold Kountze
Class B:
E. M. Dodds
K. S. Adams
Max A. Miller
Class C:
Raymond W. Hall
Oliver S. Willham
Joe W. Seacrest

President and Chairman of the Board, The
First National Bank of Junction City, Junction City, Kans
1958
President, Goodland State Bank, Goodland,
Kans
1959
Chairman of the Board, The Colorado National Bank of Denver, Denver, Colo
I960
Chairman of the Board, United States Cold
Storage Corporation, Kansas City, Mo
1958
Chairman of the Board, Phillips Petroleum
Company, Bartlesville, Okla
1959
Livestock rancher, Omaha, Neb
I960
Counsel, Gage, Hillix, Moore & Park, Attorneys, Kansas City, Mo
1958
President, Oklahoma State University, Stillwater, Okla
1959
President, State Journal Company, Lincoln,
Neb
1960
Denver Branch

Appointed by Federal Reserve Bank:
Ralph S. Newcomer
Executive Vice President, First National Bank
in Boulder, Boulder, Colo
1958
Arthur Johnson
President, First National Bank in Raton, Raton,
N. Mex
1958
Stewart Cosgriff
President, The Denver National Bank, Denver,
Colo
1959
Appointed by Board of Governors:
Ray Reynolds
Cattle feeder and farmer, Longmont, Colo
1958
Aksel Nielsen
President, The Title Guaranty Company, Denver, Colo
1959
Oklahoma City Branch

Appointed by Federal Reserve Bank:
R. Otis McClintock
Chairman of the Board, The First National
Bank and Trust Company of Tulsa, Tulsa,
Okla
1958
C. L. Priddy
President, The National Bank of McAlester,
McAlester, Okla
1958
C. P. Stuart
President, The Fidelity National Bank & Trust
Company, Oklahoma City, Okla
1959



FEDERAL RESERVE SYSTEM

147

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

Appointed by Board of Governors:
Phil H. Lowery
Owner, Lowery Hereford Ranch, Loco, Okla... 1958
Davis D. Bovaird
President, The Bovaird Supply Company, Tulsa,
Okla
1959
Omaha Branch

Appointed by Federal Reserve Bank:
William N. Mitten
Chairman of the Board, First National Bank of
Fremont, Fremont, Neb
George J. Forbes
Chairman of the Board and President, Bank of
Laramie, Laramie, Wyo
C. Wheaton Battey
President, The Continental National Bank of
Lincoln, Lincoln, Neb
Appointed by Board of Governors:
Manville Kendrick
Rancher, Sheridan, Wyo
James L. Paxton, Jr
President, Paxton-Mitchell Company, Omaha,
Neb

1958
1959
1959
1958
1959

District 11—Dallas
Class A:
J. Edd McLaughlin
John M. Griffith
Sam D. Young
Class B:
J. B. Thomas
John R. Alford
D. A. Hulcy
Class C:
Lamar Fleming, Jr
Hal Bogle
Robert J. Smith

President, Security State Bank & Trust Company, Rails, Tex
1958
President, The City National Bank of Taylor,
Taylor, Tex
1959
President, El Paso National Bank, El Paso, Tex. I960
President and General Manager and Director,
Texas Electric Service Company, Fort Worth,
Tex
1958
Industrialist and farmer, Henderson, Tex
1959
Chairman of the Board, Lone Star Gas Company, Dallas, Tex
I960
Chairman of the Board, Anderson, Clayton &
Co., Inc., Houston, Tex
1958
Rancher and feeder, Dexter, N. Mex
1959
President, Pioneer Hydrotex Industries, Inc.,
Dallas, Tex
I960
El Paso Branch

Appointed by Federal Reserve Bank:
Thomas C. Patterson
Vice President, El Paso National Bank, El Paso,
Tex
F. W. Barton
President, The Marfa National Bank, Marfa,
Tex
John P. Butler
President, The First National Bank of Midland,
Midland, Tex
Floyd Childress
Vice President, The First National Bank of Roswell, Roswell, N. Mex



1958
1959
I960
I960

148

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

Appointed by Board of Governors:
E. J. Workman
President, and Director of Research and Development Division, New Mexico Institute of
Mining and Technology, Socorro, N. Mex.. . 1958
D. F. Stahmann
Chairman of the Board and Treasurer, Stahmann Farms, Inc., Las Cruces, N. Mex
1959
William R. Mathews
Editor and Publisher, The Arizona Daily Star,
Tucson, Ariz
I960
Houston Branch

Appointed by Federal Reserve Bank:
S. Marcus Greer
Vice Chairman of the Board, First City National Bank of Houston, Houston, Tex
I. F. Betts
President, The American National Bank of
Beaumont, Beaumont, Tex
W. B. Callan
President, The Victoria National Bank, Victoria, Tex
L. R. Bryan, Jr
Vice Chairman of the Board and Chairman of
the Executive Committee, Bank of the Southwest National Association, Houston, Houston, Tex
Appointed by Board of Governors:
Tyrus R. Timm
Head, Department of Agricultural Economics
and Sociology, A. & M. College of Texas,
College Station, Tex
A. E. Cudlipp
Vice President and Director, Lufkin Foundry
and Machine Company, Lufkin, Tex
John C. Flanagan
Vice President and General Manager, Texas
Distribution Division, United Gas Corporation, Houston, Tex

1958
1959
I960

I960

1958
1959
I960

San Antonio Branch

Appointed by Federal Reserve Bank:
Burton Dunn
Chairman of the Executive Committee, Corpus
Christi State National Bank, Corpus Christi,
Tex
1958
E. C. Breedlove
President, The First National Bank of Harlingen, Harlingen, Tex
1959
J. W. Beretta
President, First National Bank of San Antonio,
San Antonio, Tex
I960
Donald D. James
Vice President, The Austin National Bank, Austin, Tex
1960
Appointed by Board of Governors:
Harold Vagtborg
President, Southwest Research Institute, San
Antonio, Tex
1958
Clarence E. Ayres
Professor of Economics, The University of
Texas, Austin, Tex
1959



FEDERAL RESERVE SYSTEM

149

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.

DIRECTORS—Cont.
Alex R. Thomas

Term
Expires
Dec.31
Vice President, Geo. C. Vaugban & Sons, San
Antonio, Tex
I960
District 12—San Francisco

Class A:
John A. Schoonover
M. Vilas Hubbard
Carroll F. Byrd
Class B:
Walter S. Johnson
N. Loyall McLaren
Reese H. Taylor
Class C:
Y. Frank Freeman
A. H. Brawner
Philip I. Welk

President, The Idaho First National Bank, Boise,
Idaho
1958
President and Chairman of the Board, Citizens
Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif
1959
Chairman of the Board and President, The First
National Bank of Willows, Willows, Calif. I960
Chairman of the Board, American Forest Products Corporation, San Francisco, Calif
1958
Partner, Haskins & Sells, San Francisco, Calif. 1959
Chairman of the Board, Union Oil Company
of California, Los Angeles, Calif
I960
Vice President, Paramount Pictures Corporation, Hollywood, Calif
1958
Chairman of the Board, W. P. Fuller & Co.,
San Francisco, Calif
1959
Vice President, Centennial Mills, Inc., Portland, Ore
1960
Los Angeles Branch

Appointed by Federal Reserve Bank:
Anderson Borthwick
President, The First National Trust and Savings Bank of San Diego, San Diego, Calif...
James E. Shelton
Chairman, Security-First National Bank of Los
Angeles, Los Angeles, Calif
Joe D. Paxton
Chairman of the Board, County National Bank
and Trust Company of Santa Barbara, Santa
Barbara, Calif
Appointed by Board of Governors:
Leonard K. Firestone
President, Firestone Tire and Rubber Company
of California, Los Angeles, Calif
Robert J. Cannon
President, Cannon Electric Company, Los Angeles, Calif

1958
1958
1959

1958
1959

Portland Branch

Appointed by Federal Reserve Bank:
John B. Rogers
President, The First National Bank of Baker,
Baker, Ore
J. H. McNally
President, The First National Bank of Bonners
Ferry, Bonners Ferry, Idaho
C. B. Stephenson
President, The First National Bank of Oregon,
Portland, Portland, Ore



1958
1958
1959

150

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

Appointed by Board of Governors:
William H. Steiwer, Sr
Livestock and farming, Fossil, Ore
Warren W. Braley
Partner, Braley and Graham Buick, Portland,
Ore

1958
1959

Salt Lake City Branch

Appointed by Federal Reserve Bank:
Russell S. Hanson
Executive Vice President, The First National
Bank of Logan, Logan, Utah
1958
George S. Eccles
President, First Security Bank of Utah, National Association, Salt Lake City, Utah
1958
Oscar Hiller
President, Butte County Bank, Arco, Idaho
1959
Appointed by Board of Governors:
Geo. W. Watkins
President, Snake River Equipment Company,
Idaho Falls, Idaho
1958
Joseph Rosenblatt
President, The Eimco Corporation, Salt Lake
City, Utah
1959
Seattle Branch

Appointed by Federal Reserve Bank:
S. B. Lafromboise
President, The First National Bank of Enumclaw, Enumclaw, Wash
1958
James Brennan
President, First National Bank in Spokane, Spokane, Wash
1958
Joshua Green, Jr
President, Peoples National Bank of Washington, Seattle, Wash
1959
Appointed by Board of Governors:
Lyman J. Bunting
President, Rainier Fruit Company, Yakima,
Wash
Henry N. Anderson
President, Twin Harbors Lumber Company,
Aberdeen, Wash




1958
1959

FEDERAL RESERVE SYSTEM

151

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
PRESIDENTS AND VICE PRESIDENTS

Federal Reserve
Bank of—

President
First Vice President

Boston

J. A. Erickson
E. O. Latham

New York

Alfred Hayes
William F. Treiber

Philadelphia . . . Karl R. Bopp
Robert N. Hilkert

Cleveland

W. D. Fulton
Donald S. Thompson

Richmond

Hugh Leach
Edw. A. Wayne

Atlanta

Malcolm Bryan
Lewis M. Clark

Chicago

Carl E. Allen
E. C. Harris

St. Louis

Delos C. Johns
Guy S. Freutel

Minneapolis . . . Frederick L. Deming
A. W. Mills
Kansas City . . . . H. G. Leedy
Henry O. Koppang
Dallas

Watrous H. Irons
W. D. Gentry

San Francisco .. H. N. Mangels
Eliot J. Swan



Vice Presidents
D. H. Angney
Benjamin F. Groot
Dana D. Sawyer
Ansgar R. Berge
O. A. Schlaikjer
George H. Ellis
Robert G. Rouse
H. A. Bilby
Walter H.Rozell J r .
John Exter
T. G. Tiebout
M. A. Harris
V. Willis
H. H. Kimball
R. B. Wiltse
H. V. Roelse
Robert V. Roosa
Joseph R. Campbell P. M. Poorman
J. V. Vergari
W. M. Catanach
David P. Eastburn
Richard G. Wilgus
Murdoch K. Goodwin
Dwight L. Allen
Martin Morrison
H. E. J. Smith
Roger R. Clouse
Paul C. Stetzelberget
C. Harrell
L. Merle Hostetler
J. M. Nowlan
N. L. Armistead
James M. Slay
J. Dewey Daane
Thomas I. Storrs
Aubrey N. Heflin
C. B. Strathy
Upton S. Martin
J. E. Denmark
L. B. Raisty
John L. Liles, Jr.
Earle L. Rauber
J. E. McCorvey
S. P. Schuessler
Harold T. Patterson
Neil B. Dawes
C. T. Laibly
W. R. Diercks
George W. Mitchell
A. M. Gustavson
H. J. Newman
H. J. Helmer
A. L. Olson
Paul C. Hodge
Homer Jones
H. H. Weigel
Geo. E. Kroner
J. C. Wotawa
Dale M. Lewis
C. W. Groth
H. G. McConnell
M. B. Holmgren
M. H. Strothman, Jr.
A. W. Johnson
E. U. Sherman
John T. Boysen
Clarence W. Tow
George H. Clay
Joseph S. Handford D. W. Woolley
T. A. Hardin
Morgan H. Rice
G. R. Murff
Harry A. Shuf ord
T. W. Plant
C. E. Walker
L. G. Pondrom
John A. O'Kane
A. B. Merritt
O. P. Wheeler
E. R. Millard
R. H. Morrill

152

ANNUAL REPORT OF BOARD OF GOVERNORS

FEDERAL RESERVE BANKS AND BRANCHES, Dec. 31, 1958—Cont.
VICE PRESIDENTS IN CHARGE OP BRANCHES

Federal Reserve Bank of—
New York ..
Cleveland ..
Richmond . .
Atlanta

Chicago . . . .
St. Louis . ..
Minneapolis .
Kansas City .
Dallas
San Francisco

Chief Officer
Buffalo
Cincinnati
Pittsburgh
Baltimore
Charlotte
Birmingham
Jacksonville
Nashville
New Orleans
Detroit
Little Rock
Louisville
Memphis
Helena
Denver
Oklahoma City
Omaha
El Paso
Houston
San Antonio
Los Angeles
Portland
Salt Lake City
Seattle

I. B. Smith
R. G. Johnson
J. W. Kossin
D. F. Hagner
R. L. Cherry
H. C. Frazer
T. A. Lanford
R. E. Moody, Jr.
M. L. Shaw
R. A. Swaney
Fred Burton
Donald L. Henry
Darryl R. Francis
Kyle K. Fossum
Cecil Puckett
R. L. Mathes
P. A. Debus
Howard Carrithers
J. L. Cook
W. E. Eagle
W. F. Volberg
J. A. Randall
E. R. Barglebaugh
J. M. Leisner

CONFERENCE OF PRESIDENTS
The Presidents of the Federal Reserve Banks are organized into a Conference of
Presidents which meets from time to time to consider matters of common interest
and to consult with and advise the Board of Governors.
Mr. Leedy, President of the Federal Reserve Bank of Kansas City, and Mr. Erickson,
President of the Federal Reserve Bank of Boston, who were elected Chairman of the
Conference and Vice Chairman, respectively, in January 1956, were re-elected as such
in March 1957 and continued to serve until the meeting in February 1958. At this
meeting Mr. Erickson was elected Chairman of the Conference and Mr. Johns, President of the Federal Reserve Bank of St. Louis, was elected Vice Chairman.
Mr. John T. Boysen, Vice President and Cashier of the Federal Reserve Bank of
Kansas City, served as Secretary of the Conference from May 1956 to February 1958.
Mr. Loring C. Nye, Assistant Cashier of the Federal Reserve Bank of Boston, was
appointed as Secretary of the Conference at the meeting in February 1958.




FEDERAL RESERVE SYSTEM
BOUNDARIES OF FEDERAL RESERVE DISTRICTS
AND THEIR BRANCH TERRITORIES

= =

BOUNDARIES OF FEDERAL RESERVE DISTRICTS
BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES

^

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

®

FEDERAL RESERVE BANK CITIES

•

FEDERAL RESERVE BRANCH CITIES

NOTE.—For a description of the Federal Reserve districts and branch territories, see the Annual Report of the Board of
Governors for 1953, pp. 124-34; for later changes in branch territory lines, see p. 57 of the 1954 Annual Report.



Page
Acceptance powers granted member banks
91
Acceptances, bankers':
Federal Reserve Bank holdings
99, 106, 108, 110
Open market transactions during 1958
129
Alaska Statehood Act:
Actions by Board of Governors incident to
87
Federal Reserve districts, readjustment to include Alaska
87, 94
National banks, membership in Federal Reserve System
94
Assets and liabilities:
Banks, by classes
125
Board of Governors
102
Federal Reserve Banks
106-111
Balance of international payments
13
Bank credit, supplies of
25, 27
Bank holding companies
90
Bank Holding Company Act of 1956, report to Congress under
95
Bank premises, Federal Reserve Banks
and branches
100, 106, 108, 110, 120
Bank supervision by Federal Reserve System
89
Banking offices:
Changes in number
127
On, and not on, Par List, number
128
Board of Governors:
Accounts audited
101
Bank Holding Company Act of 1956, report to Congress under. . . . 95
Income and expenses
101-103
Members and officers
132
Policy actions
72-88
Regulations (See Regulations)
Branch banks:
Domestic, changes in number
127
Federal Reserve (See Federal Reserve Banks)
Foreign
92
Business
finance
21
Capital accounts:
Banks, by classes
125
Federal Reserve Banks
107, 109, 111
Chairmen of Federal Reserve Banks
135
Charts:
Bank loans and investments
25
Deposits of commercial banks
28
Economic indicators, selected
2
Gross national product
5
Interest rates
20
Reserves and borrowings, member banks
9
U. S. balance of payments
12
Commercial banks:
Assets and liabilities
125
Banking offices, changes in number
127



154

INDEX

155
Page

Commercial banks—Continued
Deposits
28, 125
Loans and investments
27, 125
Number, by classes
125
Condition statement of Federal Reserve Banks
106-111
Consumer
finance
22, 26
Credit demands and supplies
18, 25
Defense Production Act of 1950, amendment of
94
Defense production loans
95, 124
Deposits:
Banks, by classes
125
Commercial banks
28, 125
Federal Reserve Banks
107, 109, 111, 118
Savings and other time deposits, maximum rates
123
Deputy Chairmen of Federal Reserve Banks
135
Directors, Federal Reserve Banks and branches
136
Discount rates at Federal Reserve Banks:
Increases in
9, 82, 85
Reductions in
3, 73, 76, 80
Table of
122
Discounts and advances by Federal
Reserve Banks
99, 106, 108, 110, 113, 114, 118
Dividends:
Federal Reserve Banks
97, 98, 115, 116
Member banks
126
Dollar exchange, permission granted member bank to accept
drafts or bills drawn for purpose of furnishing
92
Earnings:
Federal Reserve Banks
97, 114, 116
Member banks
126
Economic review
1-11
Examinations:
Federal Reserve Banks
89
Foreign banking and financing corporations
93
Holding company affiliates
91
Member banks
89
State member banks and foreign branches
89, 93
Expenses:
Board of Governors
101-103
Federal Reserve Banks
97, 114, 116
Member banks
126
Federal Advisory Council:
Meetings
134
Members and officers
134
Federal Open Market Committee:
Meetings
34, 133
Members and officers
133
Policy actions
32-71
Review of continuing authorities or statements of policy
39
Special actions incident to disorderly market in Government
securities
7, 53



156

INDEX
Page

Federal Reserve Act:
Section 2, amendment relating to readjustment of Federal
Reserve districts to include Alaska
94
Section 13b, repeal of, and return of surplus to Treasury
95, 98
Section I4(b), amendment extending authority of Federal Reserve Banks to purchase and sell Government obligations
directly from or to the U. S
94
Section 24, amendment relating to national bank loans participated in by Small Business Administration
94
Federal Reserve Banks:
Assessments for expenses of Board of Governors
103, 114
Authority to purchase and sell Government obligations directly
from or to the U. S., extension of
94
Bank premises
100, 106, 108, 110, 120
Branches:
Bank premises
100, 120
Directors
136
Vice Presidents in charge of
152
Capital accounts
107, 109, 111
Chairmen and Deputy Chairmen
135
Condition statement
106-111
Directors
136
Discount rates:
Increases in
9, 82, 85
Reductions in
3, 73, 76, 80
Table of
122
Dividends
97, 98, 115, 116
Earnings and expenses
97, 114, 116
Examination of
89
Foreign and international accounts
99
Officers and employees, number and salaries
114, 121
Presidents and other officers
151
Profit and loss
115
Section 13b loan authority, repeal of, and return of surplus
to Treasury
95, 98
Special certificates purchased direct from Treasury, holdings of. . . . 113
U. S. Government securities:
Holdings of
98, 106, 108, 110, 112, 113, 118
Open market transactions during 1958
129
Volume of operations
96, 113
Federal Reserve districts:
Readjustment to include Alaska
87, 94
Twelfth District, readjustment to include Alaska in territory of
Seattle Branch
87
Federal Reserve notes:
Condition statement data
106-111
Cost of printing, issue, and redemption
103
Interest paid to Treasury
97, 98, 115, 116
Federal Reserve policy:
Actions to combat recession
3
Digest of principal policy actions
30



INDEX

157
Page

Federal Reserve policy—Continued
Gold movements and Federal Reserve policy
16
Record of policy actions:
Board of Governors
72-88
Federal Open Market Committee
32-71
Federal Reserve System:
Bank supervision by
89
Map of
153
Membership:
Changes in
90
National banks in Alaska
94
Foreign banking and financing corporations:
Examination of
93
Operations of
92
Titles of foreign financing corporations, amendment of
Regulation K
86
Foreign branches
92
Gold certificate reserves of Federal Reserve Banks
106, 108, 110
Gold movements in 1958, relation to balance of international
payments and U. S. monetary system
11
Government
finance
18
Government securities (See U. S. Government securities)
Holding company affiliates
91
Industrial loans by Federal Reserve Banks:
Condition statement data
106, 108, 110
Earnings on
99, 114
Rates on
122
Section 13b loan authority, repeal of, and return of
surplus to Treasury
95, 98
Insured commercial banks
125, 127
Inter-Agency Bank Examination School
93
Interest rates:
Discount rates at Federal Reserve Banks:
Increases in
9, 82, 85
Reductions in
3, 73, 76, 80
Table of
122
Federal Reserve rates, table of
122
Regulation V loans
124
Savings and other time deposits, maximum rates
123
International capital transactions
24
Investments (See also specific types of investments) :
Banks, by classes
125
Commercial banks
27, 125
Federal Reserve Banks
106, 108, 110
Member banks
125
Legislation:
Alaska Statehood Act
94
Bank Holding Company Act of 1956, report to Congress under.... 95
Defense Production Act of 1950, amendment of
94



158

INDEX
Page

Legislation—Continued
Federal Reserve Act:
Section 2, amendment relating to readjustment of Federal
Reserve districts to include Alaska
Section 13b, repeal of
Section 14(b), amendment extending authority of Federal
Reserve Banks to purchase and sell Government obligations directly from or to the U. S
Section 24, amendment relating to national bank real estate
loans participated in by Small Business Administration
Small Business Investment Act of 1958.
95,
Loans (See also specific types of loans) :
Banks, by classes
Commercial banks
27,
Federal Reserve Banks
98, 106, 108, 110, 118,
Member banks
National bank real estate loans participated in by Small Business
Administration, amendment of Section 24 of Federal Reserve Act
Margin requirements:
Increases in
10, 81,
Reduction in
10,
Table of
Meetings:
Chairmen of Federal Reserve Banks
Federal Advisory Council
Federal Open Market Committee
34,
Presidents of Federal Reserve Banks
Member banks:
Acceptance powers
Assets, liabilities, and capital accounts
Banking offices, changes in number
Earnings, expenses, and dividends
Examination of
Foreign branches, number in operation
Number
90,
Reserve requirements:
Reductions in
3, 75,
Table of
Reserves and related items
Membership in Federal Reserve System:
Changes in
National banks in Alaska
Mutual savings banks
125,
National banks:
Alaskan banks, membership in Federal Reserve System
Assets and liabilities
Banking offices, changes in number
Foreign branches, number in operation
Number
90,



94
95
94
94
98
125
125
122
125
94
83
72
124
135
134
133
152
91
125
127
126
89
92
125
78
123
118
90
94
127
9A
125
127
92
125

INDEX

159
Page

National banks—Continued
Real estate loans participated in by Small Business Administration, amendment of Section 24 of Federal Reserve Act
94
Trust powers
91
Nonmember banks
125, 127, 128
Open Market operations
32-71, 129
Par List, banking offices on, and not on, number
128
Policy actions, Board of Governors:
Alaskan Statehood, actions incident to
87
Discount rates at Federal Reserve Banks:
Increases in
82, 85
Reductions in
73, 76, 80
Margin requirements:
Increases in
81, 83
Reduction in
72
Regulation K, Corporations Doing Foreign Banking or Other
Foreign Financing under the Federal Reserve Act, amendment of Sections 3(b) and 10(c) (2)
86
Reserve requirements of member banks, reductions in
75, 78
Policy actions, Federal Open Market Committee:
Authority to effect transactions in System Account
32-71
Review of continuing authorities or statements of policy
39
Special actions incident to disorderly market in
Government securities
53
Presidents of Federal Reserve Banks:
Conference of
152
List of
151
Meetings
152
Salaries
121
Real estate loans:
National bank loans participated in by Small Business Administration, amendment of Section 24 of Federal Reserve A c t . . . . 94
Recession and recovery
1
Regulations, Board of Governors:
Amendments incident to admission of Alaska to Statehood
87
D, Reserves of Member Banks:
Reserve requirements, reductions in
3, 75, 78
K, Corporations Doing Foreign Banking or Other Foreign
Financing under the Federal Reserve Act:
Amendment of Sections 3(b) and 10(c) (2)
86
T, Extension and Maintenance of Credit by Brokers, Dealers,
and Members of National Securities Exchanges:
Margin requirements:
Increases in
10, 81, 83
Reduction in
10, 72
U, Loans by Banks for the Purpose of Purchasing or Carrying
Stocks Registered on a National Securities Exchange:
Margin requirements:
Increases in
10, 81, 83
Reduction in
10, 72



160

INDEX
Page

Regulations, Board of Governors—Continued
V, Loan Guarantees for Defense Production
95, 124
Repurchase agreements:
Bankers' acceptances
106, 108, 110, 129
U. S. Government securities
106, 108, 110, 118, 129
Reserve requirements, member banks:
Reductions in
3, 75, 78
Table of
123
Reserves:
Federal Reserve Banks
106-111
Member banks
118
Salaries:
Board of Governors
103
Federal Reserve Banks
114, 121
Savings
26
Savings deposits (See Deposits)
Small Business Administration:
Real estate loans participated in by, amendment of Section 24
of Federal Reserve Act
94
Small business financing study
103
Small Business Investment Act of 1958
95, 98
State member banks:
Assets and liabilities
125
Banking offices, changes in number
127
Examination of, and foreign branches
89, 93
Foreign branches, number in operation
92
Number
90, 125
System Open Market Account:
Audit of
89
Authority to effect transactions in
32-71
Territory of Federal Reserve Banks and branches:
Seattle Branch territory, inclusion of Alaska in
87
Time deposits (See Deposits)
Treasury
finance
18
Trust powers of national banks
91
U. S. Government securities:
Authority of Federal Reserve Banks to purchase and sell
directly from or to the U. S., extension of
94
Bank holdings, by class of bank
125
Commercial bank holdings
28, 125
Federal Reserve Bank holdings
98, 106, 108, 110, 112, 113, 118
Open market operations
32-71, 129
Special certificates purchased direct from Treasury
113
V-loans
95, 124
Voting permits issued to holding company affiliates
91





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102