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Annual Report of Operations of the Federal Reserve Bank of St. Louis IN ADDITION TO RESPONS1I3IUITIES involving the formation of monetary policy, the Federal Reserve Bank performs supervisory functions and a variety of services for the public, the United States Government, and commercial banks. Background irsformation on monetary actions is frequently provided in this Review (for an analysis of 1966 see the December issue). Supervision by the Federal Reserve Bank is exercised principally through examination of statechartered member banks. This review of the year concentrates on the service functions of the bank. Among its service operations, the hank furnishes currency for circulation, facilitates the collection and clearing of checks, handles the legal reserve accounts of member banks, and acts as fiscal agent of the Government. Most operations of the bank including those at the branches in Little Rock, Louisville, and Memphis increased in 1966, Coin counted reflecting growth in economic ac- Currency counted2 collected tivity in the Central Mississippi Checks Noncash collection items Valley) Transfers of funds and the average denomination of coins and bills han— ciled ~vcre tsp, resulting in a sizable increase in dollar ~r~lsjme Coin handling continued to rise sharply in 1966, reflecting a greater availability of supplies following the severe shortage in 1964. The number of pieces handled rose from a low of 227 million in 1964 to -318 million in 1965 and to 387 million in 1966, increases of 40 and 22 per cent for 1965 and 1966, respectively. The dollar value rose 10 and 46 per cent in these years. Coin handled in 1966, however, was still well below’ the 1961 peak, when 490 snillion pieces valued at $48 million were counted and sorted. Since the coin 5 VOLUME OF OPERATIONS — 1966 — 7 Money Operations. Supplying coin and currency to commercial banks and thereby to the general public is carried out through the Money Department of the bank. Its major activities include receiving, sorting, counting, wrapping, storing, paying out, and shipping coin and currency. Money handling operations in 1966 rose from year-earlier levels. Both the number of pieces ~Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri, and Tennessee. With the exception of Arkansas, only a portion of each of these states is in the Eighth Federal Reserve District. For a review of district economic activity during 1966, see the January 1967 issue of this Review, Per C ent Change Dollar Amount (Millions) —~ 2 U.S. Savings Bonds handled 2 Other Government securities handled U.S. Government coupons paid Loans to member banks— daily average outstanding 1965 1965-66 Annual Rate 1956-66 39.5 27.0 46.3 2.0 1,508.9 113,825.9 626.0 135,844.9 1,421.9 102,900.2 566.2 109,066.4 6.1 10.6 10.6 24.6 2.4 7.2 6.5 12.6 —1.2 8.0 8.2 669.5 624.3 7.2 17,168.1 154.6 16,282.6 136.6 5.4 13.2 31.8 15.3 107.8 Number (Mill ions) Coin counted Currency counted 2 Checks collected Noncash collection items Transfers of funds U.S. Savings Bonds handled 3 3 Other Government securities handled U. S. Government coupons paid 1966 1965 387.3 224.3 317.5 218.8 22.0 2.5 0.9 266.7 244,6 9.0 6.7 5-5 4-9 2,8 10.5 1.9 .835 .214 .587 .200 9,270 8.784 .665 .755 .564 .733 42.2 7.0 5.5 17.9 3.0 0.9 ~Total for the 5t. Louis office and the Little Rock, Louisville. and Memphis branches. 2 Excludes Government checks and money orders. 3 lasued, exchanged, and redeemed. Page 13 shortage still existed in the early part of 1966, the operations for the year as a whole were less than at any time during the 1960-63 period. Coin Counted Millions Millions 50 40 35 30 25 0 Millions 0 Mill: ons 450 450 Nu~ 400 400 350 350 300 300 250 250 200 1954 no change from 1955 to 1963. The number of pieces counted and sorted totaled 224 million in 1966, 2.5 per cent more than a year earlier. Pieces handled have increased at an annual rate of 5.5 per cent since 1963 in contrast to a moderate decline during the previous eight years. Cheek Collections. Federal Reserve Banks receive checks from member banks, other Federal Reserve offices, and Government agencies for collection, Checks received may be drawn on banks in the Eighth District that remit at par, all par-remitting banks in other districts, Federal Reserve Banks, and the United States Treasury. The number of checks passing through the bank rose from 245 million in 1965 to 267 million in 1966, an increase of 9 per cent. Since the average check drawn was for a greater amount, dollar volume of these collections rose 11 per cent to $114 billion in 1966. The number and dollar value of checks collected increased every year from 1956 to 1966. The number rose at an average rate of 6.7 per cent per year, and the dollar value, at a 7.2 per cent rate. 200 5956 5958 1960 1962 5964 Checks Collected Billions 130 H0 Billions 130 1966 520 The dollar value of currency handled rose to $1.5 billion in 1966, 6 per cent above the year-earlier level. The value of currency counted has increased at an annual rate of 8.6 per cent since 1963 after virtually Bill ions Currency Counted 1.55 110 100 90 Billions 80 ‘.55 70 I-So 1.50 1.45 5.45 1.40 1.40 1.35 5.35 1.30 1.30 1.25 1.25 1.20 1 .20 1.55 1,15 60 50 0 ions 270 240 210 0 ~~i±ij:~IIariioIum~:::T Milli ,ns 180 150 0 Millions 120 Ado 230 : I 220 220 250 210 203 200 I ~— I 1954 1956 Page 14 I 1958 ~- I 5960 190 m 1962 1964 1966 0 I I 1954 1956 5958 1960 5962 ‘tacls,de, Government checks and possslmsneysrdnrs. -~ 1964 ~S2=0 1966 Noncash Collections. In addition to maintaining facilities for check collections, Federal Reserve Banks handle numerous other items for collection. These noncash collections include drafts, promissory notes, bonds and bond coupons, and various other docu- ments. The combined dollar value of these collections Transfers of Funds wascent up average 11 perrate centfrom from 1956. 1965 to The 1966 number and at ofa 6items per jumped 42 per cent from 1965 to 1966 and have risen at a 5.5 per cent average rate since 1956. Noncash Collection Items Millions 650 600 _T~ 5 1954 t’ 5 5954 [ [ i ~‘t~ 5956 I “T~ 1958 I 1960 -r 1962 I I 1964 5966 Transfer of Funds. Wire transfers of funds arc largely movements of member bank balances between Federal Reserve Banks, resulting for the most part from Federal funds transactions, check collection settlement, and transfers in connection with transactions in U. S. Treasury obligations. This bank participated in 214,000 such transfers in 1966, up 7 per cent from the previous year. The dollar value, totaling $136 billion, was up 25 per cent. ‘T~ 1956 5958 S 1960 I t~ 5962 I 5966 States Savings Bonds valued at $670 million. The number of bonds was up 5.5 per cent from a year earlier, and their value was up 7 per cent. From 1956 to 1966 dollar volume declined at a 1.2 per cent annual rate, while number of pieces increased at a S per cent rate. Other Government securities issued, U.S. Savings Bonds Issued, Exchanged, Millions and Redeemed Millions 900 900 850 850 800 800 750 750 700 700 650 so 600 Bank Fiscal Agency Operatiosss. Each Federal Reserve acts as depository and fiscal agent of the United States Government. The Reserve Banks carry the principal checking accounts of the Treasury, issue and redeem Government securities, administer the Treasury tax and loan deposit accounts at commercial banks, and perform various other Government financial duties. 600 I 0 . . I . . I Mill pns 9.0 8.5 I Mu 0 ions 2.0 ~~L/ -____ 8.5 8.0 3.0 7-5 7.5 7.0 In its capacity as fiscal agent, the bank in 1966 issued, exchanged, and redeemed 9.3 million United 0 “~‘ 5964 1954 7.0 iii 5956 1958 1960 1962 5964 1966 Page 15 Other Government Securities Issued, Serviced, Billic as ~AI and Retired 811 ions - ~ 17.5 17 15.0 15.0 12.5 12 5 - 10.0 10.0 7-5 7.5 0 _______________ Thousand ________ a ________ --r Thousands ________ 650 650 600 600 550 500 450 400 350 300 550 500 450 250 Number I Pieces z~ ~--:- 400 350 300 Th~ I, 250 200 1954 rate. Government coupons paid in 1966 were up 3 per cent in number and 13 per cent in dollar value. Loans. Federal Reserve credit is generally extended on a short-term basis to a member bank to enable it to adjust its asset position when necessary because of developments such as withdrawal of deposits or shortrun requirements for credit beyond those which can reasonably be met by use of the bank’s own resources. Federal Reserve credit is also available for longer periods when necessary to assist member banks in meeting unusual situations resulting from national, regional, or local difficulties or from exceptional circumstances involving particular member banks. The discount rate, the rate charged member banks which borrow from a Federal Reserve Bank, is established by the bank’s directors, subject to review and determination by the Board of Governors. The last rate change was an increase from 4 to 4½per cent in December 1965,2 Discount Rate 200 1956 1958 1960 Zf 1964 1962 Federal Reserve Bank ot St Per Cent oats Per Cent 5.0 1966 5.0 serviced, and retired rose 18 per cent from a year earlier, and their value was up 5.4 per cent. Since 4-5 1956 the number of such securities has risen 10 per cent per year, and the dollar volume, at an 8 per cent U.S. Government Coupons Paid 2.5 2.0 I-S 1.0 .5 0 1954 1956 1958 1960 1962 1964 1966 Average borrowing by member banks from the Federal Reserve Bank of St. Louis was much higher in 1966 than in other recent years. Average credit outstanding to member banks in the Eighth District in 1966 was $32 million, up from $15 million in 1965 and from about a $5 million average in the 1961-6-4 period. In comparison, loans to member banks averaged about $19 million during the 1955-60 period. The greater borrowings in 1966 reflected a sharp rise in short-term market interest rates relative to the dis‘The rate charged under Sections 13 and l3a of the Federal Reserve Act on advances secured by U. S. Government securities and discounts of and advances secured by eligible -~ I 1954 S Page 18 1956 1958 1960 1962 I I 1964 _ZU 1966 o paper. The rate charged on advances secured by collateral other than Government securities and “eligible” paper is onehalf of one per cent higher than the normal discount rate. The Board of Governors has recommended elimination of this “penalty” discount rate. COMPARATIVE STATEMENT OF CONDITION count rate and a strong demand for commercial bank credit. The rise in short-term interest rates resulted from a huge demand for funds accompanyprimarily ing a stimulative Federal budget and a strong demand for goods and services. Loans to Member Ba nks Mu lions of Do ‘jars (Doily Anerage Outotanding( 45 F r L - Millions of Dollors 45 40 35 Thousands of Dollars December 31, 1966 Gold certificate reserves Federal Reserve notes of other banks 534,492 29,701 31,278 527,575 2,400 Other cash Discounts and advances 40 U.S. Government securities Uncollected items 35 Other assets Total assets 30 25 Liabilities and Capitol Accounts 20 20 Federal Reserve notes (net) Deposits: Member banks-reserve accounts U.S. Treasurer-general account Other 15 10 10 50)78 1 .394 1,546,710 412,676 40,003 2,61 8,361 2 577,5 15 1,471,034 1,450,866 727,057 599 11,814 690,741 I 490,875 479437 Other liabilities and accrued dividends Total capital accounts 360,611 7,748 39,498 55,282 14,589 320,883 6,894 38,260 Total liabilities and capital accounts 2618,361 2,577,5 15 Deferred availability cash items 5 I 42,029 7,128 30 25 0 1954 December 31, 1965 Assets ,-~ 1956 1958 1960 1962 1964 1966 Statements. Total assets of the Federal Reserve Bank of St. Louis were $2.6 billion at the end of 1966, an increase of 1.6 per cent from a year earlier. The rise in assets was largely matched by increases in COMPARATIVE PROFIT AND LOSS STATEMENT Thousands of Dollars notes outstanding (currency) and member bank deposits (reserves). Net earnings, before payments to the United States Treasury, from 1965.rose The to rise $56 interest in milhon earnings in 1966, reflected 19 primarily per cent the higher average rates on upbank earning assets. Dividends to member banks, set by law at 6 cent of paid-in capital, were up 5 per cent. Payper ments to the Treasury (interest on Federal Reserve notes) of $55 million were 21 per cent above a year earlier. Tatal earnings Net expenses 1966 68,176 58,246 1965 11,809 11,053 Net earnings Net additions (+1 or deductions I—) 56,367 47,193 —44 +39 Net earnings before payments to U.S. Treasury 56,323 47,232 1,168 1,110 44,935 1,187 Distribution of net earnings, Dividends Interest an Federal Reserve notes Transferred to surplus Total 54,536 619 56,323 47,232 Page 19
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