Full text of Annual Report of the Federal Reserve Bank of Boston : Nineteenth Annual Report of Federal Reserve Bank of Boston for the Year Ended December 31, 1933

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SIINETEENTH ANNUAL REPORT OF THE

FEDERAL RESERVE^BANK
OF BOSTON
FOR T H E YEAR E N D E D
D E C E M B E R 31, 1933

BOSTON • MASSACHUSETTS




NINETEENTH ANNUAL REPORT
OF THE FEDERAL RESERVE BANK
OF BOSTON

FOR THE YEAR ENDED
DECEMBER 31, 1933

BOSTON, MASSACHUSETTS







CONTENTS
PAGE

Letter of Transmittal
Introductory
New England Business Conditions
Business Indices — New England
Member Bank Credit
Federal Reserve Bank Credit
Bankers' Acceptances
Acceptance Liability
Open Market Operations
Member Bank Reserve Deposits
Money Rates and Discount Rates
Boston Money Market, 1933
Federal Reserve Notes and Bank Notes
Reserve Position
Banking Indices — New England
Operating Statistics
Statement of Condition
Income and Disbursements
Deposit Insurance
Membership
Bank Organization and Personnel
Stockholders' Meeting
Volume of Operations
List of Officers and Directors




4
5
8
12—13
14
18
20
21
21
22
22
24
25
25
26-27
28-29
30—31
31
32
32
33
34
35

LETTER OF TRANSMITTAL

BOSTON, MASS.,

February 24, 1934.

HON. EUGENE R. BLACK,
Governor, Federal Reserve Board,
Washington, D. C.
Sir:
I have the honor to submit herewith the Nineteenth Annual
Report of the Federal Reserve Bank of Boston, covering industrial
and credit conditions in New England, and the operations of the
bank for the period January 1, 1933, to December 31, 1933.




Respectfully yours,
FREDERIC H. CITRTISS,

Chairman and Federal Reserve Agent

NINETEENTH ANNUAL REPORT
OF THE FEDERAL RESERVE BANK
OF BOSTON
INTRODUCTORY
The year 1933 will probably be referred to in history as the
fourth year of the great depression. While it ended with considerable improvement in commodity prices, volume of production,
and stabilization in bank deposits, the forces of depression that
had begun in 1929 continued unabated during the first quarter
of the year. Some recovery in business in this district was evident
in the late summer of 1932, but towards the end of that year
there was another recession. During the early months of 1933
this general recession in business activity continued. Bank deposits continued to decline, the local banking situation being influenced
by banking difficulties elsewhere in the country, coupled with the
flight of capital out of the United States.
Events moved rapidly towards a climax during the latter part
of February, culminating in the declaration of bank holidays in
Illinois, New York, and Massachusetts on Saturday, March 4.
At 3:30 A.M. on Saturday, March 4, the officers of the Federal
Reserve Bank of Boston received word by telephone that the Governors of the States of Illinois and New York were to declare bank
holidays on that day, which would be observed by the Federal
Reserve Bank of New York and the Federal Reserve Bank of
Chicago. The bank commissioner of each of the six New England
States was immediately notified by telephone of this situation, and
asked to get in touch with the Governor of his State. The Executive Committee of the Boston Clearing House Association met
with the officers of the Federal Reserve Bank of Boston a few hours
later, and decided to request its members to remain closed on that
day. The Federal reserve bank also decided to observe the
holiday, and proclamations were issued by the Governors of all
the New England States on that day, declaring a bank holiday.
On the following Monday, March 6, all banks in the United States
were closed by presidential proclamation. The holiday was first
proclaimed to expire on March 9, but was later extended to March
13. The Boston banks immediately got plans under way for the
printing and issuance of clearing house certificates. Similar policies were adopted in other New England cities, and in several parts
of the district clearing house certificates were taken out and used
for a day or two; but owing to the facilities furnished by the
Federal reserve bank for currency needs the clearing house cer


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tificates were not used extensively. In Providence the bank commissioner permitted withdrawals of scrip, limited to $10 per week
to any one person, in place of clearing house certificates. On
March 15 the Providence clearing house committee voted to declare
the plan for issuance of scrip terminated.
Early in the morning on Monday, March 6, the Federal Reserve
Bank of Boston received permission from Washington to open its
currency department for the exchange of currency other than gold
and gold certificates. Shortly thereafter all banks were allowed
to perform this function. Later on the same day access was allowed
to all safe deposit boxes. Also, New England banks were allowed
to return all checks and collection items not charged on their
books, to cash checks drawn on the Treasurer of the United States,
and to open new trust accounts subject to demand withdrawals.
Throughout the week of March 6-11, inclusive, all commercial
and savings banks remained closed. On Saturday, March 11, all
Federal reserve banks reopened to make loans to their members
on United States Government securities and to transact necessary
business to make effective the authorized withdrawal of currency
for payroll and for other necessities. Under this privilege member banks in this district increased between February 22 and
March 15 their borrowings from the Federal reserve bank
$22,000,000, sold acceptances of $15,000,000, reduced their
reserves $33,000,000, and took out Federal reserve notes for payroll and other purposes amounting to $70,000,000. In the meantime Congress on March 9 passed the Emergency Banking Bill,
giving President Roosevelt wartime powers over gold transactions,
providing for reorganizing banks, and creating new Federal
reserve bank currency in the form of Federal reserve bank notes.
On March 13 the Secretary of the Treasury gave authority to
the Federal reserve banks to issue licenses to all member banks
of the Federal reserve system located in each of the Federal reserve
cities whose application to reopen had been approved, and all
Boston member banks were opened on that day. On the following
day member banks in other Clearing House cities were similarly
licensed, and banks elsewhere in New England on Wednesday,
March 15. Details regarding banks opened will be found on page
32 of this report under "Membership." No restrictions were
placed on the banks which had been licensed to reopen, except as
pertained to the paying out of gold and other currency when
hoarding was suspected, and certain dealings in foreign exchange.
Throughout March and the succeeding months a series of emergency regulations and new legislation came in rapid succession.
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Chief among these were the presidential proclamations regarding
gold, designed first to stop the hoarding of gold and later to
prevent the export of gold. Although no gold could be paid out
in the form of currency after the bank holiday. Although no gold
could be paid out in the form of currency after the bank holiday,
the Secretary of the Treasury was permitted to license the withdrawal of gold for export under proper conditions. About the
middle of April, when the dollar fell to the export point, such
licenses were granted. On April 18, however, the granting of
licenses was discontinued, and on April 20 an Executive Order
placed an embargo on gold exports for commercial purposes.
These measures brought about the departure of the United States
from the gold standard. About two weeks later, on May 3, coupon
payments in gold to foreign holders of United States obligations
were refused by the United States Treasury, and on May 26 repeal
of the gold clause in outstanding bonds and private contracts
was asked for in a joint Senate and House resolution, which was
approved on June 5, 1933. As time passed, the necessity for a
free gold market in the United States became increasingly apparent. On August 29 the gold embargo was modified to permit
a regulated export market for newly-mined gold at world prices.
In order to accomplish this, the United States Treasury Department was permitted to take the new production of domestic gold
mines on consignment for sale abroad.
The reopening of the banks restored in the mind of the public
confidence in the banking structure. This confidence spread in
other directions, with the result that during the spring and early
summer a general improvement in business was experienced, increasing industrial activity to a marked degree. In fact, the
increase in production during this period was the most pronounced
on record. Low inventories and the fear of rising prices in commodities, however, influenced the manufacturer to overestimate
the demand for goods, and while business activity during these
months recovered to the level of the summer of 1930, the reaction
towards the end of 1933 was such as might have been expected
although the year ended with more confidence in the general situation than at the close of the preceding year, and with business
activity considerably greater.




[7]

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N E W E N G L A N D B U S I N E S S CONDITIONS

Industrial activity in the aggregate during the year 1933 in
New England was considerably lower than in 1932, being affected
by the adverse factors in financial conditions, continued price
declines, and further weakening of confidence during the first
quarter. Beginning in the second quarter, however, business
activity began to increase, this upward movement continuing until
August. During the last half of 1933 a declining tendency prevailed, but this downward movement was gradual rather than
abrupt, and at the close of the year industrial activity in this
district was considerably above the low point reached in March.
Activity in cotton and woolen mills in New England increased
rapidly during the second quarter of 1933, and production of
boots and shoes for the entire year exceeded the output in 1932.
Building: Total construction contracts awarded in New England during 1933 amounted to $120,696,100, an increase of 5.3
per cent over the value of new awards in 1932. The two classes
of building construction which principally represent private
financing, residential and non-residential construction, reported
a smaller dollar volume in 1933 than in 1932, showing declines of
6.3 and 28.0 per cent, respectively. In the first class of construction, residential, no change occurred in the value of the principal
type of building in this class, namely, dwellings. The value of
contracts for single-family homes in 1932 was $27,776,000, and
in 1933 it was $27,737,000. The value of new hotel construction
was considerably reduced between 1932 and 1933, decreasing from
$1,335,000 to $413,300. Other types of residential building, representing construction undertaken for speculative or investment
purposes, decreased from $6,883,500 in 1932 to $4,480,200 in
1933.
In the non-residential classification the two types of construction representing a direct interest in the business prospect,
new commercial and factory building, increased from $13,626,400
in 1932 to $16,193,200 in 1933. This gain was entirely centered in
two types of factory construction, those for food production and
printing and binding. The types of non-residential construction
which indicate to some degree the capacity to endow certain educational or philanthropic interests declined from $17,605,700 to
$5,266,400, a decrease of 66.6 per cent. The third principal
division of the construction industry, comprising public works and
public utilities construction activities, during recent years has
been largely dominated by public financing. The total value of
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this class of building amounted to $32,271,300 in 1932 and to
$53,424,910 in 1933, a gain during the past year of 65.7 per
cent. Between 1931 and 1933 several changes took place in the
relative importance of several types of construction entering into
the total of public works and utilities contracts awarded. In 1931
total public works and utilities contract awards were valued at
$88,742,100, with $33,313,000 representing highway construction
and $23,035,100 new railroad construction. In 1932 a decrease of
63.7 per cent was recorded in the value of public works and utilities construction undertaken, with only $19,955,000 awarded for
new highway construction, and virtually a complete absence of
railroad contracts, only $125,100 of new contracts having been
awarded during the entire year.
During 1933 activity in public works and utilities contracts was
renewed. The combined group reported a gain of 65.7 per cent
in the value of new awards over 1932. New highway construction
in 1933 amounted to $23,491,000, an increase of approximately
$4,500,000 compared with the preceding year. Increases in all
types of public works construction during 1933 resulted in a
total value for new public works contracts of $37,142,000, compared with $27,620,800 in 1932. Public utilities were also increased as a result of contracts let for water supply systems,
totaling $12,652,900, compared with $2,642,600 in 1932. The
value of new railroad construction in 1933 shrank to only $90,000.
Shoes: The course of the boot and shoe industry in 1933, as
measured by the seasonally adjusted index of boot and shoe production, showed an irregular tendency. In March the volume of
production declined to 88.8 per cent of the 1923-24-25 monthly
average, rising steadily during the following four months to a
peak of 137.7 per cent in July, a new high in the seasonally
adjusted monthly output; since July production has declined
rapidly, although showing slight gains over the preceding month
during October and December.
Total boot and shoe production in 1933 was estimated at 116,710,000 pairs, compared with 112,558,000 pairs in 1932 a gain
of 3.7 per cent. This increase in total output for 1933 followed
a rise of 1.4 per cent in 1932, and a gain of 5.6 per cent in 1931
over 1930. In fact, since 1930, when the volume of shoe production dropped 14.6 per cent from the 1929 high of 123,093,000
pairs, increases have occurred in each successive year in the total
number of pairs of shoes produced in this district, amounting to
5.7 per cent in 1931, 0.8 per cent in 1932, and 3.7 per cent in




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1933. The estimated output of boots and shoes for 1933 of
116,710,000 pairs places the rate of activity of the industry for
1933 in fourth place since 1923, being exceeded in rate of output
by only 1923,1928, and 1929.
Textiles: The seasonally adjusted index of raw cotton and wool
consumption reflected tendencies toward rapid expansion during
the first half of 1933, followed by a correspondingly severe contraction in the final quarter of the year. At the close of December
both the cotton and the woolen and worsted manufacturers were
operating at less than half the rate which obtained in the early
summer, and were reporting a volume of consumption of raw
material below that for December, 1932.
The number of bales of raw cotton consumed in New England
during the past year amounted to 973,173 bales, against 681,572
bales in 1932. This was an increase of nearly 43 per cent in the
rate of consumption in a single year, and represented the largest
annual volume since 1929, when over 1,400,000 bales were consumed. The current rate of consumption, averaging a little more
than 81,000 bales per month, is only approximately one-half the
average monthly consumption which prevailed 10 years ago.
During the past year a reduction of 5.6 per cent occurred in the
average number of cotton spindles in place, although the number
of spindles active increased 15.6 per cent, compared with a rise
of 50.5 per cent in average spindle hours operated per spindle
in place.
New England woolen and worsted establishments consumed
282,327,000 pounds, grease equivalent, of raw wool during the
past year. In 1932 these establishments consumed 213,641,800
pounds, so that the 1933 total represented a gain of 32.2 per
cent. The present rate of raw wool consumption is only 5.3 per
cent less than in 1929. Since 1923, the first year for which complete monthly data are available, the 1933 volume of raw wool
consumption has been exceeded only in 1923 and 1929.
Employment: The decreases in employment and payrolls in
2333 identical New England manufacturing establishments between November and December, 1933, amounted to 4.4 and 3.9
per cent, respectively. In December, 1933, employment was 18.8
per cent greater than in the same month of 1932, while payrolls
were 28.8 per cent larger than in the corresponding month of the
preceding year. Averages for the entire year 1933 showed increases
of 14.6 per cent in the number employed and 14.3 per cent in weeklv
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payrolls, with a resultant slight decrease of 1.8 per cent in the
average weekly wages, reflecting the smaller number of hours
worked per week per person.
Trade: The amount of new ordinary life insurance written in
New England during 1933 was 3.6 per cent less than in 1932, while
the volume in 1932 was nearly 19 per cent under that for 1931.
During the closing months of 1933 the month-to-month comparisons with the preceding year showed more favorable conditions.
In the first half of 1933 sales of new automobiles in this district
were less than in 1932, but in the second half rapid gains more
than offset the declines, and about 28 per cent more new cars were
registered in the year 1933 than in 1932.
Retail trade, as represented by sales of department and apparel
stores in New England, were eight per cent smaller in dollar
volume in 1933 than in 1932. The sharpest decreases occurred
during the first quarter, the only gains during the year taking
place in July and August. In December, 1933, sales of these
stores were in the same volume as in the corresponding month of
1932.
In September a semi-monthly survey of sales in 600 to 800
Massachusetts retail establishments of all types was inaugurated.
Reports from these establishments showed the comparative condition of dollar sales with that for the corresponding period of the
preceding year. The following table illustrates the changes
which occurred in the eight classified groups of Massachusetts retail establishments reporting sales data for December, 1933, compared with December, 1932. The actual gain in the total reported
dollar volume of retail sales in December, 1933, over December,
1932, amounted to $557,186.
MASSACHUSETTS RETAIL SALES
December, 1933, compared with December, 1932
Total
Number
Number
Number
Number Reporting
Reporting
Reporting
Reporting INCREASE DECREASE No Change

GROUP

Foods
General Merchandise
Automotive
Apparel
Furniture and Household
Restaurants and Eating Places
Lumber
All Other

107
116
77
92
58
46
54
195

46
76
38
63
30
13
24
104

53
35
35
22
26
27
24
76

8
5
4
7
2
6
6
15

TOTAL

745

394

298

53
$24,144,546
$23,587,360

Total Reported Volume—December, 1933. .
Total Reported Volume—December, 1932..




Per Cent
Change in
Dollars

+0.55%
+ 1.42
+ 7.69
+3.26
—1.82
—4.35
+3.41
+4.51
+2.36

[11]

BUSINESS INDICES — NEW ENGLAND
GENERAL BUSINESS
19SS
19S2
1. New Incorporations — Mass. (Year ending
2.
3.
4.
5.
6.
7.
8.
9.

Nov. 30)
Life Insurance Sales
Carloadings, Mdse., I.C.I., and Misc
N . E . Railroads Net Operating Income .
Residential Building Contracts Awarded .
Non-residential Building Contracts Awarded
Public Works Contracts Awarded . . .
Public Utilities Contracts Awarded . . .
Total Construction Contracts Awarded
.

.
.
.
.
.
.

2,547
$505,812,000
1,181,787
$18,992,776
$36,309,100
$30,962,100
$37,421,500
$16,003,400
$120,696,100

INDUSTRIAL PRODUCTION
1. Industrial Activity—Electric Power Consumed
(1923-1925 Average)
93.6%
2. Electric Power Production (Kilowatt hours) . 6,040,738,000
3. Cotton Consumption (Bales)
973,173
4. Average Cotton Spindles in Place . . . .
10,824,000
5. Average Cotton Spindles Active
6,907,000
6. Average Spindle Hours Operated per Cotton
Spindle in Place
.
146
7. Wool Consumption (Pounds, grease equivalent)
282,327,000
8. Wool Receipts — Domestic — Boston (Pounds,
grease equivalent) . . . .
. . . .
268,029,400*
9. Wool Receipts — Foreign — Boston (Pounds,
grease equivalent)
48,851,800*
10. Shoe Production (Pairs)
116,710,000*
11. Shoe Shipments—Brockton (Pairs) . . . .
4,401,800
ORDERS—MASSACHUSETTS—(1926=100)
1. Textiles
2. Leather and Shoes
3. Metal Trades
4. Paper




83.8%
47.1
40.2
54.1

2,498
$522,509,000
1,188,923
$21,503,410
$38,771,000
$43,010,800
$27,620,800
$4,650,500
$114,053,100

78.3%
5,722,983,000
681,572
11,429,000
5,979,000

Per Gent Change
1933-1932 1932-1931

+ 1.9%

— 3.6
— 0.6
—11.7
— 6.3
—28.0

+35.5
+244.0
+ 5.3

+19.6
+ 5.6
+12.7

+ 3.5%
—18.9
—22.8
—31.2
—55.7
—63.8
—46.0
—87.6
—61.4

+15.6

—18.9
—10.4
—26.0
— 7.2
—23.1

07

+50.5

—21.2

213,641,800

+32.1

—23.7

212,617,400

+32.5

—16.2

17,556,400
112,558,000
5,085,000

+178.2
+ 3.7

—62.1

+17.5

—11.8
—13.9
—37.6
—25.6

71.3%
47.8
32.1
46.1

— 5.2

—13.4

— 1.4

+25.6
+17.3

+ 1.4
—to.o

BUSINESS INDICES — NEW ENGLAND (continued)
EMPLOYMENT—(Monthly Averages)
1. Number of Manufacturing Establishments reporting
2. Number Employed in Identical Establishments
3. Number Employed per Establishment .
4. Weekly Payroll in Identical Establishments .
5. Weekly Wage per Person in Identical Establishments
TRADE
1. Department Store Sales (Per cent of 1923-2425 Monthly Average)
2. Sales of New Motor Cars
3. Number of Commercial Failures (Dun & Bradstreet, Inc.)
. .
4. Liabilities of Commercial Failures (Dun &
Bradstreet, Inc.)
PRICES—(1926=100)
1. Wholesale Prices (Bureau of Labor Statistics)
2. Retail Food Prices (Bureau of Labor Statistics)
3. Cost of Living—Combined—Massachusetts
4. Cost of Living—-Food—Massachusetts .
5. Cost of Living—Clothing—Massachusetts .
6. Cost of Living—Shelter—Massachusetts
7. Cost of Living—Fuel and Light—Massachusetts
AGRICULTURE
1. Acreage—Principal Crops
2. Total Farm Values—Principal Crops .
3. Farm Prices — Bureau of Labor Statistics
(1926=100)
4. Potato Crop:
1. Acreage
2. Production (Bushels)
3. Yield per Acre (Bushels)
4. Value of Crop
5. Average Price per Bushel
* Preliminary



2,407
410,660
171
$7,092,627
$17.26
64.2%
117,655

2,386
358,760
150
$6,201,060
$17.56
69.9%
93,743

- - 0.8
- -14.6
- -14.0
- -14.3

+34.4
+ L7

-

—16.4

1.8

—24.2
—15.1

— 8.2%

+25.5

—21.9%
—43.1

2,134

3,305

—35.4

+45.7

$51,268,000

$73,826,852

—30.5

—11.4

66.1%

64.9%

+ 1.8

—11.1

61.3*
75.7
64.4
71.7
79.4

63.9
78.3
66.2
71.1
86.0

— 3.7
— 3.3
— 2.7
— 7.6

—15.6
— 9.4
—15.7
—14.8
— 6.1

82.2

84.5

— 2.7

— 6.1

3,548,000
$99,355,000
51.4%
203,000
50,165,000
241
$33,232,000
$0,663

3,567,000
$74,576,000

+ 0.8

— 0.5

+33.3

—12.1

48.2%

+ 6.7

—25.6

221,000
48,350,000
219
$14,127,000
$0,292

— 8.1

— 7.5
—13.4
— 6.4
— 0.9

+ 3.7
+10.1
+135.2
+126.9

+ 14.5

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B A N K

MEMBER BANK CREDIT
The deposits of member banks in the New England district
continued to decline during January and February, 1933, although
not as rapidly as in most other sections of the United States. This
contraction in deposits was largely in Government and time deposits, withdrawals being financed by the weekly reporting member banks out of excess reserves which they had been carrying,
and from the sale of securities. The volume of rediscounts at the
Federal Reserve Bank of Boston showed practically no change
during this period, ranging from $10,000,000 to $12,000,000.
Serious developments in the Middle West directly affected the
New England banks during the period through the withdrawal
of their deposits to furnish currency requirements in other sections of the country where banking moratoria and State holidays
had been proclaimed.
Following the reopening of the banks, during the middle of
March, after the general bank holiday, a rapid return flow of
currency out of hoarding took place, which was the beginning of a
substantial expansion in deposits, culminating on November 1.
This was a period during which United States deposits were built
up rapidly, reaching the record high point of $105,000,000 in the
weekly reporting member banks throughout New England on
November 1. A considerable growth in demand deposits also
occurred, while time deposits showed a slight decline. It is significant that of the $139,000,000 increase in total deposits in the
weekly reporting member banks in nine New England cities between March 29 and November 1, $94,000,000 occurred in United
States deposits alone. The channels through which this new bank
credit was invested are significant. A large part of it,—$54,000,000,—went into what is known in the statements as "all other
loans"; $27,000,000 additional went for the purchase of United
States securities. On the other hand, collateral loans, real estate
loans, and other bonds and stocks owned actually declined. There
is reason to believe that a substantial part of the increase in
commercial loans noted above represented open market operations
in acceptances and brokers' commercial paper which were liquidated from time to time, this view being suggested by some of the
sudden fluctuations which occurred in this classification of loans
during the period under review. Excess reserves also were built
up extensively, rising $39,000,000.
After the peak reached on November 1, substantial contraction in time deposits and in United States Government deposits
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SITUATION

REPORTING MEMBER BANKS IN FEDERAL RESERVE DISTRICT 1
1900

19 2 9

930

931

!932

1933

*-TOTAL LOANS AND INVESTMENTS

NET DEMAND DEPOSITS^




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contrasted with a relatively stable volume of demand deposits, with
the result that the total volume of loanable funds declined materially between November 1 and December 27. Since this year-end
contraction occurred mostly in time deposits and United States
Government deposits, while demand deposits were well maintained,
contrary to the seasonal tendency downwards, it seems obvious that
the general movement was only slightly affected by seasonal influences. Demand deposits, which ordinarily contract about five
per cent during this two months' period, actually maintained
their level close to the November 1 peak.
Therefore, in analyzing the position of the member banks during
1933 it is more significant to compare the movement of net demand
deposits than the movement of total deposits, the fluctuations of
the latter being highly erratic on account of the exceptionally
heavy transactions in United States deposits. Considering only
the net demand deposits, it appears that the year was marked by
two, rather than three, distinct phases: first, the violent contraction in March, and secondly, the steady improvement which
occurred during the rest of the year. The downward trend in total
deposits (while demand deposits remained stationary) during
November and December is largely attributable to the contraction
in United States deposits and, therefore, does not reflect commercial credit conditions in this district. Such deposits, being
subject to sudden and large withdrawals, are usually invested in
the shortest term paper available.
The close of 1933 finds the New England member banks in a
much stronger position than for several years. Compared with
their position at the close of 1932, total deposits are higher.
Time deposits, on which the heaviest rate of interest is paid, are
substantially below the level of a year ago. Net demand deposits
are about the same as at the end of 1932, while United States
deposits, against which no reserve is required and no interest
is paid, are much higher at the end of 1933. Commercial loans
have expanded substantially, while all other types of loans and
investments have declined. Even holdings of United States Government obligations were only slightly higher on December 27,
1933, than on December 28, 1932. Not only was the liquidity
of bank investments improved by the gradual thawing of frozen
assets and their replacement by more liquid loans and investments, but the banks were further fortified by unusually large
excess reserves as the year drew to a close. There is no longer any
shortage of short-term commercial credit available at New Eng[16]



ANNUAL

REPORT

OF

THE

FEDERAL

RESERVE

BANK

FEDERAL RESERVE BANK OF BOSTON
FLUCTUATION OF PRINCIPAL
325

929

930

93

ITEMS

1932

1933

300

275

250

225




[17]

ANNUAL

REPORT

OF

THE

FEDERAL

RESERVE

BANK

land member banks for borrowers having legitimate requirements
or adequate security.
A group of 61 mutual savings banks located throughout New
England report their deposits monthly to the Federal Reserve
Bank of Boston. These 61 banks represent about half of the total
mutual savings deposits in the district, and are therefore a reasonably good sample of the trend in such deposits. Month by
month these mutual savings deposits declined throughout the year,
until on November 30 they were a t the lowest point since May,
1930. An encouraging factor in the mutual savings bank situation, however, is the substantial gain in the number of accounts
on the books. These accounts reached their lowest level in June,
1933, followed by a gradual improvement from month to month.
This improvement was due not only to the large number of new
accounts opened, but to a substantial reduction in the number of
old accounts closed each month.

FEDERAL RESERVE BANK CREDIT
The volume of credit provided by the Federal Reserve Bank of
Boston during 1933 averaged higher than in any year since 1920.
The composition of this credit, however, was wholly different from
that in the earlier period. In 1933 it consisted, during the greater
part of the year, almost solely of United States Government obligations. Holdings of bankers' acceptances were practicallv eliminated early in June and remained very low until December. Member bank discounts also were steadily reduced following the bank
holiday, reaching a minimum of $3,711,000 on October 18. This
was the smallest volume of credit advanced to all member banks
in this district since May, 1917, shortly after this country officially declared war.
It is one of the primary functions of Federal reserve banks to
absorb the seasonal pressure on member banks. Thus, since the
establishment of the Federal reserve system, seasonal pressure on
the member banks, as reflected in money rates, has been greatly
reduced. It follows that the movement of total earning assets
in the Federal reserve banks is largely determined by those seaonal influences affecting the member banks. Ordinarily the contour of the curve of total earning assets of the Federal Reserve
Bank of Boston roughly resembles the letter U. This formation
is largely attributable to the close resemblance to the letter U of
the curve for acceptances, which customarily declines steadily
during the first half of the year and rises as steadily during the



A N N U A L

R E P O R T

O F T H E

F E D E R A L

R E S E R V E

B A N K

second half. The normal curve of loans to member banks more
nearly resembles the letter W, with an intermediate peak coming in
the middle of the year. The special emergencies and extreme
abnormalities occurring during 1933 practically eliminated the
usual seasonal trends. Member banks were borrowing relatively
little from the Federal Reserve Bank of Boston during January
and February. The bank holiday closed all the member banks
during most of the first half of March. In order to prepare themselves for reopening, these banks borrowed heavily from the Federal
Reserve Bank of Boston, member bank discounts rising abruptly
from $12,000,000 on February 22 to $34,000,000 on March 15.
Funds arising out of the return flow of currency to the member
banks from individuals who had been hoarding it previous to the
holiday, and to the Federal reserve banks by the member banks,
which had accumulated large cash vault reserves in anticipation
of the reopening of the banks resulted in the prompt payment of
these March advances. They declined steadily to the minimum of
$3,711,000 reached on October 18. Thereafter there was some
increase, but the usual seasonal advance was largely absent, owing
to the extreme liquidity in which the member banks as a whole
found themselves. Similarly, the seasonal movement in acceptance
holdings was lacking. Late in February, by buying bills extensively, the Federal Reserve Bank of Boston assisted the bill dealers
who found themselves in difficulties. Holdings of bankers' acceptances rose from $2,000,000 on February 15 to $64,000,000 on
March 15, thereafter declining steadily and practically disappearing entirely from the portfolio late in May. Not until
December 8 did anything approaching seasonal buying of acceptances develop and even then only to a limited extent.
The Federal Reserve Act provides for rediscounting between
Federal reserve banks. Such action, however, takes place as a
rule only during periods of emergency. This year the Federal
Reserve Bank of Boston advanced money to other Federal reserve
banks through discounts and purchase of United States securities
and acceptances for the period of a week between March 8 and
March 14, inclusive. This was the first time that such operations
between the Federal Reserve Bank of Boston and other Federal
reserve banks had occurred since December, 1921. Such interreserve bank operations had been quite general during the difficult
years of 1920 and 1921 but had been entirely absent during the
eleven years from December, 1921, to March, 1933.




[ 19]

A N N U A L

R E P O R T

OF

T H E

F E D E R A L

R E S E R V E

B A N K

BANKERS' ACCEPTANCES
The low level of foreign trade during 1933 was largely responsible for the small amount of acceptances made in the United
States. The average volume of acceptances for the country as
a whole was lower than in any year since 1926, the decline being
especially marked in those acceptances based upon foreign trade
and those issued for dollar exchange. On the other hand, the
volume of acceptances based on warehouse credits was well maintained, the average for 1933 being substantially the same as that
in 1932 and 1931. During the second half of the year there was
also an expansion in the volume of acceptances issued against
imports.
The representation of the First Federal Reserve District was
well maintained in the aggregate of acceptance liabilities for the
country as a whole. The volume of acceptances made in New
England was exceeded only by that in the New York district.
Boston acceptance liabilities consistently exceeded those of the
Chicago district in every month of the year, and also exceeded
the aggregate of the next two largest districts, Philadelphia and
San Francisco, combined.
The fact that the Federal Reserve Bank of Boston held practically no bankers' acceptances during the greater part of the
year reflected not so much the lack of supply of acceptances as the
demand for such paper on the part of member banks. Bill dealers
found little difficulty in selling their acceptances to member banks,
who sought that type of paper as a desirable form of liquid secondary reserve. Although the total supply of such acceptances
for the country as a whole was considerably less in 1933 than in
1932, member bank holdings generally were fully up to the level
of 1932. Thus there was no necessity on the part of bill dealers
to come to the Federal Reserve Bank of Boston to obtain help in
carrying unsold bills, excepting during a few weeks in March and
December. In view of this situation, the Federal Reserve Bank
of Boston allowed the buying rate for acceptances in the open
market to remain practically unchanged throughout the year,
with the exception of special arrangements made during the emergency period immediately preceding the bank holiday.
During and just preceding the bank holiday acceptances
amounting to $15,000,000 were bought from member banks and
bill dealers in this district, $5,000,000 from other Federal reserve
banks, and $50,000,000 for the System account. Those purchases
increased the average volume carried for the year about $6,000,000
[20]



A N N U A L

REPORT

OF

THE

FEDERAL

RESERVE

BANK

and the volume of acceptances held at any one time to a peak of
$66,000,000 on March 14.
ACCEPTANCE LIABILITY
Of All Banks and Acceptance Corporations in Federal Reserve District I
19SS

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

31
28
31
29
31
30
31
31
30
31
30
30

$43,000,000
41,000,000
41,000,000
43,000,000
46,000,000
47,000,000
48,000,000
44,000,000
44,000,000
45,000,000
47,000,000
47,000,000

1932

$60,000,000
58,000,000
54,000,000
54,000,000
46,000,000
43,000,000
43,000,000
42,000,000
40,000,000
41.000.000
43,000,000
42,000,000

19S1

1930

$133,000,000
125,000,000
113,000,000
102,000,000
106,000,000
104,000,000
98,000,000
91,000,000
81,000,000
71,000,000
66,000,000
62,000,000

$166,000,000
157,000,000
151,000,000
145,000,000
145,000,000
136,000,000
134,000,000
129,000,000
122,000,000
137,000,000
145,000,000
145,000,000

OPEN MARKET OPERATIONS
Open market operations, indeed practically all operations of
the Federal Reserve Bank of Boston, were dominated during the
greater part of 1933 by the purchase and sale of Government
securities. As noted elsewhere in this report, the volume of
bankers' acceptances purchased in the open market was exceptionally low. Furthermore, the recourse of member banks to the
Federal Reserve Bank of Boston was at a minimum, partly as a
result of the credit released to the member banks through the
purchase of United States Government obligations in the open
market. Holdings of United States Government obligations
amounted to $93,000,000 on May 17. They reached a peak of
$158,000,000 on November 8, at which level they remained for
the rest of the year. This large volume of government securities
brought the level of total earning assets, in spite of the almost
complete absence of acceptances and member bank discounts, to
the highest level in recent years.
During the latter part of May a large open market investment
program on the part of the Federal reserve system as a whole
was begun, and this buying program continued until into November, during which period Government security holdings of the
Federal Reserve Bank of Boston were increased almost $65,000,000 by means of weekly participations allotted on a percentage basis to the Federal Reserve Bank of Boston by the open
market committee.




[21]

A N N U A L

R E P O R T

O F

T H E

F E D E R A L

R E S E R V E

B A N K

MEMBER BANK RESERVE DEPOSITS
As a general rule the volume of member bank reserve deposits
in the Federal Reserve Bank of Boston follows very closely the
movement of deposits in the member banks. In normal times it is
the custom of member banks to carry a minimum of idle excess
reserves so that their reserve deposits are maintained close to
the required percentages of reserves. The year 1933, however, was
an exception. At times the member banks were carrying heavy
excess reserves. Consequently, the movement of member bank
reserve deposits in the Federal Reserve Bank of Boston fluctuated
widely, and frequently without any reference to the level of
deposits in the member banks. During January and February,
when distrust of the banks was steadily increasing, the banks
expanded their excess reserves to large proportions, at a time
when the deposits in the member banks were declining. Following
the restoration of confidence after the reopening of the banks in
March, such excess reserves dropped rapidly to the lowest point
for the year during April and May, coinciding with an increase
in deposits in the member banks. Subsequently, excess reserves
were again built up, reaching another high point in November
when they rose to the hitherto unparalleled average of $75,000,000
for all member banks in the First Federal Reserve District.
In ordinary times the percentage of reserve deposits to total
deposits of all kinds in the Boston member banks averages somewhere between 8 ^ per cent and nine per cent. During December,
1933, however, they fluctuated between 11 per cent and 12 per
cent. Much the same thing was noticeable in the case of the
weekly reporting outside member banks, where the customary percentage is in the neighborhood of five per cent, as compared with
seven to eight per cent in December, 1933. This situation is doubly
significant in view of the fact that during 1933 banks were carrying an abnormally large amount of United States Government
deposits, against which no reserve is required.

MONEY RATES AND DISCOUNT RATES
At the opening of 1933 money rates were at record low levels.
Late in February and during March rates advanced sharply,
subsequently declining until, during September, October, and early
November, they again reached the low levels obtaining in the first
two months of the year. During the last seven weeks of the vear
money rates became noticeably firmer. The open money markets,
like the operations of the Federal reserve banks and of the member
r 22]



A N N U A L

REPORT

OF

THE

FEDERAL

RESERVE

BANK

banks, were dominated by the Government security market. This
is best indicated by the average yields at which short-term discount
bills were issued by the Treasury Department. At the close of
1932, an issue of such bills dated December 28, 1932, brought an
average yield to the investor of only .09 per cent. This yield was
increased in subsequent new bill issues to a maximum of 4.26 per
BOSTON MONEY

MARKET

NINETY DAY SECURITIES

1925

1926

1927

1928

1929

1930

1931

1932

1933

FEDERAL RESERVE BANK Or BOSTON
REDISCOUNT RATE
BROKERS COMMERCIAL PAPER
oecoo BANKERS ACCEPTANCES
U S.

~™^

cent for the issue of March 6, 1933, then declined steadily until
two issues were sold at an average rate of .10 per cent on
September 27 and October 4, practically the same low level as on
December 28, 1932. From that date onward the price of Government money increased steadily and rapidly until finally the
issues for December 20 at .74 per cent and for December 27 at
.73 per cent brought the highest levels since April.
This firming tendency in money rates, led by United States
Treasury bills, was communicated to other departments of the
money market. For example, the asking rate for 90-day acceptances,—which was only 14 of one per cent for several weeks
during January and February, then rose sharply to 3 % per cent
on March 13-15, later declining again by rapid degrees to the
former record low level of 14 P e r cent, where it remained throughout September, October, and part of November,—rose abruptly
to % of one per cent early in December. The low rates for acceptances during much of the year undoubtedly reflected the exceptionally keen demand for such paper on the part of member
banks, coupled with the comparatively small supply of such bills
available. Other less sensitive forms of paper, such as brokers'




[23]

A N N U A L

R E P O R T

O F

T H E

F E D E R A L

R E S E R V E

B A N K

commercial paper, responded to a less marked degree to the same
influences.
The low rate for short-dated paper of all kinds contrasted
during 1933 with the high yields obtainable throughout the year
on long-term bonds. It is significant that the price of United
States long-term bonds was far more steady than the price of
corporate bonds. Weekly reporting member banks in nine New
England cities alone increased their holdings of Government securities $42,000,000 between June 7 and November 1, while reducing
their holdings of other bonds and stocks during the same period
about $9,000,000. During this period the Standard Statistics Company's bond price index indicated that the price of United States
bonds was well maintained, declining only from 103.5 to 103.1,
while the price of corporation bonds fell from 78.1 to 73.6. It is
estimated that all banks in the United States, including member
banks, nonmember banks, mutual savings banks, and Federal reserve banks, held over $10,000,000,000 of United States obligations in December, 1933. This constituted about 45 per cent of
the entire Government debt.
The discount rate of the Federal Reserve Bank of Boston was
reduced twice during 1933. As the year opened, the 3 ^ per cent
rate which had been in effect since October 17, 1931, was still
effective and remained so until June 1, at which time the rate was
reduced to three per cent. A second reduction on November 2
brought the discount rate of the Federal Reserve Bank of Boston
to 2y2 per cent, at which level it remained to the end of the year.
This low rate was partly in recognition of the low yields prevailing
in all departments of the open money market and partly in recognition of the improved liquidity and generally strong position of
the member banks throughout the district.
BOSTON MONEY MARKET, 1933
Prevailing Rates on 90-Day Maturities as of 15th of Each Month
Month

Time Loans
Customers'
Loans to
U. S. Treasury
Brokers'
Secured by
Commercial Correspondent Certificates of Acceptances Commercial
Bonds and Stocks
Loans
Banks
Indebtedness (Asking Rate)
Paper

January
February
March
April
May

June
July
August
September
October
November
December

[24]



4-5%
4-5

5-54
44-5
44-54
4-5
4-5

4-44
4-5
4-5
4-5
4-5

3-44%
3-44
44-54
34-4

3-5
3-5
3-5
3-5
2-5
2-5
2-5
2-4

4-5%

4-5
5
5

44-5
4-44
5|

4-5f
5-5|
54-51
5-5f
4-5

0%
0

14
h
0
0
0
0
0

§%

I
31
4
4

1

i

4
4
i
i
1

a

1

li
li
44
24

11

n
ii
14
li
li
li
li

ANNUAL

REPORT

OF

THE

FEDERAL

RESERVE

BANK

FEDERAL RESERVE NOTES AND BANK NOTES
As in the case of the total earning assets of the Federal Reserve
Bank of Boston, so in the case of the volume of Federal reserve
notes outstanding during 1933, seasonal influences were noticeably
absent. The heavy demands attending the withdrawal of currency
preceding and during the bank holiday resulted in a peak of $265,000,000 of Federal reserve notes outstanding in this district on
March 14, as compared with the year's lowest figure of $185,000,000 on January 25. The rapid return flow of currency marking the period of the reopening of licensed banks reduced this
circulation to $219,000,000 on May 26, near which level it fluctuated for six months. The volume of Federal reserve notes in circulation, although dropping on November 2 to $214,000,000, was
relatively high in comparison with that which prevailed in the
preceding ten years. As a result of the large volume of Federal
reserve notes already in circulation, there was, contrary to seasonal expectation, no appreciable expansion in currency outstanding during the fall, the highest amount of Federal reserve notes
outstanding at any time during December being $236,000,000.
The average amount of Federal reserve notes outstanding was
$28,000,000 more than in 1932.
The volume of Federal reserve note circulation in this district
was not greatly altered by the use of Federal reserve bank notes,
which never amounted to a large figure, exceeding $21,000,000
only by a small amount for a few days following Thanksgiving.
Although the Act providing for their issue permits the use of
discounted and purchased bills as cover, it was at no time necessary for the Federal Reserve Bank of Boston to resort to such
cover, the bank notes being at all times fully secured by United
States Government obligations.
RESERVE POSITION
During January total cash reserves of the Federal Reserve
Bank of Boston stood at a high figure. They dropped abruptly
during February and March, rose again to an all time peak of
$351,000,000 on June 25, then declined steadily to $255,000,000
on December 13, and closed the year at $254,000,000. The decline
in cash reserves during February and March reflected the demands
made upon the Federal Reserve Bank of Boston by its member
banks to which it loaned some $23,000,000, in addition to furnishing funds through open market purchases of acceptances and



[25]

ANNUAL

REPORT

OF

T H E

FEDERAL

RESERVE

BANK

United States Government securities. The greater part of this
expansion in Federal reserve credit outstanding was due to an
increase in Federal reserve notes which require a 40 per cent gold
reserve. There were also during the early part of this period
substantial withdrawals of gold which decreased the reserves of
the Federal reserve bank. As a consequence of these developments, the reserve ratio of the Federal Reserve Bank of Boston
dropped to 47.0 per cent on March 8; this compares with 71.8
per cent on December 31, 1932 and with 63.0 per cent on December 30, 1933. The low reserve ratios of March were of short
duration. The reserve position of the Federal Reserve Bank of
Boston steadily improved until a ratio of 80.1 per cent was reached
on June 7. Since the reserve ratio is influenced not only by the
volume of reserves but also by the movements of Federal reserve
notes and deposit liabilities, against which reserves must be carried,
the reserve ratio does not necessarily fluctuate directly at all times
with the volume of total cash reserves.

BANKING INDICES — NEW ENGLAND
Data as of last reporting date each year
(Amounts in millions of dollars)
REPORTING MEMBER BANKS
In Boston:
1. C o m m e r c i a l L o a n s . . . .
2. R e a l E s t a t e L o a n s . . . .
3. C o l l a t e r a l L o a n s
4.
Total Loans
5. U. S. Securities
6. A l l O t h e r S e c u r i t i e s O w n e d .
7.
Total Bonds and Stocks . .
8.
Total Loans and Investments
9. Net Demand Deposits . . .
10. U. S. Government Deposits . .
11. Time Deposits
12.
Total Deposits
13. % of Reserve to Total Deposits
14. % of Loans and Discounts to
Total Deposits

[26]



1933
$236
44
185
465
212
9
6
308
773
554
63
160
777
12.2%
59.8%

Change in One Year
1932
Amount
Percentage
$216
+$20
+ 9.3%
46
— 2
— 4.3
195
— 10
— 5.1
457
+ 8
+1.8
2 3 1 — 19
— 8.2
9 5
+ 1
+ 1.1
326
— 18
— 5.5
783
— 10
— 1.3
544
+ 10
+ 1.8
15
+48
+320.0
196
— 36
— 13.3
755
+22
+ 2.9
8.5%
+ 3.7 points
60.5%

— 0.7 points

A N N U A L ,

R E P O R T

O F

T H E

F E D E R A L

R E S E R V E

B A N K

BANKING INDICES — NEW ENGLAND (continued)
Outside of Boston:
15. Commercial Loans
. . . .
16. Real E s t a t e Loans
. . . .
17. Collateral Loans
18.
Total Loans
19. U. S. Securities .
. . .
20. All Other Securities Owned
21.
Total Bonds and Stocks .
22.
Total Loans and Investments
23. Net Demand Deposits .
24. U. S. Government Deposits
25. Time Deposits
26.
Total Deposits
. . . .
27. % of Reserve to Total Deposits
28. % of Loans and Discounts to
Total Deposits

MONEY RATES (Boston)
Open Market:
29. Brokers' Prime Commercial
Paper
30. Bankers' Prime 90-day Acceptances
31. Treasury Certificates of Indebtedness (June 15 maturity) .
32. Call Money (Boston) . . .

1933

1932

$ 99

$107

82
91
272
133
104
237
509
230
19

84
105
296
109
116
225
521
238

243
492
7.1%
55.3%

5
245
488

4.9%
60.6%

Change in One Year
Amount
Percentagt
—$ 8
— 7.5$
— 2
— 2.4
— 14
— 13.3
— 24
— 8.1

+ 24

+ 22.0

— 12

— 10.3

+ 12

+

5.3

— 12
— 8

—
—

2.3
3.4

+ 14
— 2

+280.0
— 0.8

+ 4

+

+

0.8

2.2 points

— 5.3 points

0
+
.25

At Member Banks:
33. Prime Commercial Loan Rate .
2-3%
34. Time Collateral Loan Rate. .
4-5
At Federal Reserve Bank of Boston:
35. Discount Rate
36. Buying Rate on Acceptances . 3-3J

8 point

0
2

+ .25 points
— J point

3-4%
4-5

— 1 point
0

3-3i

— 1 point
0

$47

$ 42

+$5

+ 11.9%

Mutual Savings Banks:
38. Deposits in 62 Reporting Banks
$1,650
in 6 New England States

$1,676

—$26

—

1.6%

Check Transactions (year's totals) :
39. Boston
$11,938 $12,603
6,650
40. Outside New England Cities . 6,095
19,253
41.
Total—16 Cities . . . .
18,033

—$665
— 555
—1,220

—
—
—

5.39?
8.3
6.3

MISCELLANEOUS
37. Acceptance Liabilities (F. R.
District 1)




[27]

A N N U A L

R E P O R T

O F T H EF E D E R A L

R E S E R V E

B A N K

COMPARATIVE STATEMENT OF CONDITION
RESOURCES

Dec. SO, 1933

CASH RESERVES held by this bank
against its deposits and note circulation:
Gold held by the Federal Reserve Agent as
part of the collateral deposited by the
bank when it obtains Federal reserve
notes. This gold is lodged partly in the
vaults of the bank and partly with the
Treasurer of the United States
$192,672,080.00
Gold redemption fund in the hands of the
Treasurer of the United States to be used
to redeem such Federal reserve notes as
are presented to the Treasury for redemption
1,977,474.80
Gold and gold certificates in vault .
22,092,146.29
Gold in the gold settlement fund lodged
with the Treasurer of the United States
for the purpose of settling current transactions between Federal reserve districts
19,239,961.16
Legal tender notes, silver and silver certificates, national and Federal Reserve
bank notes, subsidiary silver, nickels and
cents in the vaults of the bank (available
as reserve only against deposits) .
18,043,778.85
TOTAL GOLD RESERVES AND OTHER CASH

$254,025,441.10

Redemption Fund, Federal reserve bank
notes, Represents deposit of lawful
money with Treasurer of the United
States which shall at no time be less than
5 per cent of Federal reserve bank note
circulation
$ 1,250,250.00
LOANS AND INVESTMENTS
Loans to member banks:
On the security of obligations of the United
States
$ 2,715,000.00
By the discount of commercial or agricul2,145,100.32
tural paper or acceptances
Acceptances bought in the open market .
28,671,228.18
United States Government bonds, notes,
certificates of indebtedness, and bills .
157,671,000.00

Dec. 31,1932

$181,027,080.00

2,123,112.85
13,807,705.90

14,425,725.46

21,486,734.63
$232,870,358.84

$

$ 3,085,746.60
8,727,212.71
2,248,510.82
96,667,500.00

TOTAL LOANS AND INVESTMENTS

$191,202,328.50 $110,728,970.13
MISCELLANEOUS RESOURCES
Bank premises
. $ 3,224,177.25 $ 3,280,009.25
Checks and other items in process of collec45,141.385.12
tion
50,938,283.68
1,182,487.26
All other miscellaneous resources . . .
650,105.49*
TOTAL MISCELLANEOUS RESOURCES
TOTAL RESOURCES

.

.

$ 54,812,566.42

$ 49,603,881.63

.

$501,290,586.02

$393,203,210.60

* Includes $298,442.26 claims suspended banks.
$255,442.75 due from foreign banks.
[28]



A N N U A L

R E P O R T

O F

T H E F E D E R A L

R E S E R V E

B A N K

COMPARATIVE STATEMENT OF CONDITION
LIABILITIES
Dec. 30, 1933

Dec. 31,1933

CURRENCY IN CIRCULATION
Federal reserve notes in actual circulation,
payable on demand. These notes are secured in full by gold and discounted and
purchased paper
$234,304,660.00
Federal reserve bank notes in actual circulation, payable on demand. These notes
are secured in full by United States
obligations
19,976,450.00

$195,960,340.00

$254,281,110.00

$195,960,340.00

TOTAL CURRENCY IN CIRCULATION .

DEPOSITS
Reserve deposits maintained by member
banks as legal reserves against the deposits of their customers
$165,945,217.95
United States Government deposits carried
at the reserve bank for current requirements of the Treasury
101,964.30
Other deposits, including foreign deposits,
deposits of non-member banks, etc. .
2,740,709.08

0

$119,419,579.38
667,886.99
1,629,754.48

$168,787,891.33

$121,717,220.85

MISCELLANEOUS LIABILITIES
Deferred items, composed mostly of uncollected checks on banks in all parts of
the country. Such items are credited as
deposits after the average time needed to
collect them elapses, ranging from 1 to
8 days
. . . . $ 46,344,857.06
All other miscellaneous liabilities
770,245.63

$ 43,754.393.46
454,882.52

TOTAL DEPOSITS

TOTAL MISCELLANEOUS LIABILITIES .

$ 47,115,102.69

Reserve for losses
$
702.322.63
CAPITAL AND SURPLUS
Capital paid-in, equal to 3 per cent of the
capital and surplus of member banks
$ 10,563,750.00
Surplus—that portion of accumulated net
earnings which the bank is legally required to retain
19,840,409.37
TOTAL CAPITAL AND SURPLUS
TOTAL LIABILITIES




. . . .

$ 44,209,275.98
$
0

$ 10,855,900.00
20,460,473.77

$ 30,404,159.37

$ 31,316,373.77

$501,290,586.02

$393,203,210.60

[29]

A N N U A L

R E P O R T

O F

T

H

E F E D E R A L

R E S E R V E

B A N K

COMPARATIVE STATEMENT OF CONDITIONS
The foregoing statements of the Federal Reserve Bank of Boston as of December 31, 1932, and of December 31, 1933, show
the following changes during the year 1933.
1.
2.
3.
4.
5.
6.
7.
8.

Loans to member banks show a decrease of $7,000,000.
Bankers' acceptances purchased in the open market increased
$19,900,000.
United States Government securities bought in the open market
increased $61,000,000.
Total earning assets increased $80,000,000.
Total gold reserves increased $24,600,000.
Member banks' reserves increased $46,500,000.
Total deposits increased $47,000,000.
Reserve percentages against combined Federal reserve notes
and deposit liabilities decreased from 71.8% to 63.9%.
ANALYSIS OF INCOME AND DISBURSEMENTS

As shown by the accompanying table, the total earnings from
the ordinary bank activities varied but slightly from those of
1932,—$2,774,080.62 in 1933 as compared with $2,774,303.27 in
1932.
On the other hand, the increases to profit and loss account
were less than in the previous year, so that the total income was
about $116,000.00 less than in the previous year. The source of
earnings, however, changed materially, the increase from loans
being considerably smaller than in 1932, and an offsetting increase
from United States securities. Due to the exigencies of the bank
holiday in March, the operating expenses and cost of Federal
reserve currency increased, the former by $57,000.00 and the currency costs by $137,000.00.
After making allowances for depreciation on bank building and
reserves against possible losses, the net increase for the year was
$25,616.40 as compared with $686,638.96 in 1932.
As the net increase for the year was not sufficient to pay the
six per cent dividend on the capital stock of $645,680.80, it was
necessary to draw on the surplus account $620,064.40, leaving a
balance of $19,840,409.37 in that account.

[30]



A N N U A L

R E P O R T

O

F

T

H

EF E D E R A L

R E S E R V E

B A N K

INCOME AND DISBURSEMENTS
EARNINGS

1933

From loans to member banks and paper dis$ 302,776.34
counted for them
227,020.32
From acceptances owned
2,135,075.15
From U. S. Government obligations owned .
109,208.81
Other earnings

1932

& 931,538.88
204,593.79
1,546,769.08
91,401.52

$2,774,080.62 $2,774,303.27
90,643.82
206,359.46

Total earnings
Additions to earnings
Total income applicable to expenses and other
deductions

$2,864,724.44 $2,980,662.73

DEDUCTIONS FROM TOTAL INCOME
For the expense of current bank operations (including the non-reimbursable expense incurred
as Fiscal Agent of the United States) .
$1,830,649.68 $1,773,168.44
For Federal reserve currency, mainly the cost
of printing new notes to replace worn notes
in circulation, and to maintain supplies unissued and on hand, and the cost of redemption
243,580.10
107,014.96
764,878.26
For depreciation, reserves, losses, etc
413,840.37
Total deductions
. . $2,839,108.04 $2,294,023.77
Net income available for dividends and addi$ 25,616.40 $ 686,638.96
tions to surplus
DISTRIBUTION OF NET INCOME
Dividends paid to member banks at the rate of
6 per cent on paid-in capital
Transfer to or from surplus
Total net income distributed

.

$ 645,680.80 $ 675,510.57
620,064.40*
11,128.39
$

25,616.40 $ 686,638.96

* Transferred from surplus.

DEPOSIT INSURANCE
Under the provisions of the Banking Act of 1933, all member
banks were automatically admitted to the provisions of the
Temporary Insurance Fund, operative January 1, 1934, which
will insure deposit accounts of such banks up to and including
$2,500 until July 1, 1934, when the Permanent Insurance Fund
will become effective. Every effort was made to bring all licensed
member banks up to a standard by December 31, 1933, in regard
to capital structure, and where local interests could not procure
the needed additional capital this was procured through the assistance of the Reconstruction Finance Corporation.




[31]

A N N U A L

R E P O R T

O F

T H E

F E D E R A L

R E S E R V E

B A N K

MEMBERSHIP
On January 1, 1933, there were 367 member banks of the
Federal Reserve System in the First Federal Reserve District,—
338 national banks and 29 State banks. There was no change in
membership up to the time of the bank holiday on March 6.
Immediately following the bank holiday, 268 (73 per cent) were
licensed by the Secretary of the Treasury to reopen. The reopened
banks held $1,588,000,000 deposits, or 87 per cent of the total
for all member banks. Of the remaining 99 banks, 39 had been
licensed to reopen by May 1, and 13 more were licensed during
the remainder of the year, making a total of 320 of the original
banks licensed. In addition, 25 banks that were in existence
January 1 were succeeded by 24 new national banks, five consolidated with other banks, three became branches, one State member bank withdraw voluntarily, and one State member bank went
into liquidation. This left 12 of the original banks which had not
been licensed at the end of the year; ten of these had plans of
reorganization in process which had been approved by the Comptroller of the Currency and two had no plans for reorganization.
In addition to the changes caused directly by the bank holiday,
15 State banks and three new national banks were admitted to the
system and four national banks went into voluntary liquidation to
become branches of a nonmember State bank, one national bank
consolidated with another national bank in the same town and two
member trust companies voluntarily withdrew from membership.
The total number of member banks in the First Federal Reserve
District on December 31, 1933, was 355, of which 318 were national banks and 37 were State banks.
BANK ORGANIZATION AND PERSONNEL
Directors: On December 31, 1933, the terms of Mr. Edward
S. Kennard as Class A director, Mr. Edward J. Frost as Class B
director, and Mr. Allen Hollis as Class C director and Deputy
Chairman, expired. Mr. Kennard and Mr. Frost were re-elected
as Class A and Class B directors, respectively, by member banks
in Group 3 for three-year terms, Group 3 being composed of
banks having a combined capital and surplus of less than $300,000.
Mr. Hollis was reappointed by the Federal Reserve Board as
Class C director for a term of three years, and was also redesignated by the Board as Deputy Chairman for the year 1934.
[32]



ANNUAL

REPORT

OF

THE

FEDERAL

RESERVE

BANK

Mr. Frederic H. Curtiss was redesignated by the Federal Reserve
Board as Chairman of the Board of Directors and Federal Reserve
Agent for the year 1934. On March 13, 1933, Mr. William
D. McRae, for several years Manager of the Department of
Examination, was appointed an Assistant Federal Reserve Agent.
Personnel: The number of employees on December 31, 1933,
other than officers, was 665 compared with 648 on December 31,
1932.
Advisory Council: At a meeting of the Board of Directors
held on January 11, 1933, Mr. Thomas M. Steele, President of
The First National Bank and Trust Company of New Haven,
New Haven, Connecticut, was reappointed member of the Federal
Advisory Council to represent the First Federal Reserve District
for the year 1933.
STOCKHOLDERS' MEETING
The eleventh annual meeting of representatives of member
banks was held at the Federal Reserve Bank of Boston on November 10, 1933, with 291 representatives from 206 member banks
in attendance. The Chairman of the Stockholders' Advisory
Committee, Mr. Earle W. Stamm, Vice President and Cashier of
The National Bank of Commerce of New London, New London,
Connecticut, presided. The principal speaker was Hon. Eugene
R. Black, Governor of the Federal Reserve Board, who discussed
the powers of the Federal Reserve Board and the banking developments and problems of 1933. A review of some of the provisions
of the Banking Act of 1933 was given by Mr. John T. Noonan of
Boston. Other speakers were Mr. Frederic H. Curtiss, Chairman
of the Board of Directors, and Governor Roy A. Young. At the
conclusion of the meeting, Mr. Stamm announced that the Stockholders' Advisory Committee had elected Mr. Allan Forbes, President of State Street Trust Company, Boston, Massachusetts, as
chairman of the committee for the ensuing year.




[33]

A N N U A L

R E P O R T

OF

T H E

F E D E R A L

R E S E R V E

B A N K

VOLUME OF OPERATIONS
The following table shows the volume of operations in the principal departments of the bank during the year compared with the
similar items for the preceding year :
NUMBER OF PIECES HANDLED*
Bills Discounted :
Applications
Notes discounted . . .
Bills purchased in open market for own account
Currency received and counted
Coin received and counted
Checks handled
Collection Items Handled:
U. S. Government coupons paid . . . .
All other
U. 8. Securities:
Issues, redemptions and exchanges by Fiscal
Agency Department (see note) . . . .
Transfers of funds
AMOUNTS H A N D L E D
Bills discounted
Bills purchased in open market for own account
Currency received and counted
Coins received and counted
Checks handled
Collection Items Handled:
U. S. Government coupons paid . . . .
All other
U. 8. Securities:
Issues, redemptions and exchanges by Fiscal
Agency Department (see note) . . . .
Transfer of funds

1933

1932

4,856
17,376

9,235
48,666

6,443
190,864,000
314,004,000
71,378,000

2,089
210,237,000
326,430,000
79,644,000

1,155,000
444,000

1,145,000
451,000

162,000
38,000

103,000
44,000

$ 265,882,000

$ 667,765,000

95,747,000
1,075,158,000
40,389,000
10,205,783,000

49,907,000
1,264,411,000
30,586,000
11,192,741,000

38,935,000
528,728,000

34,478,000
642,642,000

1,128,706,000
3,339,115,000

914,955,000
8,661,681,000

* Two or more checks, coupons, etc., handled as a single item, are counted as
one "piece".
N O T E : Figures for 1933 a r e exclusive of 151 Federal Intermediate Credit
Bank debentures and Federal Land Bank bonds redeemed amounting to
$740,000. Fiscal Agency figures for 1932 on same basis are as follows:
Number, 103,000; amount, $906,690,000.

[34



FEDERAL RESERVE BANK OF BOSTON
OFFICERS AND DIRECTORS

1933
OFFICERS
ROY A. YOUNG, Governor

FREDERIC H. CURTISS, Federal Reserve Agent

WILLIAM W. PADDOCK, Deputy

CHARLES F. GETTEMT, Assistant Federal Re-

serve Agent

Governor

WILLIAM D. MCRAE, Assistant Federal Re-

WILLIAM WILLETT, Cashier
KRICKEL K. CARRICK, Secretary

serve Agent
HARRY F. CURRIER, Auditor

ELLIS G. HULT, Assistant Cashier
ERNEST M. LEAVITT, Assistant Cashier
CARL B. PITMAN, Assistant Cashier
L. WALLACE SWEETSER, Assistant Cashier

DIRECTORS
Class and Group
A 1 ALFRED L. RIPLEY,

A 2 F. S. CHAMBERLAIN,

A 3 EDWARD S. KENNARD,
B 1 PHILIP R. ALLEN,
B 2 EDWARD S. FRENCH,
B 3 EDWARD J. FROST,
C

FREDERIC H. CUBTISS,

C

ALLEN HOLLIS,

C

CHAS. H. MERRIMAN,

Chairman of the Board,
The Merchants National Bank
of Boston
President,
The New Britain National
Bank
Vice-President and Cashier,
The Rumford National Bank
President, Bird & Son, Inc.
President, Boston & Maine
Railroad
Vice-President and Director,
Wm. Filene's Sons Company
Chairman
Deputy-Chairman, Lawyer
President, Lippitt Woolen Co.

Term Expires
Decembers!
Boston, Mass.

1935

New Britain, Ct.

1934

Rumford, Me.
E. Walpole, Mass.

1936
1935

Springfield, Vt.

1934

Boston, Mass.
Boston, Mass.
Concord, N. H.
Providence, R. I.

1936
1935
1936
1934

GENERAL COUNSEL
PHILLIPS KETCHUM, Boston, Mass.

MEMBER OF FEDERAL ADVISORY COUNCIL
THOMAS M. STEELE

President of The First National Bank and Trust Company of New Haven
New Haven, Conn.