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F E D E R A L R E S E R V E BANK O F N E W Y O R K
Fiscal Agent of the United States
°

L

T cir5ul? 1949 3 3 1
,r„
N?A 4 3
April 8,
J

Public Notice of Offering of $900,000,000, or thereabouts, of 91-Day Treasury Bills
D a t e d A p r il 14, 1949

M a tu r in g J u ly 1 4 , 1949

To all Incorporated Banks and Trust Companies in the
Second Federal Reserve District and Others Concerned:
F ollow in g is the text o f a n otice today m ade public by the T reasu ry D epartm ent with respect to a new offering o f T reas­
u ry bills payable at m aturity w ithout interest to be sold on a discou n t basis under com petitive and non-com petitive bidding.
FO R RELEASE, MORNING NEW SPAPERS,
Friday, April 8, 1949.

TRE ASU RY DEPARTM EN T
Washington

The Secretary of the Treasury, by this public notice, invites tenders for $900,000,000, or thereabouts, of 91-day Treasury
bills, for cash and in exchange for Treasury bills maturing April 14, 1949, to be issued on a discount basis under competi­
tive and non-competitive bidding as hereinafter provided. The bills of this series will be dated April 14, 1949, and will
mature July 14, 1949, when the face amount will be payable without interest. They will be issued in bearer form only, and
in denominations of $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value).
Tenders will be received at Federal Reserve Banks and Branches up to the closing hour, two o’clock p.m., Eastern
Standard time, Monday April 11, 1949. Tenders will not be received at the Treasury Department, Washington. Each
tender must be for an even multiple of $1,000, and in the case of competitive tenders the price offered must be expressed on
the basis of 100, with not more than three decimals, e. g., 99.925. Fractions may not be used. It is urged that tenders be
made on the printed forms and forwarded in the special envelopes which will be supplied by Federal Reserve Banks or
Branches on application therefor.
Tenders will be received without deposit from incorporated banks and trust companies and from responsible and
recognized dealers in investment securities. Tenders from others must be accompanied by payment of 2 percent of the
face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty of payment by an
incorporated bank or trust company.
Immediately after the closing hour, tenders will be opened at the Federal Reserve Banks and Branches, following which
public announcement will be made by the Secretary of the Treasury of the amount and price range of accepted bids. Those
submitting tenders will be advised of the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Subject
to these reservations, non-competitive tenders for $200,000 or less without stated price from any one bidder will be accepted
in full at the average price (in three decimals) of accepted competitive bids. Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve Bank on April 14, 1949, in cash or other immediately avail­
able funds, or in a like face amount of Treasury bills maturing April 14, 1949. Cash and exchange tenders will receive equal
treatment. Cash adjustments will be made for differences between the par value of maturing bills accepted in exchange and the
issue price of the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or other disposition of Treasury bills shall not have any special
treatment, as such, under the Internal Revenue Code, or laws amendatory or supplementary thereto. The bills shall be
subject to estate, inheritance, gift or other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any of the possessions of the United States,
or by any local taxing authority. For purposes of taxation the amount of discount at which Treasury bills are originally
sold by the United States shall be considered to be interest. Under Sections 42 and 117 (a )(1 ) of the Internal Revenue
Code, as amended by Section 115 of the Revenue Act of 1941, the amount of discount at which bills issued hereunder are
sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are
excluded from consideration as capital assets. Accordingly, the owner of Treasury bills (other than life insurance com­
panies) issued hereunder need include in his income tax return only the difference between the price paid for such bills,
whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at
maturity during the taxable year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms of the Treasury bills and
govern the conditions of their issue. Copies of the circular may be obtained from any Federal Reserve Bank or Branch.
In accorda n ce w ith the above announcem ent tenders w ill be received at the Securities D epartm ent o f this bank
(9 th floor, 33 L ib erty Street) N ew Y o r k 45, N . Y ., o r at the B u ffalo Branch o f this bank (2 7 0 M ain S treet) B u ffalo 5,
N . Y ., up to tw o o ’c lo c k p.m ., E a stern S tan dard tim e, on M o n d a y , A p r il 11, 1949. It is requested that tenders be
subm itted on special form printed on reverse side and returned in special envelope enclosed herew ith. Payment for the

Treasury bills cannot be made by credit through the War Loan Deposit Account. Settlement must be made in cash or other
immediately available funds or in maturing Treasury bills.
A l l a n S p r o u l, President.
(Extract from Treasury Department statement released for publication April 5, 1949, announcing results
after tenders were opened for Treasury bills dated April 7, 1949 maturing Jidy 7, 1949)
Total applied fo r ........$1,454,237,000
Total accepted........... $ 901,529,000 (includes $52,661,000
entered on a non-competitive basis
and accepted in full at the average
price shown below)
Average price___ 99.707
Equivalent rate of discount
iDDrox 1 160 oercent Der
Inn m
0
t .
....
...
Range of accepted competitive bids:
H lSh ..................... 99709
Equivalent rate of discount
approx. 1.151 percent per
t
£ nn? m. *
.
#
„
L o w ..................... 99706
Equivalent rate of discount
approx. 1.163 percent per
annum
(44 percent of the amount bid for at the low

price was accepted)



Federal Reserve
District

Total
Applied for

Total
Accepted

16,369,000
941,894,000
22,715,000
35,/90,000
5.005,000
5,910,000
302,477,000
14,461,000
2,445,000
15,126,000
13,875,000
78,170,000
______
’
T ot a l ....................... $1,454,237,000

'
$ 15,865,000
567,374,000
16,527,000
62—
,000
3,605,000
4,510,000
182,773,000
11,493,000
1,997,000
11,550,000
9,843,000
47,370,000
’
$901,529,000

'---------------------Boston ............................
New Y o r k ......................
Philadelphia ................
Cleveland . . . . . . . . . . . .
Richmond ......................
Atlanta .........................
Chicago ..........................
St. L o u is ........................
Minneapolis ..................
Kansas City ................
D a l l a s . . . . . ..................
s
F ra n cisco..............

$

( over )

IM PORTANT— If it is desired to bid on a competitive basis, fill in rate per 100 and
maturity value in paragraph headed “ Competitive Bid” . If it is desired to bid on a non­
competitive basis, fill in only the maturity value in paragraph headed “ Non-competitive
Bid” . DO NOT fill in both paragraphs on one form. A separate tender must be used for
each bid.
No.

TENDER FOR 91-DAY TREASURY BILLS
Maturing July 14, 1949.

Dated April 14, 1949.
To

F

ederal

R

eserve

B

a n k

of

N

ew

Y

Dated a t .......................

ork,

1949

Fiscal Agent of the United States.
COMPETITIVE BID

NON-COMPETITIVE BID

Pursuant to the provisions of Treasury
Department Circular No. 418, as amended, and
to the provisions of the public notice on
April 8, 1949, as issued by the Secretary
of
the
Treasury,
the
undersigned
offers

Pursuant to the provisions of Treasury De­
partment Circular No. 418, as amended, and to the
provisions of the public notice on April 8,
1949, as issued by the Secretary of the Treasury,
the undersigned offers a non-competitive tender

..............................................* for a total amount of

for a total amount of $ ...............................................
(N ot to exceed $200,000)

(R ate per 100)

$ ........................................................ (maturity value)
of the Treasury bills therein described, or for
any less amount that may be awarded, settlement
therefor to be made at your bank, on the date
stated in the public notice, as follows:

(maturity value) of the Treasury bills therein
described, at the average price (in three deci­
mals) of accepted competitive bids, settlement
therefor to be made at your bank, on the date
stated in the public notice, as follows:
By surrender of the maturing issue of

By surrender of the maturing issue of
Treasury b ills ................... $ .........................................

Treasury b ills ................... $ .........................................
By cash or other immediately available

By cash or other immediately available
funds ...................................$ .........................................

fu n d s .................................. $ .........................................

The Treasury bills for which tender is hereby made are to be dated April 14, 1949, and are to mature
on July 14, 1949.
This tender will be inserted in special envelope entitled “ Tender for Treasury bills” .
Name of Bidder
(Please print)

By....
(Official signature required)

(T itle)

Street Address ..................................

(C ity, Town or V illage, P. O. No., and State)

If this tender is submitted for the account of a customer, indicate the customer’s name on line below:

(Name of Customer)

(C ity, Town or V illage, P.O. No., and State)

Use a separate tender for each customer’s bid.

IM PO RTAN T INSTRUCTIONS:
1. N o tender for less than $1,000 will be considered, and each tender must be for an even multiple of
$1,000 (maturity value). A separate tender must be executed for each bid.
2. If the person making the tender is a corporation, the tender should be signed by an officer of the corporation
authorized to make the tender, and the signing of the tender by an officer of the corporation will be construed as a rep­
resentation by him that he has been so authorized. If the tender is made by a partnership, it should be signed by a mem­
ber of the firm, who should sign in the form “ ..................................................................................................., a copartnership, by
......................................................................................................... a member of the firm” .
3. Tenders will be received without deposit from incorporated banks and trust companies and from respon­
sible and recognized dealers in investment securities. Tenders from others must be accompanied by payment of
2 percent of the face amount of Treasury bills applied for, unless the tenders are accompanied by an express guaranty
o f payment by an incorporated bank or trust company.
4. If the language of this tender is changed in any respect, which, in the opinion of the Secretary of the
Treasury, is material, the tender may be disregarded.

Payment b y credit through War Loan Deposit Account will not be permitted.

T E N T B —980-a


* Price must be expressed on the basis of 100, with not more than
three decimal places. Fractions may not be used.
( over)

a y

g

1

x

-

—

■

-

-

................... ..........................

FEDERAL RESERVE BANK
OF N EW Y O R K




President's

to
^Directors

for 1948

ort

S 3

F E D E R A L




RE SE R V E

BANK

‘P r e s i d e n t ' s

OF

N E W

‘ ^ e p o r t
T

to

'Directors

fo r 1948

CONFIDENTIAL

YO R K

FE D E R A L R E S E R V E BANK
O F NEW YORK

March 31, 1949.

To the Directors of the
Federal Reserve Bank o f New York:

Following our now established custom, I submit herewith a confidential report on
the operations of the bank during the year 1948. As I said last year, it gives a more
detailed and intimate view of internal operations of the bank than is possible or
appropriate in a public document such as our annual report to the stockholders, which
will be published shortly.
The character and volume of our operations during 1948 showed no significant
changes from the trends which became evident during 1947; the importance of our
operations and their effect upon the national economy, however, have come into
sharper public focus. Among the factors contributing to this heightened public inter­
est have been the several increases in reserve requirements of member banks, the
System’s open market operations in Government securities, and the reinstatement of
control over instalment credit.
As the year 1948 ended, there was evidence that some country bankers were giv­
ing more than the usual consideration to the meaning and value of membership in
the Federal Reserve System. To sharpen our own ideas on the subject, and in order
to move toward the prescription and administration of possible needed correctives in
our approach to the problem, a full-scale study of System membership was begun
early in 1949. It is hoped that this study will develop ideas which will result in action
looking toward improved relations with our member banks and sustained membership
in the Federal Reserve System.




Yours sincerely,

President.

CONTENTS
PAGE
Open M arket O perations ................................................................................................................................... .....1
Long-term Government Securities......................................................................................................................1
Retirement of Public D e b t ............................................................................................................................ .....2
Developments with Respect to Short-term Rates...........................................................................................2
Statistical Summary ......................................................................................................................................... .... 2
F iscal A gency O p e r a t io n s ........................................................................................................................................3
Government Financing Operations....................................................................................................................3
Transactions in Government Securities.......................................................................................................... 3
Transfer of Treasury Bonds by W i r e ........................................................................................................ .... 3
Payment of Treasury Coupons...........................................................................................................................4
Reconstruction Finance Corporation .......................................................................................................... .... 4
Foreign Funds C on trp l..................................................................................................................................... .... 4
International Bank for Reconstruction and Development . . . ............................................................. .... 4
P ersonnel ......................................................................................................................................................................... 5
Head Office Salary L ia b ility ........................................................................................................ ................. .... 5
Salary Adm inistration....................................................................................................................................... .... 5
Leadership T ra in in g .......................................................................................................................................... .... 6
Federal Reserve d u b ............................................................................................................................................ 6
Group L ife Insu ran ce....................................................................................................................................... .... 6
Blue Cross Plan and Doctors ’ P l a n ............................................................................................................... .... 6
Payroll Deductions for Series E Savings B o n d s ...................................................................................... .... 6
Quarter Century C lu b ............................................................................................................................................ 6
Retirement S y ste m .............................................................................................................................................. .... 6
F oreign Op e r a t io n s ................................................................................................................................................... .... 7
Assets Held for Foreign and International A c c o u n t............................................................................. .... 7
Changes in Status of Foreign A cco u n ts........................................................................................................ 8
Loans on G o ld ....................................................................................................................................................... .... 8
Gold M ovem ents.................................................................................... .............................................................. .... 9
International Bank for Reconstruction and Development, International
Monetary Fund, and Export-Import B a n k ............................................................................................. 9
Visits to Foreign Central B a n k s ........................................................................................................................ 9
Foreign Central Bank V is ito r s .................................. ................................................................................... .... 9
Staff Group on Foreign In te re sts................................................................................................................. .... 9
C heck Co l l e c t io n ....................................................................................................................................................... .... 9
Change in Operating Procedure ........................................................................................................................ 10
Processing on Satu rdays................................................................................................................................... .... 10
A ir Transportation ................................................................................................................................................. 10
Check Routing Symbol Program ........................................................................................................................ 10
Amendments to Regulation J and Cash Collection Circulars to Permit
Delayed Posting of Checks...................................................................................................................... .... 10
Government Checks ............................................................................................................................................ .... 11
Ca sh O perations ........................................................................................................................................................ ....11
Counterfeits .......................................................................................................................................................... .... 11
Armored Car S ervice...............................................................................................................................................11
Risk of Loss on Shipm ents............................................................................................................................... ....11
I mportant L i t ig a t io n ...................................................................................................................................................12
Reichsbank L itig a tio n ........................................................................................................................................ ....12
State of Netherlands L itig a tio n ........................................................................................................................12
B a n k S upervision and B a n k R e l a t io n s ......... .....................................................................................................12
Membership in S y s te m ................................................................................................................................. ........12
L oans and Cr e d it s ..........................................................................................................................................................13
Consumer Instalment C r e d it...............................................................................................................................13
R esearch A ctivities ................................................................................................................................................. ....14
Domestic Studies and Publications....................................................................................................................14
Foreign and International Studies and P ublications............................................................................. ....14
Foreign M issio n s................................................................................................................................................. ....15
B uffalo B ranch O perations ............................................................................................................................... ....15
Fiscal Agency O perations....................................................................................................................................15
P ersonnel...................................................................................................................................................... ...............15
Check Collections......................................................................................................................................................16
Membership ...............................................................................................................................................................16
Loans to Member B a n k s .................................................................................................................................... ....16




PR E SID E N T’ S R E P O R T T O D IR E C T O R S FO R 1948
OPEN M AR KET OPERATIONS
Inflationary pressures continued to dominate our
national economy in 1948. Accordingly, the Federal
Reserve System and the Treasury continued their policy
of mild restraint on the expansion of credit. This policy
involved the exercise of as much pressure on monetary
and credit expansion as was consistent with the avoid­
ance of a major decline in production and employment,
and with the maintenance of stable prices and orderly
conditions in the market for United States Government
securities. The principal steps taken in 1948 included
the following:

The volume of Treasury bonds which the System was
called upon to absorb fell off rapidly in the early weeks
of 1948, however, except for a temporary spurt which
was related to the first increase in reserve requirements
of central reserve city banks.
Yields on Treasury and Corporate 'Securities
W EEK LY

AVERAGES

OF

D AIIY

FIGURES

pER CEN T

1. The continuation o f a program o f debt retirement with
emphasis on maturing issues o f Treasury obligations held by
the System.
2. A further increase in rates on short-term Treasury
obligations.
3. Increases in the discount rates o f the Federal Reserve
Banks in January, and again in August.
4. Increases in reserve requirements against demand de­
posits o f member banks in central reserve cities in February,
and again in June; and increases against demand and time
deposits o f all member banks in September.

The Federal Reserve Bank of New York, as agent for
and under the direction of the Federal Open Market
Committee, continued to operate the System Open Mar­
ket Account in which the twelve Federal Reserve Banks
participate for the purpose of conducting open market
operations in Government securities. The coordination
of policies of debt management and credit control in­
volved both an increase in the scope and a change in the
character of open market operations, which assumed a
position of importance unique in the history of the Sys­
tem.
Long-term Government Securities

Open market operations prior to November 1947 were
governed mainly by considerations involving the volume
of credit and the movement of short-term rates. An
active demand for capital in excess of current savings
available for investment, which developed late in 1947
and continued in 194S, was accompanied by rising
interest rates on corporate and municipal bonds which
widened the spread between yields on such securities
and yields on Government bonds. This situation resulted
in strong pressure by institutional investors to sell long­
term Government bonds and to buy other higher yielding
securities which were available in large volume. The
policy of maintaining orderly markets in Government
securities which up to that time had involved chiefly
support of the market for short-term securities and
efforts to restrain the rise in prices of long-term bonds,
then required a reversal of operations to support long­
term bonds and, at times, to supply short-term securities.
In the final week of 1947, a lowering of the System’s
support prices for Treasury bonds led to a temporary
acceleration, rather than an abatement, of sales by invest­
ing institutions which went far beyond the immediate
needs for funds for the purchase of corporate securities.



TREASURY BILLS
(N EW

1943

1944

1945

ISS UES )

1946

1947

1948

W ith the sharp break in agricultural prices in Febru­
ary and resultant uncertainty in the economic outlook,
there followed several months of relative market stability
in which it was unnecessary to support long-term Treas­
ury bonds. Renewed uncertainty developed in June,
however, following an increase in reserve requirements
against demand deposits of member banks in central
reserve cities, the announcement of a special offering of
Series F and G savings bonds to be sold to institutional
investors during the first half of July, and the calling
of a special session of Congress to discuss anti-inflationary
measures; again there were substantial offerings of mar­
ketable Government bonds. In this unbalanced market
situation, support operations were resumed on a broad
scale in July. During the summer and early fall there
was a great deal of public debate over the wisdom and
effect of the support policy; there were many rumors of
impending changes in policy; and confidence in the
maintenance of the support policy was shaken because
of the size of the operations and their limiting influence
on credit policy. The general increase in required re­
serves of all classes of member banks, under the new
authority given the Board of Governors by Congress,
made it necessary for the banks to sell— and the Reserve
Banks to buy— approximately $2 billion of Government
securities in September. Despite statements by Treasury
and Federal Reserve officials on several occasions to the
effect that the policy of supporting a 2^2 per cent long­
term rate would be continued for the “ foreseeable
future” , nervous selling added to the already large sales

I

2

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

arising from switches to new corporate securities and
reserve adjustments.
This situation continued into the last quarter of the
year, and by early November System purchase of Treas­
ury bonds had run up to a total of well over $10 billion
within twelve months. W ith the reelection of the national
administration in November, however, many investors
concluded that the continuance of the support policy
was assured. Furthermore, the demand for bank loans
to business slowed, and a reduction in the demand by
corporations for additional capital appeared to be in
prospect. These developments were accompanied by a
reduction in market offerings of Government bonds, and
it was generally expected that there would be a greater
interest in intermediate and long-term Treasury bonds
on the part of both commercial banks and other investors.
Under these influences a much firmer Treasury bond
market developed. Support operations with respect to
some of the long maturities were still necessary from
time to time, but by mid-December a broadening de­
mand had lifted all issues of Treasury bonds above the
support levels.
Retirement of Public Debt

Throughout the year Treasury operations, and System
redemptions and open market sales of short-term
Treasury obligations, were active counterinfluences tend­
ing to reduce the amount of reserves acquired by the
commercial banks as the result of the bond support pro­
gram and other factors, including an inflow of gold and
a return of currency from circulation. In addition to
administering its balances so as to prevent, at times,
inappropriate increases in bank reserves, the Treasury
applied a substantial surplus in the budget to the retire­
ment of public debt. The Federal Reserve Banks pre­
sented for redemption— and the Treasury retired in
accordance with an agreed policy— large amounts of
maturing issues of United States Government securities
held in the System Open Market Account; thus the funds
used to pay these issues were kept out of the banking
system where otherwise they might have furnished a
basis for further credit expansion. Owing to seasonal
fluctuations in Treasury receipts during the year, these
retirement operations were uneven and tended to be con­
centrated in the first quarter of the year when the
Treasury surplus was the largest. Some of the first quar­
ter surplus was carried over for later use in W ar Loan
deposits, however, and the proceeds of the special sale of
Series F and G savings bonds in July (to institutional
investors) provided funds from which additional re­
tirements of debt were made.
Developments with Respect to Short-term Rates

Supplementing the restraints on bank reserves imposed
by the retirement of System-held debt, the System was a
ready seller of short-term Treasury obligations when the
market was receptive. The existence of a demand for
such issues was partly related to a preference for
liquidity or safety on the part of investors who were ap­
prehensive over future long-term rate prospects. The de­
mand was also stimulated by an increase in short-term




rates, for which the System pressed in pursuit of a better
balanced structure of rates, and as a result of which bank
funds would be attracted into short-term Government
securities.
The interest rate on one-year Treasury certificates of
indebtedness issued October 1,1948, was increased to 1^4
per cent, the second increase of % Per cent during the
year. The Treasury’s announcement on August 9, 1948,
of this proposed change caused an immediate decline in
prices for outstanding certificates, notes and the earlier
maturities of Treasury bonds. The System facilitated
appropriate adjustment with respect to those issues, and
took the occasion to abandon rigid price support and
revert to a more flexible support policy in the case of
bank-eligible taxable Treasury bonds of short and inter­
mediate maturities. Rates for ninety-one day Treasury
bills also rose in response to the change in the one-year
certificate rate. The System adjusted its exchange tenders
and its market transactions to permit a narrower spread
between the rates on bills and on one-year certificates.
A t times of improving market demand it was possible
for the System to adjust its exchange tenders so as to
cause its bill holdings to run off in part or in full without
an undesirable effect on the bill rate.
Despite substantial market purchases from time to
time to supply needed reserves to the banking system,
Reserve Bank holdings of Treasury bills, certificates, and
notes were reduced through redemptions and sales by an
amount only slightly less than the increase in holdings
of Treasury bonds during 1948.

Statistical Summary

During the year, under the direction of the Federal
Open Market Committee, this bank purchased in the
open market for the twelve Federal Reserve Banks, Gov­
ernment securities having a total face value of $22.5
billion, and sold or presented for redemption securities
having a face value of $21.7 billion. Thus the year’s
transactions resulted in an increase of $0.8 billion in
System Account holdings of United States Government
securities. It must be remembered, however, that reserve
requirements of member banks were increased by ap­
proximately $3 billion during the year, thus forcing
member banks to convert an approximately equivalent
amount of Government securities into reserve funds. If
it had not been for our purchases of Government securi­
ties to meet this need, System holdings of Treasury
obligations would have declined more than enough to
offset additions to reserves arising out of an inflow of
gold and a return of currency from circulation. Excess
reserves of all member banks were reduced by about
$0.4 billion during the year.
Total System holdings amounted to $23.3 billion at
the end of 1948 as compared with $22.5 billion at the
r
end of 1947. While holdings of Treasury bonds increased
by $8.1 billion, there were decreases of $5.9 billion in
Treasury bills and $1.4 billion in certificates of indebt­
edness and notes combined. This bank’s share in the
Government securities held by the System Open Market
Account amounted at the year end to $5.6 billion as com­
pared with $5.7 billion at the end of 1947.

FEDERAL RESERVE B A N K OF N E W Y O R K

FISCAL AG ENCY OPERATIONS
Government Financing Operations

Government financing operations during 1948 were
concerned primarily with the refunding or payment of
various issues of marketable securities which matured
or were called for redemption. Cash sales of securities
during the year were confined to non-marketable sav­
ings issues for non-bank investors, except for the regular
weekly offering of Treasury bills. The net result was a
decrease of $4.1 billion in the public debt, as compared
to a decrease of $2.5 billion during the calendar year
1947.
The total amount of marketable issues outstanding
declined $8.3 billion during the year. In part, this decline
resulted from the scaling down, from time to time, of the
amounts of the weekly offerings of Treasury bills in rela­
tion to the amounts of the issues maturing. Certifi­
cates of indebtedness or short-term notes were offered in
exchange not only for a number of similar maturing
issues, but also for four issues of Treasury bonds; in con­
nection with these exchange offerings, holders of the
maturing securities elected to exchange $30.1 billion for
securities of the new issues, and presented $5.4 billion for
cash redemption. One issue of Treasury bonds in the
amount of $451 million was wholly paid. On balance,
these operations resulted in a reduction of $6.4 billion
in bonds, and $2.9 billion in bills, and an increase of
$1 billion in certificates of indebtedness and notes out­
standing.
Non-marketable securities outstanding increased $1.9
billion during the year. Reductions in the amounts of
Treasury Savings Notes and Armed Forces Leave Bonds
were more than offset by an increase of $3 billion in the
amount of savings bonds outstanding. Emphasis was
placed on continuing sales of savings bonds to non-bank
investors throughout the year. A Security Loan Drive
was conducted in May and June. The Drive later was
extended with a special offering to institutional investors,
during the first 15 days of July, of savings bonds of Series
F and G in amounts up to $1 million, rather than the
usual limitation of $100,000 in each calendar year. At the
same time, commercial banks holding time or savings
deposits were permitted to invest up to $100,000 in such
bonds. In connection with the special offering, this bank
received 994 subscriptions aggregating $295 million,
including $42 million invested by 452 commercial banks.
Other factors affecting the public debt during 1948
included an increase of $2.8 billion in special issues of
Treasury securities held by Government trust funds, and
a decrease of $500 million in debt bearing no interest,
including special obligations issued to the International
Bank and Monetary Fund.
Transactions in Government Securities

The physical volume of transactions handled during
1948 by this bank, as fiscal agent of the United States, in
connection with the issue, exchange, transfer and redemp­
tion of marketable Government securities, increased to a
new post-war high. During the year, such transactions
involved the receipt or delivery of approximately 3 mil­
lion individual securities having an aggregate par value



3

of $264 billion. This represented an increase of 30%
over the number of pieces handled in 1947, although
the aggregate par value of securities handled in each
year was substantially the same.
The total volume of work in connection with United
States Savings Bonds declined slightly during the year,
an increase in the number of bonds sold being more than
offset by a decrease in the number redeemed. The number
of bonds delivered by the bank in 1948 as compared with
the previous year, in connection with original issues,
increased from 8,632,000 to 9,231,000, or by about 7 % ,
while the aggregate issue price of such bonds increased
by 25% from $985,299,000 to $1,235,329,000. Sales of
Series E bonds, ownership of which is limited to individ­
uals, accounted for the entire increase in the number of
pieces delivered and for about one-third of the increase in
proceeds of sales. The balance of the increase in sales
resulted from the purchase of larger denomination Series
F and Series G bonds by institutional investors and com­
mercial banks during the Security Loan Drive. During
the year 12*4 million savings bonds having an aggregate
redemption value of $714 million were redeemed by the
bank, a reduction of approximately 10% in the number,
and 17% in the dollar amount, of bonds redeemed as
compared with the year 1947.
As a continuation of the program for consolidation and
simplification of savings bond operations commenced in
1947, the work of several sections of the Savings Bond
Department was merged during 1948 and the number
of employees assigned to the Department was further
reduced from 437 to 376.
Gross Debt of the United States Government

Transfer of Treasury Bonds by Wire

During 1948, this bank, as fiscal agent of the United
States, along with the other Federal Reserve Banks,
expanded the scope of its facilities for the telegraphic
transfer of Government securities between certain cities
in this country. Since 1921, facilities have been provided
for the transfer of short-term securities (Treasury bills,
certificates of indebtedness, and notes) in connection with

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

4

sales of such securities, in order to provide a countrywide
market at relatively uniform prices. Commencing on
March 1, 1948, the service was extended to include the
telegraphic transfer of Treasury bonds. In this manner,
the banks provide facilities for a broader market in long­
term, as well as in short-term, Government obligations,
which has become desirable because of the increased pro­
portion of bonds in the composition of the public debt
as the result of war financing. These facilities expedite
delivery and reduce expense of shipment and insurance
of the securities in the ease of any sale requiring delivery
at a distant point.
When securities to be delivered in connection with a
sale are presented for telegraphic transfer, and are to
mature or have been called for redemption within one
year, the transfer is made without charge to the owner
and the cost is borne by the Treasury Department; this
has always been the practice in the case of telegraphic
transfers of short-term Government securities. Those who
transfer securities which will not mature or have not been
called for redemption within one year are required to pay
fees to the Federal Reserve Banks for account of the'
Treasury. The fee amounts to $5 for each transaction
involving $50,000 or less, and $10 where the amount
involved is over $50,000. (The expense of insuring and
shipping $1 million of securities from New York to Chi­
cago by registered mail, for example, is slightly more
than $200.)
This expanded service has been well received and
actively used and has necessitated the installation of
additional leased wire facilities between this bank and
the offices of the Board of Governors. W e now have two
telegraphic circuits in operation between New York and
Washington, and, as a result, delays during busy periods
have been almost entirely eliminated.
From March 1, 1948, through December 31, 1948, this
bank handled 19,128 telegraphic transfers of Treasury
bonds of a total par value of $6.7 billion, in addition to
maintaining the previously existing facilities for short­
term securities. For the full year, 63,734 telegraphic
transfers involving securities with a total par value of
$25.2 billion were made through this bank.

Reconstruction Finance Corporation

Further curtailment of the wartime activities of the
Reconstruction Finance Corporation, and continuation
of its plan undertaken in 1947 to transfer from the
Federal Reserve Banks to its district Loan Agencies the
accounting records relative to the lending programs for
which such agencies have administrative responsibility,
have brought about a further substantial reduction in
the work performed by this bank as fiscal agent and cus­
todian for the Corporation. Certain sections of our
R. F. C. Custody Department have been merged or
abolished as a result of the reduction in work, and per­
sonnel assigned to the Department decreased during the
year from 98 to 34.
Disbursements and collections made for account of the
Corporation during 1948 were $161 million and $253
million, respectively, as compared with $424 million and
$662 million, respectively, during the previous year.

Foreign Funds Control

A year ago we anticipated that our Foreign Funds
Control activities would cease on June 1, 1948, when
jurisdiction over remaining blocked property was to have
been transferred from the Treasury Department to the
Office of Alien Property of the Department of Justice.
The transfer was, however, delayed, and when it was
finally effected on October 1, 1948, we were requested by
the Secretary of the Treasury to continue these activities,
as fiscal agent of the United States, for the Department
of Justice.
A new census was taken of property remaining blocked
in the United States as of June 1, 1948.
The amount of blocked property has been reduced
through the issuance of licenses, and through certifica­
tions issued by the appropriate agencies of countries with
which defrosting agreements have been made; and there
has been a commensurate reduction in the volume of work
of our Foreign Funds Control Department. Although
the amount of property remaining blocked is relatively
unimportant, the problems involved in its unblocking or
other disposition are difficult and may not be resolved
for some time.

Payment of Treasury Coupons

W ith the vast increase in the Government debt result­
ing from war financing, the number of Treasury coupons
presented to us for payment has increased substantially
in recent years. In order to expedite the handling of these
coupons, we began experimenting in March 1947 with a
single count of coupons in denominations under $500,
instead of a double count which had been our former
practice. These coupons of smaller denomination con­
stitute approximately 80 per cent of the number of cou­
pons we pay. The experiment has proved to be successful
and there has been no appreciable increase in the number
of errors found by the Treasury Department upon verifi­
cation of our payments. In addition, the new procedure
has enabled us to handle the payment of coupons more
expeditiously during interest paying periods and has
reduced our cost of paying coupons by approximately
$34,000 a year, or nearly 39 per cent.



International Bank for Reconstruction and Development

This bank, as fiscal agent of the International Bank for
Reconstruction and Development, conducts various trans­
actions on its behalf in connection with its outstanding
bonds, a $150,000,000 twenty-five-year 3% issue and a
$100,000,000 ten-year 2 ^ % issue. Commencing October
4, 1948, bonds of the two issues, which were originally
delivered in temporary form on July 15, 1947, were
presented to us to be exchanged for definitive securities.
In preparation for the exchange, this bank, as registrar
of the two issues, authenticated by manual signature of
its officers, 184,000 of the permanent bonds. Between
October 4 and the close of the year, we had received
169,927 of the temporary bonds and had delivered 120,244
definitive securities in exchange. Nearly all of this work
was done during the month of October.

FEDERAL RESERVE B A N K OF N E W Y O R K

Head Office Salary Liability

PERSONNEL
The postwar decline in the number of employees at the
head office which characterized the years 1944 through
1947, ceased during the past year; at the year end there
were 3,771 employees as against 3,755 on December 31,
1947. There was a further decrease in the number of
head office employees engaged in fiscal agency opera­
tions, although this was more than offset by increases in
staff to meet other requirements, particularly in our
Check and Cash Departments. The number of dismissals
during 1948 was cut to about 39% of the previous year’s
figure, and included only 24 persons released as excess,
as compared with 182 during 1947. Present indications
suggest comparatively little change in the size of the staff
during 1949, although a modest decrease is a possibility.
The following table, covering the years 1944 through
1948, shows some basic statistics concerning the head
office employment situation.
1944
Employees, close of business Dec. 3 1 . . . .

5

1945

1946

1947

1948

4,367

4,294

4,142

3,755

3,771

The following figures, covering the years 1944 through
1948, inclusive, show employee salary liability (including
reimbursable salary) at the head office as of the close of
business on December 31 of each year. Supplementary
compensation, which was paid prior to January 1, 1946,
has been treated as part of salary.
1944
Salary liability
(in thousands of dollars) $8,790

1945
$9,515

1946

1947

1948

$11,242 $10,621 $11,496

In the graph below are shown the changes in annual
head office employee compensation for the past twenty
years and the extent to which such compensation was
reimbursable by the United States Government and its
agencies. The term “ compensation” for purposes of the
graph, includes basic salary, supplemental compensation,
separation pay, overtime and “ breakfast money” .
Total Yearly Compensation Received by Head Office Employees
and Extent Reimbursable, 1929-1948

M L N
IL IO S
O DLAS
F OL R

Employees, average number, engaged in
work reimbursable by U . S. Govt, and
its agencies ..............................................

1,893

1,584

1,218

824

690

Employees, average number, all other . . .

2,601

2,662

2,949

3,066

3,141

1<

Applicants ........................................ ..

4,736

6,002

8,346

7,405

8,050

10

H i r e d ...............................................................

1,379

1,043

948

565

1,427

1,116

1,100

952

751

Dismissals (included in Separations) . . .

133

120

246

402

N O N -R E IM B U R S A B L E C O M P E N S A TIO N

767

S eparations*..................................................

E 5 3 R EIM BUR SABLE CO M P EN SATIO N
'■ I

158

9
8

* Includes entered military service, became officers, resigned,
dismissed, retired, died.

The chart appearing below illustrates the fluctuations
in yearly average head office employment during the
past twenty years, and shows the effect of reimbursable
work performed for the United States Government and
agencies thereof, on total employment.

7
6

5

PI I I I I I I

4

■ a

3

Fluctuations in Yearly Average Head Office Employment
1929-1948

2

r r m

«

!n

11111111111111111111

O
■ i

T m

111II n n

1
l?ff] IN R E IM B U R S A B L E WORK

l l

111111111111111111111

1929*30 *31 ’32 ’ 33 ’ 34 ’ 35 ’ 36’3 7 ’ 3 8 ’ 39 *40’41 *42 *43’ 4 4 ’45 ’4 6 ’47*48

IN A L L O T H E R WORK

Salary Administration

1929*30 »31 ?32 *33 *34 ’ 35 “
*36 ^ 7 ’ 38 '3 9 ’ 40 ’ 41 ’ 42 *43 ’ 44 ’ 45 '46 *47 *48




The bank’s new personnel classification plan, estab­
lished during the latter half of 1947, had its first full
year of operation during 1948. In keeping with the
program of maintaining the plan in appropriate relation­
ship with community markets— a program we contem­
plated when the plan was established, we made surveys
of the markets, both in New York City and in Buffalo,
during the first half of 1948. Upon the basis of findings
that substantial increases in the rates of pay for many
jobs had occurred in both communities since the estab­
lishment of the plan, the minimum and maximum salary
rates under the plan were increased, effective November
1, 1948; and at the same time, general salary increases
were made effective at the head office and the branch.
At the head office, the minimum and maximum salary
rates were increased by about 5 per cent; and (with cer­
tain limited exceptions) employees were granted salary

6

PRESIDENT’S REPORT TO DIRECTORS FOR 1943

increases of 5 per cent of the first $7,500 of their annual
salaries, those salaries below the newly established minimums being brought up to the minimums. The increases,
aggregating $536,629 per annum, benefited 3,767 (all but
36) employees, and, in addition, 438 employees received
further increases totaling $9,325 per annum to bring
their salaries to the new minimums. (The adjustments
affecting employees at the branch are described in the
part of this report dealing with the branch operations.)
A t the year end there were 32 employees at the head
office whose salaries exceeded the maximum rates for
their jobs by an aggregate amount of $4,084, as compared
with 223 employees whose salaries exceeded the maxi­
mum rates for their jobs by an aggregate amount of
$39,425 as of December 31,1947. In the main, this change
was due to the increase in maximum salary rates.
Leadership Training

A program of leadership training was launched during
the year. The program took the form of a series of round
table conferences, in which the officers first participated
and in which the chiefs and assistant chiefs are now
participating. With the aid of a consultant engaged for
the purpose, these conferences are designed to focus atten­
tion upon the important role of management in personnel
relations, and to suggest methods whereby the responsi­
bilities of management in this area might be more effec­
tively discharged.

Blue Cross Plan and Doctors’ Plan

As of December 31, 1948, 3,251 persons or 85.2% of the
head office staff were covered under our Blue Cross Plan
and Doctors’ Plan. “ Individual” , “ husband and wife” ,
or “ family” coverage is available, as required, with the
bank paying two-thirds of the premium. In 1948, the
cost to the bank was $84,616, and to participants $43,842.
During the year, members of the bank’s staff insured
under the plan filed 598 claims for hospital care (5,246
days), which would have cost the insured $64,350, and
546 claims for medical and surgical care amounting to
$33,760. The plan provides substantial protection against
the usual hospitalization and related expenses, generally
in an amount sufficient to absorb all or most of the cost,
and affords some measure of security against surgical
costs. Many members of our staff averted real financial
hardship in 1948 through membership in the plans.
Payroll Deductions for Series E Savings Bonds

The year witnessed a further decline in head office
staff participation in the plan permitting purchase of
Series E Savings Bonds through payroll deductions. As
of December 31, 1948, 2,024 persons or 52.7 per cent of
our force were participants, with an average payroll
deduction of 3.2 per cent of salary. A t the previous yearend, 61.6 per cent of our staff were buying bonds under
the payroll deduction plan, with an average deduction
of 3.6 per cent of salary.

Federal Reserve Club

Membership in the Federal Reserve Club during the
year averaged about 87% of our force; the Club’s social,
recreational, and other activities continued to be geared
to suit widely varied tastes.
A successful Club project was a series of three open
house and children’s parties held on the first three Satur­
days in April. Designed primarily to interest the mem­
bers, old and young, of the families of our staff, these
parties were attended by some 3,000 persons. The parties
were more than pleasant social occasions; they were also
a constructive medium for acquainting the families of
our staff with the bank.
On October 21, 1948, the Club Store, sponsored by the
Federal Reserve Club, observed its 25th Anniversary.
The Store exists primarily as a convenience to meet some
day-to-day needs of our staff; it serves this purpose
effectively.
Group Life Insurance

Changed economic conditions in recent years made an
increase in the amount of group life insurance available
under our optional plan seem appropriate. The staff was
given the opportunity to join in a revised plan offering
coverage of $1,000 to $6,000, (instead of a previous maxi­
mum of $3,000) depending on the salary and sex of the
insured, provided that at least 75% of eligible employees
indicated their desire to participate. The required per­
centage gave affirmative answers, and the new plan,
which continues at a cost on the part of the insured of
60<* per month per $1,000 of life insurance, became effec­
tive on July 1, 1948. As of December 31, 1948, 2,822
persons (or 74 .5 % ) of the head office staff were parti­
cipants in our group life insurance plan.




at
Quarter Century Club

Members (and former members) of our staff who have
completed their 24th year in the service of the bank are
eligible for membership in the Quarter Century Club,
organized in 1946 to succeed the Twenty Year Club. In
addition, membership still includes some individuals who
previously belonged to the Twenty Year Club, and who
were allowed to continue their membership in the succes­
sor organization, although they fall short of meeting cur­
rent membership requirements. As of December 31,1948,
410 employees and 18 officers at the head office had
served the bank upwards of 24 years. Actual member­
ship in the Quarter Century Club at the year-end was
456, compared with 433 on December 31, 1947. Members
of the Quarter Century Club have played an important
part in the development of this bank. It is a source of
satisfaction that nearly 11% of our staff have been with
us for a quarter of a century.
Retirement System

A factor related to employment by this institution,
which contributes materially to the security of its em­
ployees, is the Retirement System of the Federal Reserve
Banks. Organized in 1934, this contributory Systemwide plan, in which the Federal Reserve Banks meet ap­
proximately 60 per cent of the cost, offers benefits which,
according to recent studies, compare favorably with those
available under other plans. A t the year-end, 260 persons
formerly on our staff were “ retired members” , receiving
benefits from the Retirement System. Of these, 149 were
retired on service retirement, having reached age 65, 86
were retired on special service, and 25 on disability.

7

FEDERAL RESERVE B A N K OF N E W Y O R K

FOREIGN OPERATIONS
Assets Held for Foreign and International Account

Reversing the downward trend which had been in evi­
dence since September 1915, the total of earmarked gold,
deposits, United States Government securities, and other
dollar assets held at the Federal Reserve Bank of New
York for foreign account increased $876 million during
1948 to $4,246 million. Furthermore, such assets held
for the International Bank for Reconstruction and De­
velopment and the International Monetary Fund rose by
$127 million to $3,166 million, with the result that total
assets held for foreign and international account reached
$7,412 million on December 31, 1948.
The increase in assets held for foreign account, in the
face of continued heavy requirements for dollar exchange,
resulted primarily from further large shipments of foreign-owned gold to this country, and from the substantial
amounts of dollars made available under United States
Government foreign aid programs and by the Interna­
tional Monetary Fund and the International Bank.

E.C.A. payments into foreign accounts accounted for
roughly $900 million; these payments, however, repre­
sented largely reimbursement for previous outlays for
goods and services covered by the European Recovery
Program.
The table below indicates that the increase in assets
held for foreign account occurred in all forms of hold­
ings, the largest increase being in holdings of United
States Government securities. The accounts showing
the greatest increases in total assets were those of the
central banks of England, Canada, and Belgium, while
the only significant declines were in the assets here of
Portugal, Argentina, and China. Total assets held for
account of the Bank of England rose by a net amount of
$424 million. In addition to about $950 million of gold
shipped to this country, the Bank of England’s assets
here were augmented chiefly by the receipt of the remain­
ing $300 million under the $3,750 million British loan,
and nearly $700 million from the E .C .A ., representing
reimbursement for previous outlays for purchases cov­
ered by the European Recovery Program.

Total Assets Held at Federal Reserve Bank of New York
for Foreign and Certain International Accounts
(In Millions)
Sept. 19, 1945
(H igh Point)

Dec. 31, 1947

$4,175 (a)

$2,766 (b)

Net Change
Dec. 31, 1947Dec. 31, 1948 Dec. 31, 1948

Foreign Accounts
Earmarked Gold ....................................................................

$2,961(c)

+$

195

Deposits.............................................................................

1,082

392

642

+

250

United States Government Securities......................

1,589

187

593

+

406

Miscellaneous Securities, Commercial Paper, and
Bankers Acceptances................................................

22

25

50

+

25

$6,868

$3,370

$4,246

+$

876

—

$ 764

$ 809

330

296

+$
—

45

—

1,945

1,604

—

341

—

—

457

+

457
127

T otal — Foreign A ccou n ts..............................................

International Accounts
(International Fund and Bank)

Miscellaneous Securities .................................

.......
.......
.......
.......

T otal— International A cco u n ts........................

.......

—

$3,039

$3,166

+$

G rand T o t a l ................................................................ .........

$6,868

$6,409

$7,412

+ $ 1 ,003

Earmarked Gold ................................................
D eposits..................................................................
United States Government Securities...........

—-

34

(a) Includes $10,204,000 held as collateral against loan made by Federal Reserve Banks to a foreign central bank; ex­
cludes $102,814,000 held for account of a domestic commercial bank against loan to a foreign central bank.
(b) Includes $132,641,000 held as collateral against loans made by Federal Reserve Banks to foreign central banks; ex­
cludes $8,020,000 held for account of domestic commercial banks as collateral against their loans to foreign central
banks; excludes $80,814,000 held by Federal Reserve Bank of New York as fiscal agent to secure repurchase agree­
ment with Brazil.
(c) Includes $197,074,000 held as collateral against loans made by Federal Reserve Banks to foreign central banks; ex­
cludes $8,020,000 held for account of domestic commercial banks as collateral against their loans to foreign central
banks.




PRESIDENT’S REPORT TO DIRECTORS FOR 1948

8

Total Gold and Dollar Assets Held at the Federal Reserve
Bank of New Y ork for Foreign Accounts and
for International Fund and Bank

1939

1940

f 941

1942

1943

1944

1945

1946

1947

1948

Changes in Status of Foreign Accounts

During 1948 this bank, as principal, opened accounts
for Bank deutscher Laender (the central bank for the
three western occupation zones of Germany) and for the
central bank of Austria. Simultaneously with the exten­
sion by us of a loan on gold to Brazil and the repayment
by Brazil of its obligation under the United States-Brazil
Stabilization Agreement (as mentioned below), the ac­
count in the name of Banco do Brasil as fiscal agent of the
Brazilian Government, which we had been operating as
fiscal agent of the United States, was closed and the bal­
ance transferred to a new account in the same name
which we maintain as principal. Arrangements were
also completed during the year for the opening of a fiscal
agency account for the World Health Organization, an
agency of the United Nations; it is expected that this
account will be opened in the near future.
In addition to the above-mentioned closing of the fiscal
agency account of the Banco do Brasil, the accounts of
Bank voor Nederlandsche-Indie N. V., the Common­
wealth of Australia, and Military Governments for Ger­
many (U S /U K ) were closed. The Netherlands East
Indian and Australian accounts had served the purpose
for which they were originally opened and had been inac­
tive for some time. The balance in the Military Govern­
ments account was transferred to the account of Bank
deutscher Laender, referred to above.
In July 1948, the Treasury Department unblocked
Yugoslav assets in the United States, and, shortly there­
after, the accounts of the central bank of Yugoslavia and
of the Government of Yugoslavia were reactivated. Soon
after reactivation, however, the gold and dollar balances
in the account of the Government of Yugoslavia were
withdrawn. Reflecting continued political considerations,
the accounts on our books in the names of the central
banks of Hungary, Bulgaria, and Rumania have not been
reactivated and remain blocked pursuant to Foreign
Funds Control regulations.




Loans on Gold

There was, during the past year, a further demand by
foreign central banks for loans against gold, continuing
a trend which began to be an important factor in our
operations in 1946. Starting the year 1948 at $50.6 mil­
lion, the total of such loans outstanding rose to a new
record high of $259.7 million in August, and then tapered
off to $190.1 million at the end of the year. Seventy-six
separate advances were made, and interest earned on
these loans amounted to $2.5 million, as compared with
$620 thousand in the previous year and $955 thousand in
1946. Other Federal Reserve Banks participated in these
loans and the income therefrom to the usual extent of
about two-thirds.
No material changes were made in our policy with
respect to our loans on gold. In general, the loans were
made under arrangements providing for three-month
advances up to stipulated maximum amounts and Mere
r
designed to cover seasonal requirements for dollar
exchange on the part of the borrowers. In some cases,
our loans have been renewed, subject to negotiation every
three months, up to one year, at the end of which time
it has been our general policy to establish a program of
repayment. All loans are fully secured by gold in our
vaults and bear interest at our current discount rate.
A t the beginning of the year, loans were outstanding
to the central banks of Greece, Poland, Turkey, and
France. Those to Greece and Turkey were retired in full
during the year. The loan to Poland, after increasing to
$26.5 million, was reduced to $14.1 million by year end,
while the loan to France, which was put on only a few
days before the beginning of the year, increased to the
authorized amount of $100 million. Pursuant to our gen­
eral policy, after the loan to Poland had been on our
books for somewhat more than one year, we established
a program of repayment calling for a gradual liquida­
tion. A similar arrangement has also been established for
the loan to Banque de France, the first repayment under
this program being scheduled for May 1949.
During the year we made three separate advances to
the central bank of Ecuador, a previous borrower, and
one to the Central Bank of China, all of which were
repaid. Loans were also made to the central bank of the
Netherlands, to Brazil (the proceeds of which were used
to repay its obligation under the United States-Brazil
Stabilization Agreement), and to Yugoslavia (the pro­
ceeds of which were paid to the Secretary of State in
payment by the Government of Yugoslavia of its obliga­
tion under an agreement regarding pecuniary claims
between the United States and Yugoslav Governments).
The above-mentioned loan to Brazil provides for a sched­
ule of repayment which calls for final liquidation in
June 1949, or one year from the date the loan was origi­
nally made.
In addition to the loans actually made in 1948 we
advised the central banks of Costa Rica and the Nether­
lands East Indies and the Bank for International Settle­
ments that, as of the dates of reply to their requests, we
were prepared to make loans on gold to them. None of
these banks, however, availed themselves of the facilities
in 1948.

FEDERAL RESERVE B A N K OF N E W Y O R K

The following schedule reflects all the loans against
gold which were outstanding during 1948:

Central
bank o f :
G r e e c e .........
P o la n d .........
Turkey . . . .
France . . . .
Ecuador . . .
Netherlands
China .........
Brazil ........
Y ugoslavia

(I n Millions of Dollars)
Maximum
Outstanding outstanding
Date of
End
first advance end of 1947
1948
of 1948
___
9-24-46
8.8
8.8
, 4- 8-47
17.0
26.5
14.1
—
, . . 9-29-47
14.8
16.0
. . 12-22-47
10.0
100.0
100.0
___
3-15-48
3.4
.
. . . 4- 5-48
20.0
10.0
—
—
...
5- 6-48
10.0
—
...
6- 3-48
80.0
60.0
. . . 8-30-48
17.0
6.0
—

Total

_

_
—

50.6

_

Date of
final i
repayment
12-22-48
—
6-24-48

—

12-23-48
—
11- 8-48
—
—

190.1

Gold Movements

The net acquisition of foreign-owned gold by the
United States during 1948 amounted to $1,506 million,
as compared with $2,826 million in 1947, $711 million in
1946, and a net loss of $450 million in 1945. The net gain
during the past year included purchases by the Treasury
of $1,051 million of gold released from earmark and $637
million of gold imported for direct sale, less sales of gold
by the Treasury to foreign account of $182 million. That
the total amount of gold held under earmark for foreign
account actually increased by $195 million during the
year, as mentioned earlier in this report, reflects, of
course, the fact that the heavy sales from earmark were
exceeded by the amount of gold imported and earmarked
and by new purchases of gold here for earmark.
Although the total volume of all gold transactions
handled during the year was somewhat below the record
amount of 1947, it continued to be very large, particu­
larly in the case of imports.
International Bank for Reconstruction and Development,
International Monetary Fund, and Export-Import Bank

Operations handled by this bank as depository of the
International Bank for Reconstruction and Development
and the International Monetary Fund continued to be of
considerable magnitude during 1948. Services to the for­
mer consisted primarily of handling the investment of
its idle funds in United States Government securities,
receiving deposits, making payments under loans granted
by the Bank, and holding securities in custody. This bank
also continued to act as fiscal agent for the International
Bank in connection with its two bond issues floated in
1947.
Services to the International Monetary Fund involved
chiefly the holding of the gold earmarked here for account
of the Fund and making payments in connection with its
foreign exchange and gold transactions with member
countries.
W e continued to perform certain functions in connec­
tion with the $200 million loan granted by the ExportImport Bank of Washington, with the participation of
some 40 commercial banks, to the Kingdom of the Nether­
lands. In 1946 and 1947, we had acted as fiscal agent of
the Export-Import Bank in connection with individual
drawings under this loan by the Netherlands Govern­
ment. Since June 1947, when drawings were completed,
our activities have been restricted to the payment of
interest and the repayment of principal with respect to
the notes issued by the Netherlands to the creditor banks.



9

In doing so, we acted on behalf of the Kingdom of the
Netherlands, rather than as fiscal agent of the ExportImport Bank.
Visits to Foreign Central Banks

In the spring and early summer of 1948, representa­
tives of the Foreign and Research Departments visited
the central banks of England, France, Switzerland, the
Netherlands, and Belgium, the Bank for International
Settlements, and the Joint Foreign Exchange Agency
of the Military Governments in Germany. Mr. Rushmore,
Special Assistant in the Foreign Department, made the
entire trip as the operating representative, while Mr.
Bloomfield, Chief of the Balance of Payments Division,
was the research representative for the English and
French part of the trip and Mr. Moore, Manager of the
Research Department, for the remaining part. The pur­
poses of the trip were to study the organization and oper­
ations of foreign central banks, to become acquainted
with their personnel, to obtain first-hand information on
economic conditions and problems in the countries visited,
and, in the case of Germany, to discuss means of facilitat­
ing operations through the Military Governments ac­
count with us.
Foreign Central Bank Visitors

During 1948 we received thirteen visitors, represent­
ing the central banks of Australia, Canada, Denmark,
England, France, Italy, Mexico, and New Zealand, who
came to New York to study our operations and methods.
In addition to these visitors, governors and other senior
officials of a number of central banks, who attended meet­
ings, in Washington, of the International Monetary
Fund and International Bank for Reconstruction and
Development, had informal discussions with the officers
of this bank while passing through New York.
Staff Group on Foreign Interests

This Group, consisting of some of the officers and staff
of the Foreign, Legal, and Research functions at this
bank and of the Board of Governors, continued in 1948
to be concerned very largely with United States gold
policies and procedures. On this subject it maintained
fairly constant contact with the staff of the United States
Treasury. The Group also had to deal in the course of
the year with questions of System foreign missions, the
use of the Federal Reserve System by the Economic
Cooperation Administration, and various other problems
and developments in the international field. Through
the Group, arrangements were made for a systematic
exchange of foreign research personnel between the
Board of Governors and the Federal Reserve Bank of
New York, to begin early in 1949.

CHECK COLLECTION
The annual volume of cheeks collected by this bank
reached a new peak in 1947 with the collection of 289.5
million checks. In 1948, a new record was attained when
we collected over 318 million checks, representing $130
billion, and constituting a 10 per cent increase over the
number collected in 1947.

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

10

Some of the more important steps taken to cope with
this steadily increasing volume of work are described
below.
Change in Operating Procedure

As I have reported previously, the use of I. B. M. punch
card and tabulating equipment, in the preparation of our
cash letters, has been found unsatisfactory both to this
bank and the drawee banks. During the year further
progress was made in changing over to a system involving
the use of proof machines and manually prepared cash
letters; all cash letters sent to the New Jersey and Con­
necticut banks in this district, and about half the cash
letters sent to banks in New York State, are now being
processed under the new system. It is expected that the
change-over will be complete by mid-1949.
Processing on Saturdays

On Saturday, June 5, 1948, as the result of a request
from the New York Clearing House Association, we com­
menced making consolidated shipments of checks (i.e.,
shipments in which are consolidated checks being sent by
direct-sending banks in the New York metropolitan area
and checks being sent by us to other Reserve Banks and
branches) on Saturdaj^s and computing credit avail­
ability on such checks from the date of shipment. In
order to give the same service and availability to member
banks which deposit their checks with us, we also are
processing and dispatching their interdistrict checks on
Saturdays.
Air Transportation

Our use of air transportation in the collection of cash
items during 1948 has continued with increased volume.
For example, during October 1948, we shipped approxi­
mately 570,000 interdistrict checks weighing about 1,900
pounds on each weekday and approximately 180,000 such
checks weighing about 600 pounds on each Saturday. As
a result, the 34 direct-sending member banks which con­
solidated their work with ours received earlier reserve
credit in substantial amounts.
As a result of the consistent performance of air trans­
portation in making possible the earlier collection of
checks, we revised our head office time schedule on June
3, 1948, to provide earlier availability for deferred-credit
items payable in sixteen Federal Reserve bank and branch
cities to those member banks which deposit their cash
items with our head office for collection.
While the great bulk of our checks payable in other
districts is now shipped by air, there is one important
exception— night shipments to the Federal Reserve Bank
of Philadelphia. In order to overcome numerous delays,
principally due to weather, which we had encountered
in connection with such shipments to Philadelphia, we
inaugurated on January 20, 1948, in conjunction with
the Federal Reserve Bank of Philadelphia, a station wagon
service between the two banks. On each of five nights a
week, at approximately midnight, a station wagon
leaves each Reserve Bank with consolidated shipments
of cash items (mostly checks) and United States Gov­
ernment card checks for delivery to the other Reserve
Bank. The station wagons meet in Princeton, New Jersey,




the midway point, where the drivers change cars and
drive back to their respective banks with the shipment
from the other bank, arriving at approximately 4 a.m.
City checks delivered to us in this manner are received
by us at a much earlier hour than they were previously
received when shipped by either rail or plane, enabling
us to have such checks cleared more expeditiously.
Check Routing Symbol Program

The check routing symbol program sponsored by the
American Bankers Association and the Federal Reserve
Banks, launched in June 1945, has made substantial
progress during the past year in most Federal Reserve
Districts. A t the year end 58 per cent of the checks in
circulation in the country, drawn on par remitting
banks, bore the symbol in the approved location— the
upper right-hand corner. The number of such checks in
circulation in the various Federal Reserve Districts
varied, however, from highs of 71 per cent in this district
and 69 per cent in the Boston and Dallas Districts, to
lows of 44 per cent and 39 per cent in two other districts.
Amendments to Regulation J and Cash Collection Circulars to
Permit Delayed Posting of Checks

During the war many banks adopted the practice of
“ delayed posting” , which means that checks drawn on a
bank, and presented to it for payment, are not posted by
the bank to the ledger accounts of its depositors, the
drawers, until the day following their receipt by the
bank. This practice requires that the drawee bank either
(1) postpone until the next day its remittance for checks,
or (2) pay checks on the day of receipt and to delay
until the following day the return of checks not paid
for any reason. The second procedure, rather than the
first, is considered essential from the standpoint of the
Federal Reserve collection system. Our time schedules
of deferred credit are based on remittance on the day
of receipt. Under the delayed remittance procedure it
would be necessary for us either to absorb an increased
amount of “ float” or to revise our time schedules so as
to defer availability by an extra day.
In 1944, the Conference of Presidents decided not to
give formal authorization or recognition to the practice
of delayed posting. The practice continued after the
war, however, and, in various states, statutes were en­
acted having the effect of authorizing delayed remittance.
In 1947, the Committee on Operations of the Conference
of Presidents appointed a Special Committee of Counsel,
of which Mr. Logan was chairman, to collaborate with
the Committee on Collections, of which Mr. Willis is
chairman, in connection with this subject. After a num­
ber of meetings, the two committees filed a joint report in
January 1948 with reference to the request of the Ameri­
can Bankers Association that the Board of Governors’
Regulation J and the Federal Reserve Banks ’ cash collec­
tion circulars be amended to permit this practice, and
recommending that this be done provided the A. B. A.
(1) suggest to its member banks a form of contract with
depositors to protect them in sending checks to the
Federal Reserve Banks for collection in accordance with
the Federal Reserve rules, and (2) prepare and encour­
age State legislation in satisfactory form to authorize
the conditional payment and delayed return procedure.

FEDERAL RESERVE B A N K OF N E W Y O R K

These recommendations were adopted by the Confer­
ence of Presidents and the Board of Governors and
shortly thereafter, in May 1948, the A . B. A. wrote to its
member banks recommending that they review their
agreements with depositors and enclosing a suggested
form. During the early fall of 1948, the Special Com­
mittee of Counsel, and particularly counsel for this bank,
considered various drafts of proposed model statute pre­
pared by counsel for the A. B. A. and made many sugges­
tions with reference thereto. In November 1948, a statute
in satisfactory form was submitted to the Board of
Governors. In the meantime, the Committee on Collec­
tions, with the assistance of counsel for this bank, pre­
pared revisions of the Federal Reserve Banks’ uniform
circular on collection of cash items, which were approved
by the Conference of Presidents and the Board of
Governors. Accordingly, Regulation J and the cash col­
lection circulars of the Federal Reserve Banks were
amended effective January 1, 1949, so as to authorize the
Federal Reserve Banks to accept, as conditional, pay­
ment for checks and other cash items made on the day
such items are received by a drawee bank and to permit
the drawee bank to return items, as unpaid, for credit
or refund at any time on the drawee’s next business day.
The A. B. A. has suggested that State Banking Associa­
tions submit the model statute to the State legislatures
holding sessions in 1949.
The A . B. A. sent the proposed model statute to all of
the State Bankers Associations and suggested that they
sponsor its enactment in their States. Up to the present
time we understand that thirteen of the State legislatures
holding sessions in 1949 have enacted statutes in sub­
stantially the form of the model statute and several
others, including New Jersey and Connecticut, are
expected to do so before they adjourn. The Legislative
Committee of the New York State Bankers Association
took no action with reference to deferred posting legis­
lation and no statute on the subject was introduced in
the New York legislature.
Although neither the amendments to Regulation J and
to the cash collection circulars of the Federal Reserve
Banks, nor the A. B. A. model statute, require any bank
to follow the practice of delaying the return of unpaid
cash items, it is contemplated that the practice of
“ delayed posting” may become widespread as it is
claimed to be an important step toward economy in bank
operations, and to improve staff morale because of more
regular working hours.
Government Checks

Our Government check operations consist of receiving
for payment or collection punch card checks drawn on
the Treasurer of the United States, which are payable
through this or other Federal Reserve Banks, and checks
in conventional paper form which are drawn on and
payable by the Treasurer in Washington. Government
checks of both types handled by this bank reached a peak
volume in 1945 when over 103 million checks were han­
dled. W ith the curtailment of wartime activities during
1946 and 1947, there was a substantial reduction in the
number of such checks issued. During 1948 an apparent
leveling off point was reached as approximately 39 mil­
lion checks were handled, a decrease of only 4 per cent




11

from the volume handled in 1947. It is anticipated that,
except for issuances of checks for special purposes, such
as the proposed payment of a dividend to holders of
National Service Life Insurance policies which may be
paid during 1949, Government check volume in 1949
should approximate that of 1948.
Increased efficiencies in operating procedures, together
with a decline of 22% in the average number of em­
ployees in the Government Check Department, combined,
during 1948, to lower the cost of operation of the Depart­
ment by about 23 per cent, as compared with the cost
during 1947.
CASH OPERATIONS
Counterfeits

During 1948, 1,390 counterfeits in the amount of
$20,000 were detected by our currency counters. Only
340 counterfeits were detected in 1947, indicating a
marked increase in the number of counterfeits being
circulated. Two counterfeit notes, in $10 and $20 denom­
inations, purportedly issued by the Federal Reserve Bank
of Chicago, were widely circulated last year. These two
notes first made their appearance here late in November
and by the year end our sorters detected 230 of the $10
counterfeits and 70 of the $20 counterfeits. W e circular­
ized all banks in this district, with the approval of the
Secret Service, giving a complete description of these two
counterfeits. In addition, in order to place the public on
notice, similar information was issued through the press,
television, and radio. This immediately resulted in a
sharp decrease in the number of such counterfeits
detected in our currency deposits.
Armored Car Service

Late in 1947 we inaugurated a program for transport­
ing currency and coin by armored car, at our expense, to
and from twelve member banks and branches in Queens
County. This program was welcomed by the banks with
enthusiasm, primarily because it eliminated the risk to
their employees in transporting money shipments to and
from a post office or express office. The program also
proved advantageous to us by reason of reduced trans­
portation costs, and accordingly we expanded the service
substantially during 1948. A t the present time we are
operating eight different routes which serve 280 banking
offices of member banks in nearby areas of Long Island,
Westchester County and New Jersey. The costs of this
service are approximately $100,000 less per year than
the mail and express costs which we formerly absorbed
incident to the shipments of currency and coin to and
from these same banks.
Risk of Loss on Shipments

Prior to July 22, 1948, we did not assume any risk of
loss incident to the shipment of paper currency and coin
by us or to us by express, while the shipment was not in
our custody. W e did, however, assume stated risks
of loss incident to shipments of paper currency by regis­
tered mail (except shipments to nonmember banks), from
the time such shipments left the sending bank until deliv­
ery at the office of the addressee bank. To provide some­
what more comparable treatment of the two methods of

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

12

shipment, we extended our assumption of risk, effective
July 22, 1948, to include the so-called “ terminal risks”
on express shipments, i.e., stated risks of loss arising
from the time such a shipment to us leaves the office
of the sending bank until it is delivered into the custody
of the express company, as well as risks arising from
the time a shipment from us to a member bank is
delivered to the addressee by the express company (at
any place other than the office of the addressee) until it
reaches the office of the addressee.
IM PORTANT LITIGATION
During the year the Legal Department conducted or
participated in litigation of importance to the bank and
to the banking community generally.
Reichsbank Litigation

An important proceeding involving this bank was
decided during the year by the United States District
Court for the Southern District of New York.
This case involved the conflicting claims of judgment
creditors in State court actions, who had attached the
accounts of the Reichsbank with us amounting to some­
thing over $1,000,000, and of the Attorney General of the
United States, as successor to the Alien Property Custo­
dian who had vested and directed this bank to turn over
the entire balances in the same accounts under the Trad­
ing With the Enemy Act. After extensive negotiations
with the Department of Justice it was arranged that in­
stead of suing this bank alone, as previously intended, the
Attorney General would sue in the Federal court and join
in one action with this bank the attaching creditors and
sheriff. This would permit the real adverse claimants
to raise all possible questions on the merits and leave us
in the position of a mere stakeholder.
The proceeding was argued in March 1948 and Judge
Bondy rendered his decision in October to the effect that
the rights of the Attorney General prevailed since the
sheriff and attaching creditors, by attachments not
licensed by the Treasury under the so-called “ Freezing
Orders” , obtained no superior claim to the accounts.
A question of some importance to the bank— its pos­
sible liability for interest on the balance of $300,000
which we had retained pursuant to the State court in­
junction since the turn over directive of the Alien Prop­
erty Custodian in October 1946 — was satisfactorily
settled by agreement with the Justice Department. No
claim for interest is to be made and we are to continue
to hold the balances until the litigation in the Federal
and the proposed litigation in the State courts and all
appeals in each have been concluded. W e have agreed
not to appeal but the attaching creditors and the Sheriff
of the City of New York have instituted an appeal to the
Circuit Court of Appeals from the judgment in favor of
the Attorney General. Since important constitutional
questions of conflict between the powers and jurisdiction
of State and Federal courts are involved it is anticipated
that, whatever the result of the pending appeal, the
matter will ultimately have to be passed upon by the
Supreme Court of the United States.
It was not necessary to employ outside counsel in the



foregoing case, the matter being handled by the General
Counsel and Legal Department.
State of Netherlands Litigation

Another series of cases in which the bank occupies the
position of stakeholder has been instituted against it by
the State of the Netherlands in the United States District
Court. These cases involve so-called “ looted securities” ,
obligations of various American companies that allegedly
belonged originally to various Dutch banks and nationals,
which were seized by the Germans during the occupa­
tion of that country and subsequently brought to the
United States. W e have held these securities under the
Treasury’s General Ruling No. 5 and presently hold them
for the account of the Attorney General as successor to
the Alien Property Custodian.
By a Netherlands decree title to all such securities was
lodged in the State of the Netherlands, which has to date
instituted six actions to obtain possession of specified
bonds aggregating $34,000. As each suit is brought we
obtain such disclaimers of interest as we can from the
depositors of the securities with us and then implead all
adverse claimants, so that the respective rights of the
Netherlands and of the present ostensible owners of the
securities may be judicially determined. In one addi­
tional case the alleged owner sued us as well as the
Netherlands, and proceedings are under way to consoli­
date the actions over the particular bonds involved since
difficult technical questions of sovereign immunity arise
in connection with the possible impleading by us of that
government in an action brought against us by another.
In these cases, which may well be the prelude to a
great number of similar cases, involving an aggregate of
some $900,000 in bonds, the United States Attorney for
the Southern District of New York represents us as
attorney of record by arrangement with the Department
of Justice, but our Legal Department is cooperating in
handling the legal details.
B ANK SUPERVISION AND BAN K RELATIONS
Membership in System

On January 1, 1948, in addition to the 538 national
banks in the district, there were 259 State member banks.
During the year, one nonmember State bank was ad­
mitted to membership in the Federal Reserve System,
six national banks and eight State member banks were
taken over by other member banks, and one State member
bank withdrew from membership. Of the total of 898
banks in the district at the end of the year (exclusive of
savings banks, private bankers, and industrial banks),
there were 532 national banks, 251 State member banks,
and 115 nonmember banks.
During the year the whole question of the meaning
and value of membership in the Federal Reserve System
became more acute in the district. This resulted from
three principal factors:
(1)
As the result of three successive increases in re­
serve requirements, the last of which, in September, ef­
fected across-the-board increases in the reserves to be
maintained by all member banks against both demand
and time deposits, discrepancies between the reserve re­
quirements for member and for nonmember banks became

FEDERAL RESERVE B A N K OF N E W Y O R K

more pronounced. This was so even though the State of
Connecticut brought the reserve requirements for nonmember State banks into virtual conformity with the
new System requirements, since the State of New Jersey
took no action to change its requirements, and the State
of New York could raise its requirements only to a statu­
tory ceiling which was lower than the new requirements
for member banks. Legislation which became effective in
New York on February 23, 1949 enables the New York
Banking Board to bring the reserve requirements appli­
cable to nonmember State banks into full conformity with
System requirements, but action has not been taken
under this new legislation.
Coupled with these discrepancies in pure percentages,
are those which arise because of provisions of State laws
authorizing the inclusion in reserves of both vault cash
and certain balances maintained with other banks.
(2) The passage in New Jersey of a new banking act
permitting county-wide branch banking on a basis more
liberal, with respect to capital requirements, than that
applying to State member banks, added to the existing
situation in this regard in New York, reemphasized for
this district the desirability of some action by the Con­
gress to bring the Federal law on the subject of capital
requirements for out-of-town branches more nearly into
line with State requirements. A bill to effect this was
introduced in the Eightieth Congress (1947-1948), but
was not acted upon, although it had System approval; the
legislation has been re-introduced in the present Congress
and is now pending.
(3) Increases in the cost of commercial banking opera­
tions (coming at a time when the percentage of earning
assets was being reduced by the increases in reserve re­
quirements) has had the effect of accentuating the de­
mand by member bankers for additional or expanded
services from the Reserve Banks.
The situation as a whole was highlighted in February
1948 by the withdrawal from membership of the Cran­
ford Trust Company, Cranford, New Jersey, ostensibly
for the reason that it wished to establish a branch in the
neighboring community of Kenilworth which it would
not be able to do as a member bank. While the establish­
ment of this branch was the reason given for withdrawal,
we were also led to believe that the management of the
bank felt that its operations would be generally more
profitable as a nonmember State bank. W e have been told
that other banks in New Jersey are watching this situa­
tion closely. Several other member banks wish to establish
branches in growing communities from which they are
now obtaining business, and the increased discrepancy in
reserve requirements, added to higher capital stock
requirements, has caused some of them to consider with­
drawing from the System.
The implications of this situation were sufficiently
serious to warrant a thorough-going study of the whole
question of System membership— its advantages and its
disadvantages— to aid in giving direction to the future
course which this bank, and the System, should steer in
their relations with members and potential members.
Such a study was initiated as the year ended; as its re­
sults become apparent, they will be discussed with the
directors.




13

LOANS AND CREDITS
There was no significant change in the pattern of mem­
ber bank use of our credit facilities during 1948 in com­
parison to 1947. There was a decrease in both the number
of advances made to member banks and in the amount
of their daily average borrowings during last year. 2,715
advances were made during 1948 to 354 banks, against
2,951 advances to 336 banks in the previous year, all
secured by obligations of the United States or Federal
Intermediate Credit Bank debentures. The daily aver­
age borrowings amounted to approximately $45.4 million
as compared with $47.5 million in 1947. Outstanding
advances in 1948 ranged from a low of $1.7 million to a
high of $493.1 million on December 23, which exceeded
the peak reached in 1947 by approximately $152 million.
However, this high point of borrowings occurred for
only one day and represented principally the borrowings
of New York City banks. Outstanding advances at any
time during the year, to member banks other than to
New York City member banks, did not exceed $38.3 mil­
lion, which compared with a high point of approximately
$52 million the previous year.
There were no applications received during 1948 for
industrial loans or commitments under section 13b of the
Federal Reserve Act.
Consumer Instalment Credit

On August 19, 1948, the Board of Governors of the
Federal Reserve System issued Regulation W to become
effective September 20, 1948, pursuant to the Joint Reso­
lution of Congress, approved August 16, 1948, as Public
Law 905, which authorized the Board of Governors to
exercise controls over consumer instalment credit.
The regulation follows the general form of the original
Regulation W , as amended, which expired November 1,
1947, and is directed at controlling, through restrictions
as to permissible maximum maturities and loan values,
instalment loans and instalment sales credits in the prin­
cipal amount of $5,000 or less arising out of the sale of
twelve major categories of consumers’ durable goods,
new or used, having a cash price of $50 or more. In
addition, instalment loans not exceeding $5,000 in prin­
cipal amount made for any other purpose, except those
specifically exempted by the regulation, are subject to
restrictions on maximum maturities. The Board of Gov­
ernors subsequently adopted two minor amendments
which were designed to eliminate inequities in certain
sales fields.*
A ll parties engaged in a business subject to the regu­
lation are required to register with the Federal Reserve
Bank in the district of which the head office of the busi­
ness is located; registrations with this bank amounted
to approximately 13,600 as of December 31, 1948.
The enforcement phase of the program was inaugu­
rated about the middle part of October 1948. To the end
of that year, 1,272 registrants were investigated by the
Head Office (Credit Department) and Buffalo Branch; 27
registrants were found to have violated the regulation to
*
A third amendment, effective March 7, 1949, eased down­
payment requirements in the case of all listed items except auto­
mobiles, and maturity requirements in the case of all listed items.

14

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

a significant extent. In the cases of such registrants ap­
propriate action has been taken by means of disciplinary
correspondence or by conferences with their principals;
assurances of future compliance were received in all in­
stances. Re-examination of these registrants is scheduled
for an early date in 1949. The enforcement program of
the bank will comprise the examination of all sales finance
companies and of approximately 25 per cent of other
classes of registrants, exclusive of supervised lenders,
before the presently-scheduled expiry date of the regula­
tion, June 30, 1949. Working arrangements have been
established with the regional offices of the various State
and Federal supervisory agencies so that, in the course
of their regular examinations of various types of lenders
under their jurisdiction in this district they can watch
for compliance with the terms of Regulation W .
RESEARCH ACTIVITIES
The demands on the Research Department during 1948
for information, special studies or surveys, and foreign
missions, in addition to its routine assignments, were
unusually heavy. As in the past, the Department was
concerned with foreign and international as well as
domestic statistics and research.

charged to commercial borrowers; several changes were
made in the form as a result.
At the request of the Cash Department, the Research
Department studied the matter of finding a more equit­
able formula than the one now used for the allotment of
new currency to member banks in this district. An initial
result of this study has been the decision, in consultation
with the Cash Department, to mail a questionnaire to the
member banks with a view to soliciting more detailed
information on their requirements of new currency.
A few of the principal research papers written on
domestic topics during the year are listed below:
Government-Insured Mortgage Lending
The President’s Budget Message o f January 12,1948
The Reconstruction Finance Corporation, 1946-47
The Dearth o f Venture Capital
Federal Reserve Consumer Credit Statistics
History o f the Statutory Reserve Requirements o f Federal
Reserve Member Banks
Federal Reserve Bond Support Program and the Inflation
o f the Money Supply
The Role o f Dissaving in Economic Analysis
Increasing the Treasury’s Net Receipts from the Sale o f
Savings Bonds
Sampling Methods Used in Public Opinion Polls
Population in the Second Federal Reserve District, 1940-48

Domestic Studies and Publications

On the domestic side, the year’s principal activity was
related to problems of Federal Reserve credit policy
(including policy with respect to the support of Govern­
ment bonds and bank reserve requirements), interest
rates, Federal debt management, and Treasury fiscal oper­
ations. At the request of a System research committee, an
analysis was made to determine the impact of alternative
reserve requirement proposals upon member banks in
the Second District. Tests were made to determine the
effects of varying increases in the percentages of reserves
required to be held by central reserve city banks, reserve
city banks, and country banks. Considerable time was
devoted to the analysis of current business conditions, to
price and wage developments, and to the financial posi­
tion of business. A study of bank debits and clearings
completed in the Department was published by the Board
of Governors as a brochure. In order to further a System
project toward uniformity in the collection and publica­
tion of retail trade statistics, the Department did some
work on a departmental manual and directory for depart­
ment stores which report sales and other data to us. It
also surveyed the prevailing reporting practices of the
department stores and made several special tabulations
in this field for the Board of Governors.
The annual survey of retail credit in the Second District
was made for the Board of Governors. A special survey
was made for the Board of Governors of sales finance com­
pany operations in this district during 1947, in order to
supply “ benchmark” data for the Board’s monthly statis­
tical series on sales finance companies. This involved mail­
ing a questionnaire to 199 sales finance companies and
following it up with personal interviews and telephone
calls. In February 1948, through personal interviews with
several New York City banks, a pre-test was made of a
revised quarterly form to be used by selected banks in
New York City and Buffalo to report interest rates




Foreign and International Studies and Publications

On the foreign and international side, the Department
continued to supply the directors, and the officers of the
bank’s Foreign function, with information and analysis
on particular foreign areas, on international capital move­
ments, on the balance of payments and other foreign rela­
tions problems of the United States, and, in general, on
world economic and financial developments and condi­
tions. A major field of study was in the various interna­
tional aspects of the European Recovery Program and the
related problems of intra-European economic collabora­
tion. Among other important activities were those con­
cerning the international economic position of the United
Kingdom, foreign exchange developments in France and
elsewhere, the world gold situation, and the economic
problems of underdeveloped areas. In addition to a large
number of studies on the problems of individual coun­
tries, studies were prepared in connection with the foreign
loans made by this bank against gold, and also on the
activities and programs of the International Bank and
Fund, the Bank for International Settlements, and the
International Trade Organization.
The Department continued to compile and issue a
monthly press release giving data on the promptness of
payment of export drafts drawn on Latin American coun­
tries, as reported by twelve large New York City banks.
These data were analyzed in the June issue of this bank’s
Monthly Review, in an article which was subsequently
issued as a reprint, of which some 4,000 copies were issued.
In July a leading export association in New York City
adopted a resolution commending the Federal Reserve
Bank of New York for its initiative and work in this field
and asking that consideration be given to extending the
scope of our survey to banks throughout the United
States. A System research committee, headed by a repre­
sentative of this bank’s Research Department, is now

FEDERAL RESERVE B A N K OF NEW Y O R K

engaged in studying the desirability of such an extension
and in getting sample data from the other eleven Federal
Reserve Districts on which a conclusion can be based.
One special assignment in 1948 involved the writing of
a history and analysis of the money and banking system
of the Dominican Republic; this will appear as an intro­
duction to the published text of the legislation creating
a Dominican currency and central bank. (The legislation
in question was drafted in 1946-47 by Mr. Wallich, the
Chief of our Foreign Research Division.)
Among the more important research papers written
during the year on foreign and international topics were
the following :
A Rise in the W orld Price o f Gold?
The Industrialization o f Underdeveloped Areas
Ecuador’s New Monetary and Central Bank Legislation
Fiscal Policy and Balance o f Payments in Chile
Monetary Disintegration and Financial Rehabilitation in
Germany
Fiscal and Monetary Policy in Italy under Signor Einaudi
Sweden’s Economic Predicament
Switzerland’s Gold and Dollar Policy
The U SSR in the W orld Economy
The Sterling Area-H istory, Characteristics, and Prospects
Inflation in Japan
Philippine Central Bank Bill
The Guaranty Program o f the ECA
Administration o f Local Currency Funds under the European
Recovery Program
Financial Aspects o f the Foreign Assistance A ct o f 1948
Bilateral Agreements between the United States and E R P
Countries
European Fiscal P olicies: I— The Course o f Government
Expenditures
European Fiscal Policies: I I — The Burden o f Taxation

Apart from actual foreign travel, some members of our
research staff carried out special assignments in this coun­
try connected with foreign problems, e.g., assisting the
Stettinius Associates in drafting a national bank law for
Liberia, and assisting the Economic Cooperation Adminis­
tration in working out an intra-European payments plan.
Foreign Missions

As in past years, the Department’s officers and staff
carried out a variety of foreign missions and trips in addi­
tion to participating in visits to foreign central banks, as
described elsewhere in this report. Dr. Williams, the
bank’s Economic Adviser, made a four-wT
eek trip to Paris
upon the invitation of the Secretary-General of the
Organization for European Economic Cooperation for
the purpose of advising that Organization on the report
which it has since submitted to the Economic Coopera­
tion Administration in Washington, covering the scope
and allocation of the European Recovery Program
in 1949-52. Mr. Roelse, Vice President, spent the last
four months of the year as a member of the Joint
Brazil-United States Technical Commission, organized
by the United States and Brazilian Governments for
the purpose of studying Brazil’s economic resources
and the most suitable methods of developing them. Mr.
Glaessner, one of the economists of our Foreign Research
Division accompanied Mr. Roelse to Brazil as a financial




15

technician of the Commission. Mr. Wallich, Chief of the
Foreign Research Division, together with Mr. Adler, of
the Balance of Payments Division, spent several weeks
in El Salvador, at the invitation of the government of
that country, making a survey of the fiscal and monetary
situation; this work has since been continued here at the
bank and the mission’s report will probably be published
soon. Following his stay in El Salvador, Mr. Wallich
visited Colombia in order to obtain for the Salvadoran
study certain additional information on Latin American
fiscal problems. While on this trip, he also made brief
visits to the central banks of Guatemala and the Domini­
can Republic. Mr. Coombs (Foreign Research Division),
who had gone to Athens in September 1947 as a financial
adviser on the American Mission for Aid to Greece, con­
tinued in that capacity until late in 1948, when his leave
was extended by this bank to permit him temporarily to
head the Greek-Turkish section of the Economic Coopera­
tion Administration in Washington. Mr. Kybal (Foreign
Research Division) was given a six months’ leave in
September to serve as a consultant to the Economic Com­
mission for Latin America in Santiago, Chile.

BUFFALO BRANCH OPERATIONS
The operations of the Branch during 1948 showed an
increase in volume over those of 1947, notwithstanding
a substantial decline in the volume of fiscal agency and
other reimbursable work. Current expense and cost of
Federal Reserve currency totaled $735,850 in 1948 as
compared with $661,909 in 1947. Fiscal agency and
other reimbursable expenditures aggregated $28,355 as
contrasted with $89,961 in 1947.
Some of the more important and interesting develop­
ments in the operations of the Branch are set forth below.
Fiscal Agency Operations

The work of the Securities Division is the only reim­
bursable fiscal agency activity of importance remaining
at the Branch. The Division issued 15,597 Series E, F
and G Savings Bonds totaling $22.7 million in 1948 as
compared with 21,252 pieces amounting to $28.1 million
in 1947. In addition, 1,972 Treasury Savings Notes ag­
gregating $26.4 million were issued in the past year as
contrasted with 2,666 pieces totaling $13.9 million in
1947. The Securities Division also redeemed 10,999
Series A to E Savings Bonds, 3,693 Treasury Savings
Notes, 1,348 other United States Government securities,
and 58,674 coupons. Each of these totals represents a
modest decline as compared with the figures for 1947.
Personnel

The number of employees at the Branch increased
during the year from 164 to 176. There were 52 sepa­
rations from service, and 64 new employees were engaged
after interviewing 385 applicants.
As indicated earlier in this report, adjustments under
the bank’s personnel classification plan were made at
the Branch, as well as at the Head Office, effective
November 1.

16

PRESIDENT’S REPORT TO DIRECTORS FOR 1948

The minimum and maximum salary rates at the Branch
were increased by about 10 per cent; and all the 176
employees there received increases amounting to 10 per
cent of the first $7,500 of annual salary, salaries below the
newly established minimums being brought up to those
minimums. The percentage increases aggregated $40,766
per annum; in addition 14 employees received further
increases totaling $438 per annum to bring their salaries
to the new minimums.
The following tabulation as of the close of 1948 and
the preceding four years, shows the number of employees
at the Branch and the total employee salary liability
(supplementary compensation, paid prior to January 1,
1946, being a part of salary):
1944
Number of employees.. . 202
Salary liability—
(in thousands of dollars)$340

19451946
221211
$398

$467

1947
164
$390

1948
176
$455

A ll 176 employees have signed authorizations for de­
ductions from payroll for the purchase of Series E bonds,
the total deductions amounting to 5.24 per cent of the
payroll at the end of the year. All but 13 employees are
enrolled in the Blue Cross and Blue Shield plans for
hospitalization and surgical benefits. Some of the 13,
however, are covered under a similar plan through other
members of their families. In July a new group life in­
surance plan was adopted to provide insurance for men
in amounts up to $6,000 based upon their salary, and
for women in amounts ranging up to $4,000, whereas
the previous plan provided coverage up to a maximum
of only $3,000; and 146 employees, or 83 per cent, are
participating in this plan.
Check Collections

The Check Division collected over 24.8 million checks
aggregating $7.5 billion in 1948, as compared with 21
million items amounting to slightly over $7 billion in
1947. This gain of 3.8 million checks over the previous
year reflects not only an increase in the volume of busi­
ness transactions in the Branch territory, but also an
increased use of Federal Reserve collection facilities by




some banks which heretofore had collected their checks
through correspondent banks. The average number of
checks handled daily rose from 80,007 in 1947 to 98,258
in 1948. On February 16, 1948, a total of 167,169 items
was handled, and when subsequently even larger num­
bers of checks were received it became necessary to enlist
a volunteer force to work on Saturdays during part of
the last quarter of the year. On November 15, following
the Armistice Day and week-end holidays, a total of
202,382 checks was processed with the aid of 18 employees
who performed part of the preliminary work on the pre­
ceding Saturday. Throughout the year it has been neces­
sary for this division to borrow help from other divisions
to handle the large volume of checks requiring processing
on Mondays, in order to avoid holdover of items or pay­
ment for excessive overtime work.
In May 1948, the Branch inaugurated air express ship­
ments of checks to the Boston, Chicago, Cleveland and
Philadelphia Federal Reserve Banks, in consolidation
with the shipments of the Buffalo commercial banks.
Previously, only the Branch’s own volume of checks was
shipped by air express to those Federal Reserve Banks.
As in the case of the Head Office, the Branch revised
its time schedule, effective June 3, 1948, to provide
one day earlier availability for deferred-credit items
payable in eight Federal Reserve Bank and branch cities
to those member banks which deposit their inter-district
cash items with the Branch for collection.
Membership

No applications for membership were received from
banks in the Branch territory during 1948. Although
several nonmember institutions showed considerable in­
terest in membership early in the year, their interest
seemed to diminish following the increase in reserve re­
quirements which became effective in September.
Loans to Member Banks

A total of 263 loans aggregating $145,208,000 was
granted to 38 member banks in 1948 as compared with
303 loans amounting to $297,073,000 made to 31 member
banks in 1947. The highest amount of loans outstanding
at any one time was $10,425,000 on August 13, 1948.

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