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F E D E R A L R E S E R V E B A N K O F N E W YO RK
f Circular N o. 3 5 4 8
I
March 24, 1950

Fiscal Agent o f the United States

1
I

Public Notice o f Offering o f $900,000,000, or thereabouts, o f 91-Day Treasury Bills
Dated March 30, 1950

Maturing June 29, 1950

T o all Incorporated Banks and Trust Com panies in the
Second Federal R eserve District and Others C oncerned:

Following is the text o f a notice today made public by the Treasury Department with respect to a new offering o f Treas­
ury bills payable at maturity without interest to be sold on a discount basis under competitive and non-competitive bidding.
F O R R E L E A S E , M O R N IN G
F riday, M arch 24, 1950.

NEW SPAPERS,

TREASURY DEPARTM ENT
W a sh in g to n

T h e Secretary o f the T reasury, by this public notice, invites tenders for $900,000,000, or
bills, for cash and in exchange for T reasu ry bills m aturing M arch 30, 1950, to be issued on
tive and non -eom petitive bidding as hereinafter provided. T h e bills of this series will be
m ature June 29, 1950, when the face am ount will be payable w ithout interest. T h e y will be
in denom inations o f $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (m aturity va lu e).

thereabouts, of 91-day T reasury
a discount basis under com p eti­
dated M arch 30, 1950, and will
issued in bearer form only, and

T enders will be received at Federal R eserve B anks and Branches up to the closin g hour, tw o o ’clock p .m ., E astern Standard
tim e, M on d ay , M arch 27, 1950. T en ders will not be received at the T reasu ry D epartm ent, W a sh in g to n . E ach tender m ust
be for an even m ultiple of $1,000, and in the case of com petitive tenders the price offered m ust be expressed on the basis o f 100,
with not m ore than three decimals, e. g., 99.925. F ractions m a y not be used. It is urged that tenders be m ade on the printed
form s and forw arded in the special envelopes w hich will be supplied by Federal R eserve B anks or B ranches on application
therefor.
T en d ers will be received w ithout deposit from incorporated banks and trust com panies and from responsible and reco g­
nized dealers in investm ent securities,
l enders from others m ust be accom panied by paym ent of 2 percent o f the face am ount
of T re asu ry bills applied for, unless the tenders are accom panied by an express guaranty of paym ent b y an incorporated bank
or trust com pany.
Im m ediately after the closing hour, tenders will be opened at the Federal Reserve B anks and Branches, follow in g which
public announcem ent w ill be made by the Secretary o f the T reasu ry o f the am ount and price range of accepted bids. T h o se
subm itting' tenders will be advised of the acceptance or rejection thereof. T h e Secretary o f the T reasu ry exp ressly reserves
the right to accept or reject any or all tenders, in w hole or in part, and his action in any such respect shall be final. Subject
to these reservations, n on -com petitive tenders for $200,000 or less without stated price from any one bidder will be accepted
in full at the average price (in three decim als) o f accepted com petitive bids. Settlem ent for accepted tenders in accordance
w ith the bids m u st be m ade or com pleted at the Federal Reserve B ank on M arch 30, 1950, in cash or other im m ediately avail­
able funds or in a like face am ount of T reasu ry bills m aturing M arch 30, 1950. Cash and exchange tenders will receive equal
treatm ent. Cash adjustm ents will be made for differences between the par value o f m aturing bills accepted in exchange and
the issue price o f the new bills.
T h e incom e derived from T reasu ry bills, w hether interest or gain from the sale or other disposition o f the bills, shall
not have any exem ption , as such, and loss from the sale or other disposition o f T reasu ry bills shall not have any special
treatm ent, as such, under the Internal Revenue Code, or law s am endatory or supplem entary thereto. T h e bills shall be
subject to estate, inheritance, gift or other excise taxes, w hether Federal or State, but shall be exem p t from all taxation
now or hereafter im posed on the principal or interest thereof by any State, or any of the p ossessions o f the U n ited States,
or by any local taxin g authority.
F or purposes of taxation the am ount of discount at w hich T reasu ry bills are originally
sold by the U nited States shall be considered to be interest. U nd er Sections 42 and 117 ( a ) ( 1 ) o f the Internal Revenue
C ode, as amended by Section 115 of the R evenue A c t o f 1941, the am ount o f discount at which bills issued hereunder are
sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed o f, and such bills are
excluded from consideration as capital assets. A cco rd in gly , the ow ner o f T reasury bills (other than life insurance co m ­
panies) issued hereunder need include in his incom e tax return on ly the difference betw een the price paid for such bills,
w hether on original issue or on subsequent purchase, and the am ount actually received either upon sale or redem ption at
m aturity during the taxable year for which the return is m ade, as ordinary gain or loss.
T re asu ry D epartm ent Circular N o . 418, as am ended, and this notice, prescribe the term s of the T reasury bills and govern
the conditions o f their issue. Copies of the circular m ay be obtained from any Federal R eserve Bank or Branch.

In accordance with the above announcement tenders will be received at the Securities Department o f this bank (9th
floor, 33 Liberty Street) New Y ork 45, N. Y ., or at the Buffalo Branch o f this bank (270 Main Street) Buffalo 5, N. Y .,
up to two o’clock p.m., Eastern Standard time, on Monday, March 27, 1950. It is requested that tenders be submitted
on special form printed on reverse side and returned in special envelope enclosed herewith. Payment fo r the Treasury
bills cannot be made by credit through the Treasury T ax and Loan 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.
(E xtract from Treasury Department statement released fo r publication March 21, 1950, announcing
results after tenders w ere opened f o r 91-day Treasury bills dated March 23,1950 maturing June 22,1950)
T o ta l applied f o r ............ $1,477,857,000
T o ta l a c c e p t e d .................$900,323,000 (includes $94,373,000
entered on a non-com petitive basis
and accepted in full at the average
price show n below )
A vera ge price . . . 9 9 .7 1 2 -f Equivalent rate o f discount
approx. 1.138% per annum
R ange of accepted com petitive bids:
Equivalent rate o f discount
........................
99.717
approx. 1.12 0 % per annum

H ig h

L o w ..........................

99.710

Equivalent rate o f discount
approx. 1 .1 4 7 % per annum

Total
Applied fo r

Federal Reserve
District
B oston ............
N ew Y ork . ' . . . .
Philadelphia
Cleveland ............
R ichm ond ............
A tlan ta .................
C hicago ................
S t. L o u i s ..............
M inneapolis
K a n sa s C ity . . .
D allas ...................
San Francisco

$

7,125,000
1,172,246,000
30,042,000
26,145,000
11,240,000
8,042,000
130,018,000
9,998,000
4,305,000
15,593,000
22,467,000
40,636,000

Total
Accepted
$

6,770,000
667,236,000
16,492,000
26,003,000
11,240,000
8,042,000
79,693,000
8,946,000
4,305,000
15,593,000
18,917,000
37,086,000

(29 percent o f the am ount bid for at the low

price was accepted)



T o ta l

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

$1,477,857,000

$900,323,000

^O )
TM

23 A
IM P O R T A N T — I f it is desired to bid on a com petitive basis, fill in rate per 100 and
m atu rity value in paragraph headed "C om petitive Bid” . I f it is desired to bid on a non­
com petitive basis, fill in only the m atu rity value in paragraph headed "N on -com petitive
B id” . D O N O T fill in both paragraphs on one form . A separate tender m ust b e used fo r
each bid.
N o ............ .........................

TENDER FOR 91 -D A Y TREASURY BILLS
D ated M arch 30, 1950.

M aturing June 29, 1950.

^

Dated a t .............................. .. . . V , . . .

T o F ederal R eserve B a n k of N e w Y o r k ,
Fiscal A gent o f the United States.

. .i.
1950

C O M PE TITIV E BID

N O N -C O M P E T IT IV E BID

Pursuant to the provisions o f Treasury
Department Circular N o. 418, as amended, and
to the provisions o f the public notice on March
24, 1950, as issued by the Secretary o f the Treas­

Pursuant to the provisions o f Treasury
Department Circular No. 418, as amended, and to
the provisions o f the public notice on March
24, 1950, as issued by the Secretary o f the Treas­
ury, the undersigned offers a non-competitive

ury, the undersigned o ffe rs .
(R ate per 100)

tender fo r a total amount o f

r . . . . .... . . . .

fo r a total amount o f $ ...............................................
(maturity value) o f 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
indicated b elow :

(maturity value) o f the Treasury bills therein
described, at the average price (in three deci­
mals) o f accepted competitive bids, settlement
therefor to be made at your bank, on the date
stated in the public notice, as indicated below :

□

□

By

surrender

of

the

maturing

issue o f

By

surrender

of

the

maturing

issue o f

Treasury b ills.............

Treasury bills.............

□

(N ot to exceed $200,000)

(A m ount surrendered)

By cash o r other immediately available funds

□

(A m ount surrendered)

By cash or other immediately available funds

The Treasury bills for which tender is hereby made are to be dated March 30, 1950, and are to mature
on June 29, 1950.
This tender will be inserted in special envelope entitled “ Tender f o r Treasury bills” .
N a m e o f B idder ...............................................
(Please print)

By

(Official signature required)

S treet A d d ress

(T itle )

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

(C ity, T ow n or V illage, P .O . N o., and State)

If this tender is subm itted for the account o f a custom er, indicate the custom er’s nam e on line b e lo w :

(N am e o f

Customer)

(C ity. T ow n o r V illage, P .O . N o., and State)

U se a separate tender for each custom er’s bid.

IM P O R T A N T IN ST R U C T IO N S:
1. N o tender fo r less than $1,000 w ill be considered, and each tender m ust be for an even m ultiple o f $1,000
(m atu rity va lu e). A separate tender m ust be executed for each bid.
2. I f the person m akin g the tender is a corporation, the tender should be signed b y an officer of the corpora­
tion authorized to m ake the tender, and the signing o f the tender by an officer o f the corporation will be construed as a
representation b y him that he has been so authorized. If the tender is made by a partnership, it shou ld be signed by a
m em ber o f the firm, w h o should sign in the form “ ........................................................................................................
...........................................................................................................................

, a copartnership, by

, a m em ber o f the firm” .

3. T en d ers will be received w ithout deposit from incorporated banks and trust com panies and from respon­
sible and recognized dealers in investm ent securities. T enders from others m ust be accom panied b y paym ent o f 2 percent
o f the face -a m ou n t o f T re asu ry bills applied for, unless the tenders are accom panied by an express guaranty of paym ent
b y an incorporated bank or trust com pany.
4. I f the language o f this tender is changed in any respect, which, in the opinion o f the Secretary o f the
T reasu ry, is material, the tender m a y be disregarded.

Paym ent b y cred it th rou gh T reasury T a x and Loan A cco u n t tvill n ot be perm itted.

 T B — 1030-a
TEN


* P rice m ust be expressed on the basis o f 100, with not m ore than
three decimal places. Fractions m ay not be used.
(OVKR)

qjgrst

i- 1 1

■ ■ ■
■

—

-■ ---------

FEDERAL RESERVE BANK
OF NEW YORK




President’s Report to Directors
for i949

.......■ ■6*u>
■»




FEDERAL

RESERVE

BANK

OF

NEW

YORK

President’s Report to Directors
fo r i 949

CONFIDENTIAL

CON TEN TS
PAGE
O pen M arket O perations .................................................................................................................................... .... 1
Sales o f United States Treasury b o n d s ..................................................................................................... .... 1
Transactions in short-term Government s e c u r itie s ................................................................................. .... 2
Repurchase agreements .................................................................................................................................. .... 3
Statistical summary ............................................................................................................................................. 3
F iscal A gency O p e r a t i o n s .................................................................................................................................. ....4
P u blic d e b t ...............................................................................................................................................................4
Transactions in Government securities ..................................................................................................... ....4
Safekeeping o f savings bonds ..................................................................................................................... ....5
Reconstruction Finance C o r p o r a tio n .......................................................................................................... ....6
Paym ent o f Treasury coupons ..................................................................................................................... ....6
D eposit o f Federal t a x e s ................................................................................................................................ ....6
F oreign Funds C o n t r o l......................................................................................................................................... 6
S afekeeping

of

S ecurities .................................................................................................................................. ....6

B a n k S upervision and B a n k R e l a t i o n s ..............................................................................................................7
System membership o f State b a n k s ................................................................................................................7
Classification o f uninvested trust f u n d s ................................................................................................... ....7
Bank relations a c t iv it ie s .................................................................................................................................. .... 8
P ublic I nform ation A c t i v i t i e s ......................................................................................................................... ....9
C heck Collection .................................................................................................................................................... ....10
A ir transportation ........................................................................................................................................... ....10
Change in sorting req u irem en ts....................................................................................................................... 10
County clearing arrangements .................................................................................................................... .... 10
Check R outing Sym bol p r o g r a m ................................................................................................................... ....11
D eferred posting legislation ............................................................................................................................. 11
C a sh O perations .......................................................................................................................................................... 11
Counterfeits ......................................................................................................................................................... ... 11
Arm ored car service ......................................................................................................................................... ....12
Special coin and currency a rra n g em en ts................................................................................................... ....12
F oreign O perations ....................................................................................................................................................12
Assets held f o r foreign and international a ccou n t................................................................................. ....12
Change in status o f foreign a c c o u n t s ..............................................................................................................13
Loans on g o l d ...................................................................................................................................................... ....14
Gold movements ....................................................................................................................................................15
V isits to foreign central b a n k s ..................................................................................................................... ....15
F oreign central bank visitors ....................................................................................................................... ....15
Staff Group on F oreign I n t e r e s t s ................................................................................................................ ....15
L oans and Cr e d i t s ........................................................................................................................................................16
Consumer instalment c r e d i t ........................................................................................................................... ....16
R esearch A c t i v i t i e s ....................................................................................................................................................16
D omestic studies and p u b lic a tio n s .............................................................................................................. ....16
F oreign and international studies and p u b lic a tio n s ............................................................................. ....17
F oreign missions ................................................................................................................................................... 18
L itigation ....................................................................................................................................................................... 19
Arm and Sclimoll, Inc. v. The United S t a t e s ................................................................................................ 19
P ersonnel ....................................................................................................................................................................... 20
H ead Office salary l i a b i l i t y ............................................................................................................................... 21
Salary adm inistration ........................................................................................................................................ 21
Personnel Department o p e r a tio n s .................................................................................................................... 21
Blue Cross H ospital Plan and Surgical-M edical P l a n .............................................................................. 21
G roup lif e in s u r a n c e ............................................................................................................................................ 22
Red Cross blood donor service ..................................................................................................................... ... 22
Retirem ent System ........................................................................................................................................... ... 22
Leadership training ......................................................................................................................................... ... 22
P ayroll deductions fo r Series E Savings B o n d s ......................................................................................... 22
Federal Reserve Club .......................................................................................................................................... 22
B uffalo B ra n c h O perations ................................................................................................................................. 23
Personnel ............................................................................................................................................................. ... 23
Check collections ................................................................................................................................................... 23
Bank membership and bank r e la t io n s ........................................................................................................... 24
Loans to member banks .................................................................................................................................. ... 24
Cash operations .................................................................................................................................................. ... 24
A ccounting p r o c e d u r e .......................................................................................................................................... 24




FED ERAL RE SE R V E BANK
O F NEW YORK

March 14,1950.

To the Directors o f the
Federal Reserve BanTc o f N ew YorTc:

I submit herewith a confidential report on the operations o f the Bank during 1949.
This report serves to inform you of certain aspects o f the work o f the Bank which
cannot be covered in the annual report to stockholders, and also serves as a part of
the permanent records o f the Bank.
There was little significant change in the volume o f our operations during 1949,
compared with the two preceding years. Costs o f operation again rose reflecting
chiefly increases in salaries. Im proved methods and machines were sought and used
in various departments o f the Bank to combat this trend.

These improvements,

combined with a further falling off in our fiscal agency work, contributed to some
decline in staff, and tended to offset the rising costs o f operation.
W hat we deem to be growing public interest in Federal Reserve policies and
operations has stimulated increased attention, within the System, to the whole problem
of member bank relations and public information. A t this Bank, we have been attacking
the problem by expanding and improving, in many small but cumulatively important
ways, the services we render to our member banks (thus giving added direct evidence
of the value o f m em bership); we have also embarked upon an affirmative program
of public information which, as it develops, should result in a wider understanding
o f the System and its policies, and o f the significance o f membership.




Yours sincerely,

President.

P R E S ID E N T ’ S R E P O R T T O D IR E C T O R S F O R 1949

Federal
System, dur­
T h e efforts o f theperiod up Reserve were directed
ing the postwar
to 1949,
primarily toward combatting inflationary pres­
sures and maintaining an orderly market for
United States Government securities. In 1949,
however, the character of this problem changed as
inflationary pressures abated and deflationary ten­
dencies temporarily assumed greater importance.
A s evidence o f economic readjustment accumu­
lated, the Federal Reserve System first modified
and then reversed the earlier policies adopted to
meet postwar inflationary problems. The first
steps taken in this new phase of System policy in­
cluded a relaxation of the System’ s qualitative
controls over credit used to purchase goods on the
instalment plan and to buy securities. Later, as
economic activity continued to recede and the vol­
ume o f bank credit contracted substantially, the
supply and availability o f member bank reserves
were increased on three successive occasions
through reductions in reserve requirements. About
$3.8 billion o f reserves were returned to member
banks between May 1 and September 1, 1949,
inclusive.

OPEN M A R K E T O PER A TIO N S

Open market operations to influence the supply,
availability, and the cost o f credit played a critical
role in carrying out this m ajor change o f Federal
Reserve System policy. Operations on an exten­
sive scale throughout the year were necessary to
maintain orderly conditions in the market and to
execute current rate policies. A large part o f the
funds freed through reductions in reserve require­
ments found their way into the Government
security market, creating considerable downward
pressure on market rates, as banks generally con­
tinued a policy o f full investment. At different
times and under varying circumstances, Treasury
obligations were supplied to the market through
such operations. The Federal Open Market Com­
mittee, after consultation with the Treasury De­
partment, reformulated policy with respect to its
operations along lines intended to increase flexi­
bility and to achieve closer coordination with
other instruments o f Federal Reserve System
policy.




Toward this end, the Federal Open Market
Committee made the following statement on June
28, 1949:
The Federal Open Market Committee, after con­
sultation with the Treasury, announced today that
with a view to increasing the supply o f funds available
in the market to meet the needs o f commerce, business
and agriculture it will be the policy o f the Committee
to direct purchases, sales, and exchanges o f Govern­
ment securities b y the Federal Reserve Banks with
prim ary regard to the general business and credit
situation. The policy o f maintaining orderly condi­
tions in the Government security market, and the con­
fidence o f investors in Government bonds will be con­
tinued. U nder present conditions the maintenance o f
a relatively fixed pattern o f rates has the undesirable
effect o f absorbing reserves from the market at a time
when the availability o f credit should be increased.

This statement was significant as an expression
o f peacetime credit policy aimed at reaching a
more desirable balance between the occasionally
conflicting System and Treasury responsibilities
in the related areas o f debt management and of
credit control.
Late in 1949 the economic outlook shifted some­
what. W ith business activity holding at relatively
high levels, a large budget deficit in prospect for
the next eighteen months, and a resumption in the
growth o f bank credit, the policy of monetary ease
was modified. Mild restraint was applied on bank
reserves through open market operations and
rates were permitted to harden within the limita­
tions imposed by the large Treasury refinancing
operations scheduled for December 15, 1949 and
January 1, 1950.
Snles o f U nited States Treasury bonds

In contrast with 1948, when in all but the closing
months the Federal Reserve Bank o f New York
made large and continuous purchases of Treasury
bonds, at the direction o f the Federal Open Market
Committee, the Bank w^as an extensive seller of
bonds during the first six months o f 1949. It with­
drew almost entirely from the market when the
policy statement quoted above was made, however,
since it was not consistent with general credit
policy, at that time, to take reserve funds from the
market by selling Government securities.
The closing weeks o f 1948 were marked by a re­
versal in Treasury bond market conditions, as
selling contracted and demand improved. Prices
i

2

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

at that time were entering the first hesitant stages
of a rising trend which continued, with only minor
interruptions, throughout 1949. The more im por­
tant factors exerting a downward pressure on
rates varied in influence at different times. Basi­
cally, however, all stemmed from a changing
economic situation and from the market’s inter­
pretation of changes, or anticipated changes, in
Treasury and Federal Reserve policy. Am ong the
more important market influences were a declin­
ing business demand fo r funds— both short and
long term— in the face of a well-sustained supply
available fo r investment, a significant increase in
the availability o f bank credit resulting from the
reduction in members ’ reserve requirements, and
finally a tendency, under current Treasury refund­
ing policies, toward contraction in that portion of
the public debt represented by Treasury bonds.
These all combined to create, and later to main­
tain, a well-sustained demand fo r marketable
Treasury bonds. Commercial banks, unable to
find sufficient investment outlets elsewhere, turned
to the Treasury bond market and made substan­
tial additions to their holdings o f these securities
in an effort to bolster earnings. Nonbank in­
vestors were also sizable and persistent buyers of
restricted Treasury bonds. Some offerings o f
bank-eligible bonds became available in the mar­
ket from certain classes of nonbank investors,
some o f whom were switching to Treasury bonds
ineligible fo r bank ownership. Despite offerings
o f this type and outright sales o f various taxable
bonds by institutional investors, notably life in­
surance companies, the market supply fell con­
siderably short o f the demand and, as the attend­
ant pressure on rates mounted, the System found
it advisable to supply bonds. It was, therefore, an
almost continuous seller o f these issues over the
first six months o f the year. A s a result o f these
transactions, total holdings of United States
Treasury bonds in the System Open Market A c­
count declined between December 29, 1948 and
June 29,1949 by $3.2 billion. Owing largely to the
ready availability o f Treasury bonds from the
System, changes in yields fo r these issues were
relatively small, with the more important changes
occurring in the opening months o f the year.
During the second quarter o f the year, it became
increasingly apparent that these sales, which with­
drew funds from the market, were tending to
nullify the general credit policy which the System
was pursuing. W ith the reformulation o f open
market policy on June 28, the System withdrew




from the Treasury bond market and, except for
modest transactions to maintain orderly condi­
tions, it abstained from further intervention over
the balance of the year. The immediate result of
this withdrawal was a sharp decline in yields for
intermediate and long-term Treasury bonds as
the market attempted to adjust to the new policy.
Relative stability was soon achieved at the lower
rate levels reached toward the middle o f July. By
this time, the long-term rate had moved down from
2.44 per cent in June to 2.32 per cent, and there­
after rates again tended to move irregularly lower
in an orderly way, which required only a nominal
amount o f System intervention. A t the close of
the year, long-term 2M per cent restricted Treas­
>
ury bonds o f December 19G7-72 were selling to
yield 2.23 per cent as against 2.47 per cent at the
close of 1948.
Y ie ld s on U . S. G overnm ent Securities
Fully taxable issues

* Breaks in lines represent changes in issues included.

Transactions in short-term G overnm ent securities

Because o f declining opportunities to lend to
private business and the determination of most
commercial banks to maintain fully invested posi­
tions, a large part of the investment demand
released through reductions in reserve require­
ments converged on the market fo r short-term
Treasury obligations. The Federal Reserve Banks
met this demand by large net sales and redemp­
tions o f Treasury bills and by net sales of certi­
ficates o f indebtedness and Treasury notes.

FEDERAL RESERVE BANK OF NEW YORK

In line with the postwar objective o f a less
rigidly controlled Government security market in
which open market operations could be used to
adjust more completely the supply o f credit to the
needs o f business, the System continued to strive
for greater flexibility in short-term market rates.
In the early months of 1949, a greater measure of
freedom was permitted in the movement o f the
Treasury bill rate in relation to the coupon rate
on one-year certificates of indebtedness, with the
result that the spread between the yields on those
two classes o f issues narrowed slightly. However,
both rates generally held within a narrow range
of fluctuation over the first six months o f 1949.
The open market policy adopted in June opened
the way to considerably greater flexibility in oper­
ations. W ith the introduction o f this policy, and
the expiration at almost the same time o f the
special statutory authority over reserve require­
ments (granted in August 1948), the Federal
Reserve Banks withdrew entirely from the market
for a time, so that the funds released to member
banks would have their full effect on the market.
Treasury bill and certificate rates moved rapidly
lower, effective yields on Treasury bills declining
within several days from 1.16 per cent to 0.90 per
cent (with some bills trading as low as 0.78 per
cent), and a similar drop occurred in the yields on
certificates, which went from 1.23 per cent to
slightly under 1.00 per cent. These declines in
rates were so sharp and sudden that sales of short­
term Treasury obligations were soon resumed by
the System to restore order in the market for
these issues, and subsequently rates moved up
slightly from the low points reached in early July.
In view o f these developments and the downward
economic trend, the interest rate on the one-year
certificate of indebtedness issued September 15,
1949 was lowered from the 1% per cent rate
established a year earlier to IVs per cent. Subse­
quent Treasury refunding operations were also
based on this new level of short-term rates.
The June policy statement, which initially
brought about a rate decline, also involved a more
basic change in the conduct of open market opera­
tions, however. This took the form o f a greater
flexibility with respect to purchases and sales of
short-term Treasury obligations, which were now
undertaken within a wider range o f rates than had
heretofore prevailed; within limits, the level of
rates was left more to determination o f the mar­
ket. Under this policy, during the latter half of
1949, effective yields on Treasury bills and cer­




3

tificates of indebtedness varied in accordance with
short-run changes in money market conditions.
Average rates on new issues of Treasury bills
moved between 0.92 and 1.12 per cent, while the
yields on the longest maturities o f certificates
(nine to twelve months) showed a somewhat nar­
rower fluctuation. A t the same time, the average
rate o f discount on three-month Treasury bills ap­
proached more closely the market rate on one-year
certificates; and generally the spread between
yields on these two issues held within a narrower
range than had previously existed.
R epurchase agreements

During the year a number o f tight money situa­
tions developed, adversely affecting the cost and
availability o f credit to dealers fo r purchasing or
carrying short-term Government obligations. In
anticipation o f developments of that sort, the
Federal Open Market Committee had, in 1948, re­
instated the authority (which had not been used
here since 1933, and w hich had been terminated
T
in 1945) of the Reserve Banks to purchase short­
term securities from qualified dealers, under an
arrangement allowing the dealers to repurchase
the securities within 15 days. The 1948 authority
contemplated that the discount rate would be ap­
plicable to those agreements; by August 1949,
however, the squeeze on the dealers had tightened
because o f the decline in market rates and the
issuing rates on new short-term Treasury obliga­
tions, unaccompanied by a change in the discount
rate. The Committee accordingly permitted the
Reserve Banks to make repurchase agreements
with non-bank dealers at a rate not less than
1% per cent, the discount rate being V/2 per cent.
Use o f this instrument contributed to the gen­
eral implementation of open market policy during
1949, and was particularly effective during the
latter half o f the year.
Statistical summary

During 1949, this Bank purchased in the open
market fo r the twelve Federal Reserve Banks,
under the direction o f the Federal Open Market
Committee, Government securities having a total
face value o f $9.4 billion and sold, or redeemed,
securities having a face value o f $13.8 billion.
Thus, the y ea r’s transactions resulted in a de­
crease of $4.4 billion in System holdings o f United
States Government securities. The m ajor portion
o f this decline in System holdings was related to

4

PRESIDENTS REPORT TO DIRECTORS FOR 1949

the release o f $3.8 billion o f reserves to member
banks through reductions in reserve requirements
during the year.
Total System holdings amounted to $18.9 billion
at the end o f 1949, compared with $23.3 billion at
the end of 1948. The holdings o f Treasury bonds
declined by $3.7 billion, Treasury notes by $0.2
billion, and Treasury bills by $0.7 billion ; certifi­
cates of indebtedness increased by $0.2 billion.
This Bank’s share in total Government securi­
ties held by the System Open Market Account
amounted at the year end to $4.5 billion, as com­
pared with $5.6 billion at the end of 1948. The
Federal Reserve Bank o f New York, during 1949,
bought and sold for its own account, under repur­
chase agreements, a total o f $0.3 billion of short­
term Treasury obligations.

17 issues totaling $35.5 billion which matured or
were called.
The chief factor in expansion o f non-marketable
issues was an increase in Treasury Savings Notes
outstanding o f $3 billion (par value) during the
year. The redemption value (which includes in­
terest accruals) of savings bonds outstanding in­
creased $1.6 billion during the y e a r; there was an
increase o f $2.4 billion in Series E, F and G bonds,
while $0.8 billion o f Series D savings bonds ma­
tured during the year. Finally, there was an in­
crease o f $2.2 billion in special issues o f Treasury
securities held by Government corporations and
trust funds.
G ross D e b t of the U n ited States G overnm ent
B IL L IO N S
O f D O LLA R S

B IL L IO N S
T R E A S U R Y OCPARTM CU T D A T A

O f D O LLARS

FISC A L A G E N C Y O PER A TIO N S
P u b lic d ebt

F o r the fourth consecutive year since the con­
clusion o f the war, there were no cash offerings
o f marketable issues o f United States Govern­
ment securities, with the exception of the weekly
offerings o f Treasury bills. Nevertheless, as a
result o f sales o f non-marketable securities and
special issues, there was a net increase of $4.3 bil­
lion in the gross public debt in 1949, compared
with decreases o f $2.5 billion in 1947 and $4.1 bil­
lion in 1948.
There was a net decrease o f $2.4 billion in the
amount o f marketable issues outstanding, reflect­
ing the redemption o f the unexchanged portions
o f issues which matured or were called for pay­
ment during the year. No marketable issues, ex­
cept Treasury bills, were redeemed fo r cash in
their entirety by the Treasury. Only certificates
o f indebtedness were issued in exchange for
matured or called issues until December 1949,
when a 4*4 year Treasury note was offered in ex­
change for three bond issues and one certificate of
indebtedness issue. On balance, the refunding
operations and cash redemptions during the year
resulted in a reduction o f $6.7 billion in bonds and
increases o f $3.1 billion in certificates o f indebted­
ness and $1.1 billion in notes outstanding. In
1949, eight issues of certificates o f indebtedness
totaling $26.5 billion, one note issue amounting to
$3.5 billion, and five issues o f bonds totaling $6.7
billion matured or were called; in 1948 there were




Transactions in G overnm ent securities

The physical volume of transactions handled by
the Bank, as fiscal agent o f the United States, dur­
ing 1949 in connection with the issue, exchange,
transfer and redemption o f marketable securities
decreased slightly from the postwar high reached
last year. During 1949, such transactions involved
the receipt or delivery o f approximately 2.7 mil­
lion pieces, compared with approximately 3.0 mil­
lion the previous year. The aggregate par value
o f such securities amounted to approximately
$221 billion in 1949 compared with approximately
$264 billion in 1948. The decrease is attributable
primarily to market conditions prevailing in the
respective years.
On the other hand, as can be seen from the table
below, the total volume of work at this Bank in
connection with non-marketable securities, as
measured by pieces handled, was approximately

FEDERAL RESERVE BANK OF NEW YORK

the same as in the previous year. W hile there was
an “ Opportunity D rive” to sell savings bonds in
the second quarter o f 1949, the campaign was not
as intense as that of the “ Security Loan D rive”
in 1948. There was, however, a substantial in­
crease in the sale of Treasury Savings Notes. The
yields on these notes had been revised upward in
August 1948 and, with the decline in yields on
comparable marketable issues which took place in
1949, the Treasury Savings Notes became rela­
tively attractive.
Pieces handled
1948

1949

U . S . S av in gs B o n d s :
9 ,2 3 0 ,7 3 0

1 0 ,4 0 8 ,8 4 2

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

1 2 ,5 0 6 ,7 2 8

1 1 ,6 0 5 ,9 9 3

Reissues and correction s.............

8 5 9 ,6 4 6

8 9 2 ,5 4 5

2 9 7 ,9 5 4

8 9 ,7 6 3

9 5 ,7 5 6

8 0 ,9 2 5

2 2 ,9 9 0 ,8 1 4

2 3 ,0 7 8 ,0 6 8

Issued

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

Redeem ed

A rm ed F orces L eave B o n d s :
Issues and re d em p tio n s...............
S av in gs N o te s :
Issu ed , redeemed and r e is s u e d ..

D o lla r v o lu m e h a n d le d
(P a r or m aturity value)
1949

1948
U . S . S av in gs B o n d s :
Issued .............................................. $ 1 ,4 6 6 ,6 2 1 ,4 4 0

$ 1 ,2 0 0 ,6 4 4 ,2 1 0

R e d e e m e d ......................................

8 6 6 ,2 1 3 ,4 1 0

8 0 5 ,8 9 9 ,4 8 0

Reissues and correction s. . . .

1 7 3 ,1 3 9 ,6 1 0

2 1 2 ,2 8 3 ,9 1 0

6 3 ,9 6 6 ,0 7 5

1 9 ,3 1 7 ,2 0 0

2 ,2 5 0 ,9 4 5 ,7 0 0

3 ,9 0 7 ,4 5 8 ,6 2 5

$ 4 ,8 2 0 ,8 8 6 ,2 3 5

$ 6 ,1 4 5 ,6 0 3 ,4 2 5

A rm ed F orces L eave B o n d s :
Issues and re d em p tion s..........
S av in gs N o te s :
Issu ed , redeemed and
reissued

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

In 1948 a pneumatic tube system was installed
for the dispatch of telegrams between the W ife
Transfer Division and the Safekeeping and Gov­
ernment Bond Departments, because of the very
large volume of telegrams received and dispatched
in connection with the wire transfer o f securities.
This installation proved so successful that it was
decided to install a similar but larger tube system
for dispatching securities between our Safekeep­
ing Department and the Security Custody Depart­
ment. W e began to use this new system on No­
vember 7, 1949, and it resulted immediately in
increased efficiency and a more rapid and even
flow o f securities between the two departments.
On an average day, about 450 transactions are
dispatched by this means.




5

Safekeepin g o f savings bonds

During the year the Bank streamlined the pro­
cedures for handling savings bonds held in safe­
keeping for the public. The Treasury Depart­
ment circulars regarding savings bonds have al­
ways provided that if the owner o f a savings bond
so desires it will be held in safekeeping without
charge by the Federal Reserve Banks as fiscal
agent o f the United States. When savings bonds
were first issued, the number of requests to hold
the bonds in safekeeping was not great and we
handled these bonds in the same way that we han­
dled securities held in safekeeping for account of
member banks. This involved the issuance o f safe­
keeping receipts and the maintenance o f records
by the Safekeeping Department; actual custody
o f the bonds was in the Security Custody Depart­
ment, which has jurisdiction over the vault. A c­
counts were maintained in accordance with the
inscription on the bonds and separate receipts
were issued for each bond, except that two or more
bonds issued as o f the same date were covered by
one receipt.
W ith the great increase in savings bonds our
safekeeping business increased proportionately,
and we found that our unit cost of handling these
bonds was quite high. Accordingly, a new system
was developed. The safekeeping operation is now
handled entirely by the Savings Bond Depart­
ment. Passbooks and account cards similar to
those used by savings banks have been prepared)
and deposits and withdrawals o f bonds are re­
corded on the passbook and account card by ma­
chine in the same way that savings bank deposits
and withdrawals are posted. The bonds them­
selves are kept in filin^cabinets in a form er book
vault and are filed by account number. The transi­
tion from the old system to the new system in­
volved a great deal o f work because we endeavored
to communicate with all persons having bonds in
safekeeping to arrange for delivery of the pass­
books to them. A t the close of the year there were
still more than two thousand persons who had
deposited bonds with us, and whom we were not
able to reach. A t that time we had 32,858
accounts, in which 560,994 bonds were held.
The bonds are now filed in such a way that we
can readily ascertain the bonds that are maturing
within a particular period, and we are now render­
ing the depositors an additional service by advis­
ing them o f the maturity o f their bonds. Salary
costs under the old system were about 70^ per

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

6

bond bandied; under the new system such costs
are now about 20^.
R econstruction Finance Corporation

The character of the work perform ed by this
Bank, as fiscal agent o f the Reconstruction
Finance Corporation, continued practically un­
changed. Although there has been some increase
in the Corporation’s lending activities, especially
during the latter part o f the year, the increase in
the volume o f work, in so far as the Bank is con­
cerned, has not been large enough to offset the
gradual decrease in the volume o f work in connec­
tion with the liquidation o f wartime commitments
and other non-lending activities of the Corpora­
tion. A s a result, the personnel assigned to the
R.F.C. Custody Department decreased further
during the year from 34 to 22.
Disbursements and collections made fo r the
account o f the Corporation during 1949 were $116
million and $294 million, respectively, compared
with $161 million and $253 million, respectively,
during the previous year.
P aym ent o f Treasury coupons

The Treasury Department has until recently
required us to sort by issue and denomination,
before shipment to the Treasury, the coupons
from United States Government securities on
which we had made payment. Member banks were,
therefore, requested to sort the coupons accord­
ingly before presenting them to us. The Treasury
Department revised this procedure, effective N o­
vember 1, 1949, so as to require that coupons be
grouped only by denomination and certain interest
due dates. A s a result, lu m b e r and nonmember
clearing banks were able, when sending Govern­
ment coupons to us for payment, to make 30 per
cent fewer sorts o f coupons maturing December
15 than in the previous comparable period.
D eposit o f Federal taxes

Up to January 31, 1950, income taxes withheld
from wages had been deposited by employers
with qualified local banks, and the deposits were
either credited by the banks to their W ar Loan
Deposit accounts or remitted regularly to the Fed­
eral Reserve Banks for account o f the Treasurer
of the United States. During the latter part of
1949 the Treasury revised its system for the col­
lection of income taxes withheld by employers




from wages and included, in the revised system,
the collection of social security taxes. Under the
new system, w hich became applicable to wages
T
paid on or after January 1,1950, both types of tax
(known as “ Federal taxes” ) may be deposited
with qualified local banks or Federal Reserve
Banks and, in either case, the deposits may be car­
ried as deposit credits on the books o f local banks
in their Treasury Tax and Loan accounts (fo r ­
merly W ar Loan Deposit accounts).
The scope and volume o f the work o f this Bank,
as fiscal agent o f the United States under this re­
vised system, are expected to increase.
Foreign Funds Control

On May 31, 1949, this Bank ceased its fiscal
agency function for the Office of Alien Property
o f the Department of Justice in the administration
of foreign funds control.

SA FE K E E PIN G OF SECURITIES

During the year, we introduced two types of
safekeeping service which have proved o f con­
siderable benefit to our member banks in the State
o f New Jersey.
The New Jersey Banking A ct o f 1948 provides
that securities pledged with the Superior Court,
fo r the purpose o f qualifying banks to do a fiduci­
ary business in New Jersey, may be deposited with
the Federal Reserve Banks. Theretofore, such se­
curities were required to be lodged with the Regis­
ter of the Prerogative Court located at Trenton,
N. J., and our New Jersey member banks incurred
considerable shipping expense in sending securi­
ties to, or receiving them from, Trenton. Consider­
ing it a worthwhile service, our officers, in Novem­
ber 1948, decided that we should accept Govern­
ment securities for safekeeping from our member
banks located in New Jersey. A s o f the close of
business December 31, 1949, we had 59 of these
accounts and held Government securities with a
par value of $7,837,000.
A second safekeeping service was inaugurated
in December 1949, to aid our member banks in New
Jersey in the handling of their pledged accounts.
Authority is given to the State Treasurer o f New
Jersey to leave in safekeeping with either the
Federal Reserve Bank of New York or o f Philadel­
phia those securities pledged with him as security
fo r State funds. Consequently, in December 1949,
this Bank began accepting United States Govern­

FEDERAL RESERVE BANK OF NEW YORK

ment securities in bearer form deposited with the
State Treasurer by any of our member banks
located in the State of New Jersey.
B y the close of business December 31, 17 ac­
counts had been opened, with a par value of
$4,205,000 o f Government securities.
A further service which we have offered to our
member banks for several years is the acceptance
fo r safekeeping of securities which are pledged
by the banks as security for funds o f bankrupt
estates held by our member banks under the juris­
diction o f the various District Courts o f the United
States. Our authority for handling these accounts
is provided for in Section 61 o f the Bankruptcy
A ct (Chandler A ct). Previously these deposits
were secured by surety bonds, the cost o f which
was quite expensive to our member banks. W e had
126 o f these accounts, with Government securi­
ties having a par value o f $60,826,500, at the end
of the year.
Our member banks prefer to concentrate the
safekeeping o f their portfolios with this Bank,
and the extension of these services is of consider­
able financial value to them. It is also good bank
relations.

B A N K SU PERVISION AN D B A N K R E LA TIO N S
System m em bership o f State banks

On January 1,1949 there were 251 State member
banks in this District. During the year, three State
banks were admitted to membership in the Federal
Reserve System, seven were taken over by other
institutions, and three withdrew from member­
ship. Of the total number o f State banks in the
District at the end of the year (exclusive of
savings banks, private bankers, and industrial
banks), there were 244 members and 116 nonmem­
bers. There were no applications for membership
pending on December 31, 1949. Most eligible non­
member banks based their objections to member­
ship specifically on the financial cost involved.
They estimated that, as members, they would
reduce their earnings approximately $1,000 per
annum per $1,000,000 o f deposits, chiefly by the
exclusion as reserves o f both vault cash and bal­
ances maintained with correspondent banks.
The three withdrawals from membership were
fo r other reasons, however. These banks desired
to operate out-of-town branches with less than the




7

minimum capital required of member banks. They
had sufficient capital stock, however, to meet the
minimum capital requirements o f New York State
and, therefore, withdrew from the System in order
to open out-of-town branches. Two of the banks
stated they withdrew reluctantly from the Federal
Reserve System and assured us they would return
to membership as soon as the Federal law was
amended to bring minimum capital requirements
for establishment o f out-of-town branches more
nearly in line with State law. Except for the Fed­
eral requirement, each o f these banks, in our
opinion, had adequate capital in relation to aggre­
gate deposit liabilities and other corporate
responsibilities to merit our approval o f out-oftown branches.
In two other cases, member banks contemplating
mergers and the establishment o f out-of-town
branches will be unable to meet present capital re­
quirements under Federal law ; if these mergers
take place we may therefore expect further with­
drawals from membership unless there is an inter­
vening change in the law, easing those require­
ments.
W e have long felt that the capital requirements
of the Federal law fo r establishment of out-oftown branches are unnecessarily high and should
be reduced to more reasonable and realistic pro­
portions. W ith System approval, bills have been
introduced in Congress to effect such a reduction
on several occasions during the past few years,
but they have not been acted upon. W e have
brought these developments in this District to the
attention of the Board o f Governors to reempha­
size the need for such legislation.

Classification o f uninvested trust funds

In December, the Board o f Governors issued a
ruling which represented the successful culmina­
tion of more than a yea r’s effort on the part of
the Bank’s counsel and Trust Examiner. The rul­
ing confirms the practice o f several o f the larger
member banks in New Y'ork State under which
uninvested trust funds, consisting of the com­
mingled funds of various trust estates, are de­
posited by the trust departments of the banks in
their own banking departments as time deposits
for purposes of the B oard ’s Regulation D, relating
to reserves o f member banks, and Regulation Q,
relating to the payment o f interest on deposits.

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

8

The practice had been established many years
ago with this Bank’s approval. As a result o f some
publicity given to* the adoption of the practice by
one o f the New Y ork banks in the spring o f 1948,
and numerous inquiries from banks in various sec­
tions o f the country, the Board made a preliminary
review o f the legal aspects o f the practice. Upon
submission o f the matter by the Board to the
Federal Reserve Banks for their views, a majority
o f them disapproved of the practice. The Board
thereupon submitted to the Federal Reserve
Banks a proposed amendment to its Regulation D,
the effect o f which would have been to eliminate
the practice. A fter further efforts by this Bank’s
counsel and Trust Examiner, including the presen­
tation o f argument before a member o f the Board
and nine members of its staff in August 19-49, the
Board issued a ruling which authorizes the deposit
o f trust department funds as time deposits in the
commercial department o f a bank without identifi­
cation o f the amount of the funds o f each trust
included in such deposits, when the practice is not
inconsistent with the terms o f any applicable law
or court order.
The ruling is important to the member banks
doing a trust business, particularly to those with
a substantial volume, since, to the extent that the
classification o f deposits o f uninvested trust funds
as time deposits enables the banks to carry lower
reserves, earning assets are increased, and the
trust departments o f many institutions are able to
show an operating profit when they otherwise
might show a loss.

function, and generally one other officer o f the
Bank, were invited to this luncheon. The luncheon
was followed by a discussion of current economic
conditions under the leadership of a senior econo­
mist of our Research Department, and, following
this discussion, Mr. Clarke, Assistant Counsel,
spoke about some o f the legal aspects o f the de­
ferred posting technique, which was then a matter
o f current interest. In the fall, we substituted a
talk on Federal Reserve services by Mr. Rounds
for the latter part o f the program. During the
year, bankers from 112 banks in 11 counties
attended these meetings. A ll expressed enthusiasm
fo r the program.
2. Salary survey. During the first half o f the
year, our Bank Relations representatives distrib­
uted salary questionnaires, devised by the Bank
Relations Department in cooperation with the
Research Department, to the member banks out­
side of New York and the larger industrial cities.
About 74 per cent o f those banks returned com­
pleted questionnaires, the percentage o f return be­
ing higher for the smaller banks. Our Research
Department collated the returns by size o f insti­
tution responding. The summary of this material
was mailed in October to a senior officer o f each
member bank in the District, whether his bank had
participated or not, thus enabling the bank to
compare the salaries it pays with those paid by
banks of similar size. This survey was perhaps
more comprehensive than any similar survey made
in recent years and member bankers generally
have been pleased with this undertaking on our
part.

Bank relations activities

3. Check operations survey. F or many years
our Check Department has sent a member o f its
staff to visit those banks indicating a desire to
forward checks to us fo r collection. These visits
are especially useful in explaining our check sort­
1.
Group meetings. Beginning in A pril we held ing requirements, which are based on the volume
small group meetings with member bankers ap­ of checks sent to us. This service gradually broad­
proximately twice a month. The meetings were ened in scope, as the Check Department represen­
arranged through the various county bankers or­ tative, John J. Knox, was able in many banks to
ganizations, with each limited to 12 or 15 bankers, make suggestions not only with respect to sorting,
no more than one from a bank. Those who wished but to improving the bank’ s check operations gen­
to see our operations were conducted on a morning erally. Early in the spring, we began offering the
tour o f the Bank by the staff member who regu­ services o f this representative to member banks
larly visits them. Luncheon was then served to whether they wished to send checks to us or not,
the group in the Bank. An officer of the Cash and telling them that we had a man thoroughly experi­
Collections function, an officer from the Loans and enced in check operations o f country banks, whose
Credits or Government Bond and Safekeeping services we would gladly make available fo r the
A number of new practices were developed in
the Bank Relations Department during 1949 to
improve our relationships with member banks.
Am ong the m ajor innovations were:




F E D E R A L R E SE R V E B A N K O F NEW Y O R K

purpose of offering some helpful suggestions. W e
were able to be helpful to most of the banks visited,
and early in the fall we began to offer his services
more widely. A fter each visit, he rendered a re­
port to the bank visited, summarizing his sug­
gestions. A t the year end, this program was
accelerated and our representative was visiting
three to five banks a week.
Out o f this experience grew a proposal, which
the Board o f Directors approved last fall, to en­
gage the services of a top-flight management con­
sultant to assist us in establishing, if possible,
basic check operation standards and procedures
for banks of varied size. W e have since discussed
the project with committees of both the New York
and New Jersey State bankers associations, have
engaged a consultant, and are about to get under
way with our preliminary field work.
4. Credit file installations. E arly in the fall
we intensified our efforts to install the model
Farm Credit File in member banks. The file con­
sists o f a special folder containing forms for credit
statements, live stock appraisals, machinery and
equipment inventories, and similar purposes. We
found that there was a real need fo r this file as
well as for credit files in connection with other
types of loans. In the past few months, Mr.
Johnston o f our Credit Department has made
Farm Credit File installations in eight banks,
spending approximately a week at each. Numerous
other banks requested this service after the first
of the year. In the meantime, we have been follow ­
ing closely the efforts of the New York State
Bankers Association to develop a simplified com­
mercial file comparable with the Farm Credit File
and have indicated our willingness to furnish the
file and its inserts at cost.
5. Distribution o f National Summary of Busi­
ness Conditions. About mid-year, we began offer­
ing to member banks the “ National Summary o f
Business Conditions” prepared by the Board o f
Governors, a reprint of which is included each
month in our Monthly Review. W e felt that this
concise summary would be o f interest to many
businessmen and, therefore, suggested to our
member banks that they might distribute reprints
of it to a selected number of their customers. Our
initial mailing o f the reprint was made in Septem­
ber, when we sent approximately 2,500 copies to
39 banks. By the beginning of 1950 we were send­




9

ing about 15,000 reprints to more than 300 banks,
and we expect further increases.
6.
New visiting techniques. During the course
o f the year, we developed a number o f new tech­
niques in connection with our periodic visits to
all banks in the District. Am ong these a r e :
(a) Display o f counterfeit notes: Each o f our
representatives carried with him samples o f
counterfeit notes furnished by the United States
Secret Service. These counterfeits were samples
of those most prevalent in our District during the
year. W e made it a point to display them to the
tellers in all o f the banks visited, and upon re­
quest, we also displayed them to Chambers of
Commerce and merchant groups at meetings
sponsored by member banks.
(b) Display o f pictures: During the last half
o f the year, each o f our representatives carried
with him a portfolio of photographs o f our check
operations. These pictures illustrate the manner
in which the commercial banks’ operations tie in
with ours and show the use to which we and other
collecting banks put the Check Routing Symbol.
These pictures created considerable interest and
enabled our representatives to make the acquaint­
ance of the operating people in the check depart­
ments o f the banks visited. In 1950, we expect to
display similar pictures o f our cash operations.
(c) Instruction in the use of the Check Rout­
ing Sym bol: In the latter months o f the year, our
representatives made a special effort to instruct
the transit clerks o f member banks in the use of
the Check Routing Symbol. Some banks told us
that use of the symbol speeds up the sorting o f
checks by as much as 25 per cent. W e are now de­
veloping, for distribution early in 1950, sample
chart material which will be an important visual
aid to the use o f the symbol in smaller banks.

PU BLIC IN F O R M A T IO N A C T IV IT IE S

Following study during 1949 by the directors
and officers o f the need for expanding our work
in the field of public information, the Bank estab­
lished in the Secretary’s Office the post o f Director
o f Public Information as o f January 1, 1950, and
engaged for that job Thomas O. Waage, formerly
associate financial editor of The Journal o f Com­
merce.

10

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

C H ECK C O LLE CTIO N

The volume of checks collected by this Bank has
been increasing from year to year. In 1949 we
handled approximately 332 million checks, com­
pared with slightly more than 320 million in 1948
and 290 million in 1947. Despite this continued ex­
pansion in volume, we have made marked progress
in providing improved services to our member
banks and in effecting operating economies. In the
1946 report, it was stated that the use o f I. B. M.
punch-card and tabulating equipment in the pre­
paration o f cash letters had not worked to the
satisfaction o f either this Bank or the member
banks and, therefore, that its use was being discon­
tinued. The conversion of equipment used in pro­
cessing checks, and the accompanying revision o f
the procedures, advanced steadily throughout
1948 and was completed in May 1949. The com­
pletion o f our conversion program and the trans­
fer o f practically all check handling operations
to one floor have increased the efficiency of the
Check Department staff and made it possible to
reduce the number of employees assigned to that
department from 928 at the end o f 1948 to 734
at the end o f 1949. The cash letters now prepared
by the Check Department meet the desires o f our
member banks.

Federal Reserve Bank and Branch cities. A s a
consequence, the maximum period of deferment o f
credit for checks drawn on banks in other Federal
Reserve Bank and Branch cities is now two days.
Our use o f air transportation facilities in the
collection of checks has increased proportionately
with the greater volume o f check collections. Con­
solidated shipments, consisting o f our own cash
letters and those of 34 direct-sending banks,
reached a new peak on November 15, 1949, when
3,637 pounds, or approximately 1,200,000 checks,
were shipped by air.
The special shipping container (commonly re­
ferred to as a “ crash b ag” ), developed in 1946 and
since used by this Bank and other Reserve Banks
to protect checks in air transit against the impact
o f a plane crash and any resultant fire, was sub­
jected to a severe test when an American Airlines
plane crashed and burned at Dallas, Texas,
November 29, 1949. This plane carried two such
bags, one containing 6,232 checks dispatched by
this Bank to the Federal Reserve Bank o f Dallas,
and another containing 1,012 checks enroute to the
El Paso Branch o f the Federal Reserve Bank o f
Dallas. The larger Dallas shipment sustained the
greater damage, and it was returned to us at our
request. Examination showed that thirteen of the
twenty-three packages o f checks (including the
rubber bands securing them) making up this ship­
ment had been damaged only slightly and that
about 3,800 or 61 per cent o f the items were
legible. The bag addressed to the E l Paso Branch
was reforwarded from Dallas and that Branch
found the condition o f all but 39 checks to be such
that they could be processed in the usual manner.
Change in sorting requirem ents

A ir transportation

Because o f the consistent performance o f air
transportation in making faster collection of
checks possible, we revised our Head Office time
schedule on July 1, 1949 to provide earlier availa­
bility o f credit for cash items payable in thirteen




W e revised our check sorting requirements on
September 1, 1949 to permit any member or nonmeml>er clearing bank which deposits with us a
daily average o f not more than 250 cash items
to forward the items unsorted in one cash letter
for credit on the day after receipt. Prior to that
time these small deposits required at least one
sort. B y the end o f the year, 10 banks in the Head
Office territory had applied for and received per­
mission to deposit their cash items with us
unsorted.
C ounty clearing arrangements

County clearing arrangements, which enable
participating member banks to mail checks direct

FEDERAL RESERVE BANK OF NEW YORK

to each other for settlement on our books the
next business day, were further expanded during
1949. Two new county clearing arrangements
were formed during the year and two were sub­
stantially enlarged. A s o f December 31, 1949,
there were 275 participant banks in 18 arrange­
ments covering 25 counties.
C heck R outing Sym bol program

The Check Routing Symbol program sponsored
by the American Bankers Association and the
Federal Reserve Banks continued to make pro­
gress during the past year. A nation-wide survey
in December of checks in circulation throughout
the country, drawn on par remitting banks, re­
vealed that 67 per cent o f such checks bore the
symbol in the approved location— the upper right
hand or “ northeast” corner. This was an increase
o f 9 per cent fo r the year. The Second Federal
Reserve District again held the lead with 80 per
cent, although all districts advanced over the
year with the exception of the Ninth Federal
Reserve District (Minneapolis), which fell back
1 per cent. As an aid to the promotion of the pro­
gram in the several Federal Reserve districts, an
“ Outline o f Suggested Procedures for Promoting
Check Routing Symbol P lan” was prepared under
the auspices o f the System’s Committee on Col­
lections and made available to the President of
each Reserve Bank. The jjrogram was further ad­
vanced by the dispatch o f a letter from the Am eri­
can Bankers Association over the signature o f its
president to all of its members, asserting the
wholehearted support of that Association in the
program and urging the full cooperation of banks
in bringing it to completion. Early in 1950, the last
serious opposition to the program collapsed, when
one o f the country’s largest suppliers of checks
(which had previously resisted placing the symbol
in the approved position on the checks it supplied)
agreed to conform to the program.
D eferred posting legislation

In 1948 it was reported that in the fall of that
year a Special Committee of Counsel, appointed
by the Committee on Operations o f the Presidents
Conference, of which Mr. Logan, Vice President
and General Counsel o f the Bank, was chairman,
participated with counsel fo r the American
Bankers Association in the preparation of a model
deferred posting statute which was accepted by
the Board o f Governors and which the American




11

Bankers Association then transmitted to the State
bankers association in each State with the re­
quest that it be submitted to the State legislature.
This statute was enacted without change by the
New Jersey and Connecticut legislatures and was
also enacted, with minor changes in some cases,
by 32 other State legislatures holding sessions
in 1949. The Legislative Committee o f the New
York State Bankers Association took no action
prior to the 1949 session of the New York legis­
lature. During 1949, counsel for this Bank had
considerable correspondence and a number of
discussions with members o f the Legislative Com­
mittee and interested bankers and bank lawyers.
A group o f bank lawyers and bank operating
officers prepared a draft of a deferred posting
statute consistent with the objectives o f the A.B.A.
model statute but covering additional matter not
included in the model statute. Counsel for this
Bank also participated in a number of discussions
relating to this draft and made suggestions re­
garding it. This draft, in the form which our
counsel considers satisfactory, was approved by
the Legislative Committee. The bill has been
passed by both houses of the 1950 State legislature,
and is now awaiting action by the governor.

CASH O PER A TIO N S
C ounterfeits

The increase in counterfeits noted during the
year 1948 continued during 1949. Whereas the
1948 influx consisted largely of counterfeit notes
in the $10 and $20 denominations o f the Federal
Reserve Bank of Chicago, the past year has seen
a wide circulation of counterfeit Federal Reserve
Bank of New York notes in the same two denomi­
nations. During 1949, 2,750 counterfeits in the
amount o f $39,005 were detected by our currency
counters. Both in number and amount this repre­
sented more than double the totals discovered in
our work during 1948. W e sent a letter to all
banks in this District in September, with the
approval o f the United States Secret Service, giv­
ing a complete description of the two counterfeit
notes o f this Bank, and took other measures (de­
scribed elsewhere in this report) to bring these
notes to the attention of the banks. During the
latter part o f the year there was a marked decline
in the number of counterfeits appearing in the
deposits we received.

P R E SID E N T’ S R E P O R T T O D IR E C T O R S F O R 1949

12

A rm ored car service

Our program fo r transporting currency and coin
by armored car at our expense to and from sub­
urban member banks and branches has been in
operation two years. The banks, without exception,
have been pleased with this service primarily be­
cause it has eliminated the risk to their employees
in transporting money shipments to and from an
express office or post office, and also because in
most cases it has eliminated the loss o f reserve
account credit for the additional day or days such
shipments were form erly in transit through post
office or express channels. W e are now operating
9 different routes which serve 317 banking offices
o f member banks located within a radius o f ap­
proximately 25 miles, an increase of one route
and 37 banks over a year ago. The cost o f this
service to us is approximately $115,000 less per
year than it would have been if we had continued
to absorb the expense o f shipping currency and
coin to and from these same banks by mail or
express.

Special coin and cu rren cy arrangements

During the past year several arrangements have
been instituted which have reduced our expense
in handling coin and currency shipments to and
from us and facilitated to some extent the flow
o f money between us and our member banks. One
such arrangement developed as an outgrowth o f
the extension o f our armored car service to banks
in Newark, New Jersey. B y agreement with
several Newark banks, the sizable amount o f sur­
plus coin that we would regularly receive from
the Fidelity Union Trust Company o f Newark
is paid out directly to the other banks in that city.
The Syracuse Trust Company, Syracuse, New
York, also consistently accumulates an excess
supply o f coin. W e therefore inaugurated an
arrangement in March whereby The Syracuse
Trust Company makes direct shipments o f coin
to other banks in the district on our order. A
similar arrangement was put into effect in June
with the State Bank o f Albany, Albany, New York.
In July, a currency interchange arrangement was
developed with banks in Binghamton, Johnson
City, and Endicott, whereby the currency require­
ments o f the smaller banks are supplied by the
larger banks in those communities through ar­
mored car facilities at our expense. All o f these
arrangements have been well received by the




banks affected and have resulted in an estimated
annual saving to us of approximately $18,000.
FO RE IG N O P E R A TIO N S
Assets h eld fo r foreign and international account

During 1949 the total of earmarked gold,
deposits, United States Government securities,
and other assets held at the Federal Reserve
Bank o f New Y ork fo r both foreign and inter­
national account (International Bank and Inter­
national Monetary Fund) rose to over $8 billion,
or close to the previous peak reached in February
1947. Although gold and dollar assets held here
fo r the International Bank and Fund declined $81
million net to $3,073 million, assets held for
foreign account increased by $702 million net to
$4,956 million, continuing the upward trend which
has been in evidence since the latter part o f 1947,
as may be seen in the accompanying chart.
A s the table below indicates, the net increase
in foreign assets, while distributed among all
types, was largely in the form of earmarked gold.
The accounts showing the greatest net increases
in total assets were those o f the central banks
o f the United Kingdom, Italy, Belgium, Argen­
tina, and Switzerland. Few foreign accounts
showed any reduction in assets, the greatest re­
ductions being in those o f Portugal, Poland,
Yugoslavia, China, and France.
T o ta l G o ld and D o lla r A sse ts H e ld at the F ederal R eserve
B ank o f N e w Y o r k for F oreign A cco u n ts and for
International F u n d and B ank
B IL L IO N S
OF D O L L A R S

B IL L IO N S
o r D O LLARS

1939

*40

10

*41

*42

V3

*44

*45

*46

*47

*48

*49

F E D E R A L R E SE R V E B A N K O F N E W Y O R K

13

Total Assets H eld at Federal Reserve Bank o f New Y ork
fo r Foreign and Certain International Accounts
( I n m illions)

E nd of
1948

End o f
1949

Net Change
in 1949

$2,969 (a)
642
593

$3,451(b)
766
669

+$482
+ 124
+
76

50

70

$4,254

$4,956

+$702

$ 809
296
1,604(c)
445(d)

$ 822
317
1,454 (c)
480(d)

+ $ 13
+
21
— 150
+
35

$3,154

$3,073

— $ 81

$7,408

$8,029

+$621

Foreign Accounts
Earmarked g o l d ......................................................
D e p o s its ....................................................................
United States Government securities..................
Miscellaneous securities, commercial paper, and
bankers’ acceptances ........................................
Total— Foreign Accounts ............................

+

20

International Accounts
(International Fund and Bank)
Earmarked g o l d ......................................................
D ep osits ....................................................................
United States Government securities..................
Miscellaneous secu rities........................................
Total— International A ccou n ts....................
G rand T

o ta l

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

(a ) Includes $8,020,000 held as collateral to loans made by domestic commercial banks to Bolivia and Nicaragua and
$197,074,000 held as collateral to foreign loans on gold made by Federal Reserve Banks.
(b ) Includes $38,169,000 held as collateral to loans made by domestic commercial banks to Bolivia, France and Nicaragua and
$75,477,000 held as collateral to foreign loans on gold made by Federal Reserve Banks.
(c ) Includes non-interest-bearing non-negotiable demand notes as follows:
1948— $1,176,000,000
1949— $1,008,000,000
(d ) Does not include bonds having face value o f 17,000,000 Swiss francs and 45,355,000 Belgian francs.

Change in status o f foreign accounts

In March 1949, this Bank, as principal, and as
agent for the other Federal Reserve Banks,
opened an account for the newly organized Cen­
tral Bank of the Philippines. A regular account
was also opened for the National Bank of Egypt
on January 11,1950, and for Caisse Centrale de la
France d ’Outre-Mer on January 18, 1950. This
Bank, as fiscal agent of the United States, had
maintained an account for Caisse Centrale since
July 1944; when its regular account was opened,
the fiscal agency account was closed. A s to in­
ternational accounts, a fiscal agency account was
opened in March 1949 for the W orld Health
Organization, an agency of the United Nations.




The wartime account of the Government of
Yugoslavia was formally closed in November
1949. W e continue, however, to maintain an ac­
count for Yugoslavia’s central bank. There has
been no change in the dormant status o f the ac­
counts on our books for the central banks of
Hungary, Bulgaria, and Rumania.
During 1949 counsel collaborated with the
Foreign Department in conducting extended ne­
gotiations with the State Department for the cer­
tification, pursuant to section 25(b) of the Fed­
eral Reserve Act, of the authority of officials of
the Central Bank o f China to operate its accounts
on the books of this Bank; these negotiations re­
sulted in the issuance of a certification in Decem­

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

14

ber. The matter was somewhat complicated by the
transfer o f the head office o f the Central Bank of
China, first from Shanghai to Canton, and then to
Chungking. Immediately following the issuance
o f the certification, negotiations were opened with
the State Department to obtain a further certifica­
tion of the account by reason of the removal o f the
head office of the Central Bank of China to Taipeh,
Form osa, and the cancellation o f the authority
of form er signing officers and the appointment
o f new ones.
Contemporaneously with the transfer of sov­
ereignty over Indonesia from the Kingdom of the
Netherlands to the Republic o f the United States
of Indonesia in December 1949, the power of
attorney (granted in 1942) in favor of the Nether­
la n d s Ambassador to the United States to operate
the account on the books of this Bank in the name
of De Javasche Bank was revoked. This compelled
us to request the Secretary o f State to certify,
pursuant to section 25(b) of the Federal Reserve
Act, the authority of officials o f De Javasche Bank
to operate its account on the books o f this Bank.
Th requisite documentation and certification from
the Secretary of State are expected shortly; the
officials o f De Javasche Bank will then be able to
operate the account directly.
Loans on gold

During 1949 there was a decline in the demand
fo r loans on gold by foreign central banks. The
total o f such loans outstanding, which had risen
to a record high o f $259.7 million in August 1948,
had receded by the end of 1949 to $69.5 million.
In all, 57 advances (including renewals) were
made in 1949 and interest earned on these loans
amounted to $1.7 million, as compared with $2.5
million in 1948 and $620 thousand in 1947.
A t the close o f 1948 loans aggregating $190.1
million were outstanding to the central banks of
Poland, France, the Netherlands, Yugoslavia,
and Brazil. The loan to Poland, in accordance
with the program o f repayment calling for
gradual liquidation, was reduced from $14.1 mil­
lion to $2.5 million during the year and to $500
thousand by the end o f January 1950; the remain­
ing $500 thousand was paid in February. Simi­
larly the loan to France, which reached a maximum
o f $100 million in February 1948, now amounts to
$30 million and, under the present plan, final
liquidation is scheduled for August 1950. Liqui­
dation of our loan to France has been aided, in




considerable measure, by funds advanced to the
French government under a $75 million loan
agreement concluded last year with a group of
New York commercial banks; advances under this
agreement are secured by gold held at this Bank
for the New York banks. The loan to the Nether­
lands, amounting to $10 million, was repaid in
full during the first week o f January 1949. The
loan to Brazil, the proceeds of which had been
used to repay that country’s obligation under
the United States-Brazil Stabilization Agree­
ment, was liquidated in June in accordance with
the original fixed schedule o f repayments. The
loan to Yugoslavia was also repaid in full.
During the year we made five separate loans
aggregating $13.6 million to E cuador’s central
bank; three o f these loans in the amount of $8.5
million were still outstanding at the year-end.
Loans up to $40 million were also authorized for
Turkey’s central bank; up to the year-end $35
million had been advanced under this arrange­
ment, o f which $13.5 million was outstanding.
In May 1949 the arrangement originally made
with the Bank for International Settlements in
November 1948 for advances up to $5 million was
extended for another six months to November
1949; at that time it expired without having been
used. During the year somewhat similar agree­
ments were also in effect with the central banks
o f Costa Rica and the Netherlands East Indies,
but these arrangements also expired without hav­
ing been used. In November we agreed in prin­
ciple to make $15 million available under gener­
ally similar conditions to Australia’s central
bank, but were subsequently informed that the
bank did not expect to have need for these fa ­
cilities in the immediate future and no drawings
have so far been made. Shortly before the end of
the year we made a new arrangement with Costa
R ica’s central bank to lend approximately $2 mil­
lion for seasonal requirements; however, no part
o f this facility has as yet been used.
Our policy with respect to loans on gold re­
mains unchanged, i.e., short-term loans to foreign
central banks to take care of temporary (usually
seasonal) dollar deficiencies. Because it did not
fall into this category, we declined to make a
loan o f $7 million requested by the Central Bank
o f China in May 1949.
The following schedule summarizes our experi­
ence with respect to all loans against gold which
were outstanding at any time during 1949:

FEDERAL RESERVE BANK OF NEW YORK
(Am ounts in millions o f dollars)
O u ts ta n d C en tr a l
B an k o f

P oland ...........
F ra n ce ............
N eth erlands ..
B razil .............
Y u g o s la v ia ....
E cu a d or .........
T u rk e y ...........

M a x im u m

O u ts ta n d in g

D a te o f

in g en d
o f 1948

o u ts ta n d in g 1 9 4 9

end o f
1949

fin a l
rep a ym en t

D a te o f
fir s t a d v a n c e

A p ril
Dec.
A pril
June
A ug.
M arch
June

1947
1947
1948
1948
1948
1949*
1949

14.1
100.0
10.0
60.0
6.0
—•
—

14.1
2.5
—
100.0
45.0
—
10.0
—
Jan. 1949
60.0
—
J u n e 1949
6.0
—
F eb. 1949
8.5 8.5 (3 a d v a n ces ) —
18.5
13.5
—

190.1

69.5

* D ate o f first o f five separate advances

Gold, m ovem ents

The net purchases of foreign-owned gold by
the United States during 1949 amounted to less
than $200 million, as compared with about $1.5
billion in 1948 and $2.8 billion in 1947. The
net gain during 1949 reflected purchases by the
Treasury o f $728 million o f foreign-owned gold,
offset in part by sales o f $541 million of gold by
the Treasury to foreign central banks. The largest
foreign sellers of gold were the United Kingdom
and South A frica, while purchases were primarily
fo r account of Italy, Switzerland, Argentina,
Venezuela, Belgium, and Thailand.
The total volume o f all gold transactions
handled during the year continued the decline
which began after attaining the record peak of
1947; it continued, however, to be sizable, notably
in the case o f the purchases of foreign-owned
gold.
In addition to the gold transactions effected
during 1949, we also handled many details in
connection with the coinage and shipment of silver
and nickel coins, which were manufactured at
United States mints for Venezuela and China. A
total of 32.5 million pieces was consigned in four
shipments to Caracas from San Francisco, and
30 million pieces were consigned in eight ship­
ments to Hong K ong from Los Angeles, San
Francisco, and Philadelphia.
Visits to foreign central banks

In the summer of 1949, Mr. Knoke, Vice Presi­
dent in charge o f the Foreign function, visited the
central banks o f Austria, Belgium, France, the
Western Zones of Germany, Italy, the Nether­
lands, Switzerland and the United Kingdom, and
the Bank fo r International Settlements. During
part o f this trip, Mr. Knoke was accompanied
by Mr. Wallich, Chief of the Foreign Research
Division o f the Research Department, and on the
remainder by Mr. K riz o f the same division. The




15

purpose of these visits was to renew or establish
personal contacts with the officials of the central
banks and, at the same time, to obtain first-hand
information on economic conditions and problems
in the countries visited.
Mr. Sanford, Assistant Vice President in the
Foreign function, and Mr. Moore, Manager of
the Research Department, attended the Second
Conference of Experts o f the Central Banks o f the
American Continent held in Santiago, Chile, De­
cember 2-15, 1949. En route to and from the con­
ference, they made brief visits to the central banks
of Argentina, Brazil, Peru, and Uruguay.
Mr. Davis, Assistant Vice President in the
Foreign function, in the course of a special mis­
sion to Tokyo on behalf o f the Department o f the
Army, called on the Governor o f the Bank of
Japan and met other members of that bank’s
staff. He later visited Manila, where he studied
the operations o f the Central Bank of the Philip­
pines and the local econom y; on his return trip
to the United States, he also visited the Bank of
Thailand, the State Bank o f Pakistan, and the
National Bank o f Belgium.
Foreign central bank visitors

During 1949 there was a marked increase in the
number o f representatives o f foreign central
banks who visited at this Bank in order to ob­
serve and study our methods and operations. Such
visitors came from the central banks o f Bolivia,
Colombia, Finland, France, India, Italy, New
Zealand, Norway, Pakistan, Turkey, and the
United Kingdom, and also from the central banks
which are now being organized in Cuba and
Korea.
In addition to these visitors, we received the
senior officials o f a number of central banks, in­
cluding the Governors (or Presidents) of the
central banks of Belgium, Canada, Denmark,
Greece, India, Iran, Italy, Mexico, New Zealand,
Norway, Poland, Sweden, Switzerland, the United
Kingdom, Venezuela, and Western Germany.
Staff G roup on Foreign Interests

The Staff Group on Foreign Interests, includ­
ing representatives o f the Foreign, Legal and
Research functions o f this Bank and of the Board
of Governors, held further meetings during 1949
dealing with such questions as the financing of
B razil’s current needs (including a possible gold
loan), United States gold policy, the price of gold,

16

PRESIDENTS REPORT TO DIRECTORS FOR 1949

stabilization credits by Federal Reserve Banks,
and proposals for a European monetary au­
thority. The Group also, at meetings and by
means of telephone conversations and correspond­
ence, considered current questions dealing with
System foreign missions.

LO AN S A N D CRED ITS

The volume o f advances made to member banks
decreased, and fewer banks made use o f our
credit facilities during 1949, as compared with
the preceding year. Average daily advances out­
standing, however, showed a substantial increase
over 1948, principally by reason o f large tempor­
ary borrowings by the New Y ork City member
banks. A total of 2,257 advances, aggregating ap­
proximately $12.6 billion, were made to 308 mem­
ber banks, all secured by obligations o f the United
States, compared with 2,715 advances o f some
$7.8 billion to 354 banks in 1948. Daily average
borrowings last year were $58.2 million against
$45.4 million the previous year. Outstanding ad­
vances in 1949 ranged from $1.4 million on
December 30, a new low since June 30, 1943, to a
high o f $438.3 million on May 18. This peak com­
pares with a high in 1948 of $493.1 million re­
corded on December 23 o f that year. As in the
previous year, the 1949 peak borrowings lasted
for only one day and resulted largely from the
borrowings of the New Y ork City banks fo r the
purpose of adjusting their reserve positions,
which were under considerable temporary strain
as the result o f Treasury withdrawals and other
money market influences. Outstanding borrowings
o f member banks outside o f New York City
reached a high of $52.5 million last year, com­
pared with $38.3 million in 1948.
No applications were received during 1949 for
industrial loans or commitments under section
13b o f the Federal Reserve Act.
C onsum er instalment credit

The authority under which the Board of
Governors o f the Federal Reserve System issued
Regulation W expired June 30, 1949. The regu­
lation, made effective September 20, 1948, was
directed at controlling certain classes of con­
sumer instalment credit in the principal amount
o f $5,000 or less. The permissible maximum ma­
turities prescribed b y the regulation fo r all
extensions o f consumer instalment credit and the




minimum down payment requirements on all
articles subject to the regulation, except auto­
mobiles, were eased on two occasions through
amendments adopted by the Board o f Governors
and made effective March 7, and A pril 27, 1949.
Total registration with this Bank of those busi­
nesses covered by the regulation amounted to
14,779 as o f June 30, 1949. During the period of
enforcement, a total o f 4,635 investigations were
made by our Head Office and Buffalo Branch o f all
classes o f registrants. Investigation o f registrants
was well ahead of the original goal of 25 per cent
coverage. On the whole, compliance by registrants
in the District was satisfactory.

R E SE A R C H A C T IV IT IE S

The changes in business trends which took place
in 1949 required more than the usual amount o f
attention by our Research Department to the over­
all economic situation and prospects and to prob­
lems concerned with the determination of appro­
priate monetary policies. The research staff was
also particularly concerned during the past year
with problems relating to the devaluation o f the
pound sterling and some 30 other foreign cur­
rencies.
Research officers and staff participated in the
preparations made for the visit to this Bank of
11 professors of money and banking from the
Minneapolis District (under a scholarship pro­
gram instituted by the Minneapolis Reserve Bank)
and took part in conferences with the group dur­
ing its two-day visit. They participated in a
similar conference with a group o f professors of
money and banking, who attended the December
convention in New Y ork o f the American Finance
Association.
D om estic studies and publications

The Vice President of the Research function and
members o f the staff participated in the prepara­
tion o f joint replies by the 12 Federal Reserve
Bank Presidents to a questionnaire on money,
credit, and fiscal policies, which was sent to each
Federal Reserve Bank President by a special Sub­
committee o f the Joint Congressional Committee
on the Economic Report. Our Research Depart­
ment undertook editorial responsibility for the
entire project. A number o f special studies o f
the United States monetary and banking system
was made by wav o f preparation fo r the more

FEDERAL RESERVE BANK OF NEW YORK

comprehensive work along these lines which will
be called for if recent proposals fo r a National
Monetary Commission or similar body are
adopted.
In addition to several independent studies of
the national business outlook, the domestic re­
search staff cooperated with the Bank Relations
Department in the preparation of quarterly re­
ports and in the formulation o f replies to several
special questionnaires o f the Board of Governors
concerning business conditions in the Second
District.
Considerable work was also done in the fields
of national income and savings, Treasury finance,
consumer credit, and business finance. In antici­
pation of a revision in the B oard ’s index of in­
dustrial production, several memoranda were
prepared on problems relating to the purpose and
the construction o f indexes o f industrial produc­
tion. A s the results o f the Census of Manufactures
became available, tabulations of Second District
data were undertaken and analytical studies of
changes since the last (prew ar) Census were
initiated. Estimates o f Second District income
were refined further and an attempt was made to
develop quarterly estimates of savings in our
District. In the field o f department store statistics,
two new reports were added during the year.
During the year, research staff members made
a number of appearances before college classes
and seminars. Although not a part o f the Bank’s
official organization, a seminar of our own research
staff was held at irregular intervals (once or
twice a month) to discuss current economic prob­
lems ; at each meeting, some well-known economist
or banker gave a talk on a designated topic.
Among the special jobs carried out during the
year at the request of the Board o f Governors
w ere: (1) a sample survey of single-pavment loans
to individuals by member banks in this District,
fo r the purpose o f determining whether the pres­
ent classification o f such loans as consumer credit
is justified; (2) a compilation of the balance sheet
figures of J. P. Morgan & Co. and Brown Bros.
Harriman & Co. for the years 1863-1928, and 18981927, respectively, in order to make possible the
inclusion of private banking firms in the compila­
tion of a national series o f back data fo r “ All
Banks’ Assets and Liabilities.”
Special statistical charts drawn during the year
totaled 119, some of these accompanying the var­
ious special research studies completed during
the year, and others being furnished for officers




17

and for other departments. Sets o f charts (10
each) showing loans, investments, and deposits
by geographic areas within this District were sent
to those banks which report asset and liability
items monthly. Sixteen charts were drawn at the
request of the E C A fo r the use o f the AngloAmerican Council on Productivity.
In conjunction with the annual compilation of
member bank operating ratios in the Second Dis­
trict, a special study was undertaken to measure
the effect upon 1948 net profits of the charges
arising out of setting up reserves fo r bad debt
losses on loans, as permitted by a Treasury ruling
in December 1947.
A few o f the research papers which were pre­
pared on domestic topics during 1949 are listed
below :
Population in the Second Federal Reserve District,
1940-48
Individual Trust Funds
Recent Changes in Personal Savings
W eekly Analysis o f Gains and Losses in Member
Bank Reserve Funds. Second Federal Reserve
D istrict (a technical description)
A n Analysis o f Movements o f Federal Reserve Float
Business Lending Practices o f L ife Insurance
Companies
Causes o f the Liquidation o f Bank Loans, 1929-35
The Excess Profits T ax and Various Alternatives
Structure and Growth o f Income Payments in the
Second Federal Reserve District, 1919-48
Disposable Income and the Analysis o f Consumer
Behavior.
F oreign and international studies and publications

In the foreign and international field, our re­
search staff was predominantly concerned in 1949
with foreign exchange problems (rates, controls,
and reserves of foreign countries), with the col­
lection and analysis of data on international
capital movements and the United States balance
of payments in general, and with the international
financial problems and policies o f the United
States. Much attention was devoted to various
aspects o f the sterling question— notably the
British balance-of-payments position; the case for
and against, and (later) the repercussions of, the
devaluation o f the pound sterling; and the special
problem of the blocked sterling balances. During
the summer, the staff assisted a team of United
States Treasury investigators in a survey o f the
comparability o f British and American prices for
types o f goods imported from the United Kingdom
and o f the potential effect of European currency
devaluations on the foreign purchases o f New

P R E SID E N T ’S R E P O R T T O D IR E C T O R S F O R 1949

York retail establishments. Assistance was also
given to the British-American Productivity Coun­
cil in organizing and presenting material on pro­
ductivity changes in selected American industries,
for use in the guidance o f similar British indus­
tries. Follow ing the currency devaluations of
September, a survey involving periodic interviews
with some 40 large exporters was begun in order
to appraise the effects of the devaluations upon
American exports. Another field which required
much o f the Research Department’s attention dur­
ing the year was the progress o f the European
Recovery Program. Studies were made, in partic­
ular, of the intra-European payments plan, the
activities o f the OEEC, and the counterpart funds.
Other subjects o f special study during the year
included the position o f gold, the ITO program,
the outlook for various commodities, “ Point I V ” ,
and the work o f the National A dvisory Council.
Conditions in individual countries continued to
require much attention, with especial regard to
their central banking and monetary problems.
Special studies were prepared concerning, among
others, Britain, France, Sweden, Belgium, Bizonal
Germany, China, and Japan.
E arly in the year the Department completed its
sampling o f data from commercial banks in other
Reserve Districts on the volume and promptness
of export collections on Latin America. As a re­
sult of this sampling, our monthly survey of Latin
American export credit experience, which had
been based on reports from 12 New Y ork City
banks, was broadened to include three banks in
the Boston, Chicago, and San Francisco Districts.
During 1949 the Department initiated the col­
lection of detailed information from banks in the
Second Federal Reserve District on international
assets and liabilities of all member countries o f
the International Monetary Fund. This informa­
tion was compiled in connection with a request
made by the International Monetary Fund to the
United States Treasury. Similar requests were
made to all member countries in order to imple­
ment the repurchase provisions o f the Articles of
Agreement and to cross-check general balance-ofpayments information submitted by each member
to the Fund.
The Department also cooperated in a revision
o f the T reasury’s monthly and quarterly foreign
exchange report forms in order to provide perma­
nently more detailed information concerning in­
ternational capital movements through banking,
brokerage and commercial channels in the United




States. The revised forms, which distinguish be­
tween dollar assets and liabilities of foreign offi­
cial institutions (including central banks), other
banks, and “ others” , were used fo r the first time
fo r the reports due at the end o f January 1950.
Selected items from the many research papers
completed during the year on foreign and inter­
national topics are listed below:
The International W heat Agreement
Current Foreign Gold Developments
B elgium ’s Long-Term E conom ic Problems
Present Status o f the IT O Proposals
Some General Reflections on the Cuban Econom y
A Reappraisal o f Swedish Econom ic Policy
The Im pact o f the Rise in Coffee Prices on the
Economies o f Brazil, Guatemala, and Colombia
B ritain ’s Dollar Deficit with the W estern
Hemisphere
The Effects o f the Devaluation o f Foreign
Currencies on Am erican Foreign Trade
Tax Stimulants to Provide Foreign Investment in
Connection with Point IV
The Concept o f V iability
A n Estimate o f Future D irect Investment in, U nder­
developed Areas
The Dollar Gap and American Foreign Econom ic
Policy Objectives
Foreign missions

Research officers and staff members carried out
numerous foreign missions in 1949, in addition to
participating with the Foreign Department in
visits to foreign central banks. Mr. Roelse, Vice
President, went to Brazil fo r several weeks early
in the year (follow ing his four-month stay there
in the latter part o f 1948) in order to participate
in the final stages o f the work o f the Joint BrazilUnited States Technical Commission (o f which he
was a member), including the writing and editing
o f the Commission’s report. Mr. Glaessner con­
tinued in this period to serve as a member o f the
technical staff of the Commission, and partici­
pated in the writing of the report. Mr. Wallich,
Chief of the Foreign Research Division, and later
Messrs. Schlesinger and Adler, visited Guatemala
to make preparations for and give guidance to a
monetary and fiscal study of that country which
the Bank o f Guatemala is undertaking. Mr. W al­
lich also visited Havana to discuss the internal
organization o f the new Cuban central bank, and
went to E l Salvador in connection with the com­
pletion of a study of that country’s public finances,
and to Mexico to deliver a series of talks before
the National School o f Economy in Mexico City.
Mr. Bloomfield, Chief o f the Balance o f Payments

FEDERAL RESERVE BANK OF NEW YORK

Division, was loaned to the E C A in August for a
six-month mission to Korea, accompanied by Mr.
Jensen o f the Auditing Department, fo r the pur­
pose of drafting new monetary and banking legis­
lation fo r that country. Mr. Coombs represented
the Board o f Governors and this Bank at the
Twelfth Congress o f the International Chamber
o f Commerce at Quebec; and spent seven weeks in
Beirut as financial adviser to the United Nations
Economic Survey Mission for the Middle East.
Mr. Klopstock was on leave in March and April at
Washington as a consultant with the State De­
partment on the Berlin currency problem, and at
the end of the year was preparing to leave for
Germany to serve fo r a six-month period as con­
sultant to the Finance Division o f the American
High Commissioner’s Office of Economic Affairs.
L IT IG A T IO N

A t the end o f 1949 litigation involving claims
on forged endorsements to which this Bank was a
party had reached the lowest point in many years.
W hile there was one potential claim involving up­
wards o f $400,000 arising out o f the frauds per­
petrated against the Mergenthaler Linotype Com­
pany several years ago, that claim has not ripened
into litigation against this Bank, although related
claims against other banks are now in the courts.
As of December 31, 1949, there were only five
forged endorsement actions against this Bank, in­
volving claims aggregating $12,720, in three of
which our prior endorser had affirmatively agreed
to indemnify us and assume all burdens o f defense;
the fourth has since been dismissed; in the fifth,
there has been no activity for ten years, and the
matter may properly be considered closed. These
statistics o f current actions compare with an
average aggregate o f nearly $100,000 in claims
and from 12 to 18 actions pending at the times o f
the last five examinations o f the Bank. During
1949 claims of $81,000 were disposed o f without
loss to the Bank and without recourse to our in­
surance coverage.
Our Legal Department has been extensively in­
volved in an alien property matter arising out
o f the proposed return to an Italian insurance
company o f assets vested by the Office o f Alien
Property. The Trading W ith the Enemy A ct pro­
vides that vested property may be returned to the
foreign national from whom it was taken. A notice
of intent to return must be published at least 30
days prior to return, so that creditors o f the fo r ­




19

eign national may attach property described in
the notice as an incident to suits against the owner.
In August 1949 the first such notice was published
and promptly gave rise to attachments. This Bank
held securities described in the notice aggregating
some $510,000, and, between August and December
15th, several actions were started by the attach­
ment o f these securities. In addition, several
judgment creditors sought to examine the Bank
in supplementary proceedings. Opposition was
asserted and these attempts were unsuccessful.
One o f the creditors attempted to attach moneys
in the hands of the Bank described as “ in the
Treasury o f the United States” , apparently taking
the position that the Treasurer’s General Account
on the books of this Bank might be subjected to
attachment. The problems involved were, how­
ever, satisfactorily adjusted, and it is anticipated
that arrangements will be made in the near future
to release all attachments, substituting therefor
surety bonds, and to return the securities to the
owner under an order of return promulgated Jan­
uary 18, 1950.
Arm and Schmoll, Inc. v. T h e United States

Pursuant to its function under section 522(c)
o f the T ariff Act of 1930 o f certifying rates of
foreign exchange fo r use in the conversion of
foreign currencies to determine dutiable value in
the collection o f customs duties, this Bank in 1935
certified one rate, namely, the “ official” rate, for
the Brazilian milreis. Armand Schmoll, Inc., an
importer o f hides from Brazil, claimed that a
lower “ fre e ” rate should have been certified in
place o f the “ official” rate. In March 1939 that
Corporation brought an action against this Bank
in the Supreme Court o f the State o f New York
seeking an order to compel this Bank to certify
the “ fre e ” rate fo r the Brazilian milreis. Judg­
ment was entered in favor o f the Bank on the
ground that a State court could not direct it in
the manner in which it should perform its Federal
functions. An appeal was taken to the Appellate
Division of the Supreme Court where the
judgment o f the lower court was affirmed. This
judgment was in turn affirmed by the Court of
Appeals, and the Supreme Court o f the United
States declined to review the matter. Following the
decision by the Supreme Court of the United
States, in another case, that this Bank had author­
ity under section 522(c) to certify more than one
rate fo r a single foreign currency and that its

20

PR E SID E N T’S R E P O R T T O D IR E C T O R S F O R 1949

certification o f rates is not subject to review by
the courts, the Corporation sought a reargument
in the Court of Appeals which, on motion of
counsel fo r the Bank, was denied.
Following this series o f defeats, the Corpora­
tion protested the action o f the Collector at the
port of New Y ork in determining duties upon a
shipment o f hides from Brazil in 1935 by using
the “ official” rate for the milreis certified by
this Bank. In A pril 1946 the United States Cus­
toms Court issued a subpoena to this Bank in that
action directing this Bank to produce all o f its
records and correspondence involving the rate
certified by this Bank fo r the Brazilian milreis.
The Bank’s motion to quash the subpoena was
granted by the court upon the ground that the
certification o f rates by this Bank was not subject
to review by the courts, a point which had already
been dealt with by the Supreme Court. A fter trial
the court, on March 24,1949, affirmed the action of
the Collector. It was indicated in the opinion that
the decision in favor o f the Government was pri­
marily based upon the success of the Bank’s
motion to quash the subpoena.
The Corporation appealed to the United States
Court of Customs and Patent Appeals. Counsel
fo r the Bank appeared, filed an exhaustive brief
and argued, as amicus curiae. In December 1949
the court affirmed the decision o f the lower court
and held that the rates of foreign exchange certi­
fied by this Bank were final and conclusive. It is
believed that this decision will terminate the liti­
gation which has been vigorously contested for
more than a decade.

large measure, curtailment in staff during the
past five years has been the product o f voluntary
separations. However, dismissals in 1949 were
greater than they were in 1948 because o f further
reductions in our fiscal agency operations and the
increased efficiency in check operations. Even in
times when overstaffing exists, there is, o f course,
always some hiring to fill particular jobs unsuit­
able fo r excess employees or requiring skills so
specialized that we must at infrequent intervals
go outside the Bank to find them. W e have been
extremely careful, however, to hire no new em­
ployee to fill a job which could be filled by an
excess employee, and for this reason hiring in
1949 fell sharply.
Another development o f the last five years has
been the marked reduction in the ratio o f female
to male employees. W omen employees totaled
3,050, or 64.4 per cent o f staff, on the peak
employment date in 1944, but the number had
declined to 1,696, or 49.1 per cent o f staff, by
December 31, 1949. The fact that many women
voluntarily left our staff minimized the need for
involuntary separations.
The following table, covering the years 1945
through 1949, presents some basic statistics on
Head Office employment.
1945
E m p lo ye es, close o f

ness D ec. 3 1 ..........................




1948

1949

4 ,2 9 4

4 ,1 4 2

3 ,7 5 5

3 ,77 1

3 ,44 1

1,58 4

1,21 8

824

690

590

2 ,6 6 2

2 ,94 9

3 ,06 6

3 ,14 1

3 ,05 0

6 ,0 0 2

8 ,3 4 6

7 ,4 0 5

8 ,05 0

4,531

im bursable b y U . S . G ovt,
and its ag en cies..................

The number o f employees at the Head Office
declined by 330, or about 8.7 per cent, during 1949.
Fiscal agency operations again required fewer
employees, continuing the contraction begun in
1944, but, fo r the first time since 1939, there was
also a reduction in the number o f employees en­
gaged in all other work. A large share o f the
curtailment in staff during 1949 took place in the
Check Department, where personnel was reduced
194, or 20.9 per cent, through more efficient oper­
ations.
A t the close o f business December 31, 1949,
there were 3,441 employees at the Head Office, a
reduction o f 1,296, or 27.3 per cent, from the peak
employment o f 4,737 reached on July 27, 1944. In

1947

E m p lo y e es, average num ­
ber, engaged in w ork re­

E m p lo y e es, average

PERSON N EL

1946

busi­

num ­

ber, all o t h e r .......................
A p p lic a n ts

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

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

1,043

9 48

5 65

7 67

2 82

Sep arations*

1 .1 1 6

1,10 0

9 52

751

612

120

246

4 02

158

210

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

D ism issals (included in
S ep aration s)

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

* Includes those who became officers, were dismissed, resigned,
retired, or died.

It is gratifying to be able to report that of all
employees at the Head Office, about 800, or 23
per cent, have been with the Bank for 20 years
or more, and almost 400 have 10 to 19 years of
service. While 2,250 employees have been with the
Bank for less than 10 years, it should be noted that
there has been a net increase o f 1,200 employees
in the past decade.

F E D E R A L R E SE R V E B A N K O F N E W Y O R K
N u m b er of
E m p lo y e es

L e n g th o f Service

P ercentage of
T o ta l N um ber
o f E m p lo yees

2

.0 6 %

3 0 years to 3 4 years inclusive

268
153

4 .4 8 %

20 years to 2 4 years inclusive

374

1 0 .9 5 %

1 5 years to 1 9 years inclusive

236

6 .9 1 %

1948 was proportionately less than the decline in
personnel because the curtailment of staff took
place chiefly in the lower salary grades.

7 .8 5 %

2 5 years to 2 9 years inclusive

21

3 5 years o r m o re ..........................

132

3 .8 6 %

9 years inclusive

1,248

3 6 .5 3 %

L ess than 5 y e a r s .......................

1,00 3

2 9 .3 6 %

T o ta l (J a n . 3 1 , 1 9 5 0 ) ............

Salary administration

3,41 6

1 0 years to 1 4 years inclusive
5 years to

The chart appearing below illustrates the fluc­
tuations in yearly average Head Office employment
during the past twenty years, and shows the pro­
portion of employees assigned to reimbursable
work performed for the United States Govern­
ment and agencies thereof.
F luctuations in Y e a r ly A v e ra g e H e a d Office E m p lo y m e n t
1930-1949
THO U SAND S
OF EM PLO YEES

THO USAND S
OF E M P LO Y E E S

W e made a salary survey in the Metropolitan
Area of New Y ork City during September 1949
which assured us that a proper relationship con­
tinued to exist between the salary rate structure
at the Head Office and the rates paid in the com­
munity fo r comparable jobs. The community rate
structure appeared to be slightly higher than in
the preceding year. Rates paid fo r clerical jobs
evidenced a firm tone while increases were re­
flected in rates paid fo r some non-clerical jobs,
particularly in the building service and mainten­
ance fields.
In addition to the salary survey, we reviewed
and evaluated, on a continuous year-round basis,
all jobs perform ed in the Bank in order to assure
a proper internal alignment o f such jobs. Changes
in methods and procedures, and expansion or
contraction of functional activities, frequently
made necessary a revision o f job descriptions
in order to reflect properly the scope and level
of the actual duties performed. This maintenance
phase o f the Job Evaluation Program required the
review and evaluation o f 196 jobs, or approxi­
mately 29.6 per cent of the total number o f filled
jobs at the Head Office.
P ersonnel D epartm ent operations

During 1949 the organization and operations of
the Personnel Department were reviewed and
some changes were made. A number of personnel
records were converted from hand to mechanical
operations fo r greater efficiency. The staff of
the Personnel Department declined by 14 persons,
or about 12 per cent, during the year.
H ead Office salary liability

B lu e Cross H ospital Plan and Surgical-Medical Plan

The following figures, covering the years 1945
through 1949, show employee salary liability (in­
cluding reimbursable salary) as of the close of
business on December 31 o f each year.
1945

1946

1947

1948

1949

$ 9 ,5 1 5

$ 1 1 ,2 4 2

$ 1 0 ,6 2 1

$ 1 1 ,4 9 6

$ 10 ,9 29

S alary liability
(in thousands
o f dollars)

The reduction of about $567,000, or some 4.9 per
cent, in salary liability fo r 1949 as compared with




A t the year end, 3,102 persons, or 88.7 per cent,
of our Head Office staff held membership in the
Blue Cross H ospital and Surgical-Medical Plans,
which provide hospitalization and medical-surgical
benefits. In 1949 the expense to the Bank, which
pays two-thirds o f the total cost, was $93,992, and
to the employees $49,385. This expense was a little
higher than last year because of a moderate in­
crease in rates, effective in May 1949, under the
hospitalization plan, and, in addition, an increase

PRESIDENT’S REPORT TO DIRECTORS FOR 1949

22

in the percentage o f staff participation, offset to
some extent by a reduction in the number o f our
employees. During the year, members o f our
Head Office staff filed 593 claims fo r hospital care
(4,907 days) which would have cost the insured
$68,026; and 582 claims fo r medical and surgical
care amounting to $35,753. W e have received
favorable comments about these benefits from
many staff members.
G rou p life insurance

The staff continued to avail itself o f the oppor­
tunity to participate in our Group Life Insurance
Plan, which provides coverage o f $1,000 to $6,000,
depending upon sex and salary, at a cost o f 60^
per month per $1,000 o f coverage. A t the year
end, 2,593 persons, or 74.1 per cent, of the Head
Office staff, had group life insurance policies, com­
pared with 2,822 or 74.5 per cent on December 31,
1948. O f the sixteen Head Office staff members
who died during the year, fourteen were insured
and their beneficiaries received a total o f $64,500
from the group life policies.
R ed Cross b lood don or service

The Bank’ s staff, through the Federal Reserve
Club, has cooperated with the New York Red
Cross Chapter’s peacetime blood donor service
since its inception in June 1947. The purpose of
this service is to make blood available without
charge to the sick and injured in the five boroughs.
During 1949, members o f the staff withdrew 183
units (500 c.c. per unit) from the accumulated
blood donations made by them. The 183 units
represented a saving o f about $5,500 in expense
for blood and blood derivatives, neither of which
is covered by Blue Cross contracts. Our partici­
pation in the program has resulted in a sizable
dollar saving fo r some members o f the staff, an
extreme example being that o f a woman employee
who was spared about $900 in expense last year
because of blood made available to her husband
through our participation in the program.
R etirem en t System

Since the Retirement System of the Federal
Reserve Banks was organized in 1934, its benefits
have been liberalized from time to time; another
such liberalization took place in 1949. The chief
changes were adoption o f the best consecutive five
(rather than ten) year average salary, known as




“ final average salary” , as a basis fo r computing
all normal pension benefits, and a change from
% o f 1 per cent of final average salary on a cash
refund basis to 1 per cent o f such salary on a
straight life basis fo r computing the pension
portion o f service retirement benefits. The Fed­
eral Reserve Banks bear some 60 per cent o f the
cost o f the benefits provided by the Retirement
System, including all of the cost o f the most recent
change in benefits. During the year 21 members of
our staff retired, thereby raising the number of
retired employees to 281 (165 on service retire­
ment at age 65, 89 on special service retirement,
and 27 on disability retirement).
Leadership training

Our in-bank training programs again empha­
sized conference sessions in leadership training.
Covering virtually every level o f supervision, the
leadership sessions stimulated a keener apprecia­
tion o f the substantial benefits derived from good
human relationships. W ith the completion o f the
current group o f conferences, now under way, 39
officers and 391 employees will have taken part
in the program at the Head Office; similar con­
ferences were also arranged at the Buffalo
Branch.
Payroll deductions fo r Series E Savings Bonds

The Bank continued to present to the staff the
merits o f purchasing savings bonds by means
of payroll deductions. In particular, we promoted
vigorously the United States T reasury’s “ Op­
portunity D rive” which covered the period May
15-June 30, 1949. A t the year end, 2,157 Head
Office staff members, or 61.5 per cent of the total,
were participating with an average deduction of
3.50 per cent of salary; the corresponding figures
for a year earlier were 2,024 persons, or 52.7 per
cent o f the staff, and the average deduction was
3.2 per cent o f salary.
Federal R eserve Club

The Federal Reserve Club, which had its 31st
anniversary in 1949, continued to afford members
o f our staff an exceptionally diversified program
o f social and recreational activities and special
services. The employee publication, which is one
of these services, was changed in form at during
1949 and under its new name, “ T h e F e d ” , is now
published bi-weekly instead o f weekly. Through

F E D E R A L R E SE R V E B A N K O F N E W Y O R K

the years the Club has had the interest and sup­
port o f most of our employees, and, at the present
time, 89 per cent o f our men and women are mem­
bers. Its leadership has shown a keen perception
o f the interests of our staff and has altered the
Club’s program to conform to the members’
desires.

B U F FA LO B R A N C H O PER A TIO N S

The volume of work handled at the Branch dur­
ing 1949 was higher than during 1948. Current
expense and cost o f Federal Reserve currency
totaled $797,050 in 1949 as compared with $735,850
in 1948. Fiscal agency and other reimbursable
work aggregated $30,553 as against $28,355 in 1948.
Im proved operating procedures installed during
1949 partially offset the increases in operating
expenses caused by the greater volume o f work
handled, the higher costs o f rented equipment and
supplies, and the 10 per cent salary increase
granted on November 1, 1948.
P ersonnel

During 1949 the number of employees at the
Branch decreased from 176 to 170. There were
40 separations from service, and 34 new employees
were engaged. The following tabulation, as of the
close o f 1949 and of the preceding four years,
shows the number of employees at the Branch and
the total employee salary liability:
1945

Number of
employees..........
Salary liability
(in thousands
o f dollars) . . .

1946

1947

1948

1949

221

211

164

176

170

$398

$467

$390

$455

$448

All 170 employees have signed authorizations
fo r deductions from payroll fo r the purchase
o f Series E bonds, the total deductions amount­
ing to 6.13 per cent of the payroll at the end
o f the year. In addition, 56 employees are par­
ticipating in a special payroll savings plan, to
the extent of 3.73 per cent of the total payroll,
providing fo r deposits in a local savings bank.
A ll but seven employees are enrolled in the Blue
Cross and Blue Shield plans fo r hospitalization
and surgical benefits. Some o f the seven, however,
are covered under a similar plan through other
members o f their families. A total o f 134 employ­
ees, or 79 per cent, are participating in the new
group life insurance plan as revised in 1948.




23

In the latter half o f 1949 a survey was conducted
o f wage and salary rates paid to clerical, super­
visory, building maintenance and service employ­
ees, and personnel practices in five banks, two
insurance companies, and twelve industrial con­
cerns in the Buffalo area. Results o f the study
assured us our pay schedules compared favorably
with salary rates fo r similar jobs.
Leadership training sessions were conducted
during A pril 1949 at the Branch by William E.
Marple o f our Head Office staff. They were
attended by all four officers and 25 supervisory
employees.
C heck collections

The Branch collected 26.1 million checks totaling
over $7.1 billion during 1949 as compared with
24.8 million checks amounting to $7.5 billion in
1948. The gain in volume reflects an increased
use o f Federal Reserve collection facilities by
banks which had previously collected their checks
through correspondent banks. This is further re­
flected in the increased reimbursements made to
member banks during the year fo r postage cover­
ing their cash letters sent direct to other Federal
Reserve Banks and Branches, and in the increased
charges absorbed fo r Buffalo member banks in
connection with the consolidated shipments of
checks which the Branch sent by air express to
various Federal Reserve Banks and Branches
daily.
Further progress was made during 1949 in the
Branch territory in improving poorly designed
checks and in employing the new check routing
symbol. A survey completed in December 1949
disclosed that 82.6 per cent of the checks which
passed through the Branch’s Check Division,
drawn upon banks located in the Buffalo Branch
territory, bore the new routing symbol and transit
number in the approved location, as compared with
74.8 per cent in December 1948.
During the first quarter o f 1949 additional IBM
sorting and listing machines were delivered to
the Branch, making it possible to revise methods
of operation so as to process all New Y ork State
checks through these machines. The Branch also
adopted a new method o f sorting checks through
these machines according to the transit number
and routing symbol, instead of the previous method
of sorting by bank name and location. During
the latter half o f the year, a constant study o f air
transportation schedules and facilities, the devel­

24

PRESIDENTS REPORT TO DIRECTORS FOR 1949

opment o f a larger night force to concentrate on
handling other Federal Reserve District checks
as promptly as they are received, and an arrange­
ment fo r special transportation of Buffalo Branch
air mail to the Buffalo A irport post office station
in time fo r dispatch on afternoon planes, have
helped to speed up substantially the collection o f
checks payable in other Federal Reserve Districts.
The last mentioned step has eliminated the holding
o f air mail cash letters at the Buffalo Branch
until other mail was ready fo r dispatch, and has
avoided a further delay of two to four hours which
occurred previously when the air mail cash letters
were deposited in the central post office fo r sub­
sequent delivery to the airport. A study of the
results accomplished through these changes and
improvements during the last six months of 1949
provided the basis fo r issuing a new time schedule
on February 1, 1950, advancing by one day the
credit availability for items payable in 20 Federal
Reserve cities. A similar advance o f one day in
credit availability fo r items payable in three Fed­
eral Reserve cities was made on July 1, 1949.
Bank m em bersh ip and bank relations

The University Bank, Alfred, New York, applied
fo r membership and was admitted to the System
in December 1949. The W yom ing County Bank and
Trust Company, Warsaw, New York, withdrew
from membership in June 1949, largely because
of the capital requirements fo r operating out-oftown branches.
Bank relations activities included 364 visits to
banks and attendance at 73 meetings. Substantial
assistance was given to seven banks during the
year in installing adequate farm credit files, and
additional supplies fo r the files were provided to
36 banks already using this seivice. The Branch
also cooperated with the Head Office in making a
survey o f salaries paid to officers and employees
o f member banks in the Branch territory (the
survey is described elsewhere in this report).
Loans to m em ber banks

A total of 261 loans aggregating $207.1 million
was granted to 34 member banks, as compared with




263 loans amounting to $145.2 million to 38 mem­
ber banks in 1948. Discount earned amounted to
$21,768 as compared with $20,906 in 1948. The
highest amount of loans outstanding at any one
time during 1949 was $19,880,000 on December
29, and the longest period o f borrowing of any
one bank was 57 days. A t the end of the year no
banks were in our debt.
Cash operations

The volume o f paper currency flowing in and
out of the Branch increased modestly above that
handled in 1948. A total o f 47,705,514 pieces o f
paper currency was counted in 1949 as compared
with the previous peak o f 47,143,214 pieces counted
in 1948; 51,331,400 pieces o f coin were counted
as against 47,408,573 in the previous year; and
8,235,000 pieces of coin were wrapped, this total
representing a decline of approximately 1,100,000
below the number of coins wrapped in 1948.
A total o f 158 counterfeit notes and one raised
bill aggregating $2,170 were detected by the
Branch money counters, as compared with 58
counterfeits totaling $686 discovered in 1948.
Accounting p roced u re

During the latter part o f 1949 a study was made
by our Head Office and the Branch to develop
a more complete accounting procedure at the
Branch. A s a result of this study the Branch
started operating its own general ledger and han­
dling all the payments o f its expense items on
January 3, 1950. The change in procedure, which
should involve little additional cost, will place on
the officers of the Branch the prim ary responsi­
bility fo r supervision and control o f the Branch’s
accounts and expenses. It will make readily avail­
able at the Branch information regarding trans­
actions and expenses which has heretofore been
obtainable only after communication with the
Head Office, and it should result in more prompt
payment o f the Branch’s bills and clearing up of
suspense items. In addition, the new procedure
will place the Branch accounting methods on a
basis similar to the practice in all o f the other 23
Federal Reserve Branches.

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