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FEDERAL RESER VE BANK O F N EW YO RK
Fiscal A g en t of the U nited States
r C i r c u la r N o . 3 6 8 3
L
A p r i l 2 , 1951

A D D IT IO N A L IN F O R M A T IO N R E G A R D IN G
2 % PE R C E N T T R E A S U R Y BONDS, IN V E ST M E N T SERIES B-1975-80
T o all B anking Institutions, and Others Concerned,
in the Second Federal R eserve D is tr ic t:

Since the issuance of Treasury Department Circular No. 883, dated March 26,1951 (which
was made part o f our Circular No. 3671, dated March 19,1951), with respect to the 2% percent
Treasury Bonds, Investment Series B-1975-80, a number of inquiries have been received
regarding the bonds. Because the answers to some of these inquiries may be of general interest,
they are set forth below:
Inscription
1. 2 % percent Treasury Bonds may not be registered in the name o f a nominee. Registration
must be in the name o f the owner whether in own right or as a fiduciary.
Use in paym ent o f estate taxes
2. 2 % percent Treasury Bonds registered in the name o f a partnership may be used to pay Federal
estate taxes o f a deceased partner to the extent o f the fractional part o f the bonds in authorized
denominations proportionate to the deceased partn er’s share in the capital o f the partnership, provided
said fractional part is actually distributed to the estate upon liquidation o f partnership assets, but the
entire amount o f such fractional part must be applied to payment o f the tax.
3. I f a representative o f a decedent’s estate exchanges 2 y2 percent Treasury Bonds of June or
December 1967-72 owned by the estate or acquired by the representative o f the estate fo r 2 % percent
Treasury Bonds, the 2 % percent Treasury B onds w ill not be eligible fo r redemption at par fo r
payment o f Federal estate taxes with respect to the decedent’s estate, since the bonds did not constitute
part o f the decedent’s estate at the time o f his death.
Use as collateral
4. 2 % percent Treasury Bonds are eligible as security fo r State, county and m unicipal deposits,
but are not eligible as security fo r Treasury T ax and Loan Accounts, nor fo r other deposits o f Federal
public moneys. The term “ deposits o f public m oneys,” as used in section II, paragraph 3, o f Treasury
Department Circular No. 883, does not include State, county or municipal deposits.
5. U nder section II, paragraph 3, o f Treasury Department Circular No. 883, 2 % percent Treasury
Bonds may be used as collateral for loans and may be pledged as security fo r the perform ance o f an
obligation or for any other purpose. In the event o f a default on the loan or in perform ance o f the
obligation, the pledgee will have the right only to exchange the bonds fo r 1 y2 percent five-year
marketable Treasury notes. W hen the pledgee presents a 2 % percent Treasury B ond for such an
exchange, it should be accompanied by a power o f attorney executed by the pledgor in form satisfac­
tory to us and, if the pledgor is a corporation, a certified copy o f a resolution o f the governing body
o f the pledgor authorizing the execution o f the power o f attorney.
Trust funds
6. W here a bank acting as trustee o f an individual trust exchanges 2y2 percent Treasury Bonds
o f June or December 1967-72 fo r 2 % percent Treasury Bonds, and subsequently desires to merge the
assets o f the trust into a common trust fu n d maintained by the bank, transfer o f the 2 % percent
Treasury Bonds to the bank as trustee o f its common trust fu n d w ill be perm itted subject to limita­
tions as to amounts imposed by State law and Regulation F o f the B oard o f Governors o f the Federal
Reserve System. Retransfer to the bank as trustee o f an individual trust, and distribution to benefi­
ciaries on the termination of an individual trust, will be permitted.

Additional copies of this circular will be furnished upon request.




A lla n

S p r o u l,

President.

Fe d e r a l R e se r v e B a n k
of

N ew Y




ork

President’s Report
to
c
Directors
for 1950




FEDERAL

RESERVE

BANK

OF

NEW

President’s c
Rgport
to
1Directors
for 1950

CONFIDENTIAL

YORK

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

March 22, 1951.

T o the D irectors o f the
F ederal R eserve Bank o f N ew Y o r k :

I
submit herewith a confidential report on the operations o f the Bank during 1950.
This gives a more intimate and detailed view o f our operations than is possible or
appropriate in our annual report to the stockholders.
The swift acceleration of inflationary trends in our economy placed a heavy
burden on the Federal Reserve System and this Bank in the latter half of 1950.
Efforts to curb these inflationary forces with credit restraints applied through open
market operations were gravely hampered by a continuing failure to achieve agree­
ment with the Treasury Department on the proper coordination of debt management
and credit policies. This failure culminated in a public rupture on August 18 which
was still unhealed at the end o f 1950. (As you know, a general accord was reached in
early March o f 1951.)
Both the extent and the volume of our operations increased during 1950, com­
pared with the three preceding years. Follow ing the enactment of the Defense
Production Act o f 1950, the Board of Governors o f the Federal Reserve System
promulgated regulations dealing with loan guarantees for defense production, and
consumer and real estate credit. The administration o f these regulations and of
new Treasury controls over certain foreign assets served to broaden the scope of
our work. The larger volume reflected both the generally high and rising level
of economic activity throughout the year and the quickening tempo of the defense
program during the latter half o f the year.
The country’s expanding program o f military and economic preparedness may
further increase the demands upon our staff and facilities. W e are adding to our work­
ing force, however, and are fortunate in having many key members o f the staff com­
petent to meet the problems o f what may prove to be a rapidly changing situation.




Yours sincerely,

President,

C O N TE N TS
PAGE
Open

M arket

O p e r a t io n s

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1

T r a n s a c t i o n s i n G o v e r n m e n t s e c u r i t i e s ..................................................................................................................................
D i r e c t s e c u r i t y p u r c h a s e s f r o m t h e T r e a s u r y b y S y s t e m O p e n M a r k e t A c c o u n t ...............................

2
4

R e p u r c h a s e a g r e e m e n t s ........................................................................................................................................................................
S t a t i s t i c a l s u m m a r y ................................................................................................................................................................................

4
4

F i s c a l A g e n c y O p e r a t i o n s .....................................................................................................................................................................

5

P u b l i c d e b t ....................................................................................................................................................................................................
T r a n s a c t i o n s i n U n i t e d S t a t e s s e c u r i t i e s .............................................................................................................................

5
6

S a f e k e e p i n g o f s a v i n g s b o n d s f o r t h e p u b l i c .....................................................................................................................
T r a n s a c t io n s in s e c u r it ie s o f th e I n t e r n a t io n a l B a n k f o r R e c o n s t r u c t io n a n d
D e v e l o p m e n t ............................................................................................................................................................................................

6

R e c o n s t r u c t i o n F i n a n c e C o r p o r a t i o n ........................................................................................................................................
F o r e i g n A s s e t s C o n t r o l ........................................................................................................................................................................

7
7

7

L o a n s a n d C r e d i t s ............................................................................................................................................................................................

7

L o a n G u a r a n t e e s f o r D e f e n s e P r o d u c t i o n ( R e g u l a t i o n V ) .............................................................................
C o n s u m e r C r e d i t ( R e g u l a t i o n W ) ...........................................................................................................................................

7
8

R ea l E sta te

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

9

R e l a t i o n s .................................................................................................................................................................................................

9

C r e d i t f i l e i n s t a l l a t i o n s ........................................................................................................................................................................
C h e c k h a n d l i n g p r o c e d u r e s ...............................................................................................................................................................

10
10

P u b l i c I n f o r m a t i o n .........................................................................................................................................................................................

11

B a n k S u p e r v i s i o n ..............................................................................................................................................................................................

11

S y s t e m m e m b e r s h i p o f S t a t e b a n k s ........................................................................................................................................
R e s e r v e s ............................................................................................................................................................................................................
B a n k m e r g e r s a n d b r a n c h b a n k i n g ...........................................................................................................................................

11
11
11

B ank

Check

C r e d it

C o l l e c t io n

(R e g u la tio n

X )

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

12

A i r t r a n s p o r t a t i o n ...................................................................................................................................................................................

12

A r m o r e d c a r r i e r s e r v i c e .....................................................................................................................................................................
C h e c k R o u t i n g S y m b o l P r o g r a m .................................................................................................................................................

12
12

D e fe r r e d p o s tin g

13

Cash

O p e r a t io n s

le g is la t io n

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

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

13

C o u n t e r f e i t s ....................................................................................................................................................................................................

13

C u r r e n c y a n d c o i n s h o r t a g e s ............................................................................................................................................................

13

W i r e T r a n s f e r s o f F u n d s .......................................................................................................................................................................

14

F o r e ig n

O p e r a t io n s

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

14

A s s e t s h e l d f o r f o r e i g n a n d i n t e r n a t i o n a l a c c o u n t ......................................................................................................
C h a n g e i n s t a t u s o f f o r e i g n a c c o u n t s ...................................................................................................................................
L o a n s o n g o l d ..............................................................................................................................................................................................
G o l d m o v e m e n t s ........................................................................................................................................................................................
V i s i t s t o f o r e i g n c e n t r a l b a n k s ...................................................................................................................................................

14
14
16
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16

F o r e i g n c e n t r a l b a n k v i s i t o r s .......................................................................................................................................................
S t a f f G r o u p o n F o r e i g n I n t e r e s t s ..............................................................................................................................................

17
17

R e s e a r c h .....................................................................................................................................................................................................................

17

D o m e s t i c s t u d i e s a n d p u b l i c a t i o n s ...........................................................................................................................................
F o r e i g n a n d i n t e r n a t i o n a l s t u d i e s a n d p u b l i c a t i o n s ..............................................................................................
F o r e i g n m i s s i o n s a n d a s s i g n m e n t s .........................................................................................................................................
C o n t a c t s w i t h o t h e r o r g a n i z a t i o n s ...........................................................................................................................................
L i b r a r y ...............................................................................................................................................................................................................

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18
19
19
20

L i t i g a t i o n ..................................................................................................................................................................................................................

20

S e c u r i t y F i l e s P r o g r a m .............................................................................................................................................................................

20

E q u ip m e n t R e p l a c e m e n t P r o g r a m

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

20

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

20

B i w e e k l y p a y ..............................................................................................................................................................................................
S a l a r y a d m i n i s t r a t i o n ..........................................................................................................................................................................

20
21

H e a d O f f ic e s a l a r y l i a b i l i t y ............................................................................................................................................................
N u m b e r o f e m p l o y e e s ..........................................................................................................................................................................
S t a f f i n g s t u d i e s ...........................................................................................................................................................................................

21
21
22

E m p lo y e e

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

22

O t h e r p e r s o n n e l d e v e l o p m e n t s ......................................................................................................................................................

23

P ersonnel

b e n e fits

B uffalo B ran ch




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

23 ’

P e r s o n n e l ..........................................................................................................................................................................................................
C h e c k c o l l e c t i o n ........................................................................................................................................................................................

O p e r a t io n s

24
24

W i r e t r a n s f e r s o f f u n d s .....................................................................................................................................................................
C a s h o p e r a t i o n s ........................................................................................................................................................................................

24
24

L o a n s t o m e m b e r b a n k s .....................................................................................................................................................................
B a n k a n d p u b l i c r e l a t i o n s ............................................................................................................................................................

25
25

A c c o u n tin g p ro ce d u re

25

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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 1950

end o f the mild business recession that
1949, and the subsequent ex­
pansion o f economic activity, were reflected in
Federal Reserve System credit policies during
1950. The policy o f credit ease, announced publicly
in mid-1949, was superseded first by one of neutral­
ity and, later, when expansionary forces gained
the ascendancy, by one of restraint. Inflationary
influences gradually reasserted themselves in the
first six months of 1950; after the invasion of the
Republic o f Korea on June 28, 1950 and the
subsequent participation by Communist China on
an overt basis, they were intensified as the full
economic and military implications of these devel­
opments became better defined. It was clear that
the economy, already operating at near capac­
ity, would have to be accommodated to the
requirements of an enlarged and accelerated
defense, or possibly war, program. Accordingly,
the need for a stronger policy of credit restraint
became more urgent, and the general problem
of credit policy again became that of applying
restraint on an expanding supply of credit within
the limits imposed on the Federal Reserve System,
including those arising out of the rate problems
involved in its relations with the market for
United States Government securities.
To meet its responsibilities, as they were affected
by these developments, the Federal Reserve Sys­
tem promptly adopted a program o f both general
and selective credit control measures. In so doing,
it aligned itself with the announced policy of the
Government which, in its initial phase, was based
on fiscal and credit measures rather than full and
direct wartime controls. In alerting the public
and in explaining the direction of the steps to be
taken in the new economic setting which was
developing, the Federal Open Market Committee
and the Board o f Governors o f the Federal Reserve
System issued the following joint statement on
August 18, 1950:
h e

Tmarked most o f

The B oard o f Governors o f the Federal Reserve
System today approved an increase in the discount
rate o f the Federal Reserve Bank o f New Y ork from
1 y 2 per cent to 1% per cent, effective at the opening
o f business Monday, August 21.
W ithin the past six weeks loans and holdings of
corporate and municipal securities have expanded by
$1 14 billion at banks in leading cities alone. Such
an expansion under present conditions is clearly
excessive. In view o f this development and to sup­




port the Governm ent’s decision to rely in m ajor
degree fo r the immediate future upon fiscal and credit
measures to curb inflation, the B oard o f Governors o f
the Federal Reserve System and the Federal Open
Market Committee are prepared to use all the means
at their command to restrain further expansion o f
bank credit consistent with the p olicy o f maintaining
orderly conditions in the Government securities
market.
The B oard is also prepared to request the Congress
fo r additional authority should that prove necessary.
Effective restraint o f inflation must depend ulti­
mately on the willingness o f the American people to
tax themselves adequately to meet the Governm ent’s
needs on a pay-as-you-go basis. Taxation alone, how­
ever, will not do the job. Parallel and prom pt restraint
in the area o f m onetary and credit policy is essential.

The actions taken during the balance of the year
pursuant to this statement included:
(1 ) voluntary appeals to the commercial banks to
avoid speculative or otherwise inappropriate ex­
tensions o f credit,
(2) an increase in the discount rate at all Federal
Reserve Banks from 1 y2 to 1 % per cent,
(3) a strengthening o f the policy o f restricting addi­
tions to banks’ reserve balances to a minimum,
and a consequent firming o f market rates in
response to growing credit demands,
(4 ) the application o f selective controls over con­
sumer credit and mortgage lending (authorized
in the Defense Production A ct o f 1950), and
(5) the announcement late in the year o f an increase
in reserve requirements to become effective early
in 1951.
OPEN M A R K E T O PER A TIO N S

The character and scope of open market oper­
ations during 1950 were without precedent
in the history of the Federal Reserve System,
largely because o f the failure to achieve a greater
measure of harmony between debt management
and credit policies. This failure stemmed from
a seemingly irreconcilable cleavage of opinion
between the Treasury and the Federal Reserve
System as to the effectiveness of a program of
general credit control and the role that changes
in interest rates might play in that program.
The disagreement was evidenced by the failure
of the Treasury, in the second and third quarters
of 1950, to make the terms of its new obligations
compatible with the then current markets. The
effectiveness of a policy of credit restraint through
open market operations was seriously curtailed
l

2

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 1950

as these offerings failed to attract investors and
required System support to hold their place in
the market.
Nevertheless, open market operations continued
to be the keystone in the System’s structure of
credit controls, and they were carried out by this
Bank in accordance with the intent o f the Federal
Open Market Committee policy statement of June
28, 1949. W ithin the limits imposed by the main­
tenance of orderly markets and the need to support
Treasury refunding operations, transactions were
directed toward regulating the supply and avail­
ability o f reserve funds (1) by discouraging sales
o f short-term obligations to the Federal Reserve
Banks by commercial banks seeking to expand
credit, and (2) by increasing the cost o f reserve
position adjustments through application o f a
policy o f greater flexibility in market rates.
Transactions in G overnm ent securities

Efforts to reduce the availability of Federal
Reserve credit and to increase the cost of reserve
adjustments to commercial banks meant continu­
ation of the System’s postwar policy o f striving
for a less rigidly controlled Government security
market. As short-term rates were permitted to
respond within limits to growing demands for
credit, it became possible to reduce System
Account purchases at fixed rates and to increase
possibilities of making offsetting sales o f other
issues for which a demand existed at rising rates.
Large industrial corporations, for example, were
notable buyers o f these short-term securities
during the last five months of the year. The
limitations on System policy were especially
marked in periods of Treasury refunding opera­
tions during the second and third quarters of
the year, when debt management decisions failed
to support System efforts to restrict expansion
o f the credit supply.
Open market operations, therefore, fell short
o f open market policy goals, partly because of
Treasury reluctance to accept the consequences
(higher market rates on its obligations) o f Federal
Reserve attempts to avoid creating new reserve
funds by support purchases o f securities. This
Treasury reluctance was apparent even in the
beginning of the year, although during the first
quarter some concessions in maturities of new
offerings were made as interest rates firmed. In
the second quarter, while economic activity con­
tinued to rise, the Treasury decided to refund
issues due in June and July at terms (1^4 per




cent for 13 months) unattractive to investors
in the prevailing market. The announcement of
the refunding was made at an unusually early
date, thus in effect creating a need for substantial
Federal Reserve support operations until after
the refunding had been completed.
Thus, the outbreak o f aggression in Korea,
which came at a time of rising business activity
and expanding credit, found the System with
little area of maneuver for open market opera­
tions. Soon the difference in policy between the
Treasury and the Federal Reserve broke into the
open with conflicting announcements on August
18. As I have noted, the Board o f Governors
and the Federal Open Market Committee cited
the need for a program o f credit restriction and
stated their determination to use all the means
at their command to carry it out; the Treasury
announced a September-October refunding on the
same terms that had proved unacceptable to
investors in mid-year and did so with full
knowledge of the public statement that the Fed­
eral Reserve was issuing. Open market trans­
actions were nonetheless carried out in the spirit
o f the August 18 policy statement: although
System Account purchases were made unreserv­
edly o f the maturing issues which were exchange­
able into an unattractive obligation, partially off­
setting sales were made at declining prices o f other
securities in the System portfolio. Under these
conditions, holders of the maturing issues pre­
ferred to sell them to the System and to purchase
better yielding securities in the market, thereby
doing their own refunding. Meanwhile, the Treas­
ury was of course protected against the possibility
that an embarrassingly large amount o f the matur­
ing issues might be presented for redemption by
disappointed holders. About 18 per cent ($2.4 bil­
lion) of the maturing obligations were redeemed
for cash, compared with from 3 to 8 per cent of
refundings earlier in the year. From August
18 to September 21, the System Account pur­
chased a total o f $8.5 billion ($8.0 billion of
the four maturing issues) and sold or redeemed
$7.8 billion. Most of the sales were made at a
loss, of course.
B y November, when the next refunding opera­
tion was announced, market rates on one-year
Treasury obligations had risen
of 1 per cent.
The obligation chosen for the December-January
refunding offer was a five-year 1% per cent note.
The terms were consistent with the prevailing
market and were also designed to improve the

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

structure of the debt (which was disproportion­
ately very short-term) and to furnish more oppor­
tunities for restrictive credit policies to be exe­
cuted in open market operations. Probably
because the maturity of the new note was longer
than many corporate holders o f the maturing
issues found desirable, and because year-end
preferences for liquidity were strong, the refund­
ing required System market support. Federal
Reserve purchases during the operation totaled
$2.6 billion, against which offsetting sales of
other securities were made in the amount of
$1.3 billion. Redemptions ($1.1 billion out of
$8.0 billion maturing) were larger than “ normal.”
The conflict in policies between the Treasury
and the Federal Reserve during the refunding
operations of the second and third quarters greatly
increased the volume o f transactions for System
Account and created considerable nervousness
among institutional investors in Government
securities. But these considerations were less im­
portant than the distressing evidence that the
Treasury and the Federal Reserve were working
at cross purposes, a situation which made effective
use o f open market operations almost impossible.
Early in 1950, market transactions in longer
Y ie ld s o n U . S. G overn m en t Securities

1946

1947




1948

1949

19 5 0

3

term Treasury bonds also reflected economic con­
ditions and System policy. In accordance with
open market policy announced in June 1949 and
the general program o f credit ease which was
applied in the latter half o f that year, the System
had withdrawn from the long-term Treasury bond
market. However, as economic conditions began
to reverse themselves toward the year-end, long­
term interest rates generally tended to move lower
and the rate on the longest-term 2M per cent
>
restricted Treasury bond declined to a yield of 2.23
per cent. Unable to temper this tendency by
prompt and adequate increases in short-term mar­
ket rates, the System early in January 1950 re­
entered the market as a seller o f long-term
Treasury bonds, selling them at successively lower
prices in an effort to absorb reserves while, at
the same time, bringing about a long-term rate
structure in the Government security market—
and indirectly in other bond markets— which
would be more in keeping with the emerging
economic situation.
Throughout the first eight months of 1950 there
was a generally good net demand for intermediate
and long-term Treasury bonds on the part of a
broad group of nonbank investors, prominent
among which were trust accounts and various pen­
sion and State funds. There developed a relative
scarcity of other suitable outlets for funds, a
declining prospect of early long-term borrowing
by the Treasury, and comparatively light offerings
of long-term bonds in the market. The Federal
Reserve System was therefore able to reduce its
holdings o f long-term Treasury bonds by approxi­
mately $2.5 billion in the first three quarters of
1950, uncovering fresh investment demand at
successively lower prices while maintaining an
orderly market and investor confidence. During
this nine-month period, yields on the longest-term
restricted bonds rose from 2.23 to 2.44 per cent.
The open break between the Treasury and the
System on August 18 and the subsequent rise
in short-term yields created uncertainty about
the future course of price movements in Govern­
ment securities. Soon offerings of long-term bonds
began to exceed market demand and the System
withdrew from the market as a seller. Chief among
the sellers were life insurance companies and
savings banks, which were seeking funds to meet
new loan and investment commitments; the special
offerings o f Series F and G Savings Bonds dur­
ing the last quarter may also have encouraged

4

PR E SID EN T’ S R E P O R T TO D IR E C T O R S FO R 1950

some selling. System Account operations were
resumed early in September, but this time on the
buying side o f the market, and support purchases
were continued for the balance of the year.
D irect secu rity purchases from th e Treasury
b y System O pen M arket A ccoun t

On June 30, 1950 the Federal Reserve System’s
temporary authorization to purchase directly from
the Treasury up to $5 billion of direct or fully
guaranteed Government securities was extended
by Congress for another two years. This authority,
which was first obtained under special wartime
legislation enacted in 1942, was supported by the
Federal Reserve System and granted by Congress
solely on a basis which contemplated its use for
temporary purposes rather than permanent financ­
ing. In the past, use of this authority to purchase
special certificates of indebtedness has proved
helpful in the conduct of open market operations
by minimizing short-run fluctuations in member
bank reserve positions and in the maintenance of
orderly conditions in the Government security
market. It has also enabled the Treasury to
operate with a somewhat smaller cash working
balance.
On two occasions during the year purchases
were made for the System Open Market Account
of special certificates o f indebtedness directly
from the Treasury to avoid overdrafts at the
Federal Reserve Banks arising from short-term
fluctuations in the Treasury’s cash position at
or near tax dates. The certificates purchased
carried a rate o f *4 per cent and matured at the
end o f the month in which they were issued but
were redeemable on demand. They were purchased
in the amounts of $108 million and $105 million
in mid-March and mid-June, respectively, and
were retired within a period o f two days or less
following their issuance.
R epurchase agreem ents

In support o f a flexible rate policy, increased
use was made by the Federal Reserve Bank of
New Y ork o f the repurchase agreement authority
granted by the Federal Open Market Committee
to all Federal Reserve Banks. This authority
permits the individual Federal Reserve Banks to
buy short-term Government securities from quali­
fied dealers under an arrangement allowing
the dealers to repurchase those securities within




fifteen days. The extension o f repurchase agree­
ments at the initiative of this Bank at times of
money market stringency assisted qualified dealers
in carrying positions in short-term Treasury
obligations which had the effect of reducing, and
at times, obviating, the need for outright System
Account purchases. W ith the rise in the discount
rate on August 21, 1950 at the Federal Reserve
Bank of New York from l 1 to 1% per cent, the
/*
differential between that rate and market rates
widened but, because o f the character o f Treasury
financing operations, the higher market rates were
not reflected in coupon rates on new issues of
Treasury obligations eligible for such agreements.
Since coupon rates failed to advance with the rise
in borrowing costs, there was a tendency for the
carrying cost to dealers on short-term Treasury
obligations to increase and to be prohibitive when
the money market was temporarily tight. In
anticipation of acute situations of this kind during
periods o f money market stringency, the Federal
Open Market Committee early in 1950 had revised
the authority to the Federal Reserve Banks gov­
erning the rate on repurchase agreements with
qualified dealers in Government securities, relating
it to the issuing rate on Treasury bills rather than
to the discount rate. This instrument of Federal
Reserve policy proved to be a particularly helpful
adjunct to open market operations in the latter
half of the year in carrying out a policy o f credit
restraint emphasizing rate flexibility.
Statistical summ ary

During the year, under the direction of the
Federal Open Market Committee, this Bank pur­
chased in the open market for the twelve Federal
Reserve Banks, Government securities having a
total face value o f $19.8 billion and sold, or
presented for redemption, securities having a face
value of $18.0 billion. Thus, the year’s transactions
resulted in an increase of $1.8 billion in System
Account holdings of United States Government
securities. In addition, $53 million o f United States
Government securities were held under repurchase
agreements by this Bank over the year-end, bring­
ing the total increase in United States Government
securities held by the Federal Reserve System to
approximately $1.9 billion. The effect on member
bank reserves of this increase and o f other prin­
cipal factors affecting reserves is shown in the fol­
lowing table:

F E D E R A L R E SE R V E B A N K OF N E W Y O R K
Factors Affecting M em ber Bank Reserves— 1950
(In billion s)

F actors o f increase
Increase in Federal Reserve holdings of
U. S. G o v ’t, s e c u r itie s ....................................
$1.9
Increase in other Federal Reserve cred it................. 8
Total Federal Reserve cre d it...............
Decrease in Treasury deposits at Federal Re­
serve Banks and miscellaneous other factors

concerned primarily with the issue and redemption
of United States savings bonds, Treasury savings
notes, and special issues. The following table
summarizes the financing operations in United
States securities during 1950:
Marketable Issues

$2.7
.2

5

(In m illions)
C ertificates, n otes and b o n d s :
E x ch a n g e d

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

$39,977

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

4 ,145

$2.9

R ed eem ed

$1.7
.1

T r e a s u ry b ills :

F actors o f decrease
Decrease in gold stock .......................................
Increase in money in c ir c u la tio n ......................

$44,122
Issu ed (a n d red eem ed ) on e x ch a n g e ............

$1.8
Difference in factors
Increase in required re s e r v e s ............................
$ .9
Increase in excess re s e r v e s .......................................... 2
Increase in member bank res e rv e s ...................

$12,489

Issu ed f o r cash .....................................................

$40,642

R ed eem ed f o r cash ..............................................

39,327

Non-Marketable Issues
(In m illions)

$1.1
Sales

Total System Account holdings amounted to
$20.7 billion at the end o f 1950 as compared with
$18.9 billion at the end of 1949. Treasury bonds
declined by $2.6 billion, Treasury certificates by
$3.9 billion, and Treasury bills by $3.6 billion;
Treasury notes increased by $11.9 billion.
This Bank’s share in the total Government
securities held by the System Open Market A c ­
count amounted at the year-end to $4.8 billion,
compared with $4.5 billion at the end of 1949.
The Federal Reserve Bank of New Y ork bought
and resold for its own account, under repurchase
agreements, a total o f $0.5 billion short-term
Treasury obligations during the year.

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

R ed e m p tio n s

$9,949

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

8,425

The gross public debt as o f the close of business
December 31, 1950 amounted to $256.7 billion, as
compared with $257.1 billion at the end of 1949.
The amount of marketable issues outstanding at
the close of business December 31, 1950 was $152.4
billion, compared with $155.1 billion for 1949. The
net decrease o f $2.7 billion reflected the redemp­
tion of the unexclianged portions of issues which
matured or were called for payment during the
year.
G ross D e b t o f th e U n ited States G overn m en t

FISCAL A G E N C Y O PER A TIO N S

B IL L IO N S
OT DO LLARS

OF

T « e A S U « Y O E P A R T U C N T O A TA

P u blic debt

Refunding operations in marketable securities
of the United States during 1950 consisted princi­
pally of eight issues o f certificates o f indebtedness,
four issues of Treasury bonds, and one issue of
Treasury notes, aggregating $44 billion. There
were no cash offerings of marketable securities
other than the usual weekly offering o f Treasury
bills in an amount sufficient to meet maturing
bills, except that, for the 13-week period beginning
April 13, 1950, each weekly offering was for $100
million more than the amount of the maturing
issue. Non-marketable securities operations were




250

200

ISO

50

1941

1942

1943

1944

194 5

1946

1947

1948

1949

1950

6

P R E SID EN T’ S R E P O R T T O D IR E C T O R S F O R 1950

Transactions in U nited States securities

Acting as fiscal agent of the United States for
the issue, exchange, transfer and redemption of
marketable securities, we handled during 1950
2,820,366 pieces having a face value o f approxi­
mately $257 billion. The comparable figures in
1949 were 2,558,999 pieces with a value o f about
$218 billion.f
A ctivity in telegraphic transfers o f United
States marketable securities reached new highs
in August and September o f 1950, as shown in
the table below. The exceptional volume o f trans­
fers during these months was due primarily to
the unusual market situation which developed in
connection with the Treasury refunding of $13.6
billions o f certificates o f indebtedness and bonds
with two issues o f l 1 per cent 13-month Treasury
/^
notes.
Transfers
(Outgoing)

Pieces

Face Amount
(In millions)

December 1949* . . . .

2,850

25,892

3,914

36,229

4,788

35,561

2,503

1949

1950

........

10,408,842

11,524,857

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

11,605,993

12,304,603

Reissues and corrections.. ........

892,545

907,800

89,587

84,361

83,347*

70,767

U. S. Savings Bonds:
Redeemed

Armed Forces Leave Bonds:
Redemptions ..................... ........
Savings Notes:

3,137

September 1950 . . . ..

Pieces Handled

$1,614

August 1950 ........... . .

transfers of securities during 1950 amounted to
$136,590 as compared with $94,695 during 1949.
As can be seen from the table below, transac­
tions in non-marketable issues showed an increase
for 1950 over 1949 in volume of pieces handled,
although dollar volume declined when Treasury
savings notes became relatively less attractive as
short-term interest rates moved up.

Issued, redeemed and reissued..

23,080,314

* The 1949 report did not include 2,422 pieces redeemed at the Buffalo
Branch.

(Incoming)

D ollar V olu m e H andled

September 1948* .. . .

4,079

21,938

$1,819

August 1950 ........... ..

4,576

26,853

3,200

September 1950 . . .

4,818

32,370

2,817

1949

Since March 1, 1948, when telegraphic transfer
facilities were extended to include all outstanding
unmatured marketable bearer securities of the
United States, there has been an increase in vol­
ume which is shown in the following comparisons
for the years 1948,1949 and 1950:
Pieces

Face Amount
(In millions)

1948

26,808

209,241

$14,886

1949

32,256

269,529

$1,200,644,210

$1,328,450,235

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

805,899,480

968,156,050

Reissues and corrections

212,283,910

249,548,220

19,285,925

19,102,125

38,935

328,677

22,193

Armed Forces Leave Bonds:
Redemptions ...................
Savings N otes:
Issued, redeemed and re­
issued ...........................

3,925,008,575*
$6,163,122,100

2,193,649,750
$4,758,906,380

* The 1949 report did not include the dollar volume of $17,549,950 redeemed
at the Buffalo Branch.

17,743

1950

1950

U. S. Savings Bonds:
Redeemed

* Previous monthly high.

Transfers
(Outgoing)

24,892,388

(Incoming)
1948

37,509*

198,625

$14,809

1949

29,200

167,515

13,411

1950

35,285

219,956

20,114

*
Incoming transfers during 1948 were unusually high and resulted from
sales of Government securities to meet the several increases in reserve require­
ments that year.

Fees collected by this Bank and credited to the
Treasurer of the United States for outgoing wire
t The totals for 1949 are lower than those given in last year's report, where
some non-marketable securities were incorrectly included.




Safekeeping o f savings bonds fo r th e public

A t the close o f business December 31, 1950, this
Bank held in safekeeping 555,387 bonds having
a total maturity value o f $69,531,355 for the
account o f 29,273 depositors, as compared with
560,994 pieces with a maturity value of $67,628,450
for the account o f 32,858 depositors at the close
of business December 31, 1949. The decrease in
the number o f depositors resulted from the con­
solidation o f accounts. During 1950, 87,475 pieces
were received and deposited and 93,082 piece.®
were withdrawn and delivered.

F E D E R A L R ESER VE B A N K OF N E W Y O R K

Transactions in securities o f the International
Bank fo r R econstruction and D evelopm en t

Tlie Bank, as fiscal agent of the International
Bank for Reconstruction and Development, re­
deemed $100 million of its 10-year 2*4 per cent
bonds due July 15, 1957, which were called for
payment February 17, 1950, and issued a like
amount o f 2 per cent serial bonds of 1953-62. The
following table shows the volume of transactions
handled for the International Bank during 1950
as compared with 1949:
P ieces H an d led
1949

1950

D olla r V o lu m e H an d led
1949

1950

-0-

93,881

- 0-

$ 100 ,000,000

Redemption &
Exchange of
Securities . 15,967

52,931

$30,636,000

105,707,000

15,967

146,812

$30,636,000

$205,707,000

Issue...............

R econstruction Finance Corporation

The volume o f transactions effected by this
Bank as fiscal agent for the Reconstruction
Finance Corporation decreased during the year
to such an extent that the R.F.C. Custody Depart­
ment was disbanded on August 23, 1950. There­
after all custody work for the Corporation was
handled by our Safekeeping Department and dis­
bursements for the account of the Corporation
were handled by the Collection Department.
Since November 1950, the Reconstruction Finance
Corporation has opened several letters of credit
aggregating about $54 million and has authorized
this Bank to pay drafts drawn thereunder.
Foreign Assets Control

On December 17, 1950, the Secretary o f the
Treasury authorized and requested the Federal
Reserve Bank of New York, as fiscal agent of
the United States, to act on behalf of the Treasury
Department in the administration of regulations
issued on that date to block assets in this country
of Communist China and North Korea. As a
result, the Foreign Assets Control Department was
established in the Foreign Function under the
direct supervision of Norman P. Davis, Assistant
Vice President. This department has been func­
tioning along the general lines of the Foreign
Funds Control Department which, until the sum­
mer o f 1949, acted on behalf of the Treasury in
the administration of the blocking control incident
to W orld W ar II. In addition to handling inquiries
from the public concerning the new freezing regu­
lations and distributing pertinent documents, this




7

department, under authorization from the Treas­
ury, issues and denies licenses.
In his letter of instruction and authorization,
Secretary Snyder provided that reimbursement
will be made by the Treasury Department for
services rendered and expenses incurred by us
in these operations.
LOANS AN D CRED ITS

There was a decrease in both the number of
advances made to member banks and in the
amount of their daily average borrowings during
the last year, as compared with 1949. In 1950,
2,114 advances, aggregating approximately $7.7
billion, were made to 274 banks, all secured by
obligations of the United States, compared with
2,257 advances of some $12.6 billion to 309 banks
in 1949. Daily average borrowings in 1950 were
$44.2 million against $58.2 million the previous
year. Outstanding advances in 1950 ranged from
$1.4 million on January 2 to a high o f $442.9
million on December 28 which exceeded the 1949
high by $4.6 million. As in 1949, the 1950 peak
borrowings lasted for only one day and repre­
sented largely the borrowings o f the New York
City banks to adjust their reserve balance posi­
tions, which were under temporary strain, prin­
cipally as a result of an outflow of funds to other
areas. Outstanding advances to member banks
located outside of New Y ork City reached a high
o f $46.5 million in 1950, as compared with a high
o f $52.5 million in 1949.
During the year, one application was received
for an industrial working capital loan under sec­
tion 13(b) o f the Federal Reserve A ct from a
small soft drink bottling concern located in New
York State. The loan was made on June 13, 1950,
in the principal amount o f $30,000, evidenced by
a series of notes maturing over a period of
approximately twT years, with final maturity on
o
July 1, 1952. The loan is secured by diversified
collateral, including liens on certain plant ma­
chinery and equipment, and as o f December 31,
1950 the loan principal amount had been reduced
to $26,574.87.
Loan Guarantees fo r D efen se Production
( R egulation V )

The so-called V-Loan program o f W orld W ar
II was virtually reactivated on September 27,
1950 with the issuance o f a new Regulation V by
the Board o f Governors. The new guaranteed
loan program generally follows the pattern of

8

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 1950

the former one. Its objective is to facilitate the
financing— and thus the performance— o f Gov­
ernment defense contracts by guaranteeing loans
made by banks to contractors and subcontractors.
The program is authorized by section 301 of the
Defense Production A ct o f 1950 and Executive
Order No. 10161 o f September 9,1950, which desig­
nates the Federal Reserve Banks to act as fiscal
agents o f the United States in behalf of the follow ­
ing guarantors: The Departments of the Army,
the Navy, the A ir Force, Commerce, the Interior,
and Agriculture, and for the General Services
Administration.
There has been no delegation o f authority— as
there was in the former program, within certain
limitations— to the Federal Reserve Banks to
issue guarantees without specific authorization
o f the guaranteeing agency. However, this Bank’s
work includes processing applications for guar­
antees, reviewing the credit factors involved,
preparing reports for the guarantor, making
recommendations to the guarantor, issuing author­
ized guarantees, and servicing outstanding guar­
antee commitments. B y the year-end, we had
received 42 applications for guarantees of pro­
posed loans aggregating some $34 million; of
this number, eight guarantees of loans totaling
$4.5 million had been authorized and issued, two
had been declined by the guarantors, and the
remainder were in various stages o f processing.
This modest development o f the present guar­
anteed loan program, in contrast to our experience
during the initial stages o f the W orld W ar II
program, reflects primarily the moderate rate of
expansion o f military procurement in 1950, com­
pared with the all-out effort o f 1942. Furthermore,
many banks of the district have been willing to
provide the defense production financing of large
and well-established industrial concerns without
guarantees. About half of the applications re­
ceived have requested guarantees for 90 per cent
of the V-loans proposed.
The Comptroller General made a ruling in May
1949 to the effect that where an indebtedness by a
contractor to the Government arises by reason of
repricing o f a contract, that indebtedness may be
recovered from the bank which has financed per­
formance o f the contracts under an assignment of
the proceeds. The ruling has caused a great deal
of apprehension in the banking community and
our Legal Department drafted a complete remedial
revision of the Assignment o f Claims Act o f 1940
as an alternative to a draft prepared by a com­




mittee o f the American Bankers Association. A
bill to remove this difficulty was introduced in
Congress early in March 1951.
Consum er C redit (R egulation W )

On September 8, 1950, the Board of Governors
reinstated the control o f consumer instalment
credit through a new Regulation W effective
September 18, 1950. (The regulation is authorized
by Section 601, Title IV, of the Defense Produc­
tion Act of 1950 and Executive Order No. 8843
of August 9, 1941.) The present authority may
be terminated by the President, or by concurrent
resolution of the Congress, before the statutory
expiry date o f June 30, 1951.
Regulation AY was first issued in 1941 and was
effective through October 1947. It was reinstated
in September 1948 and expired June 1949. The
new regulation is much the same as the control that
expired in 1949, except that credit for home
improvement and repair is now included in the
restrictions imposed. It is directed at controlling,
through restricting maximum maturities and
loan values, instalment sales and instalment loans
in a principal amount of $2,500 or less, arising
out of the sale o f certain items of consumer goods
designated as “ listed articles” (instalment credit
in a principal amount o f $5,000 or less involved
in the sale of passenger automobiles is regulated).
It also covers, with certain exceptions, instalment
loans o f $2,500 or less even though the proceeds
are not used to buy “ listed articles.”
The regulation requires all persons engaged
in a business subject to its provisions to register
with the Federal Reserve Bank o f the district
in which the main office of the business is located.
B y December 31, 1950, this Bank had received
approximately 14,700 registration statements.
Our enforcement activities began about midOctober; by the year-end we had made 777 exam­
inations o f registrants, and found 15 registrants
had committed significant violations. Our enforce­
ment work has included corresponding or confer­
ring with violators and obtaining assurances of
future compliance. W e expect to examine about
25 per cent o f all classes o f registrants, except
supervised lenders, before the expiry date of
June 30, 1951. The various Federal and State
agencies supervising lending institutions have
promised to cooperate with us in our enforcement
efforts. They will check for compliance with the
regulation in the course o f their regular exam­
inations o f lenders.

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

Public understanding of the objectives o f the
control and of its application to consumer instal­
ment credit is considered an important phase of
the administration and enforcement o f the regu­
lation. This end has been sought during examina­
tions, participation in group meetings of bankers,
trade associations and others, and in replies to
inquiries from registrants and the press.
G ro w th o f R e a l E sta te and C on su m er C redit
B IL L IO N S

B IL L IO N S
O F D O LLA R S

OF D O LLAR S

50 |
------------

50

N O N FA R M
M O R TG A G E D E B T
O U TS TA N D IN G

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

End of year figures; nonfarm mortgage debt for 1950 partly estimated.

R eal Estate C redit ( Regulation X )

W e assumed new responsibilities during the
year when the Board of Governors of the Federal
Reserve System issued Regulation X , effective
October 12, 1950, under authority of the Defense
Production A ct o f 1950 and the President’s Execu­
tive Order No. 10.161 dated September 9, 1950.
The regulation was designed to lessen inflationary
pressures by reducing the record volume of resi­
dential construction and the further expansion of
mortgage credit, as well as to free men and mate­
rials for defense requirements. Similar restric­
tions on Government-aided residential financing
were imposed by the Administrator o f the Hous­
ing and Home Finance Agency and by the Vet­
erans Administration, also effective October 12,
1950. The combined restrictions on the use of
mortgage credit were intended to permit the con­
struction o f not more than 800,000 to 850,000 new
housing units in 1951, as compared with approxi­
mately 1,400,000 started during 1950.



9

On October 16, 1950, the Real Estate Credit
Department was established in our Loans and
Credits Function to administer the regulation in
the Second Federal Reserve District.
W e immediately started an educational pro­
gram answering questions on the applicability of
the regulation. During the remainder o f the year
we participated in ten meetings and panel discus­
sions in the field for the purpose of increasing the
public’s knowledge and acceptance o f the regula­
tion. Various supervisory authorities, such as the
Comptroller o f the Currency and the State Super­
intendent o f Banks, will cooperate with us,
through spot checks of transactions subject to the
regulation, in the course of their regular periodic
examinations o f financing institutions under their
supervision. They will report violations to us, as
well as actions they have taken to assure future
compliance. In addition to this liaison with super­
visory authorities, we will examine unsupervised
lenders to insure compliance with the regulation.
On November 3, 1950, the board of directors
appointed a real estate credit advisory committee
to assist in the administration of the regulation.
The committee consists o f George C. Johnson,
President, The Dime Savings Bank of Brooklyn
(Chairman o f the Committee); Milford A. Vieser,
Vice President, The Mutual Benefit Life Insur­
ance Company, Newark; and Harry Held, Vice
President, The Bowery Savings Bank, New York
City. The members o f the committee have had
wide experience in all phases of the real estate
lending field and have been of invaluable assist­
ance to us in the administration o f the regulation.
Early in 1951, Regulation X was revised twice
by the Board of Governors, once to make all resi­
dential construction credit subject to the regula­
tory terms and later to include some types of
nonresidential construction.
In early February 1951, the administration of
Regulations W and X was consolidated in the
Real Estate Credit Department, which was there­
upon renamed the Real Estate and Consumer
Credit Department.
B A N K R E LA TIO N S

The need for a better public understanding of
Federal Reserve actions in the field o f credit con­
trol and monetary policy guided much of our bank
and public relations work. In the course o f their
regular visits to member and nonmember banks,
our representatives were called upon to explain

10

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 1950

and discuss tlie steps that were being taken in the
continuing battle to curb inflation. W e also under­
took to explain and clarify the new Regulations
W and X , both in the regular course of our visits
and by assisting in making arrangements for
panel discussions before various banking organi­
zations in the district.
During the year, we continued the program
started early in 1949 o f holding biweekly meet­
ings with groups of bankers. Our officers and rep­
resentatives also increased the number of their
appearances before public organizations, particu­
larly the service clubs. In short talks, we en­
deavored to outline the basic functions and pur­
poses of the Federal Reserve System, particularly
our current anti-inflationary policies. In the latter
part o f the year, we combined these talks with
showings of the new Encyclopaedia Britannica
film on the Federal Reserve System.
In a further effort to increase public knowledge
and understanding o f the Federal Reserve System,
our representatives called on teachers o f money
and banking in colleges in the district to acquaint
them with the various publications and periodicals
available to them as teaching aids, and to invite
them and their students to visit the Bank. On
several occasions, our representatives were asked
to talk to student groups.
H igh school and college students continued to
make up the majority o f visitors to this Bank.
During 1950 over 3,000 visitors were guided on
tours o f the Bank. These visitors consisted of:
1,268 high school students, 927 college students,
608 bank employees and 470 from other fields.
Our representatives also called on editors and
publishers of daily newspapers in the district to
acquaint them with the availability o f various
press releases and publications.
In the course of our semiannual visits to each
bank in the district, we have continued to aid them
with operating problems, particularly with those
which affect our own operations in behalf o f banks.
W e gave assistance, fo r example, in such matters
as transportation delays involving checks or cur­
rency, procedural changes requested by our
operating departments, and the use o f the check
routing symbol.
C redit file installations

Several years ago we cooperated with the New
Y ork State Bankers Association in the develop­
ment of a Farm Credit File and assisted in making
pilot installations of this file in a number o f banks.



Late in 1949 we renewed our offer to assist mem­
ber banks in installing the files. In the course of
these installations, it soon became evident that a
simplified commercial credit file was also needed.
A special committee of the New York State
Bankers Association developed such a file and
again we assisted in trial installations in a number
of banks. The new file was form ally introduced
by one o f our representatives at the New York
State Bankers Association’s Farm Credit and
Bank Operations Conference held at Syracuse
in the fall. Following that meeting we mailed a
sample copy to each member bank, offering to
supply the folder at cost and the forms free of
charge. The orders received have far exceeded
our expectations. W e now have one representa­
tive in the field full time, and we are training
another, to assist member banks with the initial
installation o f credit files and to review existing
files and loan supervision techniques for the pur­
pose of making suggestions for their improve­
ment. During the past year, we assisted with
credit file installations in 36 banks; one man spent
a week or more in each bank. W e also reviewed
the files in 44 other member banks.
C heck handling procedures

Last year I reported our intention of engaging
the services of a management expert to assist us
in establishing, if possible, some basic check opera­
tion standards and procedures for banks of varied
size. W e recently received an interim report from
the management engineering firm, and we have
distributed it to representative bankers for study
and comment. The gist of this report is that the
whole problem is more complicated than we had
expected, in that efficiency is substantially influ­
enced by such intangible factors as quality o f per­
sonnel and supervision, staff morale and indivi­
dual aptitudes. The report, however, recommends
some further studies to be made by us with respect
to comparative procedures and operating times
and a more detailed study o f available mechanical
equipment to be made by the management engi­
neers. W e are convinced, as a result o f these
studies, that while there is no one easy solution
to the problem there is much to be gained from a
continuing study.
In an effort to facilitate the collection o f checks
for member banks, our representatives have en­
couraged the adoption o f county clearing arrange­
ments. Use of this clearing arrangement permits
banks within a county, or a small group of coun­

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

ties, to send their checks directly to each other,
with settlement made on our books, while return
of items is also made directly between the banks
involved. During the year two such arrangements
were established, bringing to 21 the total now in
operation. During the year, we assisted the mem­
bers of one county clearing arrangement to be­
come members of the county clearing arrangement
in an adjoining county, thereby increasing the
value of the scheme for all the members. W e have
continued to make available to member banks, at
their request, our specialist in check handling
operations. He made surveys at 75 banks during
the year, and was a featured speaker at the annual
Farm Credit and Bank Operations Conference of
the New Y ork State Bankers Association.
PU BLIC IN FO R M A T IO N

I reported last year that we had embarked upon
an affirmative program o f public information de­
signed to improve understanding of the System
and its policies. This program looks beyond the
mere use of the devices of publicity to effective
work in the public interest by this Bank and the
System, and the goal of creating an understand­
ing o f what we are doing and why we are doing it.
W e have, therefore, tried to reach more people
more effectively with our publications, films, and
speakers.
A t the end o f the year a Division of Public In­
formation was created in the Secretary’s Office
and an economist from the Research Department
was added to the staff. The work of this Division
is largely one o f assistance to all the Departments
o f the Bank in gaining the widest possible public
acceptance or approval of Bank and System poli­
cies and actions; some o f these services, therefore,
are noted in other sections o f this report.
B A N K SU PERVISION
System m em bership o f State banks

On January 1, 1950, there were 360 State banks
in this district, of which 244 were members of the
Federal Reserve System. During 1950, no State
bank was admitted to membership. On the other
hand, 8 State member banks were taken over by
other banks and one withdrew from membership.
A t the end o f 1950, there were 347 State banks, of
which 235 were members. One application for
membership was pending at the end o f the year.
During the year, Congress did not act on the
System-approved bill to reduce the minimum capi­




11

tal required under Federal law for the establish­
ment o f out-of-town branches to amounts compar­
able with those required under the State law. In
1949, 3 banks withdrew from membership because
they were unable to meet the minimum capital re­
quirements under Federal law to establish out-oftown branches. In 1950, one bank withdrew for
the same reason and another is contemplating
withdrawal; in addition, a national bank converted
into a State nonmember bank for the purpose of
taking over a national bank in another community
and continuing the office o f that bank as a branch.
All of these banks had sufficient capital to meet
New Y ork State requirements for the establish­
ment o f out-of-town branches.
Reserves

New York City lias long been classified as a
central reserve city. However, banks in certain
sections of the city have been permitted to carry
reserves proportionately lower than those re­
quired of central reserve city banks. For many
years prior to 1949 New Y ork City member banks
in the borough o f Manhattan carried reserves
required of central reserve city banks; in the
boroughs of Brooklyn and The Bronx, those of
reserve city banks; and in the boroughs o f Queens
and Richmond, those of country banks.
As a result o f action by the Board o f Governors
permitting certain banks in Philadelphia to main­
tain the reserves required of country banks, we
were requested in the early part of 1949 by banks
in midtown Manhattan that they be permitted to
carry similar reserves. A fter considering the mat­
ter we recommended to the Board of Governors
that, in view of their location and the character of
the business transacted by them, the nine member
banks (since reduced to eight) located above
Canal Street in Manhattan, and having no branch
in downtown Manhattan, be permitted to carry the
reserves required to be maintained by reserve city
banks. In September 1949, the Board of Gover­
nors granted this permission.
At various times in the months that followed
three member banks in Brooklyn, one in The
Bronx, and one in an outlying district o f Buffalo,
were granted permission to carry reserves re­
quired to be maintained by country banks rather
than those of reserve city banks.
Bank mergers and branch banking

During the past three years, the number of bank
mergers and new branch offices has increased in
this district and has been highlighted by the

12

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 1950

absorptions o f nine New York City banking insti­
tutions by other banks. The trend has not been
confined to New Y ork City or to large banks, how­
ever. Consolidations have taken place and new
branches have been established throughout the dis­
trict, and talk o f more mergers is widely current.
During 1950, a total o f 22 commercial banks,
member and nonmember, were taken over by other
banks in the Second Federal Reserve District, as
compared with 13 taken over in 1949. The
mergers in these two years enabled the continuing
banks to acquire additional deposits aggregating
$786,000,000 and 76 additional branches. Through
the absorption since 1948 o f nine New Y ork City
banks alone, the continuing banks acquired threequarters of a billion dollars in additional deposits
and 48 additional branches.
C H ECK COLLECTION

The annual volume o f commercial checks col­
lected by this Bank again reached a new peak in
1950, when ~we collected approximately 350 million
checks as compared with 332 million in 1949, the
previous high. During the year we were able to
achieve further operating economies and to obtain
increased efficiency of the staff by completing the
transfer o f all commercial check handling opera­
tions to one floor o f our building.
A substantial unexpected increase in volume
during the last three months o f 1950, together with
an increase in the rate o f personnel turnover, how­
ever, put us in the position of needing additional
manpower at a time when it was not readily avail­
able. As a result, it was not always possible to
process all checks on the day of receipt and some
debit float w created despite the complete coop­
ras
eration o f our staff through overtime work. This
condition was gradually overcome after the turn
o f the year when, with sporadic exceptions, the
volume o f checks received returned to more nor­
mal levels.
Although we opposed the move, in principle, it
was decided as a System matter that, in order to
correct certain inequities in Federal Reserve
Banks’ schedules o f availability o f credit for cash
items and to reduce the sorting requirements for
member banks, all Reserve Banks on January
12, 1951 should reduce from three to two busi­
ness days the maximum period o f deferment of
credit for cash items. A t the same time, the
Eeserve Banks announced that all telegrams relat­
ing to cash items deposited for collection through
the Federal Reserve check collection system by




member banks would be sent, to the extent prac­
ticable, over the Federal Reserve leased wires
without cost to the member banks. Previously,
these telegrams had been charged to such banks
at commercial wire rates. These liberalizations of
the use o f Federal Reserve leased wire facilities
will remove a source o f irritation to member banks
and their depositors.
A ir transportation

Our use of air transportation for the collection
o f checks showed an increase proportionate to the
rise to record volume o f check collections during
1950. Consolidated shipments to other Federal
Reserve Banks and branches of our own cash let­
ters and those of 34 participating direct-sending
banks in the metropolitan area reached a new high
o f approximately 682,000 pounds, or almost 222
million checks, an increase of 53,000 pounds over
1949.
A rm ored carrier service

In December 1948, 13 banks located in Nassau
County, Long Island, anticipating late deliveries
o f cash letters forwarded through the mail during
the holiday season, arranged to have the Armored
Carrier Corporation, Bay side, New York, make
deliveries o f their cash letters addressed to their
New Y ork City correspondent banks and to this
Bank. This service proved efficient and several
banks in Nassau County expressed a desire to con­
tinue and expand the service. They authorized us
to deliver our cash letters to the Armored Carrier
Corporation as their agent for delivery to them at
their expense. Member banks which prefer to use
this method of transportation for our cash letters
addressed to them, rather than the mail or express
service which we had previously used, are now
credited with the average daily cost o f forwarding
our cash letters by conventional means.
This service has now been expanded to include
136 banks and branches located in 8 counties in
the metropolitan area.
C heck R outing Sym bol Program

The Check Routing Symbol Program, sponsored
by the American Bankers Association and the
Federal Reserve Banks, made considerable pro­
gress during the past year. Its progress was ac­
celerated by the collapse, in early 1950, of the last
serious opposition to it— on the part of one of the
country’s largest suppliers of checks. In December

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

1950 a nation-wide survey of cliecks in circulation
throughout the country, drawn on par remitting
banks, showed that 76 per cent of the checks bore
the symbol in the approved location— the upper
right or “ northeast” corner. This was an increase
of 9 percentage points for the year. The Second
Federal Reserve District again held the lead with
87 per cent, although all districts advanced over
the year.
In general, checks supplied by banks to their
customers now conform with the program, al­
though many checks ordered directly from print­
ers by customers of banks still do not. Accordingly,
the Division o f Public Information of this Bank
produced, for the Bank Management Commission
of the American Bankers Association and the Com­
mittee on Collections of the Federal Reserve Sys­
tem, a pamphlet explaining the Check Routing
Symbol Program and its benefits to the business­
man. This promotional device will be distributed,
through the Association’s member banks, to bank
customers who order checks directly from a
printer. The Association has also recently dis­
tributed, to check printers throughout the country,
a “ guide” that describes the purpose and use of
the check routing symbol and solicits their co­
operation in the program.
D eferred posting legislation

In my 1949 report, I stated that the 1950 New
York State legislature had passed a deferred
posting bill and that, on the date of my report,
the bill was awaiting action by the governor. The
bill was enacted later into law. Four other States
and the District o f Columbia also enacted deferred
posting statutes in 1950, bringing the total number
of States that have done so to 44. Of these, 39 have
laws that are in, or substantially in, the form of the
American Bankers Association model statute and
satisfactory in all respects concerning the Federal
Reserve System.
CASH O PER A TIO N S
Counterfeits

The increase in counterfeits, first noted in 1948
and again in 1949, continued during 1950. Our
currency counters detected 3,157 counterfeits in
1950 (an increase of 15 per cent over 1949 and 127
per cent over 1948) amounting to $41,174. Most
of these counterfeits were in the $10 denomination
and a large percentage of them purported to be
issued by the Federal Reserve Banks o f Minne­



13

apolis and St. Louis. W e sent circular letters de­
scribing current counterfeits to all banks in this
district in March and August, with the approval
and cooperation o f the United States Secret Ser­
vice ; special representatives in the Bank Relations
Department also showed typical counterfeits to
banks and others. Some decline was observed
toward the end of the year in the number o f coun­
terfeits appearing in currency deposited with us.
C urrency and coin shortages

During the months of May and June our avail­
able stock o f new $1 silver certificates dropped to
an unusually low point because of the inability of
the Bureau o f Engraving and Printing to main­
tain production of this denomination at a level
sufficient to meet the demands o f the public. In
order to have a supply sufficient to fill orders, it
became necessary to reduce our standard of fit­
ness in sorting $1 certificates deposited with us.
Up to June 19, we had been rejecting approxi­
mately 50 per cent of these notes as unfit for fur­
ther circulation; thereafter we rejected only about
30 per cent. The continuing heavy demand pre­
vented our rebuilding stock on hand to desired
levels so that it was necessary to maintain the
lower standard for the balance of the year. A few
banks complained of the condition o f $1 silver cer­
tificates received from us, but the situation was
explained to their satisfaction in each case. It be­
came possible in the latter part of January 1951
to revert to the normal standard o f fitness.
During the fall a shortage o f pennies made it
necessary to ration banks to 50 per cent of amounts
requested. This shortage arose principally from
(1) reduced production by the Philadelphia Mint
as a result o f its being closed for a period during
the summer months, and (2) apparent slowdown
in the velocity of circulation of pennies. Our short­
age was temporarily relieved by the receipt late
in October o f $400,000 in pennies shipped to us
by the Treasury Department from the San Fran­
cisco Mint. Early in December, however, continu­
ing demand necessitated a resumption o f ration­
ing, which was continued into January, when a
circular was sent to all banking institutions in the
district requesting their cooperation in returning
to us all pennies not absolutely needed by them
and their depositors. The need for rationing pen­
nies disappeared in the latter part o f January
when, as the result of our circular and seasonal
influences, there occurred an influx o f surplus pen­
nies from member banks.

14

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 1950

W IR E TR A N SFE R S OF FUNDS

W ire transfers of funds handled during 1950
numbered 248,518 for a total of $174 billion, an
increase o f 24,879 transfers and $35 billion above
the preceding year, or gains of 11 and 25 per cent,
respectively. Telegrams sent and received in 1950
totaled 505,520, an increase of 64,597, or more than
14 per cent, over 1949 volume.
These increases in volume resulted partly from
a larger number o f United States Government
securities being transferred over the Federal
Reserve leased wires, but were caused primarily by
a greater velocity o f bank funds resulting from
the general high level o f economic activity. It is
anticipated that transfers o f funds and other
leased wire traffic will increase further as a result
o f certain liberalizations of leased wire services
put into effect on January 12, 1951. These liberal­
izations include (1) permission to member banks
to transfer bank balances in any amount of $1,000
or more over the leased wires without cost, as a
substitute for the previous arrangement which
limited free transfers o f balances to those in mul­
tiples o f $1,000; and (2) discontinuance o f charges
at commercial wire rates to member banks for
telegrams sent over the leased wires which relate
to cash items deposited for collection in the Fed­
eral Reserve check collection system.

assets occurred in the accounts of the central
banks of Canada ($602 million), England ($557
million), France ($138 m illion), Mexico ($126 mil­
lion), and Argentina ($118 million), and of the
Bank for International Settlements ($126 mil­
lion). The rise in Canadian assets reflected the
large inflow o f funds to that country, especially
in the period just before the change in its ex­
change rate system. The rise in British assets
reflected the continued receipt o f E.C.A. aid (which
was terminated at the end of 1950), the betterment
o f the sterling area position following the devalu­
ation o f the pound, and the boom in raw materials
produced in the sterling area following the out­
break o f war in Korea. Relatively few foreign
accounts experienced a reduction in assets; the
largest declines occurred in the accounts o f Brazil,
Colombia, Venezuela, Australia, and Czechoslo­
vakia, with the greatest reduction, however, being
only $34 million.
T o t a l G o ld and D o lla r A s s e ts H e ld at th e F ed era l R e se rve
B ank o f N e w Y o r k f o r F o r e ig n A c c o u n ts and fo r
In tern a tion al F u n d and B ank
B IL L IO N S
O F DO LLAR S

B IL L IO N S
O r D O LLAR S

F O R E IG N O P E R A TIO N S
Assets h eld fo r foreign and international account

Continuing at an accelerated rate the increase
which has been occurring since the latter part of
1947, the total amount of earmarked gold, de­
posits, United States Government securities, and
other assets held at this Bank for foreign account
rose during 1950 by about $2.3 billion to a new
peak o f approximately $7.3 billion, or about $300
million above the previous peak in September
1945. A t the same time, assets held for the Inter­
national Bank for Reconstruction and Develop­
ment and the International Monetary Fund rose
$82 million to $3,155 million, bringing the com­
bined assets held for foreign and international
account to well over $10 billion.
As can be seen from the table below, all three of
the principal types of assets held for foreign ac­
count rose during 1950. The largest rise occurred
in earmarked gold, which increased from $3,451
million to $4,757 million, but United States Gov­
ernment security holdings also expanded consid­
erably. The most pronounced increases in total




1941

1942

1943

1944

1945

1846

1 94 7

1943

1949

1950

Change in status o f foreign accounts

In addition to the accounts opened in January
1950 by this Bank, as principal, in the names o f the
National Bank o f Egypt 011 behalf o f the Egyptian
Government Exchange Control, and of Caisse
Centrale de la France d ’Outre-Mer (both men­
tioned in last year’s report), regular accounts
were also opened in 1950 for the newly established
central banks of Cuba, Costa Rica, and Honduras.
In addition, an account was opened in the name of

15

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

Total Assets H eld at Federal Reserve Bank o f New Y ork
fo r Foreign and International Accounts
(In millions)
E n d of

E n d of

1949

1950

N e t C h an ge

Foreign Accounts
Earmarked Gold .....................................................
U. S. Government Securities..................................
Miscellaneous Securities, Commercial Paper,
and Bankers’ A ccep tan ces................................
Total— Foreign A c c o u n ts ..............................

$3,451 (a)
766
669

$ 4,757 (b)
895
1,571

+$1,306
+
129
+
902
—

10

70

60

$4,956

$ 7,283

+$2,327

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

$

+$
—
+
+

47
278
249
64

$3,073

$ 3,155

+$

82

$8,029

$10,438

+$2,409

International Accounts
(International Fund & Bank)
Earmarked Gold .....................................................
D e p o s its .....................................................................
U. S. Government Securities..................................
Miscellaneous Securities ......................................
Total— International A c c o u n ts ....................
G

rand

T

otal

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

869
39
1,703 (c)
544(e)

( a ) Includes $38,169,000 held as collateral to loans made b y 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.
( b ) Includes $91,654,000 held as collateral to loans made b y domestic com m ercial banks to B olivia, N icaragua, Spain, and
Venezuela.
( c ) Includes non-interest-bearing non-negotiable demand notes as follow s:
1949— $1,008,000,000
1950— $1,270,000,000
( d ) Does not include bonds having fa ce value o f 17,000,000 Swiss francs and 45,355,000 Belgian francs.
( e ) Does not include bonds having fa ce value o f 17,000,000 Swiss francs, 87,132,200 B elgian francs, 2,893,500 Canadian
dollars, and 273,500 pounds sterling.

Instituto Espanol de Moneda Extranjera, an
agency of the Spanish Government, in connection
with gold we hold as collateral pledged by the In­
stitute to loans extended by New Y ork City banks.
W ith the establishment of an account for the new
Banco Central de Costa Rica, the account previ­
ously maintained in the name of the Issue Depart­
ment of Banco Nacional de Costa Rica was closed
and the balance therein was transferred to the
new account. Similarly, the opening of an account
in the name of Banco Nacional de Cuba was fo l­
lowed closely by the transfer to that account of
the gold which this Bank, as fiscal agent of the
United States, had held for account of the Govern­
ment of the Republic of Cuba, and the closing of
the fiscal agency account.



A sub-account was established for the Bank for
International Settlements, as Agent for the Or­
ganization for European Economic Cooperation
(European Payments Union), through which
periodic settlements are made between the mem­
bers of the E.P.U.
A t the direction of the Secretary of the Treas­
ury, this Bank, as fiscal agent o f the United States,
opened on August 21 a custody account in the
name of the Bank of Korea in which are now held
some of the Korean gold and silver reserves which
were salvaged from South Korea and brought to
this country by military carrier. The account
maintained on our books, as fiscal agent of the
United States, on behalf of The Central Bank of
China as fiscal agent of the Government of the

16

P R E SID E N T’ S R E P O R T TO D IR E C T O R S F O R 1950

Republic of China, was closed in April 1950. The
regular account for The Central Bank o f China
continues.
In connection with the move of The Central
Bank of China to Taipeli, Formosa, we obtained a
new certification from the Secretary of State, pur­
suant to section 25(b) o f the Federal Reserve Act,
regarding the authority o f certain officials of the
central bank in Taipeli. Although we subsequently
received two communications from ‘ ‘ The Liquida­
tion Office o f The Central Bank of China,” Shang­
hai, which, in effect, asserted a claim on behalf of
the “ Central People’s Government o f China” to
the assets o f The Central Bank o f China, we con­
tinued, with the concurrence o f the State Depart­
ment, to recognize the authority of those officials
named in the certification. At the year-end, this
account was small and inactive.
Loans on gold

During the year outstanding loans on gold to
foreign central banks at no time amounted to more
than $70.5 million. From this level in January
they declined steadily until complete liquidation
was effected in August. This trend extended the
prior reduction from a peak of $259.7 million in
August 1948. A t the close of 1949 loans aggregat­
ing $69.5 million were outstanding to the central
banks of Poland, France, Ecuador, and Turkey.
The loan to Poland, following a program of
gradual repayment, was liquidated in February;
the Turkish loan, after having been increased by
$1 million in January and having been outstand­
ing for nearly a year, was terminated in M ay; and
the loans to France and Ecuador were liquidated
in August. Early in the year, the central bank of
Ecuador had requested another loan— o f about
$1.7 million— which we declined to make because
it appeared that the Ecuadorian balance of pay­
ments deficit was of a more than seasonal or tem­
porary nature. Arrangements with the central
banks o f Costa Rica and Australia, and with the
Bank for International Settlements, for possible
advances during 1950 were not utilized.
Gold in our custody, belonging to the central
banks or foreign exchange authorities o f Bolivia,
Venezuela, and Spain, was transferred during the
year to the accounts o f three domestic commercial
banks. The gold is security for credits these banks
are now extending for a longer period than our
policy permits. These loans are in addition to two
credits extended in 1947, and still outstanding, by
commercial banks to the central banks o f Bolivia
and Nicaragua. Gold held as security for a loan



made to France in 1949 by a group of domestic
banks was returned to the account o f the central
bank o f that country upon liquidation o f the loan.
G old m ovem ents

In sharp contrast to net acquisitions of foreignowned gold by the United States in the amounts
of $2.8 billion in 1947, $1.5 billion in 1948, and
about $200 million in 1949, the United States ex­
perienced a net loss of gold in 1950 of about $1.7
billion. Purchases by the Treasury o f less than
$70 million o f foreign-owned gold offset to only a
minor extent sales o f $1,797 million o f gold by the
Treasury to foreign account. O f this amount, pur­
chases by England accounted for over $1 billion,
as contrasted with that country’s sales to the
Treasury of $445 million in 1949; other large pur­
chasers o f gold included Mexico, France, Canada,
The Netherlands, Uruguay, and Belgium. The
principal other sellers were Cuba and South
Africa. Despite the large dollar value, the num­
ber of all gold transactions handled during the
year was somewhat smaller than during 1949.
Visits to foreign central banks

In April 1950, Horace L. Sanford, Assistant
Vice President in the Foreign Function, and
Henry C. Wallich, Chief o f the Foreign Research
Division, Research Department, attended the in­
auguration of the Banco Nacional de Cuba, the
first central bank in Cuba.
In the fall of 1950, Bertrand H. Webber, Chief
o f the Foreign Operations Division, Foreign De­
partment, spent seven weeks at the Bank of Eng­
land, observing methods and operations. Mr.
Webber was accompanied by Charles A. Coombs
o f the Foreign Research Division, Research De­
partment, who also visited the Banque de France
and was concerned with research matters.
Charles R. Athern, Special Assistant in the F or­
eign Department, and Charles R. Pricher, Assist­
ant Chief o f the Foreign Operations Division,
Foreign Department, spent two weeks during
June at the Bank of Canada studying operations
there. This stay, part of a program for exchange
visits of staff members o f this Bank and o f the
Bank o f Canada, was followed by a two-week
period o f observation and study here by two men
from the Canadian institution. In December
W alter S. Ruslimore, Special Assistant in the
Foreign Department, and Edwin W . Carroll,
Assistant Chief of the Foreign Operations D ivi­
sion, Foreign Department, spent two weeks at the
Bank o f Canada and that bank sent two men to us.

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

Foreign central bank visitors

The number o f visitors from other central banks
coming to this Bank to observe and study our
methods and operations continued to grow during
the past year. W e provided offices for, and facili­
tated the studies of, representatives of the central
banks of Argentina, Belgium, Burma, Cuba, Eng­
land, France, Germany, Italy, Japan, and South
Africa.
W e also received during the year senior officials
o f a number of central banks, including those of
Belgium, Canada, Cuba, England, Greece, Nor­
way, South Africa, and Thailand.
Staff G roup on Foreign Interests

Several meetings were held in the course of the
year by the Staff Group on Foreign Interests,
consisting of representatives of the foreign, legal,
and research staffs of this Bank and the Board of
Governors. Among the topics discussed at these
meetings were United States treaty provisions
with respect to the treatment of American banks
doing business in foreign countries, the adequacy
of financing facilities for United States foreign
trade (particularly im ports), the influence of for­
eign currency devaluations on United States ex­
ports, the nature of the relationships between
treasury and central bank in foreign countries and
the respective roles of the two, the Federal tax
status of bankers’ acceptances and time deposits
held in this country by foreign central banks, the
question of representation by the Federal Eeserve
System on the board o f the Bank for International
Settlements, and the feasibility of a system of
Federal Eeserve stabilization credits to foreign
countries meeting certain criteria. The Staff
Group, by correspondence and telephone as well
as through its meetings, continued to deal actively
with current foreign mission problems, especially
with the preliminary selection o f personnel for
missions requested by foreign countries or United
States Government agencies.
R ESEARCH

Outstanding among the special matters receiv­
ing attention from our Eesearch Department
during 1950 were
( 1 ) the scope and type o f measures needed to
restrain inflation in this country,
( 2 ) studies and surveys connected with the intro­
duction o f Regulations W and X ,




17

(3 ) evaluation o f the results o f the September 1949
devaluation o f the pound sterling and some 30 other
currencies,
(4 ) analysis o f recent pronounced changes in the
foreign trade and balance o f payments o f the United
States,
(5 ) participation in the seminar sessions fo r a visit­
ing group o f professors o f money and banking from the
Tw elfth Federal Reserve District, and
( 6 ) preparation o f material on factors affecting the
money market and on Federal Reserve operations in
that market, fo r use by teachers o f money and banking
and others.
D om estic studies and publications

Considerable attention was devoted during the
year to studies of national income and savings,
pension plans, labor force trends, agricultural
production and policy, and business and govern­
ment finance. W e initiated a system for the regu­
lar review of Congressional committee hearings,
investigations, and reports with the object of
locating new background material or relevant
up-to-date information not available elsewhere.
A proposed method o f reserve requirement cal­
culation— “ uniform reserve requirements” — was
tested in January upon a sample group o f country
banks and upon most of the large banks in this dis­
trict. This test was made to determine what
changes would have occurred in the level of re­
quirements for different groups of banks if this
method of calculation had been in effect during a
particular reserve period. In April, the Depart­
ment cooperated with the New Jersey Bankers
Association in preparing a detailed questionnaire
on salaries and supplemental benefits for submis­
sion to the New Jersey banks.
To explore the reasons for the rapid expansion
in bank credit, the Board o f Governors, in
November, requested a special survey o f those
New Y ork City banks which had increased their
commercial and industrial loans by 25 million
dollars or more from June 28 to November 1.
These banks were asked for a breakdown of their
loan increase by the type of business of the
borrower and by the purpose of the loan. To get
the required information, three members of the
staff visited ten banks and interviewed their loan
officers.
In November and December, the Department
was called upon to check and analyze the statistical
data on about 15,100 registration statements sub­
mitted under Eegulation W by businesses engaged
in making instalment sales or instalment loans.

PR E SID E N T’ S R E P O R T TO D IR E C T O R S F O R 1950

18

The information obtained from these registration
statements is to be used as a benchmark from
which the Board of Governors intends to project
future estimates of outstanding consumer credit.
W orking in close cooperation with the Bank
Relations Department, the Research Department
fulfilled during the year numerous member bank
requests for special analyses and comparisons of
operating ratios as well as other types o f available
financial information.
Toward the end of the year, work was started
on a handbook on the mechanics of open market
operations which is to be published by the Federal
Reserve System. The first draft will be submitted
to a System editorial committee and a committee of
professors o f money and banking. The handbook
is intended primarily as a supplement to college
textbooks on money and banking.
The Department late in 1950 revised and
brought up to date a number o f articles, dealing
with factors affecting bank reserves, which have
been published in the Bank’s Monthly Review
during the past two or three years. These revised
articles will be published by this Bank shortly in
pamphlet form.
Also late in 1950, the Department revised and
expanded the table of domestic business indexes,
which appears regularly in the Bank’s Monthly
Review. Beginning with the January 1951 issue of
the Review, this set of business indicators consists
of 29 national series and 9 District series, as
against the former 10 national series and 3 District
series. Am ong the series selected for the new
table are those which are believed to give the
earliest indications o f changes in economic trends.
The usefulness o f the table has been enhanced by
adding two columns showing the percentage
changes from the previous month and from the
same month a year earlier.
During the year the Department began to issue,
with some of its press releases o f statistical data,
brief explanations of the significance of the data
and o f the changes.
The following are a few selected items from
among the numerous research papers prepared
during the year on domestic topics:
Postwar State Finances
Pension Plans, Savings, and Investment
The Problem o f Bank Capital
The Financial Position o f Federal Trust Funds
H ow Consistent A re Prelim inary Estimates o f Gross
National P rodu ct with the Final Data?
The P ort o f New Y ork A uthority




The Outlook fo r A gricultural Production and
Consumption
Significant Labor F orce Trends
The P arity Concept in Am erican A gricultural Policy
The A dm inistration’s Program fo r Revised Social
Insurance
Comparative C osts: Debt Service v. Inflation
Overlapping Responsibilities o f the Treasury and the
Federal Reserve System
Three Types o f Reserve Requirements
Investment Practices o f Government Trust Funds and
Investment Accounts
Institutionalization o f Savings in the United States
Debt Management and Credit P olicy fo r Another W ar
Foreign and international studies and publications

A variety of problems demanded attention,
including a study o f the effects of the September
1949 currency devaluations on United States trade
(for which data were collected through personal
interviews with traders), and an analysis o f the
pronounced changes which took place in the United
States balance of payments during the year. The
Department devoted considerable attention to
many other matters:
( 1 ) the international economic position and outlook
o f the United K ingdom and the sterling area;
( 2 ) the aims, structure, and implications o f the
European Payments U nion;
(3 ) the different aspects o f the general problem of
E u ro p e ’s “ viability” (ability to balance its interna­
tional payments without outside assistance) ;
(4 ) the possible later need or desirability o f a
system o f Federal Reserve stabilization credits to coun­
tries which regain financial stability and subscribe to
sound economic policies;
(5 ) economic problems which foreign countries will
face as a result o f their rearmament program s;
( 6 ) the effect o f the Korean crisis on the world
“ dollar g a p ” and on United States foreign aid
program s;
(7 ) recent and prospective trends in the m ajor serv­
ice items o f the United States balance o f paym ents;
( 8 ) analyses o f United States export and im port
trade by areas and commodities and, in particular, the
com putation o f indexes o f the price and volume o f
United States imports since 1923, according to m ajor
com modity groups and m ajor countries.

In May and June, the twelve New Y ork City
banks which report monthly data on Latin
American export credit conditions were inter­
viewed concerning possible additions and improve­
ments to our monthly survey in this field, and the
reactions of the three other reporting banks were
obtained through the Reserve Banks o f the
respective districts. As a result o f this inquiry,
the monthly survey was slightly amended and
expanded.

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

O f the several hundred research papers written
during tlie year on foreign and international
topics, the following are worth noting:
The A rgentine Econom ic Situation
E conom ic Development in Central and Southeastern
E urope
The Ceylon M onetary Law
U nited States Foreign Econom ic P olicy after 1952
The R ecovery o f the British Reserve Position since
Devaluation
The D ollar Problem o f the Sterling Area
Developments in the Philippine Balance o f Payments
and Public Finances
The E uropean Payments Union
The Revision o f the Argentine Exchange Rate Struc­
ture Effected A ugust 29, 1950
Commercial Banking Reorganization in Germany
Basic Commodity Prices since Korea
Recent and Prospective Trends in the United States
Balance o f Payments
Mutual Defense Assistance Program
Foreign D ollar B on d s: Present Status and Possibilities
o f Future Financing
Shipping P olicy and the United States Balance o f
Payments
The Interest and Dividends A ccou nt in the United
States Balance o f Payments
D ollar Shortage— Oil Surplus
Simplification o f United States Customs
Adm inistration
Foreign missions and assignments

The demands for the services o f our research
technicians for temporary foreign assignments
were heavier in 1950 than in any previous year.
As mentioned in last year’s report, Arthur I.
Bloomfield, Chief o f the Balance of Payments
Division, proceeded to Korea in August 1949, in
company with John P. Jensen o f the Auditing
Department, for the purpose o f drafting new
monetary and banking legislation for the Republic
o f Korea. In March and April o f 1950, on his way
home from Korea, Mr. Bloomfield visited the
central banks o f Japan, Indonesia, and India, and
commercial banks in Hong Kong. Henry C.
Wallich, Chief of the Foreign Research Division,
went to Portugal in December for a three-month
survey of that country’s finances and banking
system, as requested by the E.C.A. Fred H. K lopstock spent the first half o f 1950 in Germany as
adviser to the Chief o f the Finance Division o f the
United States High Commissioner. John H. Adler
and Eugene R. Schlesinger went to Guatemala in
May to assist in the completion of a fiscal and
monetary study which the Bank of Guatemala had
undertaken with our cooperation in 1949. Charles
A. Coombs served for about two months during the




19

summer as financial advisor in an economic survey
of Iran, headed by Ambassador Henry F. Grady;
before returning home, Mr. Coombs spent study
periods of approximately one and two months,
respectively, at the Bank o f France and the Bank
o f England. Miroslav A. Kriz was sent by this
Bank to attend the Third International Banking
Summer School at Stockholm, Sweden, in Septem­
ber. Before and after this attendance, he spent
brief periods o f study at the Bank for Inter­
national Settlements in Switzerland and at the
central banks o f Denmark, Sweden, and Norway.
Philip J. Glaessner was loaned in September to the
International Bank for Reconstruction and De­
velopment to serve as financial technician on a
mission making an economic survey o f Cuba; Mr.
Glaessner’s assignment was completed in January
1951.
Apart from missions involving actual travel
abroad, several staff members carried out special
assignments for various official agencies in the
foreign or international field. Mr. W allich assisted
during the summer in the study of United States
foreign economic policy, carried out by Gordon
Gray at the request of President Truman. Mr.
Bloomfield served briefly as a consultant on Korea
to the Fiscal Division of the Department o f
Economic Affairs o f the United Nations. Mr.
Klopstock followed his stay in Germany with
several months as a part-time consultant of the
Department o f State on German banking reform.
Late in 1950, Mr. Schlesinger was appointed a
temporary part-time consultant to the Washington
office o f the Economic Commission for Latin
America (a United Nations agency).
Contacts ivith oth er organizations

The Department supplied an economist to speak
at each o f the biweekly regional group meetings
of member banks organized in 1950 by the Bank
Relations Department. The subjects discussed
included current economic conditions, the business
outlook, and the data and methods used by our
Research Department in estimating that outlook.
Many other public addresses on varied topics were
made by research staff members before various
groups o f bankers, businessmen, economists,
educators, and students. Many members o f the
research staff, with the Bank’s permission and
encouragement, contributed signed articles to pro­
fessional and business journals on economic
problems o f more or less general interest. The
officers and several staff members of the Depart­

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 1950

20

ment also represented this Bank on a variety of
System committee meetings during the year.
Library

The Library Division, an essential cog in the
work o f the Research Department, continues to
serve both the Department and the Bank in many
useful ways. Aside from the ordering, catalogu­
ing, and circulating o f books, pamphlets, reports,
and periodicals, and the answering of numerous
requests for information, the Library prepares
the Bank’s daily Newspaper Review, which for
many years has been popular throughout the Bank
and has also met with genuine appreciation among
the member banks since distribution to those banks
was started in 1948. The Library also issues and
circulates in the Bank a semimonthly Library
News, listing and briefly commenting upon new
books, periodicals, etc. acquired. A t the year-end,
the Library helped in launching a new publication,
the Bank’s W eekly Neivs Review, and is now
assisting the Division o f Public Information in
preparing and circulating this Review , which is
sent to member banks for redistribution to their
customers.
L IT IG A T IO N

Two o f the litigated cases pending at the end of
1949 against this Bank on claims arising out of
alleged forged endorsements were disposed of,
together with five new similar actions instituted
during 1950. The total claims involved in these
seven cases aggregated $141,612. No loss to the
Bank was involved. A t the end of 1950 six cases
were still pending with claims aggregating $15,472
(including one action for $1,552, in which there
have been no developments since 1940 and which
may be regarded as abandoned). The Bank’s gen­
eral counsel appears as attorney of record in only
one active suit, in which $1,000 is sought. In the
other five cases the prior endorsing banks have
agreed to indemnify this Bank, and their own
counsel are conducting the defense on behalf of
this Bank without any cost or expense to it.
One action has been brought against the Bank
for $75,000 for injuries allegedly sustained by a
trucking company employee. The action is being
defended by our insurance carriers.
SE C U R IT Y FILES PR O G R A M

In a report dated August 9, 1950, the Subcom­
mittee on Destruction o f Records recommended
to the Committee on Miscellaneous Operations of
the Conference o f Presidents o f the Federal
Reserve Banks that measures be taken by each



Federal Reserve Bank to insure the protection and
duplication o f vital records so that, in an emer­
gency, the business o f each bank could be resumed,
in so far as records were concerned, on as current
a basis as practicable.
This Bank began an experimental program of
duplicating vital records for a five-week period
beginning September 5, 1950. Every effort was
made in this dry run to simulate the conditions
that would exist if these records had been main­
tained outside the Bank. Prior to the close of the
five-week trial it was determined to continue this
operation within Bank premises until suitable
space had been obtained for the location o f the
Security Files outside of New Y ork City. The
space was obtained in the Starling Building in
Ossining, New York, before the end o f the year,
and we moved our Security Files unit to Ossining
early in January 1951.
Although the records included in this program
are too numerous to detail, it may be noted that
we approached the problem from the point o f view
o f obtaining by-product records, i.e., copies of
existing forms, wherever practicable, because
these records would be less expensive than micro­
film copies, and also in a more immediately useful
form, in event o f an emergency, than microfilm.
In some instances, particularly in the case of such
records as authorizations and signature files,
where facsimile reproduction was essential, we
have made photostats. Considerable work remains
to be done on arrangements for dealing with other
problems likely to arise in the event o f an emer­
gency. W e are trying to complete the program as
soon as possible.
E Q U IPM E N T R E P L A C E M E N T P R O G R A M

The office furniture and equipment replacement
program was substantially completed during the
year, with the installation of some 1,500 desks,
1,000 tables and 2,500 chairs o f modern metal
construction.
PERSON N EL
B iw eekly pay

Perhaps the most significant new procedure of
the year affecting employees was our adoption, in
November, o f the biweekly method of paying sal­
aries. The advantages and disadvantages— both
to the Bank and to the staff— of the various meth­
ods o f paying salaries, had been studied by our
Personnel Department for some tim e; the biweekly
system was adopted largely because o f the advan­
tage of regularity o f payments to the staff.

21

F E D E R A L R ESER VE B A N K O F N E W Y O R K

Salary administration

N um ber o f em ployees

W e made wage and salary surveys in New York
During the first five and one-half months of the
City and Buffalo during October 1950 in line with year, or to about the date o f the start of hostilities
the objective of our Personnel Classification Plan in Korea, the number o f employees at the Head
of assuring an appropriate relationship between Office declined by 110, or 3.2 per cent, continuing
salaries paid in the Bank and those paid elsewhere the contraction begun in 1944. On June 17, 1950,
in the community for comparable jobs. W e found the number o f employees at the Head Office was
that substantial increases in the rates of pay for 3,331, a reduction o f 1,406 from the peak employ­
many jobs had occurred in both communities dur­ ment of 4,737 reached on July 27, 1944. The staff
ing the year. On the basis of these findings, the increased by 54 employees during the latter half
minimum and maximum rates of the salary grade of 1950, making a net reduction for the year o f 56
structures at the Head Office and Buffalo Branch employees, or 1.6 per cent. The increase during
were increased, effective November 30, 1950, and the second half year resulted primarily from the
at the same time salary increases were granted to reactivation of Regulations V and W , the admin­
most employees in order to bring our rates o f pay istration o f Regulation X , and a greater volume
up to those paid by progressive employers in the of work in the Cash and Collections Function.
community.
The following table and chart present some
A t the Head Office the average increase o f mini­ basic statistics on Head Office employment:
mum and maximum rates amounted to approxi­
mately 5.75 per cent and the salaries of most E m p loy ees, clo s e o f b u si­ 1946 1947 1948 1949 1950
employees were increased, effective November 30,
ness D e c. 3 1 ........................ 4,142 3,755 3,771 3,441
3,385
1950, by an amount equal to 7 per cent of basic E m p loy ees, a v era g e n u m ­
b er, en g a g ed in w o rk r e ­
annual salary or $300, whichever was less. These
im bu rsa b le b y U . S . G ov t,
salary increases aggregated $702,441 per annum,
a n d its a g e n cie s ................. 1,218
824
690
590
541
or 6.37 per cent of total salary liability. In addi­
E m p loy ees, a vera ge
tion to these increments, merit increases aggre­
n um ber, a ll o t h e r ............... 2,949 3,066 3,141 3,050
2,839
gating $197,978 per annum, or approximately 1.69
A p p lic a n ts ............................. 8,346 7,405 8,050 4,531
4,648
per cent of the total salary liability as of Novem­ H i r e d ......................................... 948
565
282
553
767
ber 30, 1950, were granted effective December 28,
S e p a ra tio n s* ........................ 1,100
952
751
612
609
1950, instead of the first of the new year, as here­
D ism issals (in clu d e d in
tofore, because a new pay period started on that
S e p a r a tio n s) ....................
246
402
210
109
158
day under the biweekly pay program.
* Ineludes those who becam e officers, were dismissed, resigned,
Another objective of our Personnel Classifica­ retired, or died.
tion Plan is to maintain a proper description of
jobs in terms of knowledge and skills required.
F lu ctu a tion s in Y e a r ly H e a d O ffic e E m p lo y m e n t 1941-1950
During the year, therefore, we re-evaluated 472
job descriptions, or about 75 per cent of those in
use at the Head Office. Many of these job descrip­
tions, and the position o f some jobs in the salarygrade structure, were changed as a result of the
review, which showed that material changes had
occurred in job duties and responsibilities.
H ead O ffice salary liability

As o f December 31, 1950 the employee salary
liability (including reimbursable salary) at the
Head Office was $11,779,000; the comparable fig­
ure for previous year-ends was $10,929,000 (1949),
$11,496,000 (1948), $10,621,000 (1947), and
$11,242,000 (1946). The rise o f about $850,000, or
7.8 per cent, in salary liability during 1950 reflected
primarily the general increase which became
effective November 30, and the inclusion of the
year-end merit increases.



1941

1942

1943

1944

1945

1946

1947

1948

1949

19SO

22

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 1950

The following table shows the distribution of
Head Office employees according to length of
service. It will be noted that 446 employees, or
about 13 per cent, have been with the Bank for
25 years or more.
L e n g th o f S e rv ice

N u m b er o f
E m p lo y e e s

35 years or m ore.....................

P e rce n ta g e o f
T o t a l N u m b er
o f E m p loy ees

5

.15%

30 years to 34 years inclusive

274

8.09%

25 years to 29 years inclusive

167

4.93%

20 years to 24 years inclusive

369

10.90%

15 years to 19 years inclusive

191

5.64%

156

4.61%

10 years to 14 years inclusive
5 years to

9 years inclusive

1,186

35.04%

Less than 5 years...................

1,037

30.64%

Total (Dec. 31, 1950)

3,385

Staffing studies

In the latter part of 1949 we inaugurated a pro­
gram of establishing production standards and of
developing techniques for measuring productivity,
in order to appraise the manpower needs of vari­
ous departments. The approach to this program
has been that it was not to infringe upon estab­
lished lines of management authority and respon­
sibility. Rather, its aim has been to provide in­
dividual operating officers with additional data as
an aid to them in establishing and maintaining
work forces at an efficient level.
At the outset of the program we recognized that
some functions, such as Research and Legal, were
not readily susceptible to staffing studies; and we
therefore determined to conduct our studies (1)
on a functional basis, i.e., in large operating de­
partments where repetitive identical operations
were carried on from day to day, and (2) by type
o f job, such as typists and file clerks. "Within this
framework is included approximately two-thirds
o f the employees of the Bank. By the end of 1950
we had conducted staffing studies in approxi­
mately half of the area outlined.
To date, no dollar saving of any appreciable
amount can be attributed to this program, but we
consider it worthwhile, and plan to continue staff­
ing studies. W e feel that management interest in
operating costs has been stimulated, and it is
hoped that the stimulation will be both progressive
and cumulative as the program continues. Event­
ually staffing studies may prove a most helpful
factor in the determination of budgets.




E m p loyee benefits

W e continued during 1950 the programs devel­
oped in earlier years to provide benefits and pro­
tection to staff members, including the following:
1. Blue Cross Hospital and Surgical-Medical
Plans. A total of 3,037 employees, or 88.3 per cent
were enrolled, compared with 3,102 employees or
88.7 per cent, at the end of 1949. The expense to
the Bank, which pays two-thirds of the total cost,
was $96,724, compared with $93,992 the preceding
year. During the year, members of our Head Office
staff filed 614 claims for hospital care (involving
a cost of $83,282) and 650 claims for medical and
surgical care (amounting to $39,404).
2. Our Group L ife Insurance Plan covered 2,422
Head Office employees (70.4 per cent) at the end of
1950, compared with 2,593 employees (74.1 per
cent) a year earlier. During the year, 15 Head
Office staff members died; of these 14 were covered
under the plan and their beneficiaries received a
total of $64,000.
3. Old-age and survivor’s benefits under the
Social Security law were extended to officers and
employees of Federal Reserve Banks, effective
January 1, 1951, by the Social Security A ct
Amendments of 1950. The Board of Trustees of
the Retirement System adopted a plan of integra­
tion of Retirement System benefits with Social
Security benefits effective November 30, 1950.
These combined benefits will in no case be less than
the benefit previously paid from the Retirement
System, and aggregate benefits will be substan­
tially greater for individuals retiring within the
next several years. Annual deductions from regu­
lar salaries of staff members for the combined
Social Security and Retirement System coverage,
however, will not be increased under the inte­
grated plan. Prior to January 1,1951, members of
the Retirement System were given an opportunity
to increase their contributions to the Retirement
System to compensate for Social Security tax
deductions, thus maintaining their Retirement Sys­
tem contributions unchanged; a majority of the
members at this Bank chose to exercise this option.
4. Disability Benefits. Effective July 1, 1950
our Directors amended the sick leave policy so as
to assure aggregate payments to employees, dis­
abled by nonoccupational injury or illness while

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

employed by the Bank or within 4 weeks after
involuntary termination of employment, not less
than benefits provided under a Disability Benefits
Law enacted by the New York State legislature.
Our Legal Department had earlier concluded that
the State law is not applicable to this Bank. On
November 10, 1950, we were notified by the New
York W orkm en’s Compensation Board that it ap­
peared one o f our employees, disabled by a nonoccupational injury, was in “ covered” employ­
ment with us when disabled and that we should
make payments to her as provided in the Disability
Benefits Law. W e replied in effect that, although
not subject to the law, we had paid the employee
the full amount o f her salary during the entire
period of disability (an amount exceeding the re­
quirements of the law, incidentally). W e have
received no reply to our letter, and the position of
the W orkm en’s Compensation Board on the im­
munity we claim is still uncertain.
5. Medical Division. Visits by employees to the
Medical Division during the year totaled 32,994,
an average o f approximately 10 visits per em­
ployee. W e have begun making electrocardio­
grams a part of the annual examination of em­
ployees 45 years of age and over; they are also
made for others when the Medical Staff considers
it desirable.
6. R ed Cross blood bank. W e have continued
to cooperate with the blood bank o f the American
Red Cross; the staff, through the Federal Reserve
Club, gave a total of 254 units of blood in 1950.
During the year, 163MJ units were withdrawn to
meet the needs o f employees or their families, thus
saving them about $4,900.
7. Military service. W e issued a statement dur­
ing the year o f rights and privileges of employees
leaving the Bank for military service, and gave a
copy to each o f the 28 employees leaving for mili­
tary service during 1950. Effective October 18, the
Bank absorbed the full cost of providing coverage
under the Blue Cross Hospital and SurgicalMedical Plans to families o f employees who, at the
time o f entering active service in the armed forces,
were enrolled in these plans under a “ fam ily” or
“ husband and w ife” type o f contract. W e also
resumed the custom, established during W orld
W ar II, of sending Christmas gifts to staff mem­
bers in the armed forces.



23

O th er p erson n el developm ents

The Personnel Department was reorganized dur­
ing the year to provide more effective administra­
tion o f welfare and morale activities. A Personnel
Relations Division was established to handle coun­
seling, grievances, suggestions, veterans affairs,
officers loan funds, transfers, promotions, and
similar matters. Leadership and improvement
courses, begun in 1948, were attended by 262
supervisory employees during the year. The pro­
gram o f interviewing new employees and those
who leave the Bank voluntarily was established
on a permanent basis. These interviews are
proving increasingly useful in testing the effec­
tiveness o f our personnel policies and practices.
Despite strong support of the mid-year savings
bond drive of the United States Treasury Depart­
ment, there was a decline in the number of em­
ployees participating in the payroll deduction
plan. The Federal Reserve Club continued to offer
a broad program o f social and recreational activ­
ities and special services. Our exit interviews have
shown that the program has a substantial appeal
for the staff, 90 per cent o f whom are members of
the Club.
BU FFALO B R A N C H O PER A TIO N S

Economic activity during 1950 in the Branch
territory not only recovered ground lost during
1949 but also went on to levels higher than the
wartime peak. The composite index of business
compiled by the Buffalo Chamber o f Commerce
reached 197.7 in November, compared with 186.2
in the preceding month and 171.4 in November
1949. The increase in heavy industry was featured
by the completion during the year of an enlarged
strip mill (Bethlehem Steel Company) and an
automobile body stamping plant (Ford Motor
Company). Retail trade and construction activity
were at high levels, while bank deposits in Buffalo
rose about $94 million during the year to set a
record o f $1,286 million. Business improved in
Rochester and Niagara Falls, also, but the in­
creases were not so marked as in Buffalo.
Continuing the trend of the past several years,
the volume o f most of the Branch’s operations
increased in 1950 over the previous year’s. Cur­
rent expenses, plus cost of Federal Reserve cur­
rency, totaled $804,434 in 1950, compared with
$797,050 in 1949. Fiscal agency and other reim­
bursable expenditures aggregated $27,671 as
against $30,553 in 1949. Despite the increased vol­

24

PR E SID E N T’ S R E P O R T TO D IR E C T O R S F O R 1950

ume of work handled, the higher costs of rented
equipment and supplies, and the 5 per cent salary
increase which became effective November 30,
1950, total expenditures of the Branch in 1950
were only $4,500 higher than in 1949.
P ersonnel

During 1950 the number o f employees at the
Branch increased from 170 to 172, the result of
40 separations from service, and the hiring of
42 new employees. A ll employees but one have
signed authorizations for deductions from payroll
for the purchase of Series E bonds, the total de­
ductions amounting to 5.04 per cent of the payroll
at the end of the year. In addition, 49 employees
are participating in a special payroll savings plan
providing for deposits in a local savings bank.
A ll but 11 employees are enrolled in the Blue
Cross and Blue Shield plans for hospitalization
and surgical benefits. Some of the 11 exceptions
are covered under a similar plan through other
members of their families. Employees participat­
ing in the group life insurance plan number 130,
or 75.58 per cent of the staff.
To keep our pay scales up to the community
level, the salaries o f most employees o f the Branch
were increased by approximately 5 per cent, effec­
tive as of November 30, 1950. Year-end merit
increases were also granted effective December
28, 1950.
The following tabulation shows the number of
employees and aggregate salary liability at the
last five year-ends:
1946
211

1947
164

1948
176

1949

1950

N u m b e r o f e m p lo y e e s ..

170

172

S a la r y lia b ility
( in t h o u s a n d s ) ............

$467

$390

$455

$448

$492

C heck collection

The Branch collected 28.3 million checks aggre­
gating $8.3 billion in 1950, compared with 26.1
million items amounting to $7.1 billion in 1949.
The average number o f checks handled daily rose
from 104,350 in 1949 to 113,403 in 1950. The gain
of 2.2 million checks over the previous year re­
flects greater business activity in the Buffalo area
and an increased use o f Federal Reserve facilities.
A fter an intensive study of air transportation
schedules and facilities, and after several changes
in methods o f operation, a new Buffalo Branch
time schedule was issued, effective February 1,
1950, advancing by one day the credit availability
to member banks in the Branch territory for
checks payable in 20 Federal Reserve cities.



Further progress was made during 1950 in
obtaining the revision of poorly designed checks
and the adoption of the check routing symbol. A
survey, as o f December 1, 1950, showed that 90.4
per cent of the checks passing through the
Branch’s Check Division, drawn on banks located
in the Branch territory, bore the routing symbol
and transit number in the approved location, as
compared with 82.6 per cent on December 1, 1949.
Two 32-pocket electric keyboard IBM proof
machines were installed during the latter part of
1950. The eight additional pockets on these ma­
chines have made it possible to expand the direct
sorting o f checks in some of the operations o f the
Branch’s Check Division. During the month of
November a mechanical IBM sorting machine was
installed in this division to sort Government card
checks. It will also be used for other purposes
when a tabulator and other equipment necessary
for punch-card operations are obtained.
W ire transfers o f funds

The W ire Transfer Section handled 11,576
transfers o f funds amounting to $2,376,549,000
in 1950, compared with 11,370 transfers of
$2,110,660,000 in the preceding year. The inaugu­
ration o f a private banking wire service on Octo­
ber 30 is apparently reducing moderately our vol­
ume o f so-called third party transfers (for which
we do not absorb wire costs) and increasing cor­
respondingly the volume o f straight bank-to-bank
transactions.
Cash operations

The volume o f currency flowing in and out of
the Branch increased moderately above that han­
dled in 1949. A total of 48,379,101 pieces o f cur­
rency was counted in 1950 as compared with the
previous peak of 47,705,514 in 1949; 54,718,800
pieces of coin were counted as against 51,331,400
in the previous year; and 13,696,000 pieces o f coin
were wrapped, an increase o f 5,461,000 pieces over
the 8,235,000 wrapped in 1949. A part o f the in­
crease in coin receipts originated from banks in
Syracuse, Albany, and other points in the Head
Office territory when a Railway Express Com­
pany strike in October in New Y ork City blocked
the normal channels through which coin ordinarily
flows. Counterfeit currency in circulation con­
tinued to increase during 1950, necessitating more
careful sorting and examination of the money
which passed through the Cash Division. Branch
money counters detected 194 counterfeit notes

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

amounting to $2,501, compared with 158 counter­
feits and one raised note aggregating $2,170 in
1 94 9 -

A new armored trucking service was initiated
on August 7 to pick up and deliver currency and
coin weekly for the Branch and member banks.
Arrangements were also made to include the pick­
up of deposits from two large nonmember banks
in Rochester, and the service was extended to in­
clude certain member banks and branches which
previously employed their own private trucking
facilities. This improved service is now being
used by 65 banks and branches in 9 counties. In
all, more than $65 million had been transported
between August 7 and the end of the year, accom­
plishing a saving of $5,532 over the cost which
would have been incurred by the Branch if the
same shipments had been made through registered
mail. In addition, there has been a similar saving
o f $3,830 in connection with the shipments of
banks and branches which previously employed
private trucking services.
On May 1, 1950 a Tickometer was rented and
installed in the Branch’s Cash Division to dupli­
cate the count on fit $20 notes, and to verify the
count of fit Federal Reserve notes o f this Bank
received from other Federal Reserve Banks and
branches. It is also used by the Board examiners
and Head Office auditors to speed up the count of
currency on hand during examinations and audits
o f the Branch. It will prove increasingly useful
and economical if the volume of currency flowing
through the Branch continues to gain.
Loans to m em ber banks

A total of 335 loans aggregating $264 million
was granted to 38 member banks, compared with
261 loans totaling $207.1 million granted to 34
member banks in 1949. Discount earned amounted
to $33,581, as compared with $21,768 in 1949.
The highest volume of loans outstanding at any
one time during 1950 was $13,690,000 on August
14, and the longest period of borrowing by any




25

one bank was 95 days. At the end o f the year,
no banks were in our debt.
Bank and p u b lic relations

Bank and public relations activities during 1950
included 456 visits to banks, 92 meetings attended,
and 27 addresses by officers of the Branch before
banking groups or civic organizations. All banks
in the Branch territory were visited at least twice
during the year. Nine banks were given sub­
stantial assistance during the year in installing
adequate credit files covering their farm loans,
and toward the latter part of the year an effort
was made to encourage the development of credit
files covering other loans. In all, 163 visitors were
conducted through the Branch to observe its
operations.
A ccoun tin g p roced u re

During the latter part o f 1949 a study was
made to develop a more complete accounting pro­
cedure at the Branch. As a result, the Branch
started operating its own general ledger and
handling the payments o f all its expense items
on January 3, 1950. This change in procedure
has placed on the officers o f the Branch the pri­
mary responsibility for supervision and control
o f the Branch’s accounts and expenses, subject
to audit and examination by the General Auditor
and by the Board o f Governors o f the Federal
Reserve System. It has resulted in prompter
payment o f bills and clearing up o f suspense
items, and it has enabled the Branch officers to
obtain full information regarding transactions
and expenses which heretofore had been obtain­
able only after communication with the Head
Office. Any additional cost o f this operation has
been more than offset as a result of closer budget­
ary control and scrutiny of expenses by the
Branch officers. In addition, the new procedure
in the Branch accounting methods conforms to
the practices in all the other 23 Federal Reserve
branches.

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