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FED ERAL RE SE R V E BANK O F N EW YO R K
Fiscal Agent of the United States
0
L
A p r il

r Circular No. .3 8 .38

i

3 , 1 9a2

J

Offering o f $ 1 ,4 0 0 ,0 0 0 ,0 0 0 o f 9 1 -Day Treasury B ills
Dated April 10, 1952

Maturing July 10, 1952

To all Incorporated Banks and Trust Companies, and Others
Concerned, in the Second Federal Reserve D istrict:

Following is the text of a notice published today:
FO R R E L E A S E , M O R N IN G N E W S P A P E R S ,
Thursday, April 3, 1952.

TREASU RY DEPARTM ENT
Washington

The Secretary o f the Treasury, by this public notice, invites tenders for $1,400,000,000, or thereabouts, o f 91-day Treasury
bills, for cash and in exchange for Treasury bills maturing April 10, 1952, in the amount o f $1,201,177,000, to be issued on
a discount basis under competitive and non-competitive bidding as hereinafter provided. The bills o f this series w ill be dated
A pril 10, 1952, and w ill mature July 10, 1952, when the face amount w ill be payable without interest. They will
be issued in bearer form only, and in denominations o f $1,000, $5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity value).
Tenders w ill be received at Federal Reserve Banks and Branches up to the closing hour, two o ’clock p.m., Eastern
Standard time, Monday, A pril 7, 1952. Tenders will not be received at the Treasury Department, Washington. Each
tender must be for an even multiple o f $1,000, and in the case o f competitive tenders the price offered must be expressed on
the basis o’f 100, with not more than three decimals, e.g., 99.925. Fractions may not be used. It is urged that tenders be
made on the printed forms and forwarded in the special envelopes which w ill be supplied by Federal Reserve Banks or
Branches on application therefor.
Others than banking institutions w ill not be permitted to submit tenders except for their own account. Tenders w ill be
received without deposit from incorporated banks and trust companies and from responsible and recognized dealers in in­
vestment securities. Tenders from others must be accompanied by payment o f 2 percent o f the face amount o f Treasury bills
applied for, unless the tenders are accompanied by an express guaranty o f payment by an incorporated bank or trust company.
Immediately after the closing hour, tenders w ill be opened at the Federal Reserve Banks and Branches, follow ing which
public announcement w ill be made by the Secretary o f the Treasury o f the amount and price range o f accepted bids. Those
submitting tenders w ill be advised o f the acceptance or rejection thereof. The Secretary of the Treasury expressly reserves
the right to accept or reject any or all tenders, in whole or in part, and his action in any such respect shall be final. Subject
to these reservations, non-competitive tenders for $200,000 or less without stated price from any one bidder w ill be accepted
in full at the average price (in three decimals) o f accepted competitive bids. Settlement for accepted tenders in accordance
with the bids must be made or completed at the Federal Reserve Bank on April 10, 1952, in cash or other immediately
available funds or in a like face amount o f Treasury bills maturing April 10, 1952. Cash and exchange tenders w ill receive
equal treatment. Cash adjustments w ill be made for differences between the par value o f maturing bills accepted in exchange
and the issue price o f the new bills.
The income derived from Treasury bills, whether interest or gain from the sale or other disposition of the bills, shall
not have any exemption, as such, and loss from the sale or other disposition o f Treasury bills shall not have any special
treatment, as such, under the Internal Revenue Code, or laws amendatory or supplementary thereto. The bills shall be
subject to estate, inheritance, gift, or other excise taxes, whether Federal or State, but shall be exempt from all taxation
now or hereafter imposed on the principal or interest thereof by any State, or any o f the possessions o f the United States,
or by any local taxing authority. F or purposes o f taxation the amount o f discount at which Treasury bills are originally
sold by the United States shall be considered to be interest. Under Sections 42 and 117(a)(1) o f the Internal Revenue
Code, as amended by Section 115 of the Revenue A ct o f 1941, the amount o f discount at which bills issued hereunder are
sold shall not be considered to accrue until such bills shall be sold, redeemed or otherwise disposed of, and such bills are
excluded from consideration as capital assets. Accordingly, the owner o f Treasury bills (other than life insurance com ­
panies) issued hereunder need include in his income tax return only the difference between the price paid for such bills,
whether on original issue or on subsequent purchase, and the amount actually received either upon sale or redemption at
maturity during the taxable year for which the return is made, as ordinary gain or loss.
Treasury Department Circular No. 418, as amended, and this notice, prescribe the terms o f the Treasury bills and
govern the conditions o f their issue. Copies o f the circular may be obtained from any Federal Reserve Bank or Branch.

This Bank will receive tenders up to 2 p.m., Eastern Standard time, Monday, April 7, 1952, at the Securities
Department of its Head Office and at its Buffalo Branch. Please use the form on the reverse side of this circular to
submit a tender, and return it in an envelope marked “ Tender for Treasury Bills.” Paym ent for the Treasury bills
cannot be made by credit through the Treasury T ax and Loan Account. Settlement must be made in cash or other
immediately available funds or in maturing Treasury bills.
A

llan

S proul,

President.

Results of last offering of Treasury bills (91-day bills dated April 3, 1952, maturing July 3, 1952)
Total applied f o r ........ $2,185,837,000
Total accepted ............ $1,201,355,000 (includes $168,612,000
entered on a non-competitive basis
and accepted in full at the aver­
age price shown below)
Average price..........

99.596+Equivalent rate o f discount
approx. 1.598% per annum

Range o f accepted competitive bids :
High ..........................

99.615

Equivalent rate o f discount
approx. 1.523% per annum

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

99.594

Equivalent rate o f discount
approx. 1.606% per annum

(26 percent o f the amount bid for at the low
price was accepted)




Federal Reserve
District

Total
Applied for
.

$

.

$2,185,837,000

New Y ork ..................
Philadelphia ..............
Cleveland ....................
Richmond ....................
Atlanta .......................
C h ic a g o ........................
St. L o u i s .....................
Minneapolis ................
Kansas C i t y ................
San F r a n cis c o ............
T otal

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

32,129,000
1,479,215,000
29,220,000
49,350,000
14,167,000
21,782,000
283,555,000
39,970,000
16,060,000
52,662,000
41,736,000
125,991,000

Total
Accepted
$

27,149,000
738,550,000
10,998,000
26,650,000
6,667,000
18,414,000
160,135,000
29,103,000
12,360,000
47,702,000
28,496,000
95,131,000

$1,201,355,000
( over)

IMPORTANT— If you desire to bid on a com p etitive basis, fill in rate per 100 and maturity
value in paragraph headed “ Competitive Bid.” If you desire to bid on a n on -com petitive
basis, fill in only the maturity value in paragraph headed “ Non-competitive Bid.” DO
N O T fill in both paragraphs on on e form . A separate tender must be used for each bid,
except that banks submitting bids on a competitive basis for their own and their customers’
accounts may submit one tender for the total amount bid at each price, provided a list is
attached showing the name of each bidder, the amount bid for his account, and method
of payment. Forms for this purpose will be furnished upon request.
N o ..............................

T E N D E R FOR 91-D A Y T R E A S U R Y BILLS
Dated April 10, 1952
To

F e d e ra l

R e se rv e

B a n k

o f

N ew

Maturing July 10, 1952
Dated a t .........................................................

Y o rk ,

Fiscal A gent of the United States.

............................................................. 1952
NON-COMPETITIVE BID

COMPETITIVE BID
Pursuant to the provisions o f Treasury
Department Circular No. 418, as amended, and
to the provisions o f the public notice on
A pril 3, 1952, as issued by the Secretary
of
the Treasury,
the undersigned
offers

Pursuant to the provisions o f Treasury De­
partment Circular No. 418, as amended, and to the
provisions o f the public notice on A pril 3,
1952, as issued by the Secretary o f the Treasury,
the undersigned offers a non-competitive tender

............................................ * fo r a total amount of

for a total amount o f $ ..............................................
(N o t to e x c e e d $200,000)

( R a t e p er 100)

$ ....................................................... (maturity value)
o f the Treasury bills therein described, or for
any less amount that may be awarded, settlement
therefor to be made at your Bank, on the date
stated in the public notice, as indicated below :
□

B y surrender o f maturing Treasury bills

(maturity value) o f the Treasury bills therein
described, at the average price (in three decii mals) o f accepted com petitive bids, settlement
therefor to be made at your Bank, on the date
stated in the public notice, as indicated b e low :
□

By surrender o f maturing Treasury bills

amounting t o ................... $_______________________

amounting t o ................... $_______________________

□

□

By cash or other immediately available funds

By cash or other immediately available funds

* Price must be expressed on the basis of 100, with not
more than three decimal places, for example, 99.925.

The Treasury bills for which tender is hereby made are to be dated A pril 10, 1952, and are to mature
on July 10, 1952.
This tender will be inserted in special envelope marked “ Tender for Treasury Bills.”
Name o f Bidder ...................................................................................................................
( P l e a s e p r in t )

By

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

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

(O ffic ia l s ig n a tu r e r e q u ir e d )

(T itle )

Street Address .......................................................................................................................
( C i t y , T o w n o r V i l la g e , P . O . N o ., a n d S ta te )

If this tender is submitted by a bank for the account o f a customer, indicate the customer’s name on line below:
(N a m e o f C u s to m e r )

( C i t y , T o w n o r V i l la g e , P . O. N o ., a n d S ta te )

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


Paym ent b y cred it through Treasury Tax and Loan A ccou n t will n ot b e perm itted.
http://fraser.stlouisfed.org/
1136-a
(O V E R )
Federal Reserve Bank of St. Louis

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

N

ew




Y

ork

President’s Report
to
Directors
for 1951




FEDERAL

RESERVE

BANK

OF

NEW

Presidenfs Report
to
Directors
for 1951

C O N F ID E N T IA L

YORK

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

March 25, 1952

To the Directors o f the
Federal Reserve Bank o f New Y ork :

This confidential report for 1951 is designed to give you a brief summary of
matters that cannot appropriately be included in our annual report to stockholders,
and to give a more detailed view of our operations than is possible in the public report.
It also becomes part of a continuing record of the policies o f the Bank and their
administration.
The accord with the Treasury, announced early in March 1951, restored to the
Federal Reserve a measure o f initiative over the availability and cost o f bank reserves.
During the balance of the year that initiative was retained and there was a welcome
abatement o f both credit expansion and inflationary pressures. There were, of course,
other factors which contributed to this outcome. The most important were the dis­
position o f many consumers to save largely rather than spend freely, and the con­
tinued high production of consumers’ goods, despite the growing demands of the
defense program. Selective credit controls, the Voluntary Credit Restraint Program,
and the direct controls authorized by the Defense Production Act o f 1950, as amended,
also made their various contributions. In so far as they were well conceived and well
administered, each of these measures served to reenforce the others. From the stand­
point of the Federal Reserve System, however, the recovery of freedom to use the
discount rate and open market operations primarily as weapons of credit policy was
the most important factor, both in the immediate situation and for the long run.
A s the detail of the report makes clear, our work load, our staff, and our operat­
ing expenses increased again last year. More checks, fo r example, were processed
than ever before, and we took on the job o f handling postal money orders as well. The
increasing volume and importance o f our operations, however, also indicate that
the Bank and the System are still growing in usefulness to the nation and its economy.
"V are fortunate in having a competent and loyal staff, whose ability to accom­
Ve
modate itself to rapid changes in the size and nature o f our operations, has again
been proved by performance.
Yours sincerely,




President.

CONTENTS
PAGE
O p e n M a r k e t O p e r a t io n s
T r a n s a ctio n s

in

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

G overn m en t

s e c u r it ie s

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

D ir e c t s e c u r it y p u r c h a s e s f r o m th e T r e a s u r y b y S y s te m O p e n M a r k e t A c c o u n t
R ep u rch a se
a g reem en ts
......................................................................................................................................
S ta tis tic a l
su m m ary
............................................................................................................................................
F is c a l A g e n c y O p e r a t io n s

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

P u b lic
debt
..................................................................................................................................................................
V o l u m e o f W o r k ..........................................................................................................................................................
T e l e g r a p h i c t r a n s f e r s o f m a r k e t a b l e s e c u r i t i e s ................................................................................
I n t e r n a t i o n a l B a n k f o r R e c o n s t r u c t i o n a n d D e v e l o p m e n t ......................................................
T reasu ry
F o r e ig n
L oans and

T ax and Loan
A ssets

C o n tro l

C r e d it s

A ccou n t

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

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

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

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 ) ...............................................................................
R e a l E s t a t e C r e d i t ( R e g u l a t i o n X ) .........................................................................................................
V olun tary

Bank

10

11
11
11
11
11

P rogram

M e m b e r b a n k 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 .........................................................................................................
M e m b e r b a n k c o n d i t i o n ........................................................................................................................................
S a l e o f b a n k s t o c k ....................................................................................................................................................
B a n k c h a n g e s ...............................................................................................................................................................
R . F . C . i n v e s t m e n t i n m e m b e r b a n k s ......................................................................................................
R e l a t io n s

P u b l ic

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

I n f o r m a t io n

P r e s s r e la tio n s

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

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

F i l m s ......................................................................................................................................................................................
P u b l i c a t i o n s ....................................................................................................................................................................
O th e r a c t iv it ie s
Ch e c k

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

C o l l e c t io n

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

A i r t r a n s p o r t a t i o n ....................................................................................................................................................
D i r e c t r o u t i n g ...............................................................................................................................................................
C h eck R o u tin g
Ca s h

O p e r a t io n s

Sym bol P rogram

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

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

C o u n t e r f e i t s .....................................................................................................................................................................
A r m o r e d c a r r i e r s e r v i c e ........................................................................................................................................
C o i n s h o r t a g e ...............................................................................................................................................................
W ir e

T ran sfers

T e le g r a m s

of

F unds

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

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

U n it e d S t a t e s P o s t a l M o n e y O r d e r s
R esearch

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

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

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 ............................................................................................................
R e l a t i o n 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 ................................................................................................................................................................................
F o r e ig n

O p e r a t io n s

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

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 .........................................................................................................................................................
U . S . c u r r e n c y a n d c o i n ......................................................................................................................................
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 ....................................................................................................................
F o r e i g n 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 ...............................................................................................................
P ersonnel

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

S a l a r y a d m i n i s t r a t i o n ..............................................................................................................................................
N u m b e r o f e m p l o y e e s ...............................................................................................................................................
H e a d O f f ic e s a l a r y l i a b i l i t y ................................................................................................................................
E m p l o y e e b e n e f i t s .......................................................................................................................................................
B u ffalo B ran ch




8
8
9
9

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

S u p e r v is io n

B ank

7
7
7
7
8

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

S e c u r it ie s

of

6
6

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

Cr e d it R e s t r a in t

S a f e k e e p in g

2
2
5
5
5

O p e r a t io n s

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

C a s h o p e r a t i o n s ............................................................................................................................................................
W i r e t r a n s f e r s o f f u n d s ......................................................................................................................................
C h e c k c o l l e c t i o n ............................................................................................................................................................
L o a n s t o m e m b e r b a n k s .........................................................................................................................................
R e g u la tio n s W a n d X
...........................................................................................................................................
B a n k r e l a t i o n s ...............................................................................................................................................................
B a n k s u p e r v i s i o n .........................................................................................................................................................
P e r s o n n e l ..........................................................................................................................................................................
A c c o u n t i n g p r o c e d u r e s ...........................................................................................................................................

12
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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 1 9 5 1
h e

outstanding development o f the year was

Tthe revival of traditional methods o f monetary
and credit control, a revival made possible by the
unfettering of Federal Reserve operations in the
United States Government securities market.
This happy result followed an agreement between
Treasury and Federal Reserve officials on a pro­
gram fo r greater coordination o f actions in execut­
ing debt management and monetary policies. The
program was publicly announced on March 4 in
the following joint statement by the Secretary o f
the Treasury and the Chairman of the Board o f
Governors and o f the Federal Open Market Com­
mittee :
The Treasury and the Federal Reserve System have
reached full accord with respect to debt management
and monetary policies to be pursued in furthering their
common purpose to assure the successful financing of
the Government’s requirements and, at the same time,
to minimize monetization of the public debt.

Tw o months earlier, at the beginning o f the
year, however, the inflationary upsurge which had
been set off with our involvement in K orea had
grown to substantial proportions. The entry o f the
Chinese into the war late in 1950 had intensified
the scramble for both consumer and capital goods
in anticipation o f shortages and higher prices later,
when the expanded defense program was expected
to reach full stride. Buyers had not only a large
volume o f cash and near-cash assets but also ready
access to substantial volumes o f newly created
credit, much o f it based on increased commercial
bank reserves resulting from the Federal Reserve
System’s firm support of prices o f United States
Government securities. Moreover, Federal R e­
serve support purchases from nonbank investors
directly increased that portion o f the money sup­
ply represented by commercial bank deposits, as
well as the volume o f bank reserves.
Up to the time o f the accord in March, therefore,
greater reliance had to be placed upon selective
or qualitative credit controls than upon general
quantitative measures fo r curbing the expansion
of private credit. It was not feasible to withhold
Federal Reserve credit without affecting the level
o f interest rates on Government securities to an
extent quite incompatible with the T reasury’s
debt management policy. The accord, however,
opened the way fo r a shift in rate policy and




open market operations away from emphasis
on rate stabilization toward credit control ob­
jectives.
The transition from a strongly supported mar­
ket fo r Goverment securities to one less dependent
on the Federal Reserve was made against a back­
ground o f continuing active demands for credit
and capital funds. In these circumstances, efforts
to restrain credit expansion caused upward in­
terest rate adjustments throughout the whole
range o f maturities of Treasury obligations.
These adjustments were the largest recorded in
any comparable period of time in the past decade
but they took place in a reasonably orderly market
without the loss o f confidence which some had
predicted. They were the more significant since
they involved the breaching o f par, fo r the first
time since issuance, by many intermediate and
long term Treasury bonds. They were the more
effective because they were quickly communicated
to the money market, the corporate securities
market, and the mortgage market. The change
in open market operations served partially to
restore the discount rate and the borrowing
mechanism to their traditional roles as instru­
ments o f credit policy. Since banks were no
longer freely able to obtain reserves as a result
of System purchases of Government securities,
they found it necessary to resort to more fre­
quent borrowing from the Reserve Banks to ad­
just reserve positions.
A s a consequence o f action taken by the Board
of Governors o f the Federal Reserve System late
in 1950, an increase in reserve requirements be­
came effective on a staggered basis over the period
January 11-February 1, requiring a rise o f $2.0
billion in member bank reserves at the Federal
Reserve Banks. There were no further changes in
discount rates or reserve requirements in 1951. In
March a program o f voluntary credit restraint,
authorized by the Defense Production A ct o f 1950,
was developed and placed in the hands o f a large
number o f regional committees; it has been effec­
tive in helping to reduce credit expansion without
restricting loans fo r essential purposes. Selective
qualitative credit restrictions continued to be use­
ful in supplementing general credit restrictions,
but during the summer consumer instalment credit
l

2

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

terms and curbs on financing of lower cost houses
were relaxed by act o f Congress. Although use of
credit in the stock market had not been an im­
portant factor in recent years, there was a sig­
nificant expansion in this type o f borrowing dur­
ing the last quarter o f 1950, and margin require­
ments were raised in mid-January as a preventive
measure.
During the first half o f 1951 the Treasury’s cash
income exceeded its cash expenditures by almost
$7 billion, so that there was no need fo r it to enter
the market fo r new money. In the latter half of the
year, however, a cash deficit o f more than $5 bil­
lion made borrowing necessary. The weekly bill
offerings were increased to provide $2 billion, and
two special issues of Tax Anticipation bills matur­
ing March and June 15, 1952, respectively, were
marketed at auction in October and November to
produce another $2.5 billion. The use of the special
bills was expected, among other benefits, to reduce
the otherwise heavy impact on the money market
o f the Mills plan fo r accelerating income and
profits tax payments by corporations.
The Treasury’s need for funds, arising largely
out of substantial expenditures for the defense
effort, was increased during the year by the failure
o f proceeds from the sale o f Savings bonds to
match requirements for redeeming bonds o f this
type presented fo r payment. The gap between
sales and redemptions, however, tended to narrow
during the year.
A n obstacle to full achievement of the System ’s
credit control objectives in the area of open mar­
ket operations was the frequency o f Treasury
financing operations and the large proportion of
short term issues in the total debt. A fter reaching
the accord, the System and the Treasury attempt­
ed in the ensuing months to work out a coordinated
program o f joint action calculated to meet their
special needs and common responsibilities. A
chief objective o f this program, as we see it, is the
rescheduling o f maturities around quarterly dates
to widen the interval between financing dates so
as to relieve the System o f a continuous responsi­
bility fo r market stabilization at the expense of
credit policy objectives.
A s the year progressed, the post-Korea infla­
tionary boom abated; after June the economy
remained in a state of relative equilibrium at a
high level of activity.



OPEN MARKET OPERATIONS
Transactions in Government securities

The market for United States Government se­
curities in the early weeks o f the year reflected in
large part a continuation o f influences which were
operative in the latter half of 1950. These included
a tight money market, so that, despite the exist­
ence o f a substantial nonbank demand, the Federal
Reserve was the only buyer o f a sizable supply
o f short term Treasury obligations that commer­
cial banks had to sell in order to raise $2 billion
for additional reserve requirements. The market
was also subjected to continuous liquidation of
restricted Treasury bonds by nonbank investors
raising funds to meet actual or prospective invest­
ment commitments at a time when there was little
or no demand for those issues. A s this situation
developed, the market began to reflect a general
attitude of uncertainty among investors, accen­
tuated by public airing o f the conflicting views
o f the Treasury and the Federal Reserve System
on monetary and debt management policies, and
by various interpretations of these developments
and their implications fo r market rates. The com­
bination o f these general market influences caused
some investors to engage in protective liquida­
tion o f their longer term holdings and reinvest­
ment o f at least a portion of the proceeds in short
term issues. A t the same time, industrial corpora­
tions and other nonbank investors, whose interest
in short term Government securities apparently
had been stimulated by the higher rates of return
available from such obligations, were persistent
buyers of the longer maturities o f Treasury bills
and Treasury notes. On the other hand, commer­
cial banks needing reserves liquidated the shorter
maturities o f Treasury bills and notes and, when
these were exhausted, the longer term notes and
short and intermediate term taxable bonds. In
these circumstances, the Federal Reserve System
acted to purchase the securities offered by the
commercial banks and the restricted bonds sold
by nonbank investors, and to supply the longer
term bills and the October and November notes
which were in demand.
During the first few days following the an­
nouncements on March 4 o f the Treasury-Federal
Reserve accord and the exchange offering of in­
vestment series 2% per cent bonds fo r the 2% per
cent issues o f June and December 1967-72, holders
of the latter issues were given an opportunity to

FEDERAL RESERVE BANK OF NEW YORK

sell these securities at the previously supported
price ( 100 2% 2 ) ; substantial amounts were pur­
chased by the Federal Reserve System and by
Government investment accounts. On March 8,
after further details of the terms o f the exchange
were announced, support purchases at previously
existing levels ceased. Following a rapid price
adjustment accompanied by System purchases at
an intermediate price level, support was resumed
at 99%2 fo r the two longest restricted bonds and at
related but less rigid quotations for other issues.
It was not until the closing of the exchange sub­
scription books on A pril 6 that firm support was
finally abandoned. Subsequently the entire price
structure for Government securities moved lower
in search of a point o f possible stabilization, with
the System making modest scale purchases on the
way down in order to maintain an orderly market.
From the first o f the year until A pril 11, the
Wednesday following the closing o f the exchange
subscription books, the System ’s holdings of
United States Government securities increased by
$2.3 billion. Over this period $1.3 billion restricted
Treasury bonds and $1.1 billion bank eligible
Treasury bonds and long notes were purchased
fo r the System Open Market Account. Nearly $1.5
billion o f Treasury bills and short term notes also
were bought, but these purchases were approxi­
mately offset by sales and redemptions o f other
Treasury bills and short term notes. In addition,
restricted Treasury bonds totaling $0.8 billion
were purchased for Government investment ac­
counts.
In the latter part o f A pril and during May, the
System was able to recapture some o f the Federal
Reserve funds previously supplied to the market
by allowing holdings o f maturing bills to run off
and by selling Treasury bills and notes to nonbank
investors, many of whom were reinvesting the
proceeds o f sales o f long term bonds. Thus, be­
tween April 11 and May 30, the Federal Reserve
Banks’ holdings of Government securities de­
clined $0.8 billion net, reflecting mainly re­
demptions o f Treasury bills, with sales of bills and
notes at this time approximately offsetting addi­
tional purchases of restricted bonds amounting to
about $0.2 billion.
B y the end o f May, the basic position of the
Government security market had strengthened.
Despite a nearly continuous flow o f restricted
Treasury bonds to the market, through the end of




3

June, System purchases o f these issues aggre­
gated only $128 million. In addition, $45 million
restricted bonds were purchased fo r a Treasury
investment account against the sale o f a like par
amount o f partially tax-exempt bonds. A t the
lowest prices reached by the restricted Treasury
bonds at that time, liquidation tended to dry up as
many large institutional sellers withdrew from
the market. During the summer, improved senti­
ment led to a substantial recovery in the long term
bond market but thereafter prices tended to drift
lower. Although there was little selling pressure,
demand wras light; at times, because o f the thin­
ness o f the market, prices tended to respond read­
ily to the activity o f professional traders. On only
a few occasions during the latter half o f the year,
however, was there System Account intervention
in the long term bond market and then only at
times when “ street” activity or small lot sales
appeared to be unduly influencing prices. Over
the entire latter half o f the year, System Account
net purchases o f restricted bonds amounted to
only $18 million. Purchases o f restricted bonds for
Government investment accounts over this period
totaled $72 million; a substantial part was bought
against sales of partially tax-exempt bonds.
From the end o f May, interest and activity
centered in short term rather than in long term
securities, with public debt financing operations
exercising the largest single influence in the mar­
ket. Over $30 billion of maturing notes and bonds
called for payment were refunded in six separate
operations and $4.5 billion o f new money was
raised, $2.0 billion by means o f increases in the
wreekly Treasury bill offerings and $2.5 billion by
two special offerings o f Tax Anticipation bills.
System Account purchases over this period were
largely fo r the purpose o f stabilizing the market
at the time o f Treasury refunding operations.
The System ’s responsibility for the success of
these financings placed definite limitations on the
effectiveness o f its credit control measures.
Accordingly, every effort wras made to recapture
the reserves released through these stabilization
purchases by offsetting sales o f other issues for
which a demand existed, either simultaneously or
over the ensuing weeks.
The first o f the refunding operations was an­
nounced on May 28 and the exchange subscription
books were open during the four-day period June
4-7. The new issue, a lfg per cent 91
/2-month
certificate o f indebtedness, which was offered in

4

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

exchange fo r the $1.6 billion 2% per cent bonds
called fo r redemption June 15 and the three series
o f 1% per cent notes due July 1 aggregating $8.4
billion, was liberally priced by prevailing market
standards. Because o f the diversity o f their in­
vestment requirements and preferences, however,
many holders o f the “ rights” preferred to do
their own refunding in the market; others, par­
ticularly dealers, who lacked confidence in the
maintenance o f the prevailing rate structure elect­
ed to sell “ rights” rather than exchange. Buying
interest in the “ rights” or in the new certificates
of indebtedness on a “ when issued” basis was
negligible, and practically the entire supply of
these issues reaching the market was taken by the
System Account. These purchases totaled nearly
$1.4 billion, which was partially offset between
May 30 and the end o f June by sales and re­
demptions o f other short term Treasury obliga­
tions amounting to $0.9 billion.

dated October 15, 1951, due October 1, 1952 in
exchange fo r the $11.2 billion o f 1*4 per cent notes
maturing October 15 and November 1. Because of
pressure exerted on the market by extremely tight
money conditions at the end of September, short
term securities had been weak and System Account
purchases of more than $1.0 billion were made in
order to relieve the tight money situation and to
facilitate the last o f these refunding operations.
Subsequent sales of Treasury bills and certificates
and redemptions o f Treasury bills offset all but
approximately $200 million of the Federal
Reserve credit released through these purchases.
Yields on U . S. Governm ent Securities

During the early part o f July, there was sub­
stantial liquidation o f outstanding bills and other
short term issues by banks in New Y ork and other
large cities in need o f funds to adjust reserve
positions; part o f the temporary over-supply was
taken up by small System Account purchases of
bills. Redemptions o f matured bills over this
period and in the ensuing weeks to August 2 just
about offset these purchases.
Refunding of the $5.4 billion Treasury notes
maturing August 1 with a new 11-month 1%
per cent certificate due July 1, 1952, was accom­
plished without the wholesale shifting o f maturi­
ties which had accompanied the June offering. In
the aggregate, offerings o f the “ rights” were
light and purchases o f $54 million fo r System
Open Market Account apparently imparted suffi­
cient confidence to the market to curtail further
offerings.
A series of refundings followed in rapid suc­
cession. The books were open from September 4
through September 7 on the Treasury exchange
offering of 11-month 1% per cent certificates
o f indebtedness due August 15, 1952 fo r the $755
million 3 per cent partially tax-exempt bonds call­
ed fo r redemption on September 15. The books
were open from September 18 through 21 fo r an
offering o f similar 11-month certificates due
September 1,1952 in exchange fo r the $1.9 billion
1*4 per cent notes maturing October 1. The books
were open again from October 1 to 4 fo r an offer­
ing of 1% per cent certificates of indebtedness



The final financing operation of 1951 was the
exchange offering o f ll^ -m o n t h 1% per cent
certificates o f indebtedness due December 1, 1952
fo r $1.1 billion o f partially tax-exempt 2
per
cent bonds called fo r redemption on December 15.
Support o f this operation by the System was
nominal in amount and purchases were exactly
offset by other sales. Toward the end o f December
the money market became unusually tight. Partly
because o f year-end bank and corporate adjust­
ments fo r statement, dividend, and tax purposes,
buying interest in the market was negligible and
inventories o f short term securities tended to pile
up in dealers ’ hands. Increasing uncertainty as to

FEDERAL RESERVE BANK OF NEW YORK

the emerging pattern of rates, which was accen­
tuated by the action o f several leading New
York City banks followed by other large banks
throughout the country in raising their prime
commercial loan rates from 2% to 3 per cent, con­
tributed to further pressure on the rate structure,
so that just after Christmas, three-month Treasury
bills were selling to yield as high as 1.95 per cent.
In these circumstances, the System Account and
this Bank gave temporary relief to the market.
The record of the last half o f 1951 emphasizes
the urgent need for reducing the frequency of
Treasury offerings if credit policy and debt man­
agement are to work effectively together.
Direct security purchases from the Treasury
b y System Open Market Account

On two occasions during the last year, pur­
chases were made fo r the System Open Market
Account o f special certificates o f indebtedness di­
rectly from the Treasury in order to avoid over­
drafts at the Federal Reserve Banks. These trans­
actions were made pursuant to the Federal
Reserve
System ’s temporary
authorization
(which expires June 30,1952) to purchase directly
from the Treasury up to $5 billion of direct or
fully guaranteed obligations o f the United States.
The certificates carried a rate o f % per cent and
matured at the end of the month in which they
were issued but were redeemable earlier at the
option o f the Treasury. They were purchased in
amounts o f $100 million and $320 million at the
beginning o f June and in mid-December, respec­
tively, and were retired on the next business day
following their issuance. The purpose was to
anticipate large tax receipts by the Treasury, and
to avoid a strain on the money market.

5

2 and 21 per cent fo r loans. It also lessened the
/4
need fo r outright System Account purchases and
proved to be an important adjunct to the flexible
rate policy.
Statistical summary

During the year, under the direction of the
Federal Open Market Committee, this Bank pur­
chased in the open market fo r the twelve Federal
Reserve Banks Government securities having a
total face value o f $7.6 billion and sold, or present­
ed fo r redemption, securities having a face value
o f $4.7 billion. Thus, the yea r’s transactions re­
sulted in a net increase o f $2.9 billion in System
Open Market Account holdings o f United States
Government securities. In addition, there was a
net increase o f $144 million in United States
Government securities held under repurchase
agreements by this Bank, bringing the total in­
crease in United States Government securities
held by the Federal Reserve System to just over
$3.0 billion. (O f this amount, approximately $2.0
billion may be considered an offset to the increase
in the required reserves o f member banks imposed
by the Board o f Governors in January 1951.) The
effect on member bank reserves o f this increase
and o f other principal factors affecting reserves
is shown in the following table:
Factors Affecting Member Bank Reserves— 1951
(In billions)

F actors o f Increase
Increase in Federal Reserve holdings of
U. S. Government securities............................
Decrease in Treasury deposits............................
Increase in Treasury currency............................
Decrease in foreign accounts................................
Decrease in other fa cto rs.....................................

$ 3.0
0.4
0.1
0.4
0.2
$ 4.1

Repurchase agreements

The Federal Reserve Bank o f New Y ork made
active use during the year o f the repurchase agree­
ment authority granted by the Federal Open
Market Committee to all Federal Reserve Banks.
This authority permits the individual Federal
Reserve Bank to buy short term Government
securities from qualified dealers under an ar­
rangement requiring the dealers to repurchase
those securities within 15 days. This facility
assisted dealers in carrying positions in short
term Treasury obligations at rates not higher
than the discount rate at times o f money market
stringency when banks were charging the dealers



Factors o f Decrease
Increase in money in circulation........................
Decrease in other Federal Reserve credit . . . .

$ 1.5
0.2
$ 1.7

D ifference in Factors
Increase in required reserves ............................
Decrease in excess reserves...................................

$ 3.2
0.8

Increase in member bank reserves......................

$ 2.4

Total Federal Reserve System holdings of
Government securities amounted to $23.8 billion
at the end o f 1951, of which $23.6 billion was in the
System Open Market Account and $196 million
was held by the Federal Reserve Bank o f New

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

6

York under repurchase agreements. During the
year, the System Account exchanged $2.7 billion of
restricted Treasury bonds of June and December
1967-72 fo r the new 2% per cent nonmarketable
investment series bonds. Subsequently $1.5 billion
of these investment series bonds were exchanged
fo r I 1 per cent Treasury notes maturing in five
/*
years. Reflecting these and other exchanges made
during the year, as well as purchases, sales, and
redemptions, System Account holdings o f market­
able Treasury bonds declined by $0.5 billion,
Treasury notes by $7.4 billion and Treasury bills
by $0.8 billion; certificates o f indebtedness in­
creased by $10.4 billion and nonmarketable bonds
by $1.2 billion.

o f retaining their matured bonds for another ten
years, or less. I f held fo r the full 10-year exten­
sion period, the bonds will yield approximately
2.9 per cent compounded semi-annually; fo r the
first seven years of the extension period, however,
the bonds wall yield 2M per cent simple interest
>
per annum. The bondowners were also given the
option (within certain limits) o f exchanging them
at maturity for Series G bonds. The Series G
bonds issued in exchange fo r matured E bonds,
unlike those sold fo r cash, are redeemable by the
owner at par at any time after six months from
the issue date. From May 1 to December 31,1951,
we exchanged Series E bonds with a maturity
value o f $1,365,000 fo r G bonds.

This Bank’s share in the total Government se­
curities held by the System Open Market Account
amounted at the year-end to $5.3 billion, compared
with $4.8 billion at the end o f 1950. The Federal
Reserve Bank o f New Y ork bought and resold for
its own account, under repurchase agreements, a
total o f $2.2 billion short term Treasury obliga­
tions during the year. Outstanding agreements at
the year-end amounted to $196 million as com­
pared with $53 million at the end o f 1950.

On May 14, 1951, the Treasury discontinued the
sale of Treasury Savings notes, Series D, and the
next day offered a new issue, designated Series A.
Like the Series D, the new A notes have a threeyear maturity, but they yield 1.88 per cent if held
for their full life, rather than the 1.40 per cent of
the Series D.
G ross D ebt o f the United States Governm ent
B IL L IO N S
OF D O L L A R S

B IL L IO N S
Or DO LLARS

FISCAL AGENCY OPERATIONS
d ir e c t

TOTAL
A N D G U A R A N TEED

Public debt




_____

N O T E S , CE R T I F I C A T E S
A N D B IL L S

\
A

.

BO

7

Owners o f Series E Savings bonds, the first of
which matured May 1,1951, were given the option

M AR <ETABLE

<n
o

The largest single transaction during the year
in public debt securities resulted from the
T reasury’s decision to offer nonmarketable 2%
per cent bonds in exchange for the 21/2 per cent
bonds o f June and December, 1967-72. Exchange
subscriptions handled at this Bank totaled $4,113
million, in addition to $2,714 million for the System
Account, and involved 5,970 registrations. Cash
offerings o f new marketable securities in 1951
were limited to two issues o f Tax Anticipation
Series bills aggregating almost $2,500 million, the
first dated October 23, 1951, and the second
November 27, 1951. Maturities at time o f issue
were 144 days (to March 15, 1952) and 201 days
(to June 15, 1952), respectively. In addition, the
Treasury increased the weekly bill offerings by
$200 million on ten occasions, thus obtaining an­
other $2,000 million. The issues o f special bills
and the increased weekly bill offerings were re­
flected in a rise o f 37,000 pieces processed above
the 1950 volume.

S A V IN G S B O N D S
A N D S A V IN G S N O T E S

-_____ /
.................
^ S P E C IA L IS S U E S _
_

”

N O N M A R K E T K8LE BO N D S,
G U A R A N T EE D DEBT, ETC
1947

1948

'•

1949

1950

_________

1951

The Treasury’s financing operations during
1951 included, in addition to the special series
o f bills and the additional bill offerings noted
earlier, the refunding o f seven issues o f notes and
one of certificates maturing during the year, and
o f three bond issues called fo r redemption. These
refundings involved maturities aggregating $35.8
billion, excluding the $13.6 billion o f 2*/2 per cent
bonds surrendered in exchange fo r the new 2%
per cent nonmarketable issue. They may be sum­

FEDERAL RESERVE BANK OF NEW YORK

7

marized, together with comparable figures for
1950, as follow s:

account of the Treasurer of the United States.
The statistical summary of this work follow s:

Marketable Issues

Telegraphic Transfers

(In m illions)

1950
1950

Certificates, notes and bonds:
Exchanged .....................................
Redeemed .......................................

1951

$35,137
2,238

$44,122
Treasury Bills:
Issued (and redeemed) on ex­
change .........................................
Issued for c a s h ............................
Redeemed for c a s h ......................

$39,977
4,145

$37,375*

Transfers (outgoing)* ........................
Transfers (incoming) ..........................
Pieces handled (outgoing) .................
Pieces handled (incom ing).................
Par amount, in millions (outgoing).
Par amount, in millions (incoming).

1951

38,935
35,285
328,677
219,956
$22,193
$20,114

39,606
34,050
316,813
206,214
$19,824
$20,393

* M a d e o n fee basis.

$12,489
40,642
39,327

$ 4,748
56,214
51,745

International Bank for Reconstruction
and Developm ent

As fiscal agent o f the International Bank for
Reconstruction and Development, we issued on
March 1,1951, $50 million o f its 3 per cent 25-year
bonds, and on October 15, 1951, $100 million of
its 3*4 per cent 30-year bonds. Beginning May
29, 1951, we also handled the exchange of tempor­
ary certificates o f the $100 million issue o f 2 per
cent Serial bonds o f 1950, due 1953-62, for per­
manent bonds. The following is a comparison of
the volume o f transactions handled during 1950
and 1951.

*
In clu d e s $1,514 m illion o f m arketable n otes ob ta in ed in e x ch a n g e fo r
n on m ark etab le b on d s.

Nonmarketable Issues
(In m illions)

Issued on exchange..........................
Issued for cash ................................
Redeemed ...........................................

$ 9,949
—
8,425

$ 6,826
3,127
5,178

Volume o f work

These figures on the extent and nature o f the
Treasury’s financing operations, however, do not
indicate the volume o f work done at this Bank,
largely because they do not suggest the numbers
o f transfers o f ownership o f Government securi­
ties. During the year, as fiscal agent of the United
States for the issue, exchange, transfer, and re­
demption o f marketable securities, we handled
2,872,814 pieces with an aggregate par value of
$258,187,575,000, compared with 2,820,366 pieces
having a par value o f $257,010,742,000 during
1950.
The number o f pieces of nonmarketable securi­
ties handled declined during 1951 from the previ­
ous year’s level, but the par value was much
higher because o f the bond exchange offer of
March 1951. W e handled a total o f 23,967,902
pieces o f these securities in 1951, as compared with
24,892,388 in 1950; their dollar value, however, was
$15,605,281,000, as compared with $4,758,906,380
in the previous year.
Telegraphic transfers o f marketable securities

During 1951 the Bank collected $113,685 in fees
for outgoing telegraphic transfers o f United
States securities, compared with $136,590 during
the previous year. The fees are paid into the



Pieces handled
1950

Issued ........... 93,881
Redeemed and
exchanged.. 52,931

D ollar volum e handled

1951

1950

1951

92,108

$100,000,000

$150,000,000

167,147

$105,707,000

$216,076,000

Treasury Tax and Loan Account

The volume o f work in maintaining Treasury
Tax and Loan Accounts increased sharply in
March, June, and September, when the Treasury
Department permitted banks qualified as special
depositaries to credit their Treasury Tax and
Loan Accounts with funds arising from quarterly
payments o f individual or corporate income and
excess profits taxes in amounts of $10,000 or over.
In December, this privilege was modified to per­
mit only 50 per cent of payments o f $10,000 or over
to be put through the Treasury Tax and Loan
Accounts.
Deposits to Second District Treasury Tax and
Loan Accounts increased during 1951 by almost
$6.3 billion to a total o f $10.4 billion. The chief
factors contributing to the increase were the
special deposits o f quarterly tax collections and
the deposit of the proceeds o f sale o f Tax
Anticipation bills. Payment for bills by this
method had not previously been authorized since
July 15, 1942.

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

8
Foreign Assets Control

Since December 17, 1950, we have administered
the Treasury’s “ freezing regulations” through­
out the entire nation. These regulations affect
assets in this country of Communist China and
North K orea and their nationals. Our Foreign
Assets Control Department handles the details of
this w ork ; it answers public inquiries, distributes
pertinent documents, and issues or denies licenses
under authorization from the Treasury Depart­
ment.
B y the end o f the year, the Department had
received and processed more than 7,800 applica­
tions fo r licenses.

LOANS AND CREDITS

The System ’s change in open market policy
and the increase in reserve requirements early in
the year were reflected in increased borrowing
from us by our member banks in 1951, as com­
pared with 1950. Banks outside New York City
borrowed more often and for larger amounts than
in previous years. Some o f these banks had never
borrowed from us before and others had done so
only rarely. W e continued to supervise loans to
our members to prevent their making improper
use o f Federal Reserve credit.
The table below shows the volume (in millions
o f dollars) and number o f loans to member banks
in 1951 and in 1950.
1950

Total advances..................................
Daily average volume of advances.
Range of outstanding advances
High

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

Low ..................................................
Highest volume of outstanding ad­
vances to members outside New
York C i t y .......................................
Number of advances........................
Number of borrowing banks...........

7,700

1951

13,500

44.2

99.3

442.9
1.4

589.51

46.5
2,114
274

2.62

87.4
3,1183
333

1 Reached on December 28 and lasted one day; it was the highest
since 1945 and largely represented loans to New York City banks.
2 Reached on December 31.
3 Seven to one bank were secured by customers ’ paper; all
others, by U. S. Government obligations.

W e received no applications last year fo r work­
ing capital loans under Section 13b o f the Federal
Reserve Act.



Loan Guarantees for Defense Production
(Regulation V )

The V-loan program was reactivated in Septem­
ber 1950. Two additional agencies of the Govern­
ment, the Atom ic Energy Commission and the
Defense Materials Procurement Agency, were
authorized during 1951 to act as loan guarantors,
bringing the total number o f guaranteeing agen­
cies and departments to seven.
Excluding applications subsequently with­
drawn, we received during the year 175 applica­
tions for V-loans totaling $312.9 million. W e
issued 120 “ Guarantee Agreem ents” amounting
to $248.7 million, or $1.3 million less than the
amount originally sought; guaranteeing agencies
declined 27 applications fo r loans o f $5.9 m illion;
and 28 applications fo r $57 million o f loans were
being processed at the end o f the year. In ad­
dition, we received 22 requests to amend some
outstanding Guarantee Agreements to cover
amounts in excess o f the original loan. These re­
quests, amounting to $34.2 million, were fo r addi­
tional working capital to complete defense con­
tracts accepted after the original V-loans were
granted. Many o f these requests were received
late in the year and were still under consideration
by the guarantors when the year ended.
A s o f December 31, 1951, a total o f 106
Guarantee Agreements were outstanding on loans
aggregating $265.8 m illion; o f this amount, $154.3
million was being used by the borrowers. With
the exception o f one guarantee issued by us on
behalf o f the General Services Administration,
all the guarantees were authorized by the de­
partments o f the Army, Navy and A ir Force. A
substantial number o f the agreements were issued
to guarantee 90 per cent o f the authorized amount
o f V-loans, but the average percentage was 83.3
per cent. In only a few instances were guarantees
issued in excess o f 90 per cent; and the guarantee­
ing agencies have indicated that as a policy they
will not authorize Guarantee Agreements in ex­
cess o f this figure, except fo r borrowers whose
operations are vital to the national defense, and
fo r whom no other suitable means o f financing are
available.
In last yea r’s report we discussed our efforts to
obtain remedial legislation to remove an obstacle
to widespread use o f the V-loan facility. The
difficulty stemmed from a ruling o f the Comptrol­
ler General that, in effect, made financing institu­

FEDERAL RESERVE BANK OF NEW YORK

tions liable fo r the return of money they had
received as assignees of contractors they had
financed, if a debt arose out o f repricing of the
contract and if the contractor were unable to
pay. Congress removed the obstacle 011 May 15 by
amending the Assignment o f Claims A ct o f 1940.
Consumer Credit (Regulation W )

In September 1950 the Board of Governors rein­
stated Regulation W , as authorized by the Defense
Production A ct o f 1950 and an Executive Order
of the President. The statutory authority ran to
June 30, 1951, but was extended before this date
for another year by amendment of the original
Act. The amendment also relaxed the restrictions
embodied in the regulation by extending maximum
maturities, reducing some down payment minimums, and permitting trade-ins to be used for
all or part of the down payments on all listed
articles, a privilege previously limited to auto­
mobiles. The latter change has added consider­
ably to the volume and difficulty o f our work,
since we must now try to determine whether or
not a trade-in allowance has been assigned in good
faith. Use o f the trade-in allowance as a substitute
for cash is, unfortunately, readily susceptible of
abuse.
During 1951 we processed approximately 2,000
registration statements, thus raising the total
number o f registrants in this District by the end
o f the year to about 16,700. W e investigated 4,892
registrants, of whom more than a third are not
supervised by any State or Federal agency, and
found 1,119 violators; we also made follow-up
checks on 176 form er violators. Federal and State
agencies supervising commercial lenders con­
tinued to cooperate with u s ; six registrants were
investigated on the basis of information these
agencies gave us, and we made copies o f our inves­
tigatory reports available to them.
Our enforcement work was done largely
through corresponding or conferring with viola­
tors and obtaining assurances o f future compli­
ance. W ith more serious violators, however,
form al conferences have been held at the Bank.
During the year, 98 form al disciplinary confer­
ences were held, and a criminal action was insti­
tuted by the United States Attorney against one
violator. In our enforcement work, we have some­
times had to call upon the buyer in a particular
transaction in order to get the complete facts of



9

a violation; we did this only if one o f our officers
authorized it, and then only according to his
instructions.
Sales promotion advertisements received our
particular attention during the year. Some sellers
implied that listed articles could be bought with­
out a down payment, or that longer maturities
were possible than those permitted. These adver­
tisements confused the public and other regis­
trants. W ith the aid o f our Public Information
Department, the Better Business Bureau, and the
advertising managers o f the metropolitan news­
papers, we achieved a substantial measure o f suc­
cess in curtailing this kind o f advertising, and by
the end o f the year it had ceased to be a serious
problem.
G row th o f R eal Estate and Consumer Credit
B IL L I O N S

B IL L IO N S
or DOLLARS

or D O LLAA S

----------- 16 0

60

NONFARM
M O R T G A G E C R E D IT
OU TSTA N D IN G
\.

—

—
T O T A L --------------------C O N S U M E R CREDIT
OUTSTA N D IN G

1941

1942

1943

1944.

1945

1946

1947

1948

1949

1950

1951

E n d o f y ear fig u r e s ; n o n fa rm m o r tg a g e credit fo r 1951 p a rtly estim ated.

Real Estate Credit (Regulation X )

The 1951 Amendments to the Defense Produc­
tion A ct o f 1950 extended the statutory authority
fo r Regulation X , as they had fo r Regulation W ,
fo r another year beyond the original expiration
date o f June 30, 1951. During the year, the scope
o f the regulation was also extended. In January
and February, the Board o f Governors brought
within the regulation (form erly limited to financ­
ing o f one- and two-family houses) credit for all
residential construction and for most types of
non-residential building, including hotels, offices,
theaters, warehouses, garages and stores.

10

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

On May 11, 1951, the Board o f Governors
announced that all persons engaged in the busi­
ness o f extending real estate credit were required
to register with a Federal Reserve Bank; by the
end o f 1951, we had processed approximately 4,800
registrations. Our enforcement program, how­
ever, had begun as early as mid-February. B y the
year-end we had investigated 1,292 registrants,
including almost half o f the number not subject to
investigation by other supervisory agencies. W e
have received full cooperation from these other
agencies, conducting investigations with them or
at their suggestions, and have made a practice of
giving them copies o f reports o f investigations. In
general, compliance with the regulation has been
excellent.

Board o f Governors o f the Federal Reserve Sys­
tem, that body encouraged representatives o f the
insurance, and commercial and investment bank­
ing industries to work out the details o f the agree­
ments and programs. The Attorney General and
the Chairman o f the Federal Trade Commission
were consulted, and the required approval by the
Attorney General was obtained. A Program for
Voluntary Credit Restraint was form ally promul­
gated on March 9, 1951, and simultaneously the
Board o f Governors wrote to financing institu­
tions throughout the country, explaining the P ro­
gram and urging them to support it. On March 14,
the membership o f a national Voluntary Credit
Restraint Committee was announced and it held
its first meeting.

Three sections o f the regulation required spe­
cial attention. One of these sections exempted
from the regulation any real estate construction
credit commitment made prior to the effective date
in the regulation; another granted exemptions to
persons who had made substantial commitments
fo r new construction before the planned structure
became subject to the regulation, and who were
able to show that compliance would entail finan­
cial hardship; and the third was designed to
relieve the temporary financial hardship caused
when, in moving from one locality to another, a
person is unable to complete the sale of one house
before he must buy another.

This committee has assumed responsibility for
publicizing the Program, obtaining cooperation,
naming regional subcommittees, and providing
additional guidance from time to time as required.
This latter task included the issuance o f six bul­
letins setting forth criteria fo r judging the appro­
priateness o f proposed financing.

In accordance with a Congressional mandate
(the Defense Housing and Facilities Services Act
o f 1951), the Board of Governors amended the
regulation, effective September 1,1951, to increase
the allowable size o f loans on houses selling for
$12,000 or less and to relax credit restrictions in
critical defense housing areas.

3. New York-New Jersey Mutual Savings Bank
Voluntary Credit Restraint Committee
4. Second District Commercial Banking Voluntary
Credit Restraint Committee
5. Second District Savings and Loan Voluntary
Credit Restraint Committee

VO LU N TAR Y CREDIT RESTRAINT PROGRAM

The Defense Production A ct of 1950 gave the
President authority to encourage financing insti­
tutions to make voluntary agreements and pro­
grams to restrain the further expansion o f credit
in order to combat inflation. The aim o f these
agreements was to assure financing o f essential
projects while keeping credit fo r non-essential
purposes to a minimum. One of the most impor­
tant factors in encouraging financing institutions
to support this program was a provision exempt­
ing the agreements from anti-trust legislation.
A fter the President delegated his authority to the



Five regional committees, each serving a differ­
ent group of lenders, are located in New York
City:
1. Eastern Insurance Voluntary Credit Restraint
Committee
2. Eastern Investment Banking Voluntary Credit
Restraint Committee

Both large and small institutions are repre­
sented on each committee. Moreover, at the sug­
gestion of the Attorney General, an officer o f this
Bank serves as a member o f each committee. The
routine work o f the committees is handled by one
of our staff who acts as Secretary. Inquiries nor­
mally come to a regional committee from a financ­
ing institution seeking the committee’s opinion on
the propriety o f a proposed loan or security issue.
There is no compulsion to make an inqu iry; many
projects have been financed without reference to
a committee because they seemed clearly to be in
harmony with the Program, and many others have
been rejected because they seemed just as clearly
to be inappropriate. Following a request by the
Director o f Defense Mobilization on May 7, 1951,

FEDERAL RESERVE BANK OF NEW YORK

it became the practice fo r issuers o f “ municipal”
securities in the amount o f $1 million or more to
obtain approval from a regional committee before
offering their securities fo r sale. When an inquiry
is made to a regional committee, the name of the
prospective borrower is not disclosed. The com­
mittee gives its opinion on the propriety under
the Program o f the proposed loan or security
issue. Because o f the voluntary nature o f the P ro­
gram, the committee makes no attempt to learn
whether or not the inquirer carries out the trans­
action.
Although we have no statistics to show the effi­
cacy o f the Program, the national Committee has
concluded that it has substantially curtailed the
amount o f non-essential loans and investments
which otherwise might have been made during
1951.
SAFEKEEPING OF SECURITIES

P rior to last year we had not made our secur­
ity custody service available to member banks in
Manhattan located south o f City Hall. In March,
however, we informed these banks that we would
hold up to half of their United States Government
securities; this change was made as a precaution
against undue disruption o f operations in the
event o f an enemy attack on New Y ork City.
During the year the Reconstruction Finance
Corporation in Washington took over the custody
and servicing o f almost all the securities which,
as fiscal agent, we had been keeping for them.
These securities are held by the R. F. C. as colla­
teral for loans.
BAN K SUPERVISION
M em ber banks

On January 1, 1951 there were 751 member
banks in this District, o f which 516 were national
and 235 were State member banks. During the
year two State banks were admitted to member­
ship, and one new national bank was chartered.
Offsetting these additions, however, four banks
withdrew from membership in the System, and
thirteen member banks were merged into other
institutions, so that by the end o f the year, the
total number o f member banks had decreased
from 751 to 737.
Over the past five years, the number of banks
has been reduced by 64, primarily as a result of
mergers and absorptions. However, many have




11

withdrawn from the Federal Reserve System in
order to escape the high capital requirements for
the establishment o f out-of-town branches that
System membership entails. In the past three
years, we have lost eight members fo r this reason.
The Board of Governors of the Federal Reserve
System has recommended specific legislation to
Congress to remedy this situation, but no action
has been taken to date.
Bank mergers and branch banking

Bank mergers and absorptions and the estab­
lishment of branch offices continued at a substan­
tial pace in 1951, although slower than in 1950,
when several large banks in New Y ork City were
involved. Member banks acquired 19 banks oper­
ating 14 branches and having deposits aggregat­
ing $542,000,000 during the year. Mergers of three
State member banks and one national bank into
other banking institutions were pending at the
close o f the year; all were outside New Y ork City.
The reasons fo r the trend toward bank consolida­
tions and an increase in branch banking are the
same this year as last. Although bank stock prices
have risen to the highest point since 1937, most of
them still reflect a substantial discount below book
value, so that mergers provide an attractive
method fo r bank shareholders to liquidate their
holdings at favorable prices, or to exchange them
fo r the stock of a larger institution having a wider
market. Then, too, many banks are desirous of
acquiring new business and increasing earnings
through higher volume. Thus, a climate favorable
to consolidations is created, and it appears that
merger activity will continue to be a feature of
banking in this District fo r some time to come.
Our records show the following information on
bank mergers during the past five y ea rs:
N o. o f
banks
acquired

_
D eposits
acquired
(m illions)

1947
1948
1949
1950
1951

12
15
13
22
19

$1 19 .1
40 8 .5
238.8
547.2
543.0

N o. o f
branches
acquired
In
town
8
12
9
44
11

O ut-oftow n
15
12
9
14
21

A verage ratio o f
capital to deposits
o f continuing banks
B efore
merger
7 .9 %
8 .0 %
7 .9 %
8 .4 %
8 .7 %

After
merger
7 .4 %
7 .4 %
8 .1 %
7 .9 %
8 .4 %

M em ber bank condition

A sharp increase was noted in the number of
defalcations in State member banks in this District
during 1951, but the actual dollar amount involved

12

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

was less than the year before. The larger number
o f cases reported and the smaller average dollar
amount involved may indicate that defalcations
are now being uncovered at an earlier stage.
Other irregularities, however, consisting o f cer­
tification o f checks against uncollected funds,
kites, forgeries, overdrafts, and loans involving
gratuities, showed a large increase in 1951, mainly
due to an overdraft fo r $2,875,000 in an upstate
bank. A fter payments and insurance claims, the
loss to the member bank in this one case report­
edly will be about $41,000. This appears to be the
only criminal violation reported during the last
two years with any loss to a bank, after payment
o f insurance claims.
To meet this growing problem, we are alerting
the managements o f State member banks to weak­
nesses in their internal audits and controls, we
are encouraging them to increase their fidelity
bonds, and we are offering the services of a tech­
nical representative to help them tighten up, and
increase the scope of, their audit procedures.
On the whole, our member banks appeared to be
in somewhat better condition in 1951 than in 1950.
Notwithstanding the general expansion in the
volume o f loans, the percentage of such loans sub­
ject to classification is less; this improvement is
reflected in the following table:
State banks

National banks

Current Previous Current Previous
examina­ examina­ examina­ examina­
tion
tion
tion
tion
Banks in satisfactory
condition .................... 77.7%
Banks which have some
definite weakness . . . 18.4%
Banks which have more
3.9%
serious problem s . . .
100%

72.4%

90.5%

88.9%

18 .4%

7.3 %

8.0%

9.2%

2.2 %

3.1%

100%

10 0%

100%

The larger proportion o f national than o f State
banks in “ satisfactory condition” probably re­
flects the fact that many small banks, generally in
excellent condition, are national banks. This re­
lationship between the two types o f banks is true
o f other districts as well as our own.
Sale o f bank stock

Our member banks were more successful in sell­
ing new common stock in 1951 than in the previous
year. About $29 million par value of new common
stock was marketed by 43 banks fo r over $60




million. This included the sale by one New York
City bank of $20 million par value o f new stock for
$40 million. In addition, twT banks sold $1,700,000
o
local debentures to replace the R .F .C .’s invest­
ment, w'hich they retired. In the previous year,
28 banks sold $2,600,000 par value o f common stock
fo r about $5,400,000. The increase in the amount
o f new common capital sold in 1951 is due, in part,
to an improvement in the market for bank stocks
and also to a desire on the part of banks to retire
stock held by the R.F.C. and replace it with pri­
vate capital. Of the 43 member banks which sold
new' common stock, 25 w
rere national banks and 18
were State member banks.
Bank changes

During the year the following bank changes in
this District affected membership in the Federal
Reserve System:
One new national bank was organized.
Seven national banks were absorbed, one by a
nonmember.
Two State banks became members.
Four State banks withdrew from membership.
Five State member banks were absorbed, one by a
nonmember.
Two new nonmember State banks were organized.
Five nonmember State banks were absorbed by
member State banks.
R. F. C. investment in m em ber banks

Reconstruction Finance Corporation invest­
ment in member banks in this District was sub­
stantially reduced during 1951. During the past
15 years, about 85 per cent o f the funds originally
provided by the R.F.C. has been retired. Retire­
ments were speeded up recently when the R.F.C.
informed the banks that after February 1, 1952, it
would no longer feel obligated to give 90 days’
written notice before selling its investment to any­
one making a satisfactory offer. The Corporation’s
action had a salutary effect: 26 member banks
completely eliminated the R.F.C. investment dur­
ing 1951. Most of the other banks made partial
retirements and are now working to eliminate the
balance within a short time. About 80 per cent
o f the remaining R.F.C. investment is in four
State member banks.
The following table shows the progress that
banks have made in eliminating the R.F.C. invest­
ment (retirement and par values in m illion s):

13

FEDERAL RESERVE BANK OF NEW YORK
D ecem ber 31,1951

D ecem ber 31,1950

Original invest.
N o. of
banks

Retire.
value

N o. of
banks

Par
value

Retire.
value

N o. of
banks

State members. . . .
National banks. . . .

156
293

$181.5
147.4

37
27

$16.1
3.0

$48.1
5.6

Totals......... .

449

$328.9

64

$19.1

$53.7

* R etirem en t o f $1,177,000 (re tira b le at $1,655,1

Retire.
value

19
19

$13.3*
2.1

$43.3*
4.2

38

$15.4

$47.5

ap p ro v e d b y this B a n k and S ta te a u th orities

BANK RELATIONS

The chief concern of the Bank Relations
Department continued to be the maintenance of
mutual understanding and cooperation between
this Bank and banks in our District. During the
year, our special representatives made over 2,000
calls on banking institutions. Nine officers o f other
functions each spent a week visiting banks with
one o f our representatives. In the course o f these
visits, we explained and discussed the purposes
and functions of the System, putting special em­
phasis on its efforts to combat inflation. Much of
our effort was devoted to improving banker under­
standing o f consumer and real estate credit con­
trols, and the Voluntary Credit Restraint P ro­
gram. W e also continued to work fo r smoother
operating relations with banks, explaining the rea­
sons fo r our requirements in check and currency
transactions, fo r example. One o f the unusual
problems o f this kind was the recent nationwide
coin shortage, which caused much hardship to our
member banks and their customers. In this in­
stance, it was possible to point out that we were
doing all we could to make coin available and that
we were rationing on an equitable basis. A s in
past years, we discussed with our members the
problems and conditions peculiar to their commu­
nities and kept our officers informed of the senti­
ments o f banks in the District.
In order to promote and maintain the closest
possible relationship between our Bank Relations
staff and the operating departments of the Bank,
we recently inaugurated a program o f inviting the
chiefs of operating divisions to attend our weekly
Bank Relations staff meetings. The resultant ex­
change o f views was mutually beneficial.
Am ong the more effective o f our efforts to pro­
mote good will and understanding between our
Bank and its members has been our willingness to
assist them with their special operating problems.
F or over a year, we have sent “ technical” repre­
sentatives to help member banks with their check


Par
value

handling and credit-servicing problems. During
the year, 143 banks asked for our assistance with
their check problems, while 52 banks requested our
assistance in setting up or improving their credit
files. A s noted above, we are offering our member
banks a third service, a review o f their internal
audit and control procedures.
W e continued to hold meetings with groups o f
bankers at the Bank. About 15 bankers from the
same area are invited to each of these meetings;
nearly all are the chief executive officers of their
institutions. W e invite them to tour the Bank and,
after luncheon, to participate in a discussion o f
business conditions and credit policies. Our
officers and staff members present the topics and
open the subjects to general discussion. Bankers
tell us they have found these meetings interest­
ing and informative. During the year, we had
ten meetings attended by 102 bankers from 15
counties of New Y ork and New Jersey.

PUBLIC INFORMATION

The Public Information Department was
created in March 1951 and placed in the Secre­
ta ry ’s Office. The Director o f Public Information
was appointed a Manager and assigned to the new
Department, which includes the Public Inform a­
tion Division (established at the end o f 1950) and
the Press and Circulars Division, form erly at­
tached to the Secretary’s Office. The primary
objectives of our public information program con­
tinue to be increased public understanding o f the
purposes and functions of the System and o f this
Bank, and the rendering of assistance to other
departments o f the Bank in carrying out their
responsibilities. Included in the latter category
were such activities as obtaining press, radio, and
television publicity about the coin shortage, and
writing appeals for the return o f “ hoarded” or
inactive coin (fo r the use of banks requesting this
a id ) ; publicity on the options offered to holders
o f maturing Series E bonds (issuing agents re­

14

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

quested 90,000 copies o f one explanation made
available to th em ); solicitation of support fo r con­
sumer credit controls among advertising man­
agers o f the metropolitan press and, with the help
o f the Better Business Bureau, o f registrants;
publicity for the Voluntary Credit Restraint P ro­
gram ; suggestions about articles for the Monthly
Review and press releases reporting research
data; and publicity about the new postal money
order procedure.
Press relations

Cordial relations with the press are an essential
and important part o f the affirmative program of
public information we are engaged in developing.
Regular press conferences continued to be held at
least twice weekly throughout the year. In addi­
tion to these form al conferences, we encourage
financial writers always to call or visit the Bank
whenever they feel we can assist them in any way.
Films

Films are an excellent medium fo r reaching
large segments of the public with information on
our objectives and activities. To expand our film
activities, we acquired additional prints of the
three available Federal Reserve motion pictures
and with these we provided bookings for a total of
171 showings to bank, school and civic groups, and,
in many cases, provided speakers to supplement
the film showings. The strong and growing demand
evidenced for films on the Federal Reserve Sys­
tem has encouraged us to proceed with plans for
production o f a film of our own. Preliminary con­
versations with film producers were undertaken
during the last part o f the year and we hope that
actual production will begin in 1952.

is the first o f a series o f booklets, containing arti­
cles reprinted from our Monthly Review of Credit
and Business Conditions, intended for use in col­
lege money and banking classes. A second booklet
in the series, Money Market Essays, is scheduled
fo r publication in the spring of 1952.
A weekly summary of news items of interest to
businessmen, the Weekly News Revieiv, was made
available to member banks in the Second District
for redistribution to their customers, starting in
January. B y imprinting its owT name in space
n
provided for that purpose on the first page, a dis­
tributing member bank is able to identify itself
with the Weekly News Review. This feature
proved popular with our member banks. Circula­
tion of the Review rose rapidly, and by the end of
the year the Head Office and Buffalo Branch to­
gether were providing about 15,000 copies each
w
reek to almost 450 member banks.
Other activities

The provision o f speakers fo r appropriate occa­
sions is an important aspect of our program of
public information. The Public Information De­
partment, in cooperation with the Bank Relations
Department, provided speakers fo r a series of
meetings with Second District bankers held in the
Bank during 1951. Speakers were also provided
for a number o f nonbank groups, such as service
clubs and educational organizations. The Real
Estate and Consumer Credit Department was
especially active in satisfying requests for speak­
ers to explain and discuss Regulations W and X.
In all, 166 public addresses were made by officers
and other staff members to audiences totaling
more than 15,000, compared with 129 addresses to
almost 13,000 persons in 1950.

Publications

Two new booklets highlighted our publications
activities during the year. One was a 40-page,
illustrated booklet, entitled A B ay’s Work at the
Federal Reserve Bank of New York, designed pri­
marily fo r use in high school and junior college
classes but suitable also fo r distribution to the
general public. Our initial printing of 25,000
copies, received in June, was quickly exhausted,
and by the end o f the year over 90,000 copies of
the booklet had been distributed. The other, Bank

Reserves, Some Major Factors Affecting Them,
was a 28-page booklet; by the end o f the year,
more than 9,000 copies had been distributed. This



Toward the end o f the year, the guided tour pro­
gram was transferred from the Bank Relations
Department to the Public Information Depart­
ment, a full-time guide was employed, and plans
were made to expand and publicize the tour pro­
gram. A s part o f these plans, space was secured
on the first floor for an Exhibit Room which will
serve as a focal point fo r tours. This room is ex­
pected to be ready for use in the spring o f 1952.
Guides took 4,362 people through the Bank dur­
ing the year, an increase o f 33 per cent over 1950.
Most o f our visitors were college and high school
students.

FEDERAL RESERVE BANK OF NEW YORK

C H EC K COLLECTION

In 1951, the volume of commercial checks col­
lected by this Bank again reached a new high.
During the year, we collected approximately 385
million checks, an increase o f 10 per cent over the
350 million collected in 1950, the previous high
year, and 88 per cent greater than the number
handled ten years ago. Until the past year, there
had always been a seasonal decline in the number
of checks collected during the summer months,
but in 1951 the volume remained heavy throughout
the entire year.
The principal problem encountered during the
year centered around the procurement and reten­
tion o f a sufficient number of trained employees to
handle the volume of work in a satisfactory man­
ner. Trained proof machine operators have been
virtually unobtainable in the local labor market
and, having the largest proof machine installation
in the area, we have been particularly vulnerable
to the loss o f our trained operators to other em­
ployers. To cope with this situation, we have
been obliged to hire unskilled persons and to train
them as proof machine operators. The rate of
turnover among operators was very high during
the year, with the result that a substantial portion
o f our operators at any given time consisted of
trainees, and our production suffered accordingly.
W e frequently found it impossible to process all
checks on the day o f receipt, and it was necessary
to work overtime on many occasions.
W e have taken a number of other steps designed
to improve our capacity to handle the growing
volume of w ork :
(1) We have arranged to replace all of our proof
machines with newer improved models, and to increase
the number of our machines by about 15 per cent.
(2) W e have established two part-time forces, one
working from 5 a.m. to 10 a.m., and the other from
6 p.m. to 11 p.m. Expei*ience has shown that it is
possible to obtain employees (principally married
women) for these hours who are not available for other
working hours.
(3) W e have trained as proof machine operators 75
people, assigned to other departments of the Bank,
who are available for Check Department work on an
overtime basis.
(4) At the end of the year, we were training 49 high
school seniors as proof machine operators on a parttime basis during evening hours. Most of them came
with us on a full-time basis after they graduated in
February 1952. Because of its success, we plan to
repeat this program with a selected group from the
June graduating classes.




15

(5)
To help in meeting the peak volume of check
collections at the end of 1951 and in early 1952, we
hired temporarily about 90 college students to sort and
list checks by hand on a part-time basis.

W e believe that these measures will enable us
to handle the prospective volume o f check collec­
tions in 1952 with less overtime work and with
fewer occasions fo r holding over unprocessed
work.
During the year, we suggested to the other
Federal Reserve Banks that a broad general study
of the check collection system in this country
would be desirable. The study, which we hope to
make with the cooperation o f commercial banks
and interested commercial and industrial con­
cerns, would determine generally how well present
collection procedures and facilities are adapted to
economic needs, and specifically how well the
Federal Reserve System is executing its respon­
sibilities in this field. Initial steps in this study
include the assignment o f John H. Wurts, Vice
President, to examine check collection work at this
Bank and to explore the requirements o f the
larger project.
Air transportation

The number o f checks shipped by air increased
about 7V2 per cent in 1951, as compared with the
previous year. Consolidated check shipments to
other Federal Reserve Banks and Branches of our
own cash letters and those o f 32 participating
direct-sending banks located in the metropolitan
area averaged approximately 600,000 checks daily.
On October 16, 1951, we shipped about 1,245,000
checks by air, an all-time peak.
Direct routing

Another step was taken toward faster collection
o f interdistrict checks and toward elimination of
indirect routing and additional handling, when
commercial banks located in Fairfield County,
Connecticut, agreed to receive daily cash letters
directly from the Federal Reserve Bank o f Bos­
ton. Remittances fo r these letters are made to us
fo r account o f the Federal Reserve Bank o f
Boston. It is estimated that approximately 10,000
items are forwarded daily by the Boston Reserve
Bank to the banks in Fairfield County.
Check Routing Sym bol Program

The Check Routing Symbol Program, sponsored
by the American Bankers Association and the

16

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

Federal Reserve Banks, continued its progress
during the past year. In December 1951, a nation­
wide survey o f checks in circulation, drawn on par
remitting banks, showed that 85 per cent bore the
symbol in the approved location, an increase of
9 percentage points fo r the year. The Second
Federal Reserve District again led other districts
with 93 per cent, although gains were registered in
all districts.
CASH OPERATIONS

W e participated during the year with the
Treasury Department and the other Federal
Reserve Banks in taking precautions against a
breakdown o f our usual method o f supplying cur­
rency to the public in the event o f wartime destruc­
tion in Washington or New Y ork City. These
precautions include storage of currency in our
own vaults and in others in Washington and Fort
Knox. Using more than 2,500 cubic feet o f our
vault space, we have stored almost $180 million of
unfit silver certificates and Federal Reserve notes
in $1, $5, $10, and $20 denominations. This
“ em ergency” stock does not include the 2B notes
we hold to meet normal working requirements,
which usually ranges between 400 and 500 million
dollars. In addition, there is a fluctuating amount
o f this Bank’s unissued notes in the vaults of the
Comptroller o f the Currency in Washington, and
$170 million o f silver certificates and unissued 2B
notes at F ort Knox.
Counterfeits

Large-scale counterfeiting, first noted in 1948
and found to have increased in 1949 and 1950, con­
tinued through 1951 but at a somewhat reduced
pace. Our currency counters detected 2,263 coun­
terfeits in 1951 amounting to $34,311. W hile this
is a decrease o f 28 per cent in the number of notes
detected as compared with the previous year, the
total amount is still substantial. Most o f these
counterfeits were in the $10 denomination and
purported to be issues o f the Federal Reserve
Banks o f Dallas and San Francisco. Counterfeits
of the $20 denomination generally purported to
be o f the Federal Reserve Bank o f Richmond
issue. Circular letters describing current counter­
feits were sent to all banks in this District in July
with the approval and cooperation o f the United
States Secret Service. Special representatives
o f the Bank Relations Department continued to
show typical counterfeits to banks and others.




A rm ored carrier service

During 1951, 22 banks located in Suffolk County
and 11 banks in Nassau County entered into an
arrangement with an armored carrier fo r the
transportation of currency and coin between their
offices and this Bank. Banks under contract with
the carrier for this service are reimbursed by us,
but w e make these arrangements only when they
T
are cheaper than shipments by mail or express.
In addition to the 36 banking offices o f the banks
participating in this arrangement, there are also
357 banking offices on nine routes o f our regular
service by armored carrier under contract with us.
Coin shortage

A shortage of pennies, which made it necessary
for this Bank to ration them on a 50 per cent basis
in the fall of 1950, recurred during the spring and
summer o f 1951 and then spread to all denomina­
tions of coin except the silver dollar. It became
necessary fo r a time to ration not only pennies,
but also nickels, dimes, quarters, and half dollars.
The rationing percentages of each denomination
varied from time to time as our stocks increased
or declined, but were applied on the basis o f our
estimate o f each bank’s normal requirements. B y
the end of the year we were supplying banks with
nickels and dimes on a 50 per cent ration basis,
quarters at 25 per cent, and other denominations
to the full amount requested, provided the
requests did not exceed their estimated normal
requirements.
The inability of the Treasury Department’s
Bureau o f the Mint to meet our requirements for
coin and the consequent dissipation o f our stocks
made rationing necessary. The mints fell short
o f satisfying public demand fo r coin, in other
districts as well as our own, largely because they
received inadequate appropriations, both regular
and deficiency, and inadequate supplies o f copper.
This latter difficulty, in turn, reflected small alloca­
tions from the National Production Authority as
well as the effects o f a long strike in the industry.
W IRE TRANSFERS OF FUNDS

There w'as a marked increase in the number and
dollar amount of wire transfers handled in 1951
over comparable figures o f the previous year.
During the year, 281,916 transfers aggregating
$232 billion were made, an increase of 13y2 per
cent in volume and more than 33 per cent in dollar
amount. The increase in volume resulted primar­

FEDERAL RESERVE BANK OF NEW YORK

ily from (1) the general high level of economic
activity, and (2) the expansion o f the so-called
“ Bank w ire” and a consequent rise in the mobility
o f bank deposits, which led to compensating trans­
actions in reserve balances.
To expedite transfers o f funds made through
this Bank by the larger New York City banks, we
investigated the feasibility o f sending transfer
advices and authorizations between banks by
mechanical means rather than by messenger.
A fter study, we concluded that facsimile trans­
mission offered the best promise o f improvement,
primarily because the facsimile reproduction of
authorized signatures affords adequate safeguards
without the necessity o f coding or testing. A ccord­
ingly, arrangements were made about the middle
o f December fo r a two months’ experimental in­
stallation by the Western Union Telegraph Com­
pany of Telefax equipment linking four o f the
larger commercial banks to this Bank. The Tele­
fax equipment includes a photo-electric cell that
“ scans” messages and transmits them to a re­
ceiving terminal, which reproduces exact copies of
the original on specially treated paper. Trans­
mission time averages about two minutes per
item. I f the experiment demonstrates that Tele­
fax equipment is satisfactory under actual operat­
ing conditions, we expect to recommend a per­
manent installation in all o f the larger downtown
New Y ork City banks.

17

Upon receipt at Federal Reserve Banks, the
money orders are processed by means o f electri­
cally operated proof machines designed and manu­
factured specifically fo r the revised postal money
order program. The operator of the machine
punches into each money order card the amount
for which it is drawn, the machine then automat­
ically lists the amount to provide a proof o f the
incoming deposit, sorts the card according to
region o f issue, provides a listing of the orders by
regions, and stamps the order with the name of
the receiving Federal Reserve Bank or Branch
and the date o f processing.
A new division, known as the Money Order D ivi­
sion, was established in the Government Check
Department on July 1, 1951 to handle money or­
ders deposited with this Bank. F or three months
prior to the start o f the new operation, a group of
prospective June high school graduates was en­
gaged on a part-time basis in a course of instruc­
tion and training on the special p roof machines.
Thirty-eight proof machines are used for proc­
essing money orders, o f which 19 are also used by
a night shift. During the period from July 1 to
December 31, 1951, almost 26 million money
orders, aggregating approximately $366 million,
were processed. W e started this operation with a
staff o f 103 employees, but the number had been
reduced to 94 at the yea r’s end.

Telegram s

The number of telegrams o f all classes sent and
received increased 12% per cent, reaching a total
o f 570,000.
UNITED STATES POSTAL MONEY ORDERS

On July 1, 1951, the United States Post Office
Department put into effect a modernized postal
money order system, using a new punchcard
money order and instituting a considerably im­
proved method fo r collection and payment. Money
orders cashed or received fo r deposit by banks
are sent to Federal Reserve Banks and Branches
as cash items fo r immediate credit in the same
manner as United States Government checks.
Orders cashed at post offices are routed to the
Federal Reserve Banks and Branches through
prescribed post office channels. In either case the
Federal Reserve Banks debit the account of the
Treasurer o f the United States for the amounts
o f the money orders.



RESEARCH

In addition to regular research and statistical
activities, the Research Department was princi­
pally concerned in 1951 with analysis o f the
domestic and international economic problems
arising from the expansion o f defense activities.
Studies were made of monetary and credit policy
(both foreign and domestic), developments in the
United States’ balance o f payments, the impact
o f the defense program on the domestic economy,
and repercussions o f rearmament on the econ­
omies o f other nations. Other m ajor projects un­
dertaken by the Research Department this past
year included:
(1)
the preparation of answers, in cooperation with
the other Federal Reserve Banks, to the questionnaire
submitted to the Presidents of the Reserve Banks by
the Subcommittee on General Credit Control and Debt
Management of the Joint Congressional Committee on
the Economic Report;

18

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

(2) the preparation of papers for circulation in
advance of the Third Meeting of Experts of Central
Banks of the American Continent (which met in
February 195 2);
(3) a thoroughgoing revision of Second District and
city department store sales and stock indexes;
(4) a study of international gold movements and
gold policy;
(5) completion of a special monograph entitled
“ Indexes of United States Imports by Geographical
Area and Commodity Classification, 1923-1949” ; and
(6) a study of the long-range space and real estate
requirements of this Bank and the Buffalo Branch
projected through 1975.

In June 1951, a new job classification, Senior
Economist, was created in the Research Depart­
ment, and three men who had served five or more
years as division chiefs in the Department were
promoted to this classification. The senior econ­
omists are expected to work with Bank officers in
Research and in other functions on problems of
monetary and credit policy, and the analysis o f
economic developments in this country and
abroad. They are also to represent the Bank in
special assignments or on foreign missions requir­
ing broad economic understanding and research
experience.
D om estic studies and publications

A t the request o f the Board of Governors,
three surveys o f real estate and mortgage credit
were conducted in the Second District, and a
monthly report on residential and nonresidential
construction activity in the United States and the
Second District was initiated for use by the Real
Estate Credit A dvisory Committee. The table of
Business Indicators published regularly in the
Monthly Review was revised and expanded in
1951, including the development o f a new series on
defense expenditures; a series o f descriptive ar­
ticles was initiated in the Monthly Review to ex­
plain the “ indicators.” To date, ten o f these de­
scriptive articles have been published; when the
descriptions are complete they are to be collected
and published in pamphlet form. Revision was
completed on a monograph, Clearings and Debits

Statistics, Their Background and Interpretation,
which was published by the Board o f Governors
in January 1952.
In addition to the regular collection and analysis
o f banking and credit statistics, the Research
Department undertook several special projects in
this field. Early in the year, at the request o f the
Board o f Governors, several member banks were



contacted to obtain information on the composi­
tion of the condition statement item “ Single Pay­
ment Loans to Individuals.” In May, to provide
the Voluntary Credit Restraint Committee with
additional information on commercial lending, we
prepared and put into use a new report form for
weekly changes in commercial and industrial loans
by industry and purpose. During the summer, the
Regulation X registration statements (required
to be filed as o f May 31 by all lenders in this Dis­
trict) were edited and checked fo r accuracy, and
the data from the nearly 5,000 returns were sum­
marized on IBM cards.
Throughout the year, the Department cooper­
ated with the Board of Governors in developing a
suitable reporting form for a proposed reporting
series on “ Nonfarm Real Estate Financing A ctiv­
ity.” Other projects included a study to determine
how currency shipments and receipts by this
Bank would be affected if member bank cash in
vaults were allowed to be counted as part of
reserve balances, and a continuing exploration of
the possibility o f expanding the monthly report­
ing series o f member bank condition reports in
order to improve the coverage in certain areas of
the District. The Department also participated in
a national survey o f the effects of Federal taxa­
tion on member banks by helping in the prepara­
tion of a questionnaire, by assisting the 161 mem­
ber and nonmember banks selected in this District
to complete the forms, and by editing the returns
and forwarding them to the Board o f Governors
in Washington.
In addition to the articles on domestic subjects
printed in the Monthly Review and the Business
and Financial Summary, and the usual large num­
ber o f reports prepared fo r the Manager o f the
Federal Open Market Account, some 120 mem­
oranda covering domestic economic and financial
developments were written at the request of
officers and for other purposes; some o f these
were approved fo r outside publication. Among
the more important studies prepared during 1951
w ere:
The Federal Credit Programs, Fiscal 1952
Inequality of Income — Causes and Measurement
Regulation Q and Current Rates of Interest on Time
Deposits
Purchasing Power Savings Bonds
The Loan Expansion Reserve Plan
Economic Problems of Mobilization

FEDERAL RESERVE BANK OF NEW YORK

Department Store Sales and Disposable Income in the
Second Federal Reserve District
Eleemosynary Institutional Investors and Private
Loans
New York State Savings Bank Mortgage Commit­
ments
Credit Policy and Debt Management for 1951 (a series
of studies)
Foreign and international studies and publications

Monetary policy developments abroad, and the
problems o f international trade and finance and
of United States foreign aid were studied exten­
sively during 1951. Many of the problems studied
arose from, or were influenced by, world rearma­
ment. Special attention was devoted to monetary
developments in Germany, the United Kingdom,
Sweden, Australia, and Canada. M ajor studies
were made of the international economic position
o f various Western European and Latin Am er­
ican countries, and the background and implica­
tions o f the Anglo-Iranian oil dispute were studied
in some detail. Toward the close o f the year, a
comprehensive study of the international position
of sterling was undertaken.
Following the policy of previous years, special
attention was devoted to the m ajor current devel­
opments in the United States balance o f payments,
and a projection was made for United States gold
exports and imports through 1953. Several special
studies were prepared during the year on the
interpretation of balance o f payments data,
including studies on the interest and dividend,
investment, and travel accounts o f the balance of
payments statement.
In view o f the fact that considerable progress
in the evolution o f the United States military aid
program was made during 1951, several mem­
oranda, as well as articles fo r the Monthly Review
and the Business and Financial Summary, were
devoted to the highlights of changes in this field.
Other aspects o f United States foreign economic
policies were given in memoranda on such subjects
as the Point Four program, the suspension of
United States tariff concessions to the Soviet bloc,
and the fostering of United States foreign invest­
ment through the guaranty powers o f the E.C.A.,
the Export-Im port Bank, and the International
Bank. Many other studies were undertaken deal­
ing with special factors influencing international
trade and with the nature and direction o f United
States export patterns; some o f the studies
attempted to trace the longer-range forces affect­
ing the development o f trade patterns.



19

Some o f the more significant o f the several
hundred memoranda and special studies on for­
eign and international matters prepared in this
Department in 1951 were:
Western European Governmental Debts to the United
States
Credit Expansion in Europe
The Waiver Clause in the Anglo-American Financial
Agreement
International Monetary Fund Gold Policy ReExamined
France’s International Financial Position in 1950
United States Balance of Payments Trends
The United States Foreign Aid Program for Fiscal
1952
United States Foreign Investment and Balance of
Payments Readjustments
United States Foreign Economic Policy and EastWest Trade
Long Term Trends in United States Merchandise Ex­
ports
Foreign missions and assignments

Demands upon the Research Department for
the services o f economists and technicians for tem­
porary foreign assignments continued heavy in
1951. 0 . Ernest Moore, Manager o f the Research
Department, left the Bank in April on extended
leave o f absence to serve under the United Nations
Technical Assistance Program as financial adviser
to the Government o f Haiti. George Garvy, Senior
Economist, spent seven weeks from October to
December at the Nicaraguan Ministry of Finance
as adviser on fiscal matters with a mission sent
to that country by the International Bank fo r
Reconstruction and Development. Miroslav A.
K riz visited Iraq from March through May in the
capacity o f financial adviser with a mission o f the
International Bank fo r Reconstruction and Devel­
opment. Philip J. Glaessner was granted a yea r’ s
leave o f absence, beginning August 15, to serve
as economic officer with the Joint Brazilian-United
States Commission for Economic Development.
In September, John S. Morgan went to Lebanon
on the staff o f the United Nations Relief and
W orks Agency fo r Palestine Refugees. And
Arthur Bloomfield, Senior Economist, who had
spent several months in South K orea during 1949
and 1950 developing a banking reform program
fo r that country, returned to K orea in December
of last year on a leave of absence from the Bank
in order to serve as special consultant on financial
problems to the United Nations Civil Assistance
Command.

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

20

Participation in our foreign mission program
was not confined to the Research Department.
Paul R. Fitchen, Manager o f the Cash Depart­
ment, left the Bank in July for an extended leave
of absence to serve as financial adviser to the
Union Bank o f Burma.
Relations with other organizations

During the year, several members of the Depart­
ment did special work with other agencies, not
requiring leave of absence from the Bank. The
Department in 1951 continued to provide an
economist to speak on current economic devel­
opments at each o f the biweekly regional group
meetings of member banks sponsored by the Bank
Relations Department. Emphasis was also placed
on various phases o f bank and public relations,
such as the improvement o f arrangements for
handling foreign visitors, and the preparation of
bibliographies o f important works on banking,
finance, and other economic matters for the use
o f visitors as well as fo r internal use. A brief
manual describing the work o f the Department
was prepared fo r distribution to visitors and to
new members o f the staff. Demands upon the
Research Department fo r speaking engagements
increased during the past year and several mem­
bers o f the staff spoke to professional and civic
groups throughout the District on a wide range of
economic topics.
During May and June, the Financial Statistics
Division assisted the National Bureau o f E co­
nomic Research, a leading economic research
foundation, in its study o f the gross flow of funds
through the m ajor financial institutions of the
country. Many members o f the research staff,
with the Bank’ s permission and encouragement,
contributed signed articles to professional and
business journals on a range o f technical economic
subjects; several economists in the Department
presented papers before the conventions and
meetings of the professional societies in the field.
The officers and several staff members also rep­
resented this Bank on a variety of System com­
mittee meetings during the year.

per month, while magazine circulation approached
5,700 on a monthly average. In addition, the
Library staff answered an average o f more than
1,100 questions each month from all sources on a
wide variety of subjects. Circulation o f the daily
Newspaper Review, the most widely known serv­
ice of the Library, continued to increase, and the
Library News, which lists new accessions, was
mailed to a steadily increasing group of libraries,
commercial banks, and foreign central banks as
a check list for important current economic litera­
ture.
FOREIGN OPERATIONS
Assets held for foreign and international account

Foreign-owned earmarked gold, dollar deposits,
United States Government securities, and other
assets held at the Federal Reserve Bank of New
Y ork reached an all-time peak o f $7.5 billion in
March 1951. This was $560 million above the
previous high point, reached in September 1945,
and about $4.2 billion above the level prevailing
in the latter part of 1947, when the postwar low
was reached. A s can be seen from the accompany­
ing chart, the total remained at about the $7.5
billion level through July 1951. A persistent
decline then developed, however, and by the end
of 1951 total assets were down to less than $6.1
billion, nearly $1.5 billion below the high point in
March and $1.2 billion below the level o f a year
earlier.
T otal G old and D ollar Assets H eld at the Federal Reserve
Bank o f N ew Y o rk for F oreign A ccou n t and for
International M onetary Fund and Bank
B IL L I O N S

o ro o L L A B s
8

Library

A s in previous years, the Research Library
continued to assist the Research Department and
officers and employees of the Bank. Book circula­
tion in 1951 averaged an estimated 730 volumes



IN T E R N A T IO N A L M O N E T A R Y
FUND A N D B A N K

1945

1946

1947

1948

1949

1950

1951

21

FEDERAL RESERVE BANK OF NEW YORK

Total Gold and Dollar Assets Held at Federal Reserve Bank of New York
for Foreign and International Accounts
(In millions o f dollars)
End of
1950

End of
1951

N et Change
E nd o f 1950 to
E nd o f 1951

4,757(a)
895
1,571

4,072(b)
526
1,383

— 685
— 369
— 188

60

80

7,283

6,061

— 1,222

869
39
1,703(c)
519(d)

936
35
1,793(c)
524(e)

+
—
+

67
4
90

+

5

3,130

3,288

+

158

10,413

9,349

— 1,064

Foreign Accounts
Earmarked gold .....................................................
Deposits ...................................................................
U. S. Government secu rities................................
Miscellaneous securities, commercial paper, and
bankers’ a ccep ta n ces........................................
Total— Foreign A c c o u n t s ......................

-f

20

International Accounts
(International Fund & Bank)
Earmarked gold ..............................................
Deposits ............................................................
U. S. Government secu rities..........................
Miscellaneous securities ................................
Total— International Accounts ............
Grand T

otal

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

(a ) Includes $91,654,000 held as collateral for loans made by domestic commercial banks to Bolivia, Nicaragua, Spain, and
Venezuela,
(b ) Includes $133,292,000 held as collateral for loans made by domestic commercial banks to Bolivia, Spain and Venezuela.
(c ) Includes non-interest-bearing non-negotiable demand notes as follows:
1950— $1,270,000,000
1951— $1,296,000,000
(d ) Does not include bonds having face value o f 17,000,000 Swiss francs (or a U. S. dollar equivalent o f $3,960,575),
87,132,200 Belgian francs ($1,740,613), 2,893,500 Canadian dollars ($2,728,932), and 273,500 pounds sterling ($765,970).
(e ) Does not include bonds having face value o f 17,000,000 Swiss francs (or a U. S. dollar equivalent o f $3,889,600),
86,782,600 Belgian francs ($1,721,549), 430,000 Canadian dollars ($422,301), and 273,500 pounds sterling ($761,013).

While assets held for the International Bank
and International Monetary Fund rose slightly,
the combined foreign and international assets at
year-end stood at $9.3 billion, or $1.1 billion less
than at the end of 1950.
The accompanying table o f foreign holdings
indicates that the largest net decline, $685 million,
was in earmarked gold, with dollar deposits reced­
ing by $369 million, and Government securities
by $188 million. The principal factor in the decline
in total assets during the second half of 1951 was
the heavy loss of gold and dollar assets by the
United Kingdom, whose holdings here declined by
a net amount of $1 billion during the year. In
addition, Canada reduced its gold and dollars here



by $212 million, Belgium by $103 million, Uruguay
by $72 million, and South A frica by $50 million.
While holdings for the Bank fo r International
Settlements decreased by $135 million, virtually
all o f this decline was in the funds held by that
bank as agent for OEEC (E P U ): the European
Payments Union, Organization for European E co­
nomic Cooperation.
Germany (Bank deutscher Laender) increased
its holdings here by $116 million, Portugal by $84
million, Indonesia by $83 million, and Thailand
by $53 million. Most other foreign accounts also
experienced increases in total assets, but they
were o f small or moderate proportions.

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

22

Change in status o f foreign accounts

Four newly established central banks opened
accounts here during the year, with this Bank
acting as principal. They were the Union Bank of
Burma, the Central Bank o f Ceylon, the National
Bank o f Iraq, and the Statni banka ceskoslovenska
(the central bank of Czechoslovakia and successor
to the Narodni Banka Ceskoslovenska, the account
o f which was closed simultaneously). The account
of the Czechoslovakian bank was certified to us
by the Secretary o f State pursuant to Section
25(b) o f the Federal Reserve Act. Although the
funds maintained with us by Statni banka are
purely nominal, it appears to be the only account
still maintained in this market by Statni banka,
those previously maintained with commercial
banks having been closed. Bank Polski, on the
other hand, closed its account with us.
Loans on gold

The total outstanding amount o f loans on gold
declined to the lowest point since the w ar’s end.
"VVe made but two advances, totaling $11 million,
both o f which were to the central bank of Turkey;
they were paid off in very short periods (14-15
days). No loans on gold were outstanding at the
end of the year, although arrangements were still
in effect providing for loans up to three months
to Turkey not to exceed $10 million in the aggre­
gate outstanding at any one time. W e have similar
arrangements fo r loans up to $5 million to
Guatemala.
W e continue to hold in custody for the account
o f five United States commercial banks gold which
was transferred in our vaults to these banks by
the central banks or foreign exchange authorities
o f Bolivia, Venezuela, and Spain. This gold
secures credits, made in 1947, 1950 and 1951, to
run fo r periods longer than our own lending
policy permits. Gold held as security fo r a loan to
Nicaragua, extended originally in 1947 by a West
Coast bank, was returned to the account of the
Banco Nacional de Nicaragua upon final liquida­
tion o f the loan.
G old m ovem ents

The second half of the year witnessed a rever­
sal of the gold outflow from the United States, a
movement which began shortly after the wide­
spread currency devaluations of 1949 and grew to
a volume of $1.7 billion during 1950. The Treasury
continued to be a heavy seller of gold in the first



half o f 1951, with the United Kingdom acquiring
almost $500 million, Mexico $124 million, and
France $109 million. Then the trend began to
change, however, and in the last five months
Treasury gold purchases from foreign accounts
were substantial. Sales by the United Kingdom
were the principal source, but France, Uruguay,
Mexico, and South A frica also contributed sig­
nificantly. B y the end of the year the earlier gold
outflow and its later reversal had virtually offset
each other: the Treasury wound up acquiring $100
million net o f foreign-owned gold. Other countries
making additions to their gold stocks over the
course of the year included Egypt, Mexico, Argen­
tina, and Indonesia. It is o f interest to note that
Egypt, Uruguay, and the United Kingdom
released from earmark, and exported, sizable
amounts o f gold, the latter to Canada; these
transactions had no effect, of course, on the United
States monetary gold stock.
V. S. cu rren cy and coin

The Foreign and the Cash and Collection func­
tions handled fo r foreign central banks the import
o f $21 million in United States currency and $5
million in United States coin, and the export of
$8 million in United States currency, during 1951.
They also arranged for the export to three Central
American countries o f more than 20 million minor
coins produced fo r them at two United States
mints.
Visits to foreign central banks

In June and July 1951 Horace L. Sanford,
Assistant Vice President in the Foreign Function,
visited the central banks o f England and France,
the Bank fo r International Settlements, and the
Spanish Institute o f Foreign Exchange.
In continuation of the program providing for
exchange visits o f staff members o f this Bank
and of the Bank of Canada, four members o f the
Foreign Department, in groups o f two, spent two
weeks each studying operations at the Bank o f
Canada. In return, six members of the staff of
Bank of Canada spent two weeks in observation
and study here.
F oreign visitors

During the year, a record number of about one
hundred officials from central banks and foreign
governments visited this Bank. Among these were
the chief executives, in some instances accom­

FEDERAL RESERVE BANK OF NEW YORK

panied by other officers, o f the central banks of
Austria, Belgium, Canada, Ceylon, China, Domi­
nican Republic, Finland, France, Greece, Hon­
duras, Ireland, Japan, Mexico, Netherlands,
Norway, South A frica, Sweden, Switzerland, and
the United Kingdom. W e also received officers of
the central banks o f Australia, Cuba, Germany,
Iceland, Indonesia, New Zealand, Uruguay, and
the Bank fo r International Settlements. In many
instances we provided offices for these visitors and
arranged fo r them to observe our operations. In
addition, other officers and staff members of the
central banks o f France, Guatemala, Pakistan, the
Philippine Islands, and Thailand stayed with us
for longer periods observing and studying our
methods and operations. Included among our
visitors were a Treasury mission from Italy, a
securities mission from Japan, and numerous
Governors and executive directors of the Inter­
national Monetary Fund and International Bank.
Staff G rou p on Foreign Interests

The Staff Group on Foreign Interests, consist­
ing of representatives of the foreign, legal, and
research staffs o f this Bank and o f the Board of
Governors, held several meetings during the
year. Am ong the topics discussed at these meet­
ings were the gold policy o f this country and that
of the International Monetary Fund; an inquiry
by the Banco do Brasil regarding the possibility
o f establishing a New York agency; the loan and
loan guarantee provisions of the Mutual Security
A ct; the Federal tax status of bankers’ accept­
ances and time deposits held in this country by
foreign central banks; United States treaty provi­
sions affecting the treatment of American banks
doing business in foreign countries, and the pro­
posal o f one of our commercial banks to establish
an investment banking affiliate in Brazil. The Staff
Group also reviewed a number o f international
economic developments o f general interest and
continued to deal actively with current foreign
mission problems, especially with the preliminary
selection o f personnel for missions requested by
foreign governments or official United States and
international agencies.
PERSONNEL

The steadily rising volume o f work throughout
the Bank, which required a continuing increase in
the number o f our employees, together with the
diverse personnel problems which accompany a
period o f rapid economic expansion, marked the



23

year. A s a result, we devoted our primary atten­
tion to improved and intensified methods of
recruitment and training, while seeking to be cer­
tain that our other personnel functions did not
suffer because of our numerical growth.
Salary administration

W ith the advent o f salary stabilization regula­
tions early in the year, it became necessary to set
up records and controls which would assure the
administration o f our salary policy within the pro­
visions o f the regulations. W e have nonetheless
retained our twin objectives o f a proper internal
alignment o f salaries to jobs and maintenance o f
salaries and salary ranges appropriate to the
levels indicated by pay for comparable work by
other employers in this area.
In the maintenance of the Personnel Classifica­
tion Plan, 334 job reviews were conducted; 184 job
descriptions were revised in order to reflect prop­
erly the duties perform ed and the knowledge and
skills required. In these job revisions, point values
were changed for 119 jobs at the Head Office, rep­
resenting 18 per cent of those in use, and fo r 37
jobs at the Branch, or 54 per cent o f the total
there. Changes in job duties and responsibilities,
significant enough to cause salary grade revision,
were made in 24 jobs at the Head Office and in nine
jobs at the Buffalo Branch.
Increases in both the upper and lower limits
o f some salary grades o f the Head Office and the
Buffalo Branch were approved by our Board of
Directors and the Board o f Governors of the
Federal Reserve System, effective December 27,
1951, subject to the approval of the W age and Sal­
ary Stabilization Boards. A t the Head Office the
increase o f the salary scale aggregated 8.36 per
cent and at the Buffalo Branch 9.03 per cent. The
annual survey o f salaries paid in the community
fo r jobs selected as comparable with those in the
Bank showed that the increases in salary grades
served to keep us among employers having well
above average pay and working conditions.
Since the survey indicated that the advance of
salary levels in the New Y ork and Buffalo com­
munities had been largely in those jobs below
Salary Grade X II, larger increases were made in
the grades below Salary Grade X II. The Board
o f Directors also approved increases in individual
salaries amounting to 9.10 per cent o f salary lia­
bility at the Head Office and 10.55 per cent of
salary liability at the Buffalo Branch, subject to

24

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

approval by the W age and Salary Stabilization
Boards o f the change in salary scales. The Boards
announced their approval of the changes on
February 20, 1952, and arrangements were then
made to disburse the salary increases.
N um ber o f em ployees

The following table shows the distribution of
Head Office employees according to length of serv­
ice. It will be noted that 485 employees, or about
13 per cent, have been with the Bank fo r 25 years
or more.
Number of
employees

Percentage of
total number
of employees

35 years or more.................
30 years to 34 years inclusive
25 years to 29 years inclusive
20 years to 24 years inclusive
15 years to 19 years inclusive
10 years to 14 years inclusive
5 years to 9 years inclusive
Less than 5 years.................

17
279
189
312
187
288
1,026
1,477

.4
7.4
5.0
8.3
5.0
7.6
27.2
39.1

Total (Dec. 31, 1951)

3,775

Length o f service

A t the year-end we had 390 more persons in our
employ than we had on December 31, 1950, an
increase o f 11.5 per cent, continuing the trend
begun during the second half o f 1950. B y the end
o f 1951, the number o f persons in our employ was
962 below the peak level o f 4,737 reached on
July 27,1944.
The following table and chart present some
basic statistics on Head Office employment:
1947

1948

1949

1950

Employees, close of busi­
ness Dec. 3 1 .................. 3,755 3,771 3,441 3,385
Employees, average num­
ber, engaged in work re­
imbursable by U. S. Govt,
and its agencies............ 824
690
590
541
Employees, average num­
ber, all other................ 3,066 3,141 3,050 2,839
Applicants ....................... 7,405 8,050 4,531 4,648
767
282
553
Hired ............................... 565
Separations2 .................... 951
750
612
602
Dismissals (included in
210
Separations) ................ 402
158
109

1951

H ead Office salary liability
3,775’

530
3,084
9,092
1,245
852
87

1 Does not include 76 college students employed on a temporary,
part-time basis.
2 Includes those who were dismissed, resigned, retired, or died.
Fluctuations in A verage Y early H ead Office
Em ploym ent— 1947-1951
THOUSANOS
OF E M P L O Y E E S

THOUSANOS
OF EMPLOYEES

A s of December 31, 1951, employee salary liability (including reimbursable salary) at the Head
Office was $13,575,917 ;* the comparable figure for
previous year-ends was $11,779,000 (1950),
$10,929,000 (1949), $11,496,000 (1948), and
$10,621,000 (1947).
E m p loyee benefits

1.
Group Life Insurance. Together with the
other Federal Reserve Banks and the Board of
Governors, we provided a non-contributory active
service death benefit, effective November 1, 1951,
for each employee o f the Bank who is an active
member of the Retirement System o f the Federal
Reserve Banks, in an amount equal to the basic sal­
ary earned by the employee during his or her last
12 months of service, or during the total period of
his or her service if it is less than 12 months,
limited to a maximum of $20,000. Since our retire­
ment program also provides a similar death bene­
fit, all of our employees, except those few who for
medical reasons are ineligible to join our Retire­
ment System, are now insured, in effect, fo r an
amount equal to two years’ salary at no cost to
them.
A s a result of this change in the life insurance
program, the Bank’s contributory group insur­
ance policy was canceled as o f November 30,1951,
the anniversary date o f the policy. Participation
o f our employees in this program had declined
during the year to approximately 62 per cent—

1947

1948

1949




1950

1951

*
Includes salary increases amounting to $1,106,089, effective
as o f December 27, 1951.

FEDERAL RESERVE BANK OF NEW YORK

considerably below the level regarded as essential
fo r the sound operation o f such a plan. Since we
thought the provision o f additional non-contribu­
tory active service death benefits at no cost to the
employee would further reduce the percentage of
participation, it seemed unwise to continue our
contributory group insurance policy.
During 1951, fifteen Head Office staff members
died during the period that our contributory
group policy was in effect; o f these, twelve were
covered under the contributory plan and their
beneficiaries received a total of $51,397. Five
Head Office staff members died during 1951 after
the effective date o f our present non-contributory
policy and their beneficiaries received a total of
$20,937.
2. Blue Cross Hospital and Blue Shield Sur­
gical-Medical Plans. A total of 3,208 employees,
or 83.8 per cent, were enrolled at the end o f 1951,
compared with 3,037 employees, or 88.3 per cent,
at the end of 1950. The expense to the Bank, which
pays two-thirds o f the total cost, was $105,877,
compared with $96,724 the preceding year. Dur­
ing the year, members o f our Head Office staff filed
629 claims fo r hospital care (involving a cost o f
$92,335) and 626 claims for medical and surgical
care (amounting to $52,391).
3. Medical Division. Late in 1951 we added a
psychiatrist to our consulting staff, which previ­
ously consisted of an X -ray specialist and a den­
tist, and we made additional improvements in the
equipment o f our laboratory. W e now believe
that, with the assistance o f the consultants, our
regular staff o f doctors and nurses is providing a
well-rounded program o f diagnosis and advice,
which is proving most helpful in aiding our em­
ployees to understand themselves and to seek
appropriate medical and dental treatment. Visits
by employees and job applicants to the Medical
Division during the year totaled 36,188, compared
with 30,520 in 1950. The most important factor
affecting the work volume o f the Division was an
increase from 709 to 1,538 in the number o f job
applicants examined.
4. Red Cross blood bank. W e have continued
to cooperate with the blood bank o f the American
Red C ross; the staff, through the Federal Reserve
Club, gave a total o f 366 units o f blood in 1951.
During the year, 289 units were withdrawn to
meet the needs o f employees or their families.



25

5. Military service. During the year, 28 em­
ployees left for military service, bringing the total
of our employees currently in military service to
45. W e have continued our policy o f providing
Blue Cross Hospital and Surgical-Medical benefits
to the families o f our employees in service at no
cost to them. W e have also continued the custom
o f sending Christmas gifts to staff members in the
armed forces.
6. Other personnel developments. A s a result
o f the increasing importance of staff leadership,
an importance emphasized by our continued
growth, we added a training specialist to the staff
o f the Personnel Department during the year.
Our leadership and improvement courses, begun
in 1948, were attended by approximately 200
supervisory employees. During the sessions we
discussed such subjects as the Governmental wage
freeze, the orientation and development o f new
employees, social security benefits, community
surveys, and the non-wage benefits provided by
the Bank.
Late in the spring, with the cooperation of the
New Y ork Telephone Company, we reviewed good
telephone technique with approximately 600 of our
employees who use the telephone in their jobs each
day; specialized training in telephone voice per­
sonality was given to 25 of our employees who do
secretarial work.
The Federal Reserve Club, which continues to
have the interest and support o f most o f our em­
ployees, offered a broad program o f social and
recreational activities and special services during
the year.
BUFFALO BRANCH OPERATIONS

Business activity in the Branch territory during
1951 rose above the high levels o f the previous
year, with the largest gains being made in Buffalo.
The business index fo r that city reached an alltime high in November o f 218.2 (1936-39=100),
compared with 197.7 in November 1950. Factors
behind this rise include a 30 per cent expansion in
capacity by a large steel company, increased out­
put by two aircraft producers as well as by a large
auto body stamping plant, a new arms factory,
substantial public housing projects, a m ajor street
repair and track removal program, and work on
the New Y ork State Thruway and the Niagara
Falls link. There was a generally tight labor mar­

26

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

ket, and factory workers were averaging $75.32 a
week in November, against $69.94 in the compar­
able month o f 1950.
Business activity in Rochester was maintained
at a high and fairly stable level during the year,
averaging about 10 per cent above 1950, with fac­
tory activity almost 20 per cent higher than the
previous year. There were substantial gains in
industrial employment and payrolls in Niagara
Falls during the first nine months o f 1951, but a
mild decline in October gave signs that activity
might be leveling off there.
Agricultural income in the territory was fairly
well maintained by 1950 standards, although fruit
and vegetable crops suffered from bad weather.
Higher prices for beef enabled dairymen to cull
their herds profitably, while better prices fo r milk
more than offset higher feed costs. Even if 1951
was not the best year fo r agriculture in the area’s
history, still most farmers seem to have made
progress.
Total expenditures o f the Branch ($1,000,962)
in 1951 were $168,854 higher than in the preceding
year. Most o f the rise in expenses was caused by
payments to additional staff members required to
handle an increased volume o f check and money
handling work, by a substantial increase in staff
turnover, by new work stemming from Regula­
tions W and X and the handling o f postal money
orders, and by the 5 per cent increase in salaries
which became effective on November 30, 1950.
Higher costs o f equipment, material, and services
also played a part.
Cash operations

Our cash operations kept pace with the rise in
business activity in the territory. The net out­
flow this year was over $40 million, compared with
less than $17 million in 1950. W e paid out $318.8
million in currency and coin, compared with $275.8
million in 1950, while we received $278.7 million,
compared with $259.1 million in 1950. W e counted
51,109,838 pieces o f currency; 42,379,101 in 1950
was our previous record. W e wrapped 14,924,000
pieces o f coin, over 1.2 million more than in 1950.
The acute shortage o f pennies, and o f other coins
later on, forced us to reduce deliveries to our mem­
ber banks toward the end of the year. Counter­
feits detected declined to 159 notes for $2,326 dur­



ing 1951, compared with 194 notes fo r $2,501 the
preceding year.
During the year we received $16,200,000 o f un­
issued silver certificates ( $ l ’s, $5’s, and $10’s) to
be held in custody for the Treasurer o f the United
States. Storage o f this currency required moving
all coin from the upper to the lower vault and con­
struction of several new compartments.
The armored trucking service, begun in August
1950, transported $176.8 million this year between
the Branch and 66 banks and branches in its terri­
tory. These shipments cost us $20,338 less than
they would have cost had we used registered m ail;
banks that used the service saved $8,273 by not
having to use their own private trucking service.
W ire transfers o f funds

W e made 12,439 wire transfers o f funds amount­
ing to $3,905,524,000 in 1951; in 1950 there were
11,576 totaling $2,376,549,000. This large increase
was caused mainly by the daily lending and repay­
ing o f Federal funds in amounts o f $1 million
and more between New York City correspondent
banks and the Buffalo and Rochester banks.
C hech collection

W e handled the collection o f 31,037,000 checks
and postal money orders totaling almost $9.3 bil­
lion during 1951, compared with 28,337,000 items
aggregating nearly $8.4 billion in 1950. The gain
of 2.7 million items reflects largely the handling
of almost 2 million money orders in the second
half o f the year, with the balance o f the increase
being attributable to rising business activity and
an expanded use o f our facilities by banks that
had been employing other means. Further prog­
ress has been made in promoting the use o f the
routing symbol on checks. A survey completed in
December showed 94.7 per cent o f the checks
drawn on banks in the territory bearing the sym­
bol in the proper position, compared with 90.4 per
cent a year earlier.
W e received the remainder of our order o f 32pocket electric keyboard IBM p roof machines and
now have a total o f 20. W e have also kept six o f
the old 24-pocket machines. The new machines
have enabled us to revise some of our procedures
and to eliminate a third handling o f checks. This
increase in efficiency has cut overtime to a mini­

FEDERAL RESERVE BANK OF NEW YORK

mum and almost entirely eliminated holdover
work.
Receipt of other machines has permitted addi­
tional mechanization of operations, including
processing Government card checks and obtaining
a more complete record of this work, preparation
o f credit tickets and advices in connection with
cash letters, and initial steps to convert payroll
records and other personnel data to machine
forms. W e expect to expand our mechanization of
operations during the coming year.
Loans to m em ber banks

Member bank borrowings during 1951 were
more than double the dollar volume o f the previ­
ous year, with 444 loans aggregating $641 million,
compared with 335 loans for $264 million in 1950.
W e earned $83,901 in discounts, compared with
$33,581 the previous year. The largest loan vol­
ume outstanding at any one time was $16.3 million,
while the longest term of borrowing by a bank was
113 days. During the year 20 banks incurred 32
deficiencies in reserves, compared with 19 banks
and 27 deficiencies in 1950. Penalties assessed in
this connection totaled $219, while penalties
waived aggregated $891.
Regulations W and X

W e made 997 Regulation W investigations in
the Branch territory during the year; they dis­
closed 1,287 violations committed by 395 regis­
trants. W e held 24 conferences to discipline those
who appeared to be deliberate violators; five
registrants were referred to the Board in W ash­
ington for further action. W e maintained liaison
with the State Banking Department and partici­
pated in its examination o f 15 State-licensed small
loan companies.
W e made 154 Regulation X investigations and
103 calls on banks, lenders, and sellers o f realty.
W e found 10 minor violations, nine o f which were
failures to register. W e also accepted many invi­
tations to speak to, or to appear before, groups to
discuss both regulations.
Bank relations

Our bank relations work in the Branch territory
during the year included 314 visits to banks, 88
meetings attended, and 37 addresses by our



27

Branch officers. A ll banks except three were
visited at least twice. W e showed 399 visitors
through the Branch building, explaining our oper­
ations to them.
Bank supervision

A t the end of 1951, there were 100 banks in our
Branch territory o f which 66 were members. Of
the 34 nonmembers, 25 were State banks or trust
companies, 8 were mutual savings banks, and one
was an industrial bank. In April, six banks and
their eight branches were merged into the Marine
Trust Company of W estern New York, known
before the first o f these mergers as the Marine
Trust Company o f Buffalo. The merged banks
now operate as branches o f the Marine Trust Com­
pany. In December, the Chatauqua National Bank
and Trust Company of Jamestown, operating
three out-of-town branches, was form ed from two
other banks. Both the Marine Trust Company
and the Chatauqua bank are owned by the Marine
Midland Corporation. In addition, a bank in the
Branch territory absorbed a bank in the Head
Office territory. Eight new branch offices, o f which
two were drive-ins, were opened during the year
by banks in the Branch territory.
One o f the most significant banking develop­
ments in the Branch territory during 1951 was the
widespread increase in the interest rate paid on
time deposits by commercial banks, generally
from 1 to 2 per cent. This move to the 2 per cent
rate, matching the rate paid by the mutual savings
banks in the territory, was initiated by the Buffalo
commercial banks during the latter half o f 1951
and was followed soon afterward by most o f the
banks in the Buffalo trade area. A t the present
time at least 36 commercial banks in W estern New
York State are paying 2 per cent on time deposits.
P ersonnel

During 1951 the number o f employees at the
Branch increased from 169 to 206 at the year-end,
reaching a high point o f 214 in July. There were
72 separations from service, and 109 new employ­
ees were engaged after interviews with 402 appli­
cants. The turnover rate o f 36 per cent was due
principally to a 70 per cent turnover in our Check
Division. A ll employees but four have signed
authorizations fo r deductions from payroll for the
purchase of Series E bonds, the total deductions

PRESIDENT’S REPORT TO DIRECTORS FOR 1951

28

amounting to 4.44 per cent of the payroll at the
end o f the year. In addition, 56 employees are
participating in a special payroll savings plan
providing fo r deposits in a local savings bank. A ll
but 34 employees are enrolled in the Blue Cross
and Blue Shield plans fo r hospitalization and sur­
gical benefits, and they are covered under a similar
plan through other members o f their families.
A ccoun tin g procedures

During the latter part of 1951, a study was made
by the Head Office and the Branch to develop a




better method of handling debit and credit entries
between the two offices. On December 4, the
Branch Suspense Account and the Branch Sus­
pense Account Direct were discontinued; since
that date, all debits and credits between the two
offices, excepting certain accounting entries, have
been handled through the Interdistrict Settle­
ment Fund. This practice conform s to that used
by other Federal Reserve Banks and their
branches, and permits a closer supervision by the
Branch o f all entries, which are now reflected in
detail on the ledger o f the Branch.

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