Full text of Annual Report of the Board of Governors of the Federal Reserve System : 1944

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THIRTY-FIRST

ANNUAL RE
of the

W GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

COVERING OPERATIONS FOR

THE YEAR

LETTER OF TRANSMITTAL
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM,

Washington, April 28, 1945.
THE SPEAKER OF THE HOUSE OF REPRESENTATIVES.

Pursuant to the requirements of Section 10 of the Federal Reserve Act,
as amended, I have the honor to submit the Thirty-first Annual Report, prepared by direction of the Board of Governors of the Federal Reserve System,
covering operations during the calendar year 1944.
Yours respectfully,
M. S. ECCLES, Chairman.

CONTENTS
TEXT OF REPORT
Introduction
War Finance
The Wartime Economy
National income and its distribution
Production, consumption, and prices
Savings and accumulation of liquid assets
Banking and Credit Developments
Growth of bank deposits, their character and ownership
Currency expansion
Growth and composition of Government security portfolio....
Growth of bank loans
Reserve position and borrowing
Reserve ratio of Federal Reserve Banks
.
Consumer credit
Regulation V Loans to Industry
Absorption of Exchange Charges
International Trade and Finance
Banking Operations and Structure
Bank earnings
Capital accounts
Changes in number of banking offices
,.
Increase of membership in Reserve System
Par and non-par banks
.
Reserve Bank Operations and Personnel
Operations
Fiscal agency operations
Volume of operations
Earnings and expenses
Assets and liabilities
Sharing of losses
Bank premises
Personnel
Chairmen and Deputy Chairmen
Directors
Changes in Presidents and First Vice Presidents
Staff
Bank Supervision by the Federal Reserve
Examination of Federal Reserve Banks
Examination of State member banks
Bank holding companies
Trust powers of national banks
Foreign branches and banking corporations

i
i
4
4
5
6
8
8
10
10
11
11
12
13
13
15
24
25
25
25
26
26
27
27
27
27
29
29
30
30
30
30
30
31
31
32
32
32
32
32
33
33

Research and Advisory Services
Board of Governors—Staff and Expenditures
Reappointment of the Chairman
Redesignation of the Vice Chairman
Staff
Retirement System
Expenditures
Legislation Relating to the Federal Reserve System and Reports to
Congress
Financing of war contract termination
Purchase of Government obligations directly from the United
States
Reports to Congress
Changes in Regulations of the Board of Governors
Relations by Federal Reserve Banks with foreign banks and
bankers
Consumer credit
Financing of war production and war contract termination....

34
35
35
35
35
36
36
37
37
38
38
38
38
38
39

APPENDIX
Record of Policy Actions—Board of Governors
Record of Policy Actions—Federal Open Market Committee
Reduction in Reserve Ratio and Renewal of Authority to Pledge
United States Government Obligations as Collateral for
Federal Reserve Notes
Proposed Guarantee by Federal Reserve of Loans to Business
Enterprises
Board of Governors of the Federal Reserve System
Federal Open Market Committee
Federal Advisory Council
Senior Officers and Directors of Federal Reserve Banks
Statement of Condition of all Federal Reserve Banks Combined at
end of 1943 and 1944 and of Each Federal Reserve Bank
at end of 1944
Map of Federal Reserve Districts
Index

42-~47
48—55

56-60
61-64
65
65
66
67-75

76-77
78
79

ANNUAL REPORT OF THE BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM

During 1944 the United States again used its industrial and agricultural
resources at record capacity to support the armed forces of this country and
her Allies. Output of civilian goods increased in some lines and was sufficient in the aggregate to maintain an undiminished volume of civilian consumption. Wartime controls over material, consumption, wages, and prices
continued in effect and were successful in preventing vital shortages and rapid
price advances. The cost of living showed little change during the year.
Both individuals and businesses continued to have incomes far in excess of
expenditures and to accumulate large amounts of liquid assets in the form of
currency, bank deposits, and United States Government securities.
The year's outlays by the Federal Government were 96 billion dollars;
this total compares with 90 billions in 1943 and 9 billions in 1939, the last
year before the war. In 1944, as in the previous year, about 94 per cent of
the outlays were for war purposes. Total expenditures, together with an
increase of 10 billion dollars in the Treasury's cash balance, were
financed to the extent of 44 billion dollars out of tax revenue and other
Treasury receipts, 37 billions by borrowing individual and corporate savings,
and 2.5 billions by borrowing from banks. The amount obtained by borrowing from banks was about the same during 1944 as during 1943 and 1942., but
it was 14 per cent of the total funds raised, compared with 37 per cent in
1942..
The Federal Reserve authorities pursued the policy inaugurated shortly
after the outbreak of the war of keeping banks supplied with sufficient funds
to buy such Government securities as were not sold to other investors. In
doing this the Reserve Banks added 7 billion dollars to their holdings of
Government securities and in addition made advances to member banks,
which at one time during the year exceeded half a billion dollars.
The Board and the Reserve Banks were active throughout the year in
arranging for loans under Regulation V. These loans, made by banks and
guaranteed in part by the Government, were used for financing war production and, to an increasing extent, to provide for funds that may be needed to
release working capital pending settlement of canceled war contracts.
WAR FINANCE
War expenditures by the Government totaled 91 billion dollars in 1944,
compared with 85 billions in 1943. Further growth in total war outlays is
not in prospect since the construction of new war facilities is nearly completed
and existing facilities are being used to full capacity. Some Government
expenditures associated with the war, however, such as interest on the public

ANNUAL REPORT OF BOARD OF GOVERNORS

debt, refunds of taxes, and veterans' benefits, probably will continue to grow.
Other budget expenditures declined during the year and trust accounts and
Government agencies had larger net receipts than they had in 1943. Total
expenditures increased by 6 billion dollars to 96 billions.
Government receipts increased by 4 billion dollars more than the increase
in expenditures. The largest part of this increase was in income taxes and
reflected the higher level of corporate and individual incomes, the collection
of more than half of the unforgiven individual income taxes of 1942., and the
first full year of collection of withheld taxes. With the increase in the proportion of expenditures financed by taxes, the deficit declined from 56 to 52.
billion dollars. The public debt increased by 62. billion dollars, however,
of which 10 billions were added to the Treasury's cash balance. Growth
in the debt was 4 billion dollars more than it had been during 1943, reflecting
an additional war loan drive held near the end of the year. As a result, the
Treasury's cash balance closed the year at an all-time high of 2.2. billion
dollars.
It has been the policy of the Government from the beginning of the war
to sell the largest practicable amount of new securities to investors other
than commercial banks in order to redirect into the war effort as large a part
as possible of the income derived by the public from the Government's
disbursements for the war. This policy was directed not only toward facilitating war finance but also toward diminishing the danger that income in
excess of available civilian goods would bring inflationary pressure on prices.
In pursuance of this policy the Treasury had three large-scale war loan
drives in 1944 and encouraged pay roll savings plans. Sales of United States
Government securities during the three drives totaled 59 billion dollars.
Under pay roll savings plans, iq million persons purchased savings bonds
amounting to about 500 million dollars a month, or 10 per cent of their
wages and salaries.
Net increases in holdings of United States Government securities by
investors other than banks were considerably smaller than the amount of
securities sold to such investors on direct subscription. Some of the original
subscribers sold part of their holdings in the market and such securities were
purchased by commercial banks and by the Federal Reserve Banks. There
were also redemptions of savings notes in payment of taxes and of savings
bonds and maturing marketable issues. In the aggregate, nonbank investors
increased their holdings by 37 billion dollars, compared with 33 billions
during 1943 and 2.4 billions during 1942.. This amounted to 59 per cent
of the increase in the public debt, compared with 58 per cent during 1943 and
51 per cent during 1942.. The following chart shows the growth in holdings
of Government securities by banks and by other investors.
Individuals, partnerships, and personal trust accounts accounted for about
40 per cent of the increase in nonbank holdings. This group of investors
continued to have a substantial excess of income over expenditures and
invested nearly half of its savings in Government securities. Insurance

FEDERAL RESERVE SYSTEM

companies, mutual savings banks, and Government agencies and trust funds
accounted for about 30 per cent of the increase in nonbank holdings and nonfinancial corporations for about 2.0 per cent. The latter expanded their
liquid assets considerably less than during 1943, and they placed all of
the increase in Government securities. The remainder of the increase in
nonbank holdings was distributed among State and local governments,
dealers and brokers, foreign investors, and savings and loan associations.
Commercial banks and the Federal Reserve Banks increased their holdings
of Government securities by 2.5 billion dollars. Of this total, commercial
banks acquired 18 billion dollars, for the most part in the open market.
OWNERSHIP OF U. S. GOVERNMENT SECURITIES
JUNE AND DECEMBER FIGURES

BILLIONS OF DOLLARS

120

100

J
1940

1941

1942

1943

1944

NOTE.—"Other" holders include individuals, partnerships and personal trust accounts, mutual savings banks,
insurance companies, other corporations and associations, and State and local governments.

These banks were excluded from the war loan drives, except that they were
permitted to subscribe for a limited amount, proportionate to their time
deposits, of such long-term higher-rate securities as were made available in
the drives for purchase by savings institutions. Banks acquired additional
Government securities, however, through bids for the regular weekly offerings of Treasury bills and through purchases of outstanding securities.
Federal Reserve operations in the open market were directed toward the
objectives of supplying banks with reserves sufficient to purchase such
Government securities as were not bought and held by other investors and
of maintaining stable prices and yields on marketable Government securities.
Federal Reserve holdings increased by 7 billion dollars to a total of 19
billions. During the previous year the increase was 5 billion dollars.

ANNUAL REPORT OF BOARD OF GOVERNORS

The increase in Federal Reserve holdings was in Treasury bills, certificates,
and short-term Treasury notes. The bills were purchased from banks requiring additional reserves and from dealers who were unable to sell all their
allotments of new issues in the market. The certificates and short-term
notes represented sales by banks in need of reserves and by nonbank investors
desiring to increase their ability to subscribe for new issues offered in the
drives. Federal Reserve holdings of bonds declined, as sales were made in
the interest of market stability at times of strong demand for these securities.
The Federal Reserve made no direct purchases of special short-term certificates from the Treasury during the year.
Yields on Government securities were steady throughout the year, The
rate on three-month Treasury bills remained at ^ Vcr c e n t an<^ t ^ ie P e ^d o n
long-term Treasury bonds at 2_J/£ per cent. Rates paid by the Treasury on
new issues with other maturities and yields ranged between"Y%and 2.J/2 per
cent.
THE WARTIME ECONOMY

Economic activity in 1944 maintained the record levels reached in 1343.
Intensified military activities in Europe and in the Pacific by the year-end
caused a reversal of the earlier policy of facilitating industrial reconversion
to civilian output where available manpower was adequate. War production
schedules were generally revised upward and a sharp expansion in output of
a number of leading war products was planned. Federal controls over output and manpower were broadened and revised to achieve a fuller use of
national resources for war purposes. Many foods were returned to the ration
list and various steps were taken to preserve stability in civilian markets and
to insure adequate supplies of essential goods and services. Enlarged war
requirements indicated that supplies of goods available for civilians might
reach the lowest level of the war period.
Scarcity of manpower was one of the factors contributing to the critical
shortages of specific war items which developed toward the end of the year.
Additional manpower required for the critical program was difficult to
. obtain as readily available reserves were lacking. This situation, together
with the increased need for combat replacements in the armed forces, indicated the need for a general tightening of deferment, manpower, and civilian
production policies.
National income and its distribution. National income in 1944 increased
by 11 billion dollars to 161 billions. Owing in part to the further expansion
of the armed forces, compensation of employees accounted for 10 billions of
the increase. Net income of agricultural proprietors was roughly 12. billions, about the same as in 1943. Net income of unincorporated nonagricultural business was also about 12. billions, slightly above the year before.
Interest payments rose with the growth in the public debt but, together with
net rents, amounted to less than 11 billions. Corporate profits after tax
were 10 billions, about the same as in 1943.

FEDERAL RESERVE SYSTEM

In 1944 the American people received nearly 14 billion dollars more in
income payments than in 1943. Of this amount 11 billions were accounted
for by the increase in national income. Business savings were unchanged
but income from other sources, especially an increase in Treasury contributions to allotments for dependents of service men, brought the additional
funds distributed to individuals to about 14 billions. About one-half of
the increase was added to consumer expenditures and half to savings, additional personal taxes having absorbed a very small fraction of the increase.
Production, consumption, and prices. In 1944 the nation produced goods
and services having a value of nearly xoo billion dollars at current prices.
Half of the product was absorbed by the war effort and other public activities,
a slightly larger proportion than in 1943. Supplies for civilian markets
expanded in a few lines but contracted in others, with the result that there
was no substantial change in the level of civilian consumption.
The labor force, including those in the armed services, reached a total of
63.1 millions in December. The increase in the armed forces was larger than
the net addition to the labor force, however, and there was a moderate
decline in the civilian manpower supply. At the year end, over 11.9 million
were in the armed forces and of these over 7 million were overseas or on sea
duty. Total civilian employment declined moderately, reflecting reduction
of employment in munitions, other manufacturing, and construction that
exceeded expansion in other lines, notably trade and service. Unemployment was below 1 million most of the year and toward the end of the year
was less than 700,000.
Output at factories and mines in 1944 was 2.35 per cent of the 1935-39
average as compared with X39 in 1943, according to the Board's index. War
production, including munitions as well as other products used for war
purposes, continued to account for about two-thirds of total industrial
production. Agricultural production increased somewhat further in 1944;
about one-fourth of the total output of farms, including foodstuffs and
industrial materials, was used by the armed services or exported under lendlease arrangements. Output of livestock products was maintained at the
high 1943 level and crop production surpassed the 194Z record.
Distribution of agricultural and industrial products remained generally
at the exceptionally high level reached in 1943 and domestic transport of
some classes of freight, especially for war purposes, expanded further.
Ocean shipping facilities continued to expand owing to reduced losses in
service and to a great volume of new ship construction in 1943 and 1944.
Overseas supply needs for the armed services were much greater in 1944 than
in 1943, however, so that shipping available for commercial exports and for
imports for civilian use continued to be far short of demand. Exports,
chiefly lend-lease shipments to our Allies, increased by 1.5 billion dollars
and totaled 14.2. billions for the year. This compares with an average
annual rate of 6.2. billion dollars during 1917 and 1918, the two years of our
participation in the First World War. Imports increased both in value and
quantity during 1944.

ANNUAL REPORT OF BOARD OF GOVERNORS

Imports of foreign goods for civilian use were below prewar levels, but
supplies were supplemented by sharply expanded domestic production of
substitute or synthetic materials such as rubber, vegetable oils, and rayon.
Owing in part to this development, the physical volume of civilian consumption during 1944 was generally maintained at prewar levels. This level of
consumption drew to some extent on inventories of goods held by manufacturers and distributors, but output of certain products like agricultural
machinery, railroad equipment, and miscellaneous consumer durable goods,
was larger than in 1943. Average food consumption per capita increased
slightly above the 1943 average and was about 4 per cent higher than in 1939.
These relatively favorable supply conditions and the continued control
over materials, incomes, and prices, together with a public disposition to
save rather than to spend, resulted in the smallest price rise of any of the war
years. According to the official indexes, on the average both wholesale
prices and the cost of living advanced 2. per cent during 1944. Retail prices
of clothing and housefurnishings rose 6-12. per cent, however, while food
prices showed little change, owing in part to the payment of increased
Federal subsidies.
Total retail purchases by consumers increased somewhat further in 1944,
reflecting largely higher prices of goods sold by apparel, department, and
general merchandise stores. In the latter part of the year buying was considerably more active than usual even for the Christmas season and prices
both in primary and retail markets showed more increases than in the spring
and summer months of the year. Rural and urban land and property values
continued to rise considerably throughout the year.
Savings and accumulation of liquid assets. During the war period the
Federal Government has spent more for currently produced goods and services
than it has collected in taxes. As a consequence, individuals and businesses
have accumulated substantial amounts of unspent income or savings. During
1944 the net savings of individuals amounted to about 40 billions, thus
exceeding the record level of the previous year. Net business savings remained at high levels and, in addition, depreciation and other business
reserves tended to accumulate, owing to the wartime shortage of labor and
materials for repairs and replacements.
The greater part of total wartime savings has gone into three types of
liquid assets: United States Government securities, bank deposits, and
currency. As indicated in the chart, individuals have more than doubled
their holdings of liquid assets during the three war years; by the end of 1944,
they held about 130 billion dollars of these assets, or over two-thirds of
the total for businesses and individuals. Business—both noncorporate and
corporate—likewise has more than doubled its holdings during the war
years. By the end of 1944, corporations held about one-fourth and unincorporated business about one-tenth of the total.
During 1944, liquid asset holdings of individuals and businesses increased
by more than 40 billion dollars. By the end of the year they amounted to

FEDERAL RESERVE SYSTEM

about 194 billions in comparison with 82. billions at the end of 1941. In
addition, individuals used about 4 billions of their current savings to increase
their equities in private insurance and savings and loan associations, and
about 1 billion dollars to increase their equities in real estate.
Of the total increase in individual and business holdings of liquid assets
during 1944, 2.7 per cent was in the form of currency and demand deposits
and 73 per cent in the form of time deposits and United States Government
securities. During 1941 the currency and demand deposit accumulations of
LIQUID ASSET HOLDINGS
BY TYPE OF HOLDER
END OF YEAR FIGURES

BILLIONS OF DOLLARS

140

120

120
U. S. GOV'T
SECURITIES
DEPOSITS AND
CURRENCY

S00 —

100

1939

1941

1944
(EST.)

INDIVIDUALS

1939

1941

1944
(EST.)

UNINCORPORATED
BUSINESS

1939

1941

1944
(EST.)

CORPORATIONS

Figures for corporations exclude holdings of banks, insurance companies, savings and loan associations, and
all nonprofit associations. Holdings of individuals include those of professional people as well as farmers. Estimated distribution of United States Government securities for 1939 and 1941 was based largely on Treasury data
and extrapolated on the basis of current data to Dec 31, 1944. The estimated distribution of demand deposits
was based on Statistics of Income for 1939 and 1941 and on an extrapolation of Securities and Exchange data as
well as on the Federal Reserve deposit survey data for Dec. 31, 1944. Estimates of the liquid asset holdings of
unincorporated businesses were based largely on the Federal Reserve deposit survey and on the Federal Reserve
Retail Credit Survey.

the public accounted for 43 per cent of the total increase and during 1943 to
40 per cent. It would appear, therefore, that the demand on the part of the
public for those liquid assets usually considered to be the most readilyavailable for expenditure was decreasing. The demand still remaining was
largely limited to individuals; business holdings of currency and demand
deposits showed little change in 1944.
The wartime growth in liquid assets is essentially a product of fiscal
operations, but that it has been accompanied by remarkable price stability

ANNUAL REPORT OF BOARD OF GOVERNORS

indicates a willingness to curb spending in the face of limited supplies of
goods and services available to civilians. Durable goods have been largely
unavailable and the supply of many other civilian goods has been relatively
small. Patriotism has also been a strong incentive to the purchase and
holding of war bonds, and no doubt many individuals and businesses have
viewed their liquid assets as a reserve against a possible loss of income in the
future.
But the fight against inflation now or after the war will not be won unless
individuals and businesses continue to be willing to save. Much depends
upon the length of the war and the amount of further accumulation made
necessary by Government expenditures in excess of taxes. Should individuals
and businesses grow restive with the ever mounting volume of liquid assets,
the pressure to use savings or excessive amounts of current incomes to
purchase civilian goods and services before they are in ample supply would
seriously endanger the price structure. On the other hand, the holding of
these assets could serve as a safeguard against deflation by encouraging the
fuller use of current income in the years after full conversion to peacetime
economic activity. But large holdings of liquid assets will not of themselves assure prosperity after the war. High business balances may become
habitual, for instance, and their maintenance may tend to discourage rather
than encourage spending.
BANKING AND CREDIT DEVELOPMENTS

Banking developments in 1944 continued to be dominated by the requirements of war finance. Notwithstanding the efforts made to sell as large a
part of the new Government securities as possible to nonbank purchasers,
commercial banks and the Federal Reserve Banks absorbed 41 per cent of the
increase in the public debt, a slightly smaller proportion than in 1943.
Deposits and currency in circulation increased by 2.8 billion dollars to a level
of 151 billions at the year end. This increase was somewhat more than in
1943 but the rate of expansion was about the same in both years. In contrast
with the earlier phases of the war, when corporate business accounted for a
large part of the monetary growth, most of the expansion in 1944 appears
to have been in holdings of deposits and currency by individuals. Also, a
larger part of the deposit expansion was in time deposits.
The Federal Reserve System extended 7.5 billion dollars of new credit
during the year, for the most part through purchases of United States Government securities. During certain periods of the year there was a moderate
revival of member bank borrowing, the first significant volume of such
transactions in more than a decade. The most important use of Federal
Reserve credit was to meet the withdrawal of currency into circulation, which
amounted to about 5 billion dollars. In addition the credit offset a gold
drain of more than 1 billion dollars, and increased member bank reserve
balances by a billion and a half.
Growth of bank deposits, their character and ownership. Deposits
expanded
by 13 billion dollars during 1944 to a level of 1x7 billions, as shown

FEDERAL RESERVE SYSTEM

in the table below. Almost half of this growth was accounted for by a 10
billion dollar increase in Government deposits. Balances in war loan accounts were at relatively low levels at the beginning of the year, just before
the Fourth War Loan Drive, and at relatively high levels at the end of the
year, soon after the Sixth War Loan Drive.
DEPOSITS A N D

CURRENCY

[In billions of dollars] 1
Outstanding at end of year

Increase during year

Item
1941
Total deposits and currency.

123

Total deposits
Adjusted demand
Time and savings
U. S. Government
Currency outside banks

151

127

39
28
2

49
28

61
33
10

67
40
21

10
1

12
4

6
7
10

Owing to rounding of figures, details may not add to totals. Deposit figures are adjusted to exclude interbank deposits and items in the process of collection. Time deposits include deposits in the Postal Savings System while Government deposits include U. S. Treasurer's time deposits, open account. Figures for 1944 are preliminary.

Of the remaining 13 billions of deposit expansion, 7 billions was in the form
of time deposits. Since the middle of 1943 time deposits have been growing
at the rate of more than a half a billion dollars a month. This wartime
growth is strikingly similar to that of the last war. At that time the growth
of time deposits got under way much later than that of demand deposits,
but, once in motion, continued into the postwar period and even during the
contraction of 19x0-19x1 when demand deposits were falling. Both relatively and in absolute amounts, the increases in time deposits were greater
in commercial banks than in mutual savings banks.
The 6 billion dollar expansion of demand deposits represents a considerable
slackening in the rate of growth which is in part due to the timing of war
loan drives but also probably indicates a general belief that demand deposits
are adequate for all current and prospective needs. It appears that personal
holdings account for the major part of the growth. The estimated deposit
ownership for recent periods is shown in the table below.
D E M A N D DEPOSIT O W N E R S H I P

[Estimates, in billions of dollars]
Dec. 31
1941

July 31
1943

Feb. 29
1944

July 31
1944

Total demand deposits of individuals,
partnerships and corporations

37.6

55.6

57.2

59.6

I
1 65.9

Total for domestic business
Nonfinancial business
Financial business

24.8
20.4
4.4

36.3
31.6
4.6

35.9
31.5
4.3

37.6
33.0
4.7

i 40.4
i 35.3
j 5.1

Personal. .-..

9.6

15.8

17.7

18.4

All other 1 ...

3.2

3.5

3.6

3.5

Type of ownership

\ Jan. 31
| 1945

21.5
:

4.1

Includes nonprofit organizations, trust funds of individuals and businesses, and deposits of foreigners
other than banks and governments.
NOTE.—Revisions of figures previously published in Federal Reserve Bulletin. Owing to rounding, details
may
not add to total.

ANNUAL REPORT OF BOARD OF GOVERNORS

The geographic distribution of deposit expansion was much more even in
1944 than in the earlier war years, although southern and western States
continued to account for a large part of the deposit growth. The dominance
of individual deposits in the growth probably accounts for the more even
spread.
Currency expansion. Currency in circulation increased during the year by
4.9 billion dollars to 2.5.3 billions. With allowance for the dampening effect
of three war loan drives in 1944 as against two in 1943, the amount of expansion was virtually the same in the two years. Since vault cash of banks
increased only slightly over the year, the currency outside banks increased
by virtually the same amount as the total and at the year-end is estimated
to have been Z3.5 billions of dollars.
Large denomination currency accounted for a growing proportion of the
total currency increase. Among the denominations of $50 or more, the $100
bill accounted for the largest dollar volume of increase, over one-fourth of
the total, and its rate of increase was also among the most rapid. The $50
bill was the second most important large denomination. Circulation of very
large denominations—$5,000 and $10,000—continued to be under prewar
levels and to account for a negligible part of the currency outstanding. The
$10 and $2.0 denominations accounted for 2.3 billions of the increase,
but the total rate of outflow of these denominations slackened and was the
lowest since 1940. Small denominations increased relatively little. Coin
and paper currency of $5 or less increased by only 0.4 billion dollars.
Growth and composition of Government security portfolio. Commercial
bank holdings of Government securities increased by 18 billion dollars during
1944 to 78 billions. Purchases were made mainly in the open market during
war loan drives when the transfer of funds from private deposits to the war
loan accounts of the Government reduced required reserves and increased
excess reserves. Direct subscriptions for other than Treasury bills accounted
for 2. billions of the increase in holdings. As indicated earlier in this Report, commercial banks were permitted to purchase only limited amounts
of securities in the war loan drives.
All of the increase in commercial bank holdings was in securities maturing
within 10 years, and at the end of the year commercial bank holdings in
this category constituted 90 per cent of their total holdings, compared with
86 per cent at the end of 1943. Further growth in holdings of mediumand short-term securities is in accordance with the Treasury's policy of
limiting commercial bank purchases of new securities to issues maturing
within 10 years. The purpose of this policy, which has been in effect for
more than two years, has been both to maintain the liquidity of the banking
system and to limit the increase in earnings that commercial banks can obtain from the larger amount of the Government's war debt. Bank earnings,
nevertheless, rose to new high levels in 1944.
Although the United States Government securities added to commercial

FEDERAL RESERVE SYSTEM

bank portfolios were largely short-term, the average maturity of the additions during 1944 was somewhat longer than during the preceding two
years. The largest relative increase was in holdings of securities maturing
within 5 to 10 years, and the additions to this group comprised more than
half of the increase in total holdings. Holdings of Treasury bonds and of
Treasury notes and certificates combined showed substantial increases. On
the other hand, holdings of Treasury bills declined for the year. Annual
changes by type of issue and by maturities are shown in the table below.
COMMERCIAL BANK HOLDINGS OF GOVERNMENT OBLIGATIONS
WITH ANNUAL CHANGES
[In billions of dollars]
Outstanding—end of year

Change during year

Type of issue

Total for banks reporting to Treasury

Treasury bills
Certificates of indebtedness
Treasury notes
Treasury bonds
Maturing within 5 years
Maturing in 5-10 years
Maturing in 10-20 years
Maturing after 20 years
Guaranteed issues
Estimated total for all commercial banks

1942

1943

1944

1942

1943

1944

38.8

55.5

72.0

4.5
6.5
5.7
19.4
2.6
9.4
6.2
1.3
2.7

4.7
12.7
"7.4
28.3
5.0
15.6
6.1
1.5
2.5

4.1
15.0
15.4
36.5
4.8
24.4
5.4
1.9
1.0

+ 18.2
+3.5
+6.5
+2.4
+7.3

+16.5
-.6
+2.3
+8.0
+8.2

""-1.5"

+16.8
+ .2
+6.2
+1.7
+8.8
+2.5
+6.3
-.2
+ .2
-.2

41.4

59.8

77.5

+ 19.6

+ 18.5

+1.2
+5.9
+ .2

-.2

+8.8
7
+ "3
-1.5
+ 17.7

Reports are not received from all commercial banks, and data are not entirely comparable from month to
month.
NOTE.—Owing to rounding of figures, details may not add to total.

Growth of bank loans. Total loans of commercial banks were about z.5
billion dollars larger at the end of 1944 than at the beginning. Substantially
all of this change was accounted for by loans for purchasing and carrying
United States Government securities, which increased during the war loan
drives and decreased between drives. They were at a high point at the end
of the year, coming soon after the Sixth War Loan, and at a relatively
low" point at the beginning of the year, immediately preceding the start of
the Fourth War Loan. With allowance for these fluctuations, however,
such loans appear to have increased during the year. Loans made during the
Fourth War Loan appear to have been largely liquidated before the Fifth
War Loan, but some of those made during the Fifth Loan were still on the
books when the Sixth Loan opened.
Commercial loans at member banks declined somewhat during the first
half of 1944 and increased by about the same amount in the second half.
They amounted to 7.5 billion dollars at the close of the year. Loans for
war purposes decreased and loans for nonwar purposes increased, thus
reversing the trend of the two preceding years. Loans in commercial banks
traceable to changes in the volume of consumer credit outstanding increased
slightly during the year.
Reserve position and borrowing. The decline in member bank excess
reserves, which had been in progress since the end oi 1940, virtually ceased
by the beginning of 1944 and fluctuations in excess reserves were largely in

12.

ANNUAL REPORT OF BOARD OF GOVERNORS

response to changing phases of the war-financing program. The shifts of
funds from deposits against which reserves are required to reserve-exempt
war loan accounts of the Treasury at the time of war loan drives and the
reverse transfers between drives resulted in wide fluctuations in the amount
of required reserves. These varied in the course of the year from a low point
of about I I billion dollars to a high point of nearly 14 billions, but there was
a definite upward tendency. Excess reserves varied much less widely—
within a range of less than a billion dollars. As a consequence, total member bank reserve balances fluctuated closely in conformity to the changes in
required reserves and showed a net growth for the year—the first substantial
growth since 1940.
As indicated elsewhere in this Report, these additional reserves, together
with funds needed to meet currency demands and a loss of gold, were supplied
through an increase in Reserve Bank credit.
Most of the excess reserves were held by banks outside leading cities,
especially by banks in smaller places which gained deposits and reserves as
rapidly as they increased investments. City banks, particularly those in
the large money market centers, to an increasing extent operated on a full
investment basis, keeping their reserves close to requirements. These banks,
in addition to selling Treasury bills and certificates, at times borrowed
substantial amounts in order to maintain their reserve positions. At first a
large part of this borrowing was from other banks that had excess reserves,
and there was in the latter part of 1943 and early 1944 considerable activity
in the Federal funds market. By the latter part o£ 1944, however, virtually
all of the larger money market banks had gone on a full investment basis,
so that the sources of Federal funds dried up. Thereafter, more of the
borrowing was directly from the Reserve Banks, and discounts and advances
at Federal Reserve Banks rose sharply in the periods before the Fifth and
Sixth War Loan Drives, at one time reaching 600 million dollars—the largest
amount since 1933. In both cases most of the credit was repaid during the
subsequent drive when reserves were released by the transfer of funds to
Government deposits against which reserves are not required. Some encouragement to borrowing rather than selling securities may have resulted
from the excess profits tax provisions, which permit the use of one-half of
such borrowings in computing the capital base for profits exempt from
taxation.
Reserve ratio of Federal Reserve Banks. As the result of a large increase
in Federal Reserve notes in circulation and some decline in gold certificate
holdings, the ratio of the Federal Reserve Banks' reserves to their combined
note and deposit liabilities continued to decline and stood at 49 per cent at the
end of the year. It was apparent that, if the demand for currency continued
unabated and there were further inroads into the System's reserves, the
reserve ratio would by the end of 1945 approach or reach the minimum
prescribed by law. For this reason early in 1945 the Board recommended
to Congress that the reserve requirement in the law, which is 40 per cent in

FEDERAL RESERVE SYSTEM

gold certificates against notes and 35 per cent in gold certificates or lawful
money against deposits, be reduced to a uniform rate of ^ per cent in gold
certificates against both kinds of liabilities. An explanation of this recommendation and of alternative courses of action appears in the Appendix
on page 56 of this Report.
Consumer credit. During the entire period that this country has been at
war, the consuming public has been spending more money than before the
war and doing so with less use of consumer credit. People have bought
more goods and services every year than they did before the war, at generally
higher prices, but have been paying for them more largely out of current
income. They have been able to do this because, even after paying taxes,
consumers as a whole have had more current income left for spending and
for saving and because the only consumer goods on the market were more
largely of the nondurable kind. Such goods sell per unit at prices that
people can pay without going into debt. On net balance, up to February
1944, people paid off currently more debt than they incurred. The volume
of consumer credit outstanding went down by more than 5 billion dollars or
about 50 per cent. Since then debt incurred has slightly exceeded debt
paid off, but consumer credit outstanding has remained close to the 5 billion
dollar level, about where it was at the end of 1935.
Among the factors accounting for both the initial decrease and the subsequent absence of much increase has been the Board's Regulation W, put into
effect in September 1941, and both broadened and stiffened in the spring
of 1942.. Since then typical requirements for instalment purchases of durable
goods and for consumer loans to finance such purchases have been one-third
down and 12. months in which to pay the balance. The Board made no
changes in the standard requirements during 1944 but amended the regulation
in some administrative respects; these are summarized on page 38 of this
Report.
Regulation W is based on an Executive Order issued under legislative
authority which limits the life of the Order to a period of emergency but
does not itself prescribe when the period shall begin or end. Consumer
credit regulation by the Federal Government, however, can not be continued
indefinitely without Congressional action.
REGULATION V LOANS TO INDUSTRY
During 1944 the Federal Reserve Banks under the general supervision of
the Board of Governors continued to act as Fiscal Agents for the War Department, Navy Department, and Maritime Commission in guaranteeing loans
made by financing institutions to war contractors. The volume of such
loans outstanding amounted to about 2. billion dollars during most of the
year but declined to about 1% billions at the end of the year.
On August 18, following passage of the Contract: Settlement Act of 1944,
the Director of Contract Settlement issued his General Regulation No. 1
prescribing procedures and policies to be followed by the War and Navy

ANNUAL REPORT OF BOARD OF GOVERNORS

Departments and the Maritime Commission in guaranteeing termination
loans through the agency of the Federal Reserve Banks. Such termination
loans, known as " T " loans, are for the purpose of enabling war contractors
to obtain the use of funds tied up in war production pending final settlement
of claims arising from terminated contracts.
The T loan program is a logical extension of the V and VT loan programs
(described in the 1943 Annual Report), and the Board's Regulation V was
revised September 11, 1944, to cover loans made under the Contract Settlement Act as well as loans for war production made under the President's
Executive Order No. 91 11 of March 16, 1941.
The T loan program has been simplified and liberalized as compared with
the preceding V loan program. The War Department and Maritime Commission have delegated to the Federal Reserve Banks authority to execute
guarantees of loans totaling (a) $500,000 or less to any one borrower when
the requested percentage of guarantee is not in excess of 90 per cent and (b)
$100,000 or less to any one borrower when the requested percentage of
guarantee is not in excess of 95 per cent.
Since the beginning of the T loan program in September 1944, only two
types of guaranteed loans have been authorized—T loans and 1944-V loans.
"1944-V" loans, made under the provisions of Executive Order No. 9112., are
loans to provide working capital for war production purposes or to provide
for both production and termination financing. These new V loans are
similar to the VT loans made prior to September 1944, except that the form
of guarantee agreement has been simplified and shortened. The War Department has delegated to the Federal Reserve Banks authority to execute
guarantees of V loans totaling $150,000 or less to any one borrower when
the requested percentage of guarantee is not in excess of 90 per cent. Similar
authority has been delegated to the Federal Reserve Banks by the Maritime
Commission with respect to guarantees of $100,000 or less on loans to any
one borrower when the requested percentage of guarantee is not in excess
of 90.
During 1944 the War Department, Navy Department, and Maritime Commission authorized 1,087 guaranteed loans, aggregating $1,747,535,000.
Included in this amount were 131 T loans, amounting to $113,050,000,
authorized under the provisions of the Contract Settlement Act of 1944.
From the beginning of the Regulation V program in April 1941 to the end of
December 1944, the Armed Services and the Maritime Commission authorized
7,434 loans for a total of $9,310,581,000. Loans outstanding at the end of
the year under executed agreements amount to $1,735,970,000, of which
$1,481,038,000 was guaranteed. In addition, about $4,453,586,000 was
available to borrowers under outstanding agreements.
Regulation V loans to industry have proved themselves to be of great
value in time of war. The procedure whereby the Government assumes
contingent liabilities which will not materialize if private efforts are successful holds promise for the reconversion period and afterwards. It repre

FEDERAL RESERVE SYSTEM

sents a cooperative compromise between the need for government action and
the ability of the private enterprise system to function to the maximum
possible extent.
ABSORPTION OF EXCHANGE CHARGES
There were further important developments during the year with respect
to the question whether, under any circumstances, the absorption of exchange
charges by member banks constitutes a payment of interest within the meaning of the prohibition of the law and the Board's Regulation Q against the
payment of interest on demand deposits.
In August 1943, the Board ruled in a specific case that the absorption of
exchange charges by a particular member bank constituted a payment of
interest on demand deposits in violation of the law and the Board's Regulation; and that ruling was published in the Federal Reserve Bulletin for September 1943. In December 1943, the Committee on Banking and Currency in
the House of Representatives began hearings with respect to the matter.
These hearings were continued through January and February of 1944, after
the introduction of bills in both Houses of Congress (S. 1642.; H.R. 3956) for
the purpose of amending section 19 of the Federal Reserve Act to provide
that the absorption of exchange and collection charges by member banks
shall not be deemed to be a payment of interest. The enactment of either of
these bills would have granted permission to member banks to absorb
exchange charges under all circumstances, including permission to resort to
the practice as a device for the payment of interest.
The House bill was passed by the House of Representatives on March 2,
1944. Its passage was followed by protests from many bankers, bankers'
associations, business men, and business associations throughout the country.
In December 1944, hearings on the Senate bill (S. 1642) were held by the
Committee on Banking and Currency in the Senate. While the hearings
were in progress, the substance of the Senate bill was offered on the floor
of the Senate in the form of an amendment to the pending Federal Crop
Insurance bill. After considerable debate the amendment was defeated by a
vote of 45 to 2.5. Following this action, the hearings before the Senate
Banking and Currency Committee were closed.
The Board's formal report to the Committee on Banking and Currency in
the Senate was printed in the Federal Reserve Bulletin for February 1944,
and the statement at the Senate hearings by the Chairman of the Board
follows.
STATEMENT OF MARRINER S. ECCLES, CHAIRMAN OF THE BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, S. 1642

Mr. Chairman, shortly after Mr. Maybank introduced his Bill, the Board,
in response to the Committee's request, made a formal report. I would
like to suggest that all of the correspondence on the subject in the Committee's files, pro and con, be included in the record. In the House it was
argued, you know, that no one was opposed to the Bill except the Board.

ANNUAL REPORT OF BOARD OF GOVERNORS

This is really the first time opponents, other than the Board, have had an
opportunity to be heard. For reasons beyond anyone's control and which
everyone understands, it has been possible for only a few members of the
Committee to hear the testimony which has been offered. I hope that members of the Committee will have time to see what the many bankers associations, trade associations, bankers, and business men have to say about the
pending proposal. It is for these reasons that the suggestion is made.
I shall try to confine my statement to the broader implications of the proposed legislation and to certain matters which seem pertinent to the light
of developments since the Board's report.
First, I understand that the question has been asked why, if this law has
been in the books since 1933, was it not enforced until September 1943? I
understand also that it has been said, with all the innuendos which such a
statement implies, that the Board's action was taken only after the sudden
death of Representative Steagall in the latter part of November 1943.
Let me say that there never has been a time since I have been on the Board
when all of the Board have not believed that the absorption of exchange by a
member bank under the circumstances outlined in its published ruling of
September 1943 was a violation of the statute Congress enacted. In December 1935 the Board proposed to incorporate in its Regulation Q language
which, in so many words, would so provide. The F.D.I.C. refused to go
along in its corresponding regulation applicable to nonmember insured banks
so the Board postponed the effective date of its proposed amendment. The
Board did so because it seemed extremely unfortunate that member banks
should operate under one rule and nonmember banks under another. It
hoped to be able to find some basis for agreement between the two viewpoints
and to avoid the very situation which now exists.
In December of 1936 the Board again proposed an amendment to its Regulation Q along the lines of the 1935 proposal. It was at that time that
Chairman Steagall of the House Banking and Currency Committee and the
Chairman of this Committee asked the Board again to defer the effective
date of the proposed amendment. Some Members of Congress indicated
that they had in mind proposing an amendment to the statute. The Board
acceded to the request for a deferment but it did not recede from its position.
Let me read the Board's press statement of January 30, 1937, announcing its
action:
"Chairman Steagall, of the House Banking and Currency Committee, and Chairman Wagner, of the Senate Banking and Currency
Committee, have requested the Board of Governors of the Federal
Reserve System to postpone the effective date of the definition of
interest in subsection (f) of section (1) of the Board's regulation Q,
which the Board on December xi, 1936, announced would become
effective February 1, 1937.
"The Board, after careful consideration, had reached the conclusion
that the law and the existence of certain banking practices required
the adoption of this definition. But the Board feels that the request
which these two chairmen have now made should be granted, in view
of the fact that the Board has been informed that a number of Members of Congress are giving consideration to the question of the
advisability of amending the law under which the Board's regulation
was issued, and desire additional time for that purpose.
"The Board therefore has postponed from February 1 to May 1,
1937, the effective date of subsection (f) of section (1) of the regulation
Q which contains the definition of interest."

FEDERAL RESERVE SYSTEM

Before May i, 1937, the Board conceived the idea and suggested to Mr.
Crowley that the lawyers of the two agencies get together and write a
definition of interest which would merely restate what the courts have said
in defining the term. This was done and on February ix, 1937, the applicable
regulation of the F.D.I.C. and the Board's Regulation Q were amended to
provide that, for the purposes of both Regulations, "interest" should mean
4
'any payment to or for the account of any depositor as compensation for the
use of funds constituting a deposit." The Regulations of both agencies
thereupon became uniform in this respect. At the same time the Board and
the F.D.I.C. issued a joint statement for the press in which it was pointed
out that the effect of the amendments was to declare existing law rather than
to interpret and apply the law to particular practices. It was stated that
this would permit the general application by each agency of a uniform law
and a determination, based upon the facts involved, in specific cases.
Never, since the enactment of the law, has the issue of exchange absorption
been dead. But it became much more acute with the advent of the defense
program which brought with it a huge Government financing program and
an opportunity for investment in Government obligations on a scale no one
had ever before thought of. The preceding period had been one in which
money relatively was a drug on the market. Some banks, because of the
assessment for deposit insurance and the lack of investment opportunity,
were even trying to decrease their deposits. The Board had hoped the
problem of exchange absorption would solve itself but it became increasingly
evident that the practice was increasing.
In July 1941 the Comptroller of the Currency addressed a letter to the Board
submitting the facts of a practice being followed by a certain national bank
and requested a ruling as to the applicability of the law to the facts of that
case. The Board delayed an expression of its views pending several examinations of the bank which cumulatively developed that the bank was actually
absorbing exchange for the purpose of compensating certain of its depositors
for the use of their funds. Moreover, in October 1942., before expressing its
views, the Board suggested to the Comptroller of the Currency that representatives of the three agencies meet and consider the matter. Such meetings
were held on November 11, 1942. and January Z9, 1943. On August 6, 1943,
well in advance of the issuance of the ruling, the Board wrote Chairman
Steagall of the House Banking and Currency Committee and Chairman
Wagner of the Senate Banking and Currency Committee sending them a copy
of the proposed ruling in order that they might have an opportunity to
object or comment if they desired to do so. Mind you, this was almost
three months before Mr. Steagall's sudden death and obviously before the
Board could have forecast that untimely event. At the same time a copy of
the proposed ruling was also sent to Chairman Crowley of the F.D.I.C.
Receiving no objections or comments from either Chairman, the ruling was
transmitted to the Comptroller of the Currency on August 2.3, 1943, and was
subsequently published in the September issue of the Federal Reserve Bulletin.
I have before me copies of all the correspondence to which I have referred
and which I would like to have inserted in the record.
There is another matter which has come to my attention upon which I
would like to comment. Because my convictions with respect to how the
banking system could be made to function more effectively have been publicly
stated, the Board has been charged with having ruled as it did in September
1943 for reasons outside and beyond its statutory responsibility under section
19 of the Federal Reserve Act. One such charge has been built around creating the false notion that the Federal Reserve System is a "big bank system"

ANNUAL REPORT OF BOARD OF GOVERNORS

catering to the large banks, trying in its September ruling to abolish the dual
banking system and to make it easy for the extension of branch banking by
striking at the existence of small banks.
Absurd charges, such as these, illustrate the length to which the proponents
have gone. They talk as though the Federal Reserve Act was not patterned
to the dual banking system. The Board has consistently recommended
changes in the law designed to make it possible for more State banks to become members. There are at this time over 1,700 member State banks and
the Board and every Federal Reserve Bank wishes there were more.
Strangely enough, some of the very same critics, who now say the Board is
out to destroy the State banks, have, on other occasions, been equally critical
of the System's activities in inviting State banks to become members.
On the matter of the System's interest in the smaller banks, I point to the
fact that of a total membership of approximately 6,700 banks over 5,000
had deposits, as of December 1943, of less than 5 million dollars each. Over
3,2.00 of these had deposits of less than 2. million dollars each. Compare
this with the nonpar banks. Attached to this statement are some very
interesting maps and statistics comparing par and nonpar banks as to location, number, and size. It is apparent that if this Bill is enacted, it will be
to favor a very small minority of banks holding a still smaller proportion of
the country's deposits against the overwhelming majority of banks holding a
still greater proportion of deposits. Even the maps and statistics do not
present the picture in its entirety. As has been pointed out to the members
of the Committee, the practice of exchange absorption is not as extensive as
the practice of charging exchange. Only in the southeastern States does it
appear that the practice of absorbing exchange is extensively followed.
Thus the passage of this Bill would indeed be a case in which not only would
the tail be wagging the dog but the flea would be pushing the elephant
around.
The System is composed of small banks and its interest in their welfare
has been evidenced by more than giving lip service to the idea. Opening up
the credit facilities of the System to permit loans to nonmember banks on
the security of Government obligations was in aid of small banks, not large
ones, nor I add member banks. The System's support of Treasury efforts to
make Government securities more readily available to banks by simplifying
the bidding, making automatic allotments, and giving certain preferential
terms has been in aid of the small banks, not the large ones. The Board's
consistent opposition to the extension of the business of savings and loan
associations into the commercial banking field has been in behalf of small
banks, not the large ones. Its position, alone of all the Federal banking
agencies, in the matter of the extension of P.C.A. loans, was in behalf of
small banks, not large ones. These are a few recent illustrations.
My final comments are concerned with the discriminatory character of the
proposed Bill as applied to member banks and particularly to small member
banks. Members of the Committee are familiar with the provisions of the
Federal Reserve Act which require member banks to be par banks. It comes
about by reason of the fact that the Act provides that Federal Reserve Banks
shall receive checks at par and member banks are prohibited from charging
exchange on checks presented by a Federal Reserve Bank.
If Congress, by this legislation, authorizes the absorption of exchange, it
must be because Congress believes that banks, or at least small banks, should
be permitted to charge exchange. Certainly, therefore, it would be
extremely unfair to the small national and member State banks, which are
equally as small and greater in number than the nonpar banks, for Congress

PEDERAL RESERVE SYSTEM

I(}

to continue to require them to be par banks. I believe that such action would
be decidedly a backward step and would put a heavy and undue burden on
business and commerce; but, in the last analysis, the question is one for
Congress and if it is right for one small group of banks it should be right for
all banks.
Moreover, if Congress believes that member banks should be permitted
and thus encouraged to absorb exchange charged by nonmember banks, I
would like to say a word in behalf of the proportionately far greater number
of small banks which have no exchange to be absorbed and to suggest as a
not too happy alternative that member banks be permitted to pay interest
on bank balances to the extent such balances are not a part of the required
reserves of the depositing bank. Since member banks receive no interest
on their required reserves, this would result in all small banks alike receiving
interest on their balances with correspondent banks to the extent, of course,
that their correspondent banks would be willing to pay interest on such
accounts. At the same time, unrestrained bidding for balances on the scale
which contributed to the Bank Holiday in 1933 could be reduced by authorizing the Board to fix the maximum amount of interest which could be paid on
these accounts in the same manner as it now does in the case of time deposits.
Mr. Chairman, I can not sit by as Chairman of the Board of Governors of
the Federal Reserve System without raising my voice in protest against a
measure designed to undermine the System as this would. Not only would
it discriminate against the Federal Reserve System but it would be equally
discriminatory against the national banking system, both of which were
created by Congress in the first instance. I can see in this Bill encouragement
to withdraw from the System, encouragement to extend nonpar clearance,
and encouragement to revert to the unsound practices of the pre-Bank Holiday
period and all of this would come at a time of all times when the banking
system must continue to meet the greatest challenge it has ever faced.

NUMBER OF PAR AND NONPAR BANKING OFFICES
"*"7»T/

JUNE 3 0 , 1944

* " " " • • "

tr1

w
o

• MEMBER BANKS
H PAR NONMEMBER B
• NONPAR BANKS

DEPOSITS OF PAR AND NONPAR BANKS
DECEMBER 31. 1943
.#^-~\

I * r'*M

0
F
P

y
5 ^
•f* ,

EACH SQUAhL F<LPHt^LNll> DLFOSITS OF
APPROXIMATELY 5 0 0 MILLION DOLLARS

MEMBER BANKS
PAR NONMEMBEft
NONPAR BANKS

!
1
-;

\
\
\

2.2.

ANNUAL REPORT OF BOARD OF GOVERNORS
NUMBER AND DEPOSITS OF COMMERCIAL BANKS CLASSIFIED ACCORDING TO
FEDERAL RESERVE PAR LIST STATUS, JUNE 30, 1944
[Deposits as of December 1943, in thousands of dollars]
Preliminary figures, subject to minor change
All commercial
banks 1

Member banks2

Par nonmember
banks

N o n p a r banks

State
Number!

Deposits

Num-

Deposits

Num-

Deposits

Alabama
Arizona
Arkansas
California
Colorado

217
12
223
192
140

841,422
229,188
483,671
8,857,658
720,327

7
66
110
92

706,896
198,130
348,905
8,100,708
662,258

7
5
28
82
48

13,666
31,058
32,936
756,950
58,069

Connecticut
Delaware
District of Columbia..
Florida
Georgia

116
41 i
21 !
164

344 I

1,290,318
372,770
705,729
1,057,874
1,191,869

63
17
18
60
62

873,090
278,728
685,422
842,772
913,273

53
24
3
18
17

417,228
94,042
20,307
69,098
48,820

Idaho
Illinois
Indiana
Iowa.
Kansas

46
827 !
494
652
622

257,898
8,520,887
1,974,956
1,428,031
1,028,152

25
466
223
162
213

225,031
7,953,023
1,446,149
774,486
695,494

21
359
271
490
407

32,867
566,083
528,807
653,545
331,808

Kentucky
Louisiana
Maine
Maryland
Massachusetts.,

389
148
66
175
192

1,022,057
1,062,773
346,111
1,322,927
3,581,779

113
40
40
79
154

697,077
833,888
251,717
974,796
3,302,333

269
4
26
96
38

322,773
26,350
94,394
348,131
279,446

7
104

2,207
202,535

Michigan
Minnesota
Mississippi
Missouri
Montana

439
671
200
591
110

3,760,199
1,873,354
486,214
2,901,699
319,052

228
209
25
171
69

3,391,755
1,498,988
187,473
2,410,913
264,542

210
40
2
343
21

368,176
78,429
5,734
423,898
24,737

1
422
173
77
20

268
295,937
293,007
66,888
29,773

Nebraska
Nevada
New Hampshire
New jersey
New Mexico

408
10
65
351
41

834,275
99,101
158,644
3,098,143
162,238

146
8
53
293
27

661,373
93,359
134,492
2,633,344
130,427

110
2
12

95,153
5,742
24,152
464,799
31,811

152

77,749

New York
North Carolina
North Dakota
Ohio
Oklahoma

695
202
153
680
382

28,102,757
1,127,680
299,836
5,068,468
914,691

593
54
42
415
215

26,687,950
682,049
129,913
4,580,990
793,707

102
22
3
265
155

1,414,807
148,756
59,087
487,478
115,780

126
108

296,875
110,836

Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota

68
1,029
22
145
164

897,132
7,489,012
507,894
393,510
240,051

32
764
13
28
60

848,329
6,509,211
457,230
283,974
168,264

36
265
9
4
7

48,803
979,801
50,664
6,552
6,604

54
229
23
32

""2

146,004
229,776

1,781

850*

5,204

114,978
307,859
55,930
74,157
179,269

163
84

135,812
48,651

15
5
136
1

12,892
5,542
113,474
261

2,462

2,507,799

1,297,637
3,658,958
383,855
159,804 j
1,255,671 i

76
535
34
39
194

1,046,847
3,302,448
327,925
85,647
1,035,782

Washington
West Virginia
Wisconsin
Wyoming

124
180
560
56

1,458,162
545,563
1,897,237
136,023

56
107
157
37

1,367,838
426,961
1,351,252
112,008

267
18

77,432
113,060
432,511
23,754

105,823,257 \ 6,773

92,369,167

4,774

10,946,291

14,009

265

102,984
65,183

293
848
57
71
313

Total

120,860

129

113
97

Tennessee
Texas
Utah..
Vermont
Virginia

127

40,620

Includes (a) 102 private banks that do not report to State banking departments, in Georgia, Iowa, Michigan,
and Texas,
(b) 13 "cooperative" banks in Arkansas. Excludes (a) all nonmember mutual savings banks, on a
few of ";/vhich some checks are drawn, (b) 51 nonmember industrial banks and 54 nonmember nondeposit trust
companies
on which no checks are drawn.
2
Comprises all member banks, including 3 mutual savings banks and 5 nondeposit trust companies.
NOTE.—This table does not include deposits of industrial banks and "trust balances" of nondeposit trusl
companies on which no checks are drawn; also, deposit figures in this table are aggregates of December 1943
figures reported by banks that were in existence in June 1944. Consequently they differ from total deposits in
December 1943 of banks then in existence. The member bank figures include, and the nonmember bank figures
exclude, deposits of bank sthat became members between December 1943 and June 1944.

FEDERAL RESERVE SYSTEM
NUMBER OF PAR AND NONPAR BANKING OEFICES, BY STATES, JUNE 30, 1944
[Includes branches and additional offices, except offices at military reservations, classified according to Federal
Reserve Par List status. Preliminary figures, subject to minor change.]

State

Alabama
Arizona
Arkansas
California
Colorado

Total, all
commercial
banking
offices1

Banking offices on Federal Reserve
Par List
Total

Banking
offices not
on Federal
Reserve Par
List

Of
Of member nonmember
banks*
banks

237
38
241
1,016
140

110
38
100
1,016
140

103
28
67
893
92

7
10
33
123
48

Connecticut
Delaware
District of Columbia.
Florida
Georgia

132
52
51
164
369

132
52
51

69
18
47
60
83

63
34
4
18
18

Idaho
Illinois
Indiana
Iowa
Kansas

827
564
808
622

86
825
564
808
620

63
466
246
162
213

23
359
318
646
407

Kentucky
Louisiana
Maine
Maryland
Massachusetts

420
202
126
255
312

413
76
126
255
312

134
69
73
131
264

279
_7
53
124
48

7
126

Michigan
Minnesota
Mississippi
Missouri
Montana

614
677
248
591
110

613
255
27
514
90

373
215
25
171
69

240
40
2
343
21

1
422
221
77
20

Nebraska
Nevada
New Hampshire
New Jersey
New Mexico

410
23
67
472
47

258
23
67
472
47

148
20
54
388
27

110
3
13
84
20

New York
North Carolina
North Dakota
Ohio
Oklahoma

1,332
341
176
849
382

1,332
100
45
849
370

1,174
70
42
563
215

158
30
3
286
155

Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota

138
1,135
59
169
205

138
3,135
5
53
87

98
850
39
49
80

40
285
20
4
7

Tennessee
Texas
Utah
Vermont
Virginia

344
848
70
79
386

162
764
70
79
339

105
535
43
41
221

Washington
West Virginia
Wisconsin
Wyoming

219
180
695
56

204
175
502
55

17,584

14,787

Total
1

127
141

241
131

116
118

229

•

182
84

27
38
118

!.
!.

144
107
178
37

60
68
324
18

;

15
5
193
1

9,362

5,425

2,797

2-4

ANNUAL REPORT OF BOARD OF GOVERNORS

INTERNATIONAL TRADE AND FINANCE
During the year 1944, the foreign trade of the United States and changes in
the international financial position of the United States continued to reflect
the magnitude of our war effort.
The total merchandise exports and export surplus were the largest ever
recorded. Merchandise exports amounted to 14.2. billion dollars (excluding
shipments to our armed forces abroad), imports to 3.9 billions, and the merchandise export surplus to 10.3 billions. Since lend-lease shipments accounted for 11.3 billions of our exports, cash exports were only 3 billions.
Our international trade on a cash basis therefore actually resulted in a net
deficit of about 960 million dollars. There were also substantial net payments to foreigners arising from expenditures by the Government and by
American troops in foreign countries.
The large net payments to foreign countries on account of trade and military expenditures enabled foreign countries to make substantial gold purchases in the United States and at the same time to increase their dollar
balances to some extent. The acquisition of gold by foreign countries is
the principal factor accounting for the decline in the monetary gold stock
of the United States by 1,319 million dollars during the year to zo,6i9 million
dollars. The net effect of other factors affecting the monetary gold stock
was insignificant. Since gold under earmark for foreign account increased
by only 460 million dollars to 3,937 million dollars, it is clear that the major
part of the gold purchased by foreign countries was exported rather than
earmarked for foreign account as has been the practice in recent years.
Foreign banking funds in the United States increased by only 116 million
dollars during 1944 to 5,271 million dollars at the end of the year. Of this
amount 3,010 millions was for account of foreign central banks and governments. In contrast to the rapid growth of official funds in recent years,
there was a decrease of 89 million dollars in these accounts. Transactions
in securities accounted for a further inflow of 313 million dollars. This
movement resulted principally from purchases of long-term United States
Government securities and foreign bond redemptions.
Total estimated gold and dollar reserves of foreign countries amounted to
more than 17.5 billion dollars at the end of 1944 as compared with 7 or 8
billions in 1918 before the breakdown of the gold standard. If the position
of foreign countries is further strengthened by adoption of the proposals
agreed on at the International Monetary and Financial Conference held at
Bretton Woods, there will be every reason to expect more stability, order,
and freedom in international exchange relationships in the postwar world.
The Conference formulated proposals for the establishment of two international institutions, an International Monetary Fund and an International
Bank for Reconstruction and Development.
The proposed Fund would provide an 8.8 billion dollar reserve of gold and
currencies which could be used to give any member country facing an inter

FEDERAL RESERVE SYSTEM

2.<y

national drain a breathing spell during which it could make necessary adjustments. It would thus assist member countries to maintain stable exchange
rates and avoid harmful exchange restrictions. While members of the Fund
agree to maintain established exchange rates a procedure is provided for
orderly changes in rates by international agreement when necessary.
The proposed Bank is designed to revive the flow of productive capital to
areas in which it is needed. It would encourage long-term productive foreign
loans by guaranteeing such loans made through the investment market. It
could also make such loans out of its own fund or out of funds borrowed from
private investors. The total authorized capital of the Bank is 10 billion
dollars. Twenty per cent of the Bank's capital is subject to call for use in
making loans, while 80 per cent could be called only if needed to meet obligations of the Bank because of defaults on loans made or guaranteed by the
Bank.
BANKING OPERATIONS AND STRUCTURE

Bank earnings. Earning assets of the banking system increased about 2.3
per cent in 1944, following increases of 2.4 per cent in 1943 and 2.8 per cent in
1941. In amount, the increase of Z3 billion dollars in 1944 was greater than
in either of the two preceding years. At the close of 1944, earning assets
totaled almost 12.0 billion dollars, nearly three-fourths of which consisted
of Government securities. The increase in the total volume of assets more
than compensated for lower yields, and net profits of banks reached new high
levels.
The increase in net profits in 1944 was relatively larger at reserve city and
country banks than at central reserve city banks. In 1943, the biggest gain
was at banks in central reserve cities, and in 1942. net profits of central reserve
and reserve city banks increased while those of country banks declined.
Although gross earnings and net current earnings of member banks in 1944
were lower than in 192.9, the previous peak year, net profits were higher
because of the excess of recoveries, profits on securities, etc., over losses and
charge-offs. Losses and charge-ofts exceeded recoveries and profits in most
years prior to 1943. Dividend payments were slightly higher in 1944 than
in 1943.
Capital accounts. Capital accounts of member banks increased about
493 million dollars in 1944 as compared with 374 million dollars in 1943.
This increase came very largely from profits remaining after dividend payments, though there were some sales of additional common stock. Declarations of stock dividends out of accumulated surplus and profits by a number
of banks increased the "fixed" portion of their capital structure.
The increases in capital accounts have not kept pace with the growth in
deposit liabilities, but most of the increase in liabilities has been accompanied
by increased holdings of Government securities. The ratio of capital accounts of member banks to total assets other than cash, reserves with Federal

2.6

ANNUAL REPORT OF BOARD OF GOVERNORS

Reserve Banks, balances due from other banks, and Government securities,
was 2.8 per cent on December 30, 1944, compared with 2.3 per cent on December 31, 1941.
Changes in number of banking offices. The number of banking offices,
other than offices at military reservations, increased by 13 in 1944. This
is the first yearly increase reported since 1934. The number of offices at
military reservations increased by 74. The total number of banking offices
at the end of the year was 18,599, comprising 14,535 banks, 3,756 branches
and 308 offices located at military reservations. Nearly all of the latter are
temporary "facilities" established through arrangements made by the Treasury Department with banks designated as depositaries and financial agents
of the Government.
The number of banks (head offices) decreased by 44 during the year. The
decrease was due almost entirely to the 112. consolidations and liquidations;
the only other decrease was the reported suspension of one insured nonmember bank. There were 69 new banks opened for business in 1944, comprising 13 member banks, 48 insured nonmember banks, and 8 noninsured
banks. The number of new banks organized during the year was larger than
in any other year since 1935. During the 10-year period 193 5-1944 a total
of 519 new commercial banks were incorporated, but as a result of consolidations (including conversions of banks into branches), liquidations, and
suspensions, the number of incorporated commercial banks at the end of 1944
was 1,2.93 ^ ess than ten years before.
The number of branches and additional ofhces, other than offices at military reservations, increased by a net of 57 during the year to a total of 3,756.
The gross number of such branches and additional offices established during
the year was 74, approximately half de novo and half by conversion of banks
into branches; the number discontinued was 17, the smallest in many years.
During the 10-year period 193 5-1944, the number of branches and additional
offices (other than offices at military reservations) has increased by 6^3.
Increase of membership in Reserve System. Membership in the Federal
Reserve System continued to increase in 1944, registering a net gain of 76
banks for the year. The number of national banks declined by a net of 15,
as a result of consolidations and liquidations offset in part by the organization of new national banks and the conversion of State into national banks.
The number of State member banks increased by a net of 91, reflecting principally admissions of 113 State banks (including 5 newly organized banks).
All of the 108 operating State banks admitted to membership were already
members of the Federal Deposit Insurance Corporation. Total deposits of
these 108 banks were about 350 million dollars (excluding deposits of a large
national bank which was absorbed by a State bank at the time the latter was
admitted to Federal Reserve membership). Over two-thirds of the State
banks admitted to membership were located in four Federal Reserve districts
—New York, Chicago, St. Louis, and Minneapolis.

FEDERAL RESERVE SYSTEM

1SJ

The 6,814 member banks that were in operation at the end of 1944 accounted for 49 per cent of the number and 87 per cent of the deposits of
all commercial banks in the country. The corresponding percentages in
December 1932., the last report date before the banking holiday of March
I
933> w e r e 38 per cent and 80 per cent, respectively. The State member
banks of the Federal Reserve System constitute about 2.0 per cent of the total
number and hold about 71 per cent of the deposits of all State commercial
banks.
Par and nonpar banks. At the end of 1944 there were 11,552. banks
remitting at par to the Federal Reserve Banks for checks drawn on them.
These par remitting banks comprised approximately 83 per cent of all banks
on which checks are drawn and held about 98 per cent of the deposits of all
commercial banks in the country.
During the year 153 banks were added to the Federal Reserve Par List, 1 14
withdrew from the Par List, and 87 par banks terminated existence, resulting
in a net increase of 52. par banks. In 1943 there was a gross addition of 2.2.8
par banks ( i n in Iowa, where State legislation was enacted providing for the
clearing at par of all checks drawn on Iowa State banks) and a net increase
of 79.
There was a net decrease of 84 in the number of banks not on the Par List
during 1944, compared with a net decrease of 181 in 1943. At the end of 1944
there were 2.,445 banks on which checks are drawn that were not on the
Federal Reserve Par List.
About half of the gross addition of 151 banks to the Federal Reserve Par
List in 1944 took place in five States (Illinois, Missouri, Texas, Wisconsin,
and Montana). At the end of the year all banks in 2.2. States and the District
of Columbia were on the Federal Reserve Par List. In addition there were 9
other States in which the number of nonpar banks was very small, ranging
from one each in Michigan and Wyoming to 14 in Washington. Of the
2.,445 banks not on the Par List at the end of 1944, about 98 per cent were
located in 17 States, as follows: Minnesota 42.1, Georgia 2.71, Mississippi
174, Tennessee 162., Nebraska 151, Wisconsin 134, Arkansas 12.9, Alabama
1x7, North Carolina 12.6, South Carolina 109, North Dakota 107, Louisiana
105, South Dakota 99, Florida and Texas 82. each, Missouri 79, and Virginia 34.
RESERVE BANK OPERATIONS AND PERSONNEL
OPERATIONS

Fiscal agency operations. The war financing program and other Treasury
transactions resulted in a continued large volume of fiscal agency operations
by the Federal Reserve Banks during 1944. Operations incident to the issuance, redemption, and exchange of Government securities reached unprece1
The "Federal Reserve Par List" comprises all member banks—which are required to remit at par for checks
presented to them by the Reserve Banks—and nonmember banks that have agreed to pay without deduction
of exchange charges such checks drawn upon them as are forwarded for payment by the Reserve Banks.

2.8

ANNUAL REPORT OF BOARD OF GOVERNORS

dented proportions, particularly those connected with the issue and redemption of United States Savings bonds. As the volume of Savings bonds
outstanding steadily increased, the number of redemptions also increased.
Coupled with manpower and space shortages, this resulted in some delay in
receipt by the owners of the proceeds of surrendered bonds. Anticipating
further increases in the volume of Savings bonds and in redemptions, the
Treasury, beginning with October 1944, empowered commercial banks to
cash Savings bonds, Series A to E. This action afforded a measure of relief
to the Reserve Banks as it reduced the volume of bonds presented or mailed
by individuals direct to them.
The volume of foreign transactions passing through the Federal Reserve
Bank of New York continued large in 1944. Substantial amounts of gold
were earmarked and released from earmark. On balance gold under earmark
for foreign account increased by 460 million to 3,937 million dollars. United
States securities held for foreign account rose by 1x7 million to 960 million
dollars. Deposits for the account of foreign central banks and governments,
on the other hand, declined by 159 million to 1,101 million dollars. At the
end of 1944 the Federal Reserve Bank of New York held accounts for the
central banks and governments of 60 foreign countries. Imports of gold
were small and the market continued to absorb all foreign silver. No loans
on gold to foreign central banks by the Federal Reserve Bank of New York
were outstanding at the close of 1943 and none were made in 1944.
The Federal Reserve Bank of New York continued to carry out the operations of the United States Stabilization Fund in accordance with authorizations and instructions from the Treasury and all of the Federal Reserve Banks
continued to do a substantial amount of work as agents for the Foreign Funds
Control in the Treasury.
Among the many fiscal agency functions performed by the Reserve Banks
for the Treasury is the handling of allotment and allowance checks (in card
form) issued by Government disbursing officers to dependents of the military
personnel. The handling of these card checks by the Reserve Banks relieved
the Treasury Department of a large amount of work.
In addition to acting as fiscal agent for the Treasury, the Reserve Banks
act in a similar capacity and also as custodian for a number of other Government departments and agencies, prominent among these being the Reconstruction Finance Corporation and its several subsidiaries and the Commodity
Credit Corporation.
During the past year the Reserve Banks continued the program, begun in
1941, of increasing the powers and functions of their branches in order that
they might improve still further their services to the banks and the general
public. With the approval of the Treasury Department, this program included greater participation by the branches in Government financing
operations. The work went forward as rapidly as practical difficulties,
such as supplying stocks of Government bonds, training personnel, acquiring
necessary equipment, etc., could be overcome. Many of the branches now
perform
fiscal agency functions comparable to those of the head office.

FEDERAL

R E S E R V E SYSTEM

2.9

Volume of operations. Operations of the Reserve Banks were in considerably larger volume in 1944 than in 1943, especially those relating to the
issuance and redemption of securities and to other activities as fiscal agents
of the United States. Figures showing the volume of some of the principal
operations of the Banks are given in the following table.
VOLUME

OF P R I N C I P A L O P E R A T I O N S OF F E D E R A L R E S E R V E

BANKS

[Number in thousands; amounts in thousands of dollars]
Number of pieces handled 1

Amounts handled

Operation
Currency received and counted
Coin received and counted
Checks handled:
U. S. Government checks
All other
Collection items handled:
U. S. Government coupons paid 2
All other
Issues, redemptions, and exchanges of U. S.
Government obligations 3
Transfer of funds
r
1
2
3

1944

1943

1944

2,874,099
3,810,300

3,006,898
4,167,265

15,599,680
381,254

17,157,034
417,014

266,686
1,246,384

426,460
1,288,465

113,791,554
509,640,311

127,931,710
532,755,045

16,527
5,072

17,054
4,622

270,608
r
865

357,782
906

l,481,520
7,882,053

1,840,647
7,962,994

211,749,395
203,510,209

264,138,176
215,006,532

Revised.
Two or more checks, coupons, etc., handled as a single item are counted as one "piece."
Includes coupons from obligations guaranteed by the United States.
Exclusive of war savings stamps received for redemption.

Earnings and expenses. Current earnings of the Federal Reserve Banks
amounted to 104 million dollars in 1944, or 35 millions more than in 1943.
The increased earnings resulted from larger holdings of Government securities. Current expenses of 49 million dollars were about 5.5 million
larger in 1944 than in 1943. Net earnings were 58 millions as compared with
49 millions in 1943.
Current earnings, current expenses, and distribution of net earnings of the
Federal Reserve Banks during 1944 compared with 1943 are shown in the
accompanying table. A statement in greater detail, which shows figures
for each Federal Reserve Bank, was published in the February 1945 issue of
the Federal Reserve Bulletin.
EARNINGS,

EXPENSES,

AND DISTRIBUTION

OF N E T E A R N I N G S O F F E D E R A L R E S E R V E

BANKS

1943 A N D 1944
[In thousands of dollars]
Item

1943

1944

Current earnings
Current expenses

69,306
43,546

104,392
49,176

Current net earnings
Net additions to current net earnings

25,760
23,768

55,216
3,222

49,528

58,438

245
8,911
135
40,237

327
9,500
201
48,410

49,528

58,438

12,551

8,354

Net earnings
Paid U. S. Treasury (Sec. 13b)
Dividends paid
Transferred to surplus (Sec. 13b)
Transferred to surplus (Sec. 7)
Total
Transferred from surplus (Sec. 7) to reserves for contingencies

NOTE.—More detailed data were published in the Federal Reserve Bulletin for February 1945, pp. 186-187.
For back figures, including those for each Federal Reserve Bank, see the Annual Report of the Board of Governors
for 1943, pp. 70-71.

3°

ANNUAL REPORT OF BOARD OF GOVERNORS

Average daily holdings of discounts and securities by the Reserve Banks,
and average rates of earnings thereon during 1943 and 1944 are shown in the
table below.
EARNINGS

LOANS

AND

SECURITIES

[Amounts in thousands of dollars]
Average daily holdings

Average rate of earnings
(Per cent)

Earnings

Source of earnings

1943

1944

24,759

135,459

152

724

0.61

0.53

7,724,488
12,404

14,772,201
9,936

68,090
• 414

102,810
303

0.88
3.34

0.70
3.05

7,761,651

14,917,596

68,656

103,837

0.88

0.70

1943
Discounts and advances
U. S. Government securities direct and guaranteed
Industrial loans
Total

1944

1943

1944

Assets and liabilities. Statements of condition of the twelve Federal
Reserve Banks at the end of the year 1944 are shown in the table on page 76.
Sharing of losses. During the year 1944 the agreement between the Federal Reserve Banks to share certain losses not covered by insurance was
expanded. Effective January 1, 1945, the Federal Reserve Banks discontinued the purchase of insurance on currency, coin, and securities shipments
made at their expense.
Bank premises. Additional property was purchased during the year at
the Boston, Atlanta, St. Louis, and San Francisco head offices and at the
Charlotte, Memphis, and Los Angeles Branches. The acquisition of additional property adjoining the Detroit Branch building has been authorized.
PERSONNEL

Chairmen and Deputy Chairmen. One of the Class C directors of each
Federal Reserve Bank is designated annually to serve as Chairman and Federal Reserve Agent, and another Class C director is appointed annually as
Deputy Chairman. A list of the Chairmen and Deputy Chairmen is shown
on page 67.
The Chairman at each of the twelve Federal Reserve Banks was redesignated to serve as such during the year 1944.
Douglas W. Brooks, President of The Newburger Company, Memphis,
Tennessee, who had been a Class C director of the Federal Reserve Bank of
St. Louis since January 1, 1940, was appointed Deputy Chairman for the
year 1944.
J. R. Parten, President of the Woodley Petroleum Company, Houston,
Texas, who was appointed a Class C director of the Federal Reserve Bank of
Dallas effective January 1, 1944, was also appointed Deputy Chairman for
the year 1944.
Harry R. Wellman of Berkeley, California, who had been a Class C director
of the Federal Reserve Bank of San Francisco since October 2.7, 1942., was
appointed Deputy Chairman for the year 1944. Mr. Wellman is Director of
the Giannini Foundation of Agricultural Economics and Professor of Agricultural Economics, University of California, Berkeley, California.

FEDERAL RESERVE SYSTEM

The directors who had been serving as Deputy Chairmen of the other nine
Federal Reserve Banks were reappointed as Deputy Chairmen for the year
1944.
Directors. A list of directors of the Federal Reserve Banks and Branches
as of the close of the year is shown on pages 69-75.
The Board made the following appointments of new directors either for
terms beginning January 1, 1944, or to fill vacancies during the year:
William H. Stead, Dean, School of Business and Public Administration,
Washington University, St. Louis, Missouri, was appointed a Class C
director of the Federal Reserve Bank of St. Louis for the term beginning
January 1, 1944.
J. R. Parten, President, Woodley Petroleum Company, Houston, Texas,
was appointed a Class C director of the Federal Reserve Bank of Dallas for
the term beginning January 1, 1944.
On July 3, Brayton Wilbur, President, Wilbur-Ellis Company, San Francisco, California, was appointed a Class C director of the Federal Reserve
Bank of San Francisco.
Thomas Robins, Jr., President, Hewitt Rubber Corporation, Buffalo,
New York, was appointed a director of the Buffalo Branch of the Federal
Reserve Bank of New York for the term beginning January 1, 1944.
Malcolm E. Holtz, a farmer and stockman of Great Falls, Montana, was
appointed a director of the Helena Branch of the Federal Reserve Bank of
Minneapolis for the term beginning January 1, 1944.
George A. Slaughter of Wharton, Texas, was appointed a director of the
Houston Branch of the Federal Reserve Bank of Dallas for the term beginning
January 1, 1944. Mr. Slaughter is engaged in farming.
Henry A. Dixon, President, Weber College, Ogden, Utah, was appointed a
director of the Salt Lake City Branch of the Federal Reserve Bank of San
Francisco for the term beginning January 1, 1944.
On March 14, William Howard Smith, a planter and cattle raiser of Prattville, Alabama, was appointed a director of the Birmingham Branch of the
Federal Reserve Bank of Atlanta.
On June 2.0, W. Bratten Evans, President, Tennessee Enamel Manufacturing
Company, Nashville, Tennessee, was appointed a director of the Nashville
Branch of the Federal Reserve Bank of Atlanta.
On September 7, Rosco Stone of Hickman, Kentucky, was appointed a
director of the Louisville Branch of the Federal Reserve Bank of St. Louis.
Mr. Stone is engaged in farming.
Changes in Presidents and First Vice Presidents. During the year the
presidents of two of the Federal Reserve Banks availed themselves of the
privilege of retiring under the provisions of the Retirement System of the
Federal Reserve Banks.
After more than 2.5 years' service in the Federal Reserve System, William
W. Paddock retired as President of the Federal Reserve Bank of Boston on
May 1, 1944. He was succeeded as President by Ralph E. Flanders of Springfield, Vermont, President of Jones & Lamson Machine Co., who had served

32.

ANNUAL REPORT OF BOARD OF GOVERNORS

as a Class B director of the Federal Reserve Bank of Boston since August
1941. Mr. Flanders resigned as a Class B director on April 2.9, 1944.
After having been an officer of the Federal Reserve Bank of Cleveland for
nearly 30 years, Matthew J. Fleming retired as President on September 15,
1944. He was succeeded as President by Ray M. Gidney, formerly a Vice
President of the Federal Reserve Bank of New York, who also had been
with the Federal Reserve System for a period of nearly 30 years, serving first
as a member of the staff of the Federal Reserve Board and later as an officer
of the Federal Reserve Bank of New York.
E. B. Stroud resigned as First Vice President and General Counsel of the
Federal Reserve Bank of Dallas September 30, 1944, to resume the general
practice of law. He was succeeded as First Vice President by W. D. Gentry,
formerly Vice President and Cashier of the Bank^ who had been a member
of the Bank's staff since April 1916 and an officer of the Bank since June 19x3.
Staff. At the end of the year the total number of officers and employees
of the twelve Federal Reserve Banks and their twenty-four Branches and one
Agency was 2.4,442. as compared with 2.4,741 at the close of the previous
year.
BANK SUPERVISION BY THE FEDERAL RESERVE
The scope and volume of banking activity related to the war effort continued to expand during 1944. The Federal Reserve authorities have endeavored to follow examination and supervisory policies and practices which
would facilitate the financing and operation of the war program and enable
banks to discharge effectively their responsibilities in the w^ar effort. ^**
Examination of Federal Reserve Banks. The twelve Federal Reserve
Banks and their twenty-four branches were examined during the year, by the
Board's Division of Examinations, as required by law.
Examination of State member banks. State member banks are subject to
examinations made by direction of the Board of Governors or of the Federal
Reserve Banks by examiners selected or approved by the Board of Governors.
The established policy is to make at least one regular examination of each
State member bank, including its trust department, during each calendar
year, by examiners for the Reserve Bank of the district in which the bank is
situated, with additional examinations if considered desirable. Wherever
practicable, such examinations are made jointly in cooperation with State
banking authorities or, by agreement with State authorities, alternate examinations are made.
Notwithstanding difficulties prevailing under wartime conditions, particularly as regards travel and turnover in personnel, the program for the examination of all State member banks in 1944 was substantially completed.
Bank holding companies. During 1944, the Board acted upon applications for voting permits submitted by holding company affiliates of banks
and authorized the issuance of two permits for general purposes and three
permits for limited purposes.

FEDERAL RESERVE SYSTEM

Section 301 of the Banking Act of 1935 provides that the term "holding
company affiliate" shall not include, except for the purposes of section Z3A
of the Federal Reserve Act, any organization which is determined by the
Board not to be engaged, directly or indirectly, as a business in holding the
stock of, or managing or controlling, banks, banking associations, savings
banks, or trust companies. During the year the Board made such determinations with respect to five organizations.
In its Annual Report to Congress for the year 1943, the Board recommended that legislation be enacted to prevent the creation of new bank
holding companies or the further expansion of those now in existence.
For the reasons stated in that Report, there is urgent need for legislation
designed to prevent the use of the corporate device to circumvent and evade
sound banking principles, regulatory statutes, and declared legislative policy.
Trust powers of national banks. Under the provisions of section 11 (k)
of the Federal Reserve Act, the Board granted to 16 national banks authority
to exercise one or more trust powers. This number includes the grant of
additional powers to 5 banks which previously had been granted certain
trust powers. Trust powers of 18 national banks were terminated, 7 by
voluntary liquidation or consolidation and 11 by voluntary surrender. At
the end of 1944, there were 1,791 national banks holding permits to exercise
trust powers.
Foreign branches and banking corporations. Applications made pursuant to the provisions of section 2.5 of the Federal Reserve Act were received
in 1944 from a member bank for permission to establish 6 foreign branches.
The applications were approved and one such branch was established and
opened for business. The liberation of Belgium and France restored to
the parent member bank the control of two branches located in these
countries.
At the end of 1944, 7 member banks were operating a total of 67 branches
or offices in 16 foreign countries or dependencies or possessions of the United
States, exclusive of branches or offices in enemy occupied territory. Of the
67 branches and offices, 4 national banks were operating 61 and 3 State
member banks were operating 6. The foreign branches were distributed
geographically as follows:
Latin America
Argentina.
Brazil
Chile
Colombia
Cuba
Mexico
Panama
Peru
Uruguay
Venezuela

42.
10
4
-L
3
16
1
3
1
1
1

Far East
2.
India
2.
Continental Europe
2.
Belgium
1
France
1
England
10
U. S. Insular Possessions and Dependencies
11
Canal Zone
4
Puerto Rico
7
Total
67

ANNUAL REPORT OF BOARD OF GOVERNORS

There was no change during the year in the list of the four corporations
operating under agreements entered into with the Board of Governors pursuant to the provisions of section 2.5 of the Federal Reserve Act relating to
the investment by member banks in stocks of corporations engaged principally in international or foreign banking. One corporation has a branch in
England and during the year the Board of Governors approved its application
for permission to establish another foreign branch which, however, had not
been opened for business by the end of the year. One corporation has an
English fiduciary affiliate while the other two corporations have no foreign
offices. During the year the Board of Governors approved the application
of a member bank for permission to increase its investment in the stock of
one of the foreign banking corporations.
There is only one banking corporation in operation organized under the
provisions of section 2.5(a) of the Federal Reserve Act and chartered by the
Board of Governors to engage in international or foreign banking. Its
head office was examined during the year by the Board's Division of Examinations. The institution's three branches in the Far East are in enemy
occupied territory. The Paris Branch was restored to the control of the
parent bank following the liberation of France.
RESEARCH AND ADVISORY SERVICES
The Board of Governors throughout the year adapted its usual reporting
services to the special problems growing out of the war and to supplying
information and advice to interdepartmental conferences and committees
engaged in furthering the war effort and planning for reconstruction after
the war.
Members of the staff of the Board of Governors participated in the discussions on postwar international monetary and investment problems which
preceded the calling of the International Monetary and Financial Conference
at Bretton Woods. Two members of the Board took part in the Conference.
Officials and staff members of the Board and of the Reserve Banks assisted in
preparing the agenda for the Conference and served as advisors to the United
States delegation and in various other capacities at the Conference. Since
the Conference, members of the staff of the Board and of the Banks have
participated in meetings and discussions on the Bretton Woods Agreements
with a view to contributing to a full understanding of the proposals.
Continuing its cooperative work in the field of Latin American central
banking in 1944, the Board upon request sent two of its representatives to
Paraguay for several months to advise and assist in the revision of banking
legislation and the development of statistical series useful to the monetary
authorities. At the request of the central bank of Costa Rica, one of the
Board's representatives spent several weeks at that institution also, advising
and assisting in the development of monetary measures. In both these
missions the Federal Reserve Bank of Cleveland cooperated by sending
a member of its research staff to assist in the work. During the year students

FEDERAL RESERVE SYSTEM

of banking from Bolivia, Mexico, and Nicaragua were for various periods
engaged in study and training in the Board's offices.
Analysis of regional economic conditions was continued by the research
departments of the various Federal Reserve Banks during 1944. Throughout
the year an increasing amount of time was spent in providing information
on local developments to the public through the medium of articles published
in pamphlet form or in the Banks' Monthly Reviews of Business Conditions,
participation in meetings and forums, and cooperative work with local
organizations engaged in conducting community surveys. This type of
public activity represents a byproduct of the work that is done regularly by
the research departments in order to supply Federal Reserve Bank officials
and the Board of Governors with the economic information necessary to the
discharge of their responsibilities.
BOARD OF GOVERNORS—STAFF AND EXPENDITURES
Reappointment of the Chairman. Marriner S. Eccles, whose term as
a member of the Board of Governors expired January 31, 1944, was reappointed for a term of fourteen years beginning February 1, 1944. Mr. Eccles
was also redesignated by the President as Chairman of the Board for a term
of four years, effective February 1, 1944.
Redesignation of the Vice Chairman. Ronald Ransom was redesignated
as Vice Chairman of the Board for a term of four years, effective August 6,
1944.
Staff. On December 31, 1944, the Board's employees, exclusive of those on
military leave or on leave without pay, numbered 448, as compared with 459
at the end of 1943.
During the year two of the Board's employees who had been on military
leave returned to the Board and were reemployed after discharge from the
military service after service abroad, leaving 70 of the Board's permanent
employees on military leave at the end of the year. In addition, 2.4 employees who had received temporary appointments had resigned to enter military
service.
Effective July 1, 1944, Bonnar Brown was appointed Assistant Director
of the Division of Security Loans. Mr. Brown had been a member of the
staff of the Division since October 1, 1937, and for two years prior to that
had been on the staff of the Federal Reserve Bank of San Francisco.
Effective November 16, 1944, the Board created in its staff a Division of
Administrative Services, to which wxre transferred certain administrative,
financial, budgetary, accounting, and service functions previously performed
in the Office of the Secretary. Liston P. Bethea and Fred A. Nelson, formerly
Assistant Secretaries, were appointed Director and Assistant Director, respectively, of the new division. At the same time Bray Hammond, formerly
Chief of the Correspondence and Publications Section of the Secretary's
Office, was made Assistant Secretary. Mr. Hammond has been a member
of the Board's staff since July 1, 1933.

ANNUAL REPORT OF BOARD OF GOVERNORS

B. Magruder Wingfield resigned in January as Assistant General Attorney
to accept an official position with a national bank.
During 1944 the Board's personnel continued to participate in the pay roll
savings plan for the purchase of War Savings Bonds. Deductions from
salaries for this purpose throughout the year averaged 15.5 per cent of gross
pay roll.
Retirement System. Effective January 1, 1944, a separate plan was established within the Retirement System of the Federal Reserve Banks to provide
employees of the Board with substantially the same retirement and disability
allowances as are provided by the Civil Service Retirement System and at the
same cost to the employee. In order that the Retirement System might
continue to be fully funded a special payment of $2.72.,9i8 was made to the
System to provide for the additional accrued liabilities under the new plan.
Expenditures. The current expenses of the Board for the year 1944 aggregated $2.,o6i,i4x. Two assessments were levied on the Federal Reserve
Banks, representing about six-tenths of one per cent of their average paid-in
capital and surplus for the year to cover the general expenses of the Board.
Details are shown in the following table.
RECEIPTS AND DISBURSEMENTS OF THE BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM FOR THE YEAR 1944
General fund account:
Balance January 1, 1944:
For general expenses of the Board
For expenses chargeable to Federal Reserve Banks
For purchase of War Savings Bonds for employees under
Board's Voluntary Pay Roll Savings Plan
For income tax withholdings due Collector of Internal
Revenue

$221,282.05
397,001.57
9,479.30
57,912.35

$685,675.27

RECEIPTS
For general expenses of the Board:
Assessments on Federal Reserve Banks for estimated general
expenses of the Board
$2,296,356.54
Subscriptions to the Federal Reserve Bulletin
6,364.81
Other publications, sales
2,075.40
Reimbursements for leased wire service
42,157.55
Cafeteria operations
53,090.40
Miscellaneous receipts, refunds, and reimbursements
30,753.52 2,430,798.22
For expenses chargeable to Federal Reserve Banks:
Assessments on Federal Reserve Banks for:
Cost of printing Federal Reserve notes
4,795,050.21
Expenses of leased wire system (telegraph)
59,671.02
Expenses of leased telephone lines
9,337.25
Expenses of Federal Reserve Issue and Redemption Division (Office of the Comptroller of the Currency)
41,002.49
Miscellaneous expenses
1,559.11 4,906,620.08
Employees' pay roll allotments for purchase of War Savings Bonds

250,695.00

Income tax withheld from salaries

233,165.40

Total receipts

7,821,278.70

Total available for disbursement

8,506,953.97

DISBURSEMENTS
For expenses of the Board:
Current expenses of 1944 (per detailed statement). $2,061,141.75
Less accounts unpaid December 31, 1944
54,297.98 2,006,843.77
Expenses of prior years paid in 1944
51,106.89
Expenses of leased wire service, reimbursable
42,851.65
Retirement System (final adjustment of reserves incident to 1943
liberalization of benefits)
272,918.00
Cafeteria operations
46,230.05
Miscellaneous refunds and items reimbursable
9,094.60 2,429,044.96

FEDERAL RESERVE SYSTEM

RECEIPTS AND DISBURSEMENTS—Continued
For expenses chargeable to Federal Reserve B a n k s :
Cost of printing Federal Reserve notes
Expenses of leased wire system (telegraph)
Expenses of leased telephone lines
Expenses of Federal Reserve Issue and Redemption Division
(Office of the Comptroller of the Currency)
Miscellaneous expenses

5,154,150.21
60,279.26
9,819.00
41,002.49
5,008.46

5,270,259.42

Purchase of W a r Savings Bonds and refunds under Board's p a y roll plan

252,439.00

Collector of I n t e r n a l Revenue—income tax withheld from salaries

232,772.95

T o t a l disbursements

8,184,516.33

Balance in general fund account December 31, 1944:
For general expenses of the Board
For expenses chargeable to Federal Reserve B a n k s
For purchase of W a r Savings Bonds for employees under Board's Voluntary P a y
Roll Savings Plan
For income tax withholdings due Collector of I n t e r n a l Revenue

223,035.31
33,362.23
7,735.30
58,304.30
$322,437.6 A

CURRENT EXPENSES
Personal services:
Salaries
Retirement contributions
T o t a l personal services
Nonpersonal services:
Traveling expenses
Postage and expressage
Telephone and telegraph
Printing and binding
Stationery and supplies
F u r n i t u r e and equipment
Books and subscriptions
H e a t , light, and power.
Repairs and alterations (building and grounds)
Repairs and maintenance (furniture and e q u i p m e n t ) . .
Medical service and supplies
Insurance...
Cafeteria operations
Legal fees and expenses
Miscellaneous
T o t a l nonpersonal services
GRAND TOTAL

$1,587,223.86
126,701.02
$1,713,924.88
115,828.23
5,959.22
46,227.04
51,251.33
15,437.40
2,928.90
7,031.34
27,165.59
1,636.03
3,217.75
706.33
2,217.46
18,295.23
24,577.75
24, 737.27
$347,216.87
$2,061,141.75

Under an arrangement with the Federal Reserve Bank of Richmond, the
accounts of the Board for the year 1944 were audited by the Auditor of the
Federal Reserve Bank of Richmond, who certified them to be correct.
LEGISLATION RELATING TO THE FEDERAL RESERVE SYSTEM
AND REPORTS TO CONGRESS

Financing of war contract termination. The Contract Settlement Act
of 1944 approved July i, 1944, which provided for the guaranteeing of termination loans to war contractors, authorized the Federal Reserve Banks,
subject to regulations prescribed by the Board of Governors, to act on behalf
of any contracting agency of the Government as fiscal agent of the United
States in carrying out the purposes of the Act.
The position taken by the Board of Governors on a bill under consideration by Congress (S.511), which would authorize the Federal Reserve Banks
to guarantee financing institutions against part of the loss on loans made
to business enterprises, or to make commitments to purchase such loans from
financing institutions, is stated in the Appendix on page 61 of this Report.

ANNUAL REPORT OF BOARD OF GOVERNORS

Purchase of Government obligations directly from the United States.
By an Act of Congress approved December 2.0, 1944, the period during which
the Federal Reserve Banks can purchase obligations of the United States
directly from the United States under section 14Gb) of the Federal Reserve
Act was extended until December 31, 1945, unless sooner terminated by
Congress or the President. The amount of securities that can be held by the
Reserve Banks under this provision is limited to 5 billion dollars at any time.
Reports to Congress. On several occasions during the year, members
of the Board were called upon to appear before committees of Congress
to give information on proposed legislation. At the request of such committees, and of the Bureau of the Budget, the Board submitted reports on
proposed legislation relating to the absorption of exchange charges, the
providing of credit for forestry, the payment of fraudulent Government
checks, the providing of credit for small business, the extension of the time
during which Federal Reserve Banks may purchase Government obligations
directly from the United States, the establishment of branches by national
banks, State taxation of national banks, various aspects of the Federal Home
Loan Bank System, and the payment of the cost of examination of insured
banks.
CHANGES IN REGULATIONS OF THE BOARD OF GOVERNORS
The regulations of the Board of Governors were changed during the year
1944 in the following respects:
Relations by Federal Reserve Banks with foreign banks and bankers.
Effective January 1, 1944, as noted in its Report for 1943, the Board revised
Regulation N, principally in order to conform to changes in the law.
Consumer credit. Effective on different dates in 1944 the Board amended
Regulation W in a number of administrative respects.
The first, effective April 3, made about 15 small changes, of which one
permitted cash-lenders to use a form of their own (instead of one prescribed
by the Board) in obtaining from the borrower information concerning the
purposes of the loan, another gave merchants more latitude in handling
small balances in charge accounts and handling instalment sales of articles
priced up to $10, and another gave creditors a free hand in adjusting indebtedness incurred by servicemen prior to their induction into the armed forces.
The second, effective June 2.1, clarified the application of the regulation
to mixed credits, those consisting in part of credit subject to the regulation
and in part of credit not subject to it.
The third became effective on the same date (July 10) as price ceilings for
used cars established by the Office of Price Administration. It provided
that thereafter the basis for calculating the maximum credit value of used
cars should be those ceilings instead of figures in automobile appraisal guides.
The fourth, effective November 6, exempted servicemen's loans of a certain
category, viz., loans guaranteed under the Servicemen's Readjustment Act
of 1944.

FEDERAL RESERVE SYSTEM

Financing of war production and war contract termination. Effective
September n , 1944, the Board revised Regulation V so as to cover operations
of the Federal Reserve Banks as fiscal agents of the United States pursuant to
the Contract Settlement Act of 1944 as well as under the President's Executive
Order No. 9112. of March x6, 1942.. The Board also amended Regulation A,
effective September 11, 1944, so as to provide that paper guaranteed pursuant
to that Act need not be negotiable in order to be eligible for discount by a
Federal Reserve Bank.

NOTE.—For data usually included in numbered tables preceding the
Appendix of the Annual Report, reference is made to other parts of this Report and to the regular and special tables published in the Federal Reserve
Bulletin.

RECORD OF POLICY ACTIONS
BOARD OF GOVERNORS
MEETING ON MARCH ZT,,

1944

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Amendment to Regulation W, Consumer Credit.
By unanimous vote, Regulation W was amended, effective
April 3, 1944, to (1) modify the provision relating to instalment sales which exempted articles of small value from downpayment requirements so that it would apply to articles costing
$10 or less instead of $6 or less, (2.) permit merchants to omit a
description of the articles from the Statement of Transaction required for an instalment sale if the article were purchased by
means of a coupon book or similar credit medium on which a
down payment of at least one-third had been received, (3) permit merchants to restore credit privileges to members or former
members of the armed forces whose charge-account obligations
in default (incurred prior to induction) were adjusted by an appropriate agreement, (4) set a limit of 30 days from date of sale
instead of 15 days for the notice (calling for return of the merchandise or immediate payment) which had to be sent to
customers who, under a special provision for articles costing
up to $10, had charged listed articles against charge accounts
in default, (5) modify the provision permitting merchants to
continue credit sales to customers whose defaulted charge
accounts were small so that it would apply to all defaults that
were less than $10 instead of less than $2., (6) eliminate the requirement that a Statement of the Borrower as to the purposes
of an instalment loan or a single-payment loan should be
obtained on a form prescribed by the Board but require the
registrant to obtain the information on his own form, (7) expand the provisions giving registrants discretion in making
renewals or revisions of instalment-credit or single-paymentloan obligations of members of the armed forces (incurred
prior to induction) so as to make them apply after discharge
from service as well as during service, (8) exempt from the
regulation extensions of credit to finance the repair of heating
equipment or the replacement of heating equipment if it was
worn out, damaged beyond repair, or destroyed, (9) exempt
from the regulation rehabilitation loans to Indians made under
regulations of the Secretary of the Interior, (10) eliminate the
requirement that the Statement of Necessity to Prevent Undue
Hardship be obtained on a form prescribed by the Board but
require the registrant to obtain the information on his own
form, (11) require that relevant records be preserved for the
life of the obligation to which they relate except that the Statement of the Borrower must in any case be preserved for at least
one year, (12.) clarify the provisions with reference to reports,

FEDERAL RESERVE SYSTEM

inspections, and production of records, and (13) permit registrants to disregard a deficiency of less than $1 in the total of the
down payments received with a mail order.
These changes, which were either technical or administrative in character, were designed primarily to improve the practical workings of the
regulation by relieving both creditors and their customers from detailed
requirements that were not of sufficient importance to warrant the extra
work which they sometimes involved. None of the changes required the
credit grantor to do anything that he was not previously required to do.
The amendment was not intended to have any material effect in influencing
either the expansion or contraction of the total volume of consumer credit
outstanding.
MEETING ON JUNE 16,

1944

Members present; Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Amendment to Regulation W, Consumer Credit.
By unanimous vote, Regulation W was amended, effective
July 10, 1944, to eliminate the requirement that automobile
"appraisal guides" be used in calculating the minimum down
payment for used automobiles.
Before this amendment the regulation required that credits for the purpose of purchasing used automobiles should not exceed two-thirds of the
cash price or two-thirds of the average retail value as published in an automobile appraisal guide, whichever was lower. Effective July 10, 1944, the
effective date of the amendment, the Office of Price Administration fixed
ceiling prices on used automobiles, and it was the decision of the Board of
Governors that with the establishment of such prices the use of appraisal
guides for the purposes of the regulation was no longer necessary. A provision remaining in the regulation limited the amount of credit which could
be extended on used cars to not more than two-thirds of the ceiling price,
so that the effective rule after the adoption of the amendment was twothirds of the bona fide cash price or two-thirds of the ceiling price, whichever was lower.
MEETING ON JUNE 19,

1944

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Attendance of Chairman Eccles as a Delegate at the United Nations Monetary and
Financial Conference.
Chairman Eccles having been designated by the President
to serve, in his capacity of Chairman of the Board of Governors,
as a member of the United States delegation to the United
Nations Monetary and Financial Conference at Bretton Woods,
New Hampshire, beginning July 1, 1944, the Board, by unanimous vote, approved the Chairman's attendance at the conference as a member of the American delegation representing the
Board of Governors, with full discretion to act, according to
his judgment as to the best interests of the Federal Reserve
System in the light of the available information, on any matters
which might require the consideration of the American delegation.

ANNUAL REPORT OF BOARD OF GOVERNORS

This action was prompted by the Board's interest in helping to develop
a solution of the international monetary problems, and by the bearing of
these problems on the responsibilities of the Board for the domestic monetary
and credit situation. For more than a year experts representing the United
and Associated Nations had studied the possibility of monetary cooperation
and members of the Board's staff had participated in these studies at the
technical level. Establishment of an International Monetary Fund and a
Bank for Reconstruction and Development had been suggested as a result
of the studies and a formal conference of delegates of the United and Associated Nations had been called by the President to be held at Bretton Woods,
New Hampshire, beginning July i, 1944, for the formulation of definite
proposals. With these considerations in mind, the Board believed that it
should continue to cooperate in working out a plan designed to meet the
problems in the international monetary field and to complement essential
programs for the maintenance of full employment at home and the restoration of international trade on a sound and lasting basis, and that, for that
purpose, the Chairman should attend the Conference.
MEETING ON JUNE IO,

1944

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Amendment to Regulation W, Consumer Credit.
By unanimous vote, Regulation W was amended, effective
June i i , 1944, to provide that when credit was extended for
"mixed purposes" (partly subject to the regulation and partly
not subject to the regulation), the part of the credit not subject to the regulation could be treated as if the regulation did
not exist.
Previously Regulation W required that the portion of a credit of this
kind which was not subject to the provisions of the regulation be treated
in good faith as if it stood alone; that is, the payments which would be
required by the creditor if it were the only credit being extended should be
added to the payments required on the portion of the credit subject to the
regulation. Under the amendment the portion of the credit not subject
to the regulation may be paid under any terms and conditions agreed upon
by the parties. The principal reason for the amendment was that the old
provision of the regulation, which was designed to prevent circumvention,
had been found by experience to be susceptible of such misunderstanding and
avoidance that to preserve it would entail educational work on the part of
the Federal Reserve Banks out of proportion to its value.
MEETING ON SEPTEMBER 6,

1944

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Draper; Mr. Evans.
Adoption of Revised Regulation V, Financing of War Production and War Contract Termination.
With the approval of the Director of Contract Settlement,
the Board of Governors, by unanimous vote, adopted a revision
of Regulation V to become effective September 11, 1944.
As originally adopted by the Board in April, 1942., Regulation V established a procedure under which the Federal Reserve Banks were authorized

FEDERAL RESERVE SYSTEM

to act, pursuant to the provisions of Executive Order No. 9111, as fiscal
agents for the War Department, Navy Department, and Maritime Commission in facilitating and expediting the financing of contractors, subcontractors, and others engaged in war production. The purpose of the revised
regulation was to expand this procedure to enable the Federal Reserve Banks
to act also as fiscal agents for the armed services and the Maritime Commission in connection with the financing of claims arising out of the termination of war contracts or operations as authorized by the Contract Settlement
Act which was approved by the President on July 1, 1944. The reasons for
the Board's action are set forth in a statement released to the press on September 11, 1944, which read in part as follows:
"The Board of Governors today announced inauguration of the
program of guaranteed loans and commitments authorized under the
Contract Settlement Act of 1944. Such termination loans, commonly
called T loans, will be made by private financing institutions, chiefly
commercial banks, to war production contractors to liquefy or 'unfreeze'
working capital*tied up in terminated contracts pending final settlement
of claims arising therefrom. Guarantees will be executed by the Federal
Reserve Banks as fiscal agents of the United States acting in behalf of
the War Department, the Navy Department, and the United States
Maritime Commission. The Reserve Banks are today distributing to
all banks in their districts printed forms and detailed information.
The T loan program is a logical extension of the V and VT loan programs under Executive Order 91 iz, which provide war contractors with
financing necessary for production. VT loans, in use since September 1,
1943, provide both production and termination financing, but have not
been available after cancellation has taken place. T loans, which, are
authorized under the Contract Settlement Act, may be guaranteed after
the borrower's war production contracts have been terminated. However, commitments for such loans may be guaranteed in advance of cancellation. Thus the program affords war production contractors a
means of insurance against the freezing of their working capital which
might result from sudden termination of their war contracts.
(The paragraphs omitted relate to interest rates and guarantee and commitment fees under the revised regulation.)
While the prospective need of war production contractors for T loans
cannot be accurately estimated, the commercial banks should be prepared to make a large number of such loans within the first few weeks
after the end of the European phase of the war. If applications for such
loans were not filed until after cancellations occur in large volume, it
might be physically impossible to process them promptly. Therefore, the
program will emphasize the desirability of contractors and their banks, in
advance of cancellation, negotiating commitments to make such loans.
These commitments will be guaranteed by the Federal Reserve Bank,
acting as fiscal agent of the LFnited States, so that upon termination,
borrowers can promptly obtain such loans and the banks will already
have the protection of the guarantee.
In comparison with the V and VT loan programs, the T loan program
is simplified and liberalized in recognition of the obligation of the
Government, as expressed in the Contract Settlement Act, to provide
prompt and adequate interim financing to contractors pending final
settlement of their claims."

ANNUAL REPORT OF BOARD OP GOVERNORS

Guarantee and Commitment Fees and Rates on Loans under Regulation V.
In accordance with Section 4 of the revised Regulation V, and with
the concurrence of the Director of Contract Settlement, the Board of
Governors, by unanimous vote, prescribed a maximum rate of interest
°f 43^2% P e r annum and the following guarantee and commitment fees
on T loans and on V and VT loans executed on the revised form of 1944
V-Loan Guarantee Agreement, all to become effective September 11,
1944. In connection with these fees it was provided that no termination
fee, service fee, or other fee of a similar character, except charges covering out of pocket expenses, could be charged a borrower by a financing institution:
Per cent of loan guaranteed
80 or less
85
90
95
Over 95

Guaranteed fee (Per cent of interest payable
by borrower on guaranteed portion of loan)

10
15
20
30
50

Maximum Commitment Fee That May Be Charged Borrower
By Financing Institution
34 of 1 per cent per annum1
or
A flat fee of not to exceed $50.002
1
2

To be based on average daily unused balance of the maximum principal amount of the loan.
Without regard to the amount or maturity of the commitment.

The maximum interest rate and the guarantee fees referred to above were
lower than had been prescribed by the Board for V and VT loans and the
schedule of guarantee fees was simplified. These changes were made to
establish a schedule of rates and fees which it was believed would be practical
and equitable, would popularize the program, and would reflect the spirit
of the Contract Settlement Act which recognized the obligation of the
Government to provide prompt and equitable interim financing to contractors
pending final settlement of their claims.
Amendment to Regulation A, Discounts for and Advances to Member Banks by
Federal Reserve Banks.
By unanimous vote, subsection (h) of Section i of Regulation A was amended, effective September n , 1944, to provide
that the requirement of the section that an instrument be negotiable in order to be eligible for discount at a Federal Reserve
Bank should not be applicable with respect to any note, draft,
or bill of exchange evidencing a loan which was in whole or in
part the subject of a guarantee or commitment made pursuant
to the Contract Settlement Act of 1944.
This change in the Regulation was made to extend to T loans the same exemption as was provided for V and VT loans by a similar amendment made
to Regulation A in September, 1941. The reason for the change, which
was substantially the same for both amendments, was as follows: The incorporation by reference of certain provisions in obligations evidencing
loans guaranteed by the War or Navy Department or Maritime Commission
rendered them non-negotiable and under the provisions of Regulation A,
negotiability was one of the requirements for eligibility for discount by a
Federal Reserve Bank or as collateral for advances under section 13 of the
Federal Reserve Act. The requirement of negotiability was not a require

FEDERAL RESERVE SYSTEM

ment of the Federal Reserve Act but had been placed in Regulation A as a
means of protecting the Federal Reserve Banks against certain legal disadvantages of non-negotiable paper. It was represented to the Board that,
if war production loan obligations were eligible for discount, they would
be more readily accepted, and the Board was of the opinion that, in the
circumstances under which the notes were issued and in view of the participation of the Federal Reserve System in the procedure involved in such transactions, it could safely amend Regulation A so that negotiability of such
paper would not be required as a condition of eligibility for discount by a
Federal Reserve Bank or as collateral for advances under section 13 of the
Federal Reserve Act.
MEETING ON NOVEMBER 3,

1944

Members present: Mr. Ransom, Vice Chairman; Mr. McKee; Mr. Draper;
Mr. Evans.
Amendment to Regulation W, Consumer Credit.
By unanimous vote Regulation W was amended, effective November 6, 1944, to exempt from its provisions any loan guaranteed in whole or in part by the Administrator of Veterans'
Affairs pursuant to the provisions of the Servicemen's Readjustment Act of 1944.
The Servicemen's Readjustment Act provided for Government guarantee
of loans to veterans for specified purposes including the purchase of homes,
home repairs and improvement, purchase of business property, and purchase,
repair and improvement of farm property and equipment. The credit within
the scope of the Readjustment Act which was also subject to Regulation W
consisted principally of residential repairs and improvements and certain
consumers' durable goods occasionally purchased for business use. It appeared to the Board that Congress intended that the terms of guaranteed
veterans' loans should be fixed within the limitations of the Servicemen's
Readjustment Act and the amendment to Regulation W was adopted to
exempt such loans from any provisions of the Regulation that would interfere with that intention being carried out.

RECORD OF POLICY ACTIONS
FEDERAL OPEN MARKET COMMITTEE
MEETING ON FEBRUARY 2.9,

1944

Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;Mr.
Szymczak, Mr. McKee, Mr. Ransom, Mr. Draper, Mr. Evans, Mr. Paddock,
Mr. Fleming, Mr. McLarin, Mr. Peyton (alternate for Mr. Day).
1. Purchase of Treasury Bills for System Account.
As stated in the open market policy record covering the meeting of the
Federal Open Market Committee on October 18, 1943, the Treasury, in lieu
of an arrangement providing for the direct replacement of maturing Treasury
bills held in the System account, requested the Federal Reserve Bank of NewYork as fiscal agent of the United States to use its best efforts to see that
sufficient tenders for Treasury bills were forthcoming from the market each
week to insure the sale of whatever amount of bills was offered by the Treasury. Under this procedure the volume of purchases of bills from the dealers
by the Federal Reserve Bank of New York in its option account became very
large. To make it possible for all of the Federal Reserve Banks to participate in these purchases, an arrangement was worked out with the approval
of the members of the Federal Open Market Committee under which the
dealers would offer bills to the Federal Reserve Bank of New York at the
posted rate of 3/g per cent without a repurchase option and the Reserve Bank
would purchase these bills for the System account. In order to provide the
New York Bank with adequate authority to acquire these bills for the System account, the members of the Federal Open Market Committee, on December 1, 1943, approved an amendment to the direction issued to the executive committee at the meeting of the full Committee on October 18, 1943,
to exclude from the limitation on the authority of the executive committee
to increase or decrease the amount of securities held in the System account
bills purchased outright in the market on a discount basis at the rate of %
per cent per annum. Following this action by the full Committee a similar
amendment was made by the executive committee in its direction to the
Federal Reserve Bank of New York.
At this meeting of the Federal Open Market Committee,
upon motion duly made and seconded and by unanimous vote,
the actions of the members of the Federal Open Market Committee as set forth above were approved, ratified, and confirmed
for the reasons stated.
2. Terms upon which Federal Reserve Bank of New York Will Transact Business
with Brokers and Dealers in Government Securities for the System Open Market Account.
Upon motion duly made and seconded, unanimous approval
was given to a statement of the terms upon which the Federal
Reserve Bank of New York will transact business with brokers
and dealers in United States Government securities for the
System Open Market Account, it being understood (1) that the
procedure set forth in the statement would be put into effect at
such time as in the judgment of the executive committee such

FEDERAL RESERVE SYSTEM

action appeared to be desirable after having informed the Treasury of the proposed arrangement, and ( i ) that the executive
committee was authorized to issue such instructions to the
Federal Reserve Bank of New York as agent for the System
account in connection with the proposed procedure as appeared
to the executive committee to be desirable, including the manner in which advice of the arrangement was to be sent to
dealers who might qualify thereunder. In accordance with
this action, the following instructions were issued to the
Federal Reserve Bank of New York by the executive committee
on May 6, 1944, and the other Federal Reserve Banks were
requested to furnish a copy of the statement of procedure to
any broker or dealer in their respective districts which evidenced an interest in qualifying thereunder and in the opinion
of the Reserve Bank would have a reasonable chance of qualifying:
1. The Federal Reserve Bank of New York shall furnish copies of
the statement of terms to each broker or dealer in Government securities
with whom the Bank has been transacting business on behalf of the
System open market account, and to such other brokers and dealers as
evidence to the Bank an interest in qualifying and in the opinion of the
Bank would have a reasonable chance of qualifying. On and after
May 15, 1944, the New York Bank will transact business on behalf of
the System open market account only with the brokers and dealers who
meet the qualifications, have executed the agreement, and comply with
the terms set forth in the statement.
z. When the statement has been presented to the brokers and dealers
with whom transactions are now conducted for the System open market
account, the Bank shall give copies to representatives of the press informally as a formalization of existing procedure.
3. The Bank shall keep the executive committee of the Federal Open
Market Committee informed of each broker and dealer with whom it
ordinarily transacts business and of each addition to, or removal from,
the list of qualified brokers and dealers.
4. The Bank shall encourage the observance of high standards of
commercial honor and just and equitable principles of trade by the
brokers and dealers in Government securities, through the medium of
the Bank's contacts with the brokers and dealers and the Government
Security Dealer Group or any other similar organization that may exist
or develop.
5. When any broker or dealer has been removed from the list of qualified brokers and dealers for failure to meet the qualifications set forth in
the statement of terms or for willful violation of or failure to perform
any of the terms and conditions set forth in the agreement, and the Bank
is satisfied that he has taken appropriate steps to correct any default
and to prevent the occurrence of similar defaults in the future, the Bank
may restore him to the list of qualified brokers and dealers and resume
the transaction of business with him, after obtaining the consent of the
executive committee of the Federal Open Market Committee.
The approved statement of terms was as follows:
Terms on Which Federal Reserve Bank of New York Will Transact Business
with Brokers and Dealers in United States Government Securities for
the System Open Market Account

ANNUAL REPORT OF BOARD OF GOVERNORS

The Federal Open Market Committee has directed the Federal Reserve
Bank of New York (hereinafter referred to as the Bank) to transact
business in United States Government securities for the System open
market account with reputable brokers and dealers in such securities
who meet the qualifications and agree in writing to comply with the
terms and conditions set forth below.
i. In determining whether a person (individual, partnership or
corporation, including a bank) is a qualified broker or dealer with whom
the Bank will transact business, and the extent to which business will
be transacted with such person, the following factors will be taken
into consideration:
(a) Integrity, knowledge, and capacity and experience of management;
(b) Observance of high standards of commercial honor and just
and equitable principles of trade;
(c) Willingness (in the case of a dealer) to make markets under all
ordinary conditions;
(d) The volume and scope of business and the contacts such business provides;
(e) Financial condition and capital at risk of business; and
(f) The reliance that can be placed on such person to cooperate
with the Bank and the Federal Open Market Committee in
maintaining an orderly market for Government securities; to
refrain from making any recommendations or statements or
engaging in any activity which would encourage or stimulate
undue activity in the market for Government securities; and to
refrain from disclosing any confidential information which he
obtains from the Bank or through his transactions with the
Bank.
z. The Bank will obtain from such person an agreement in writing
to comply with the following terms and conditions:
(a) He will furnish the Bank with a statement for the confidential
information of the Bank and the Open Market Committee
showing as of the close of business each business day:
( i ) The total amount of money borrowed (directly and indirectly);
(z) The par value of all Government securities borrowed;
(3) His position, both long and short, in Government securities, classified by classes of securities and maturity groups
(or by issues, if so requested by the Bank);
(4) The volume of transactions during the day in Government
securities, classified by classes of securities and maturity
groups (or by issues, if so requested by the Bank); and
(5) Such other statistical data as in the opinion of the Bank
will aid in the execution of transactions for the System
open market account.
(b) At or before the completion of each transaction with the Bank,
he will furnish the Bank with a written notification disclosing
whether he is acting as a broker for the Bank, as a dealer for his
own account, as a broker for some other person, or as a broker
for both the bank and some other person. In the absence of a
special agreement to the contrary with the Bank with respect
to a particular transaction, he will not act as broker for any
other person in connection with any transaction with the Bank,

FEDERAL RESERVE SYSTEM

and he will receive no compensation or profit of any kind in
connection with the transaction other than the specified commission paid him by the Bank.
(c) In the absence of special arrangements with the Bank, delivery
of securities will be made at the office of the Bankbefore2.:i5
p.m. on the next full business day following the day of the contract and all payments by the broker or dealer will be in immediately available funds.
(d) He will furnish the Bank not less frequently than once during
each calendar year with a report of his financial condition as of
a date not more than 45 days prior to the delivery of the report
to the Bank in form acceptable to the Bank and prepared or
certified by a public accountant acceptable to the Bank; and,
upon the request of the Bank, he will furnish it with a statement of condition as shown by his books as of a date specified
by the Bank.
(e) Unless the Bank shall have informed him of its desire to purchase or sell a particular issue of Government securities, he will
not solicit from any other person offerings of or bids for any
issue of Government securities for the purpose of placing himself
in a position to offer to sell to or to buy from the Bank securities
of such issue.
The Federal Open Market Committee has further directed that the
Bank decline to transact any further business with a broker or dealer
in any case in which the Bank has concluded that the broker or dealer
no longer meets the qualifications set forth above or has willfully
violated or failed to perform any of the terms and conditions set forth
in the agreement.
To the Federal Reserve Bank of New York:
The undersigned hereby agrees to meet the qualifications and to comply with the terms and conditions set forth above.
Dated:
(Signature)

The above action of the Federal Open Market Committee followed a thorough study of the relationships with the dealers and brokers through which
transactions for the System open market account were executed. The Committee felt that, although the informal arrangement that had existed previously was satisfactory for a period when the volume and amount of transactions for the System open market account were relatively small, the
increase in the activity of the account, and the likelihood that operations in
very large amounts would continue during the remainder of the war and
into the postwar period, made it desirable to place the existing relationships
on a formal basis. The terms of agreement represent in sul >tance the informal agreements that had been in effect between the Federal Reserve Bank
of New York, as agent, and the dealers and brokers with whom the Reserve
Bank previously had transacted business for the System open market account.
MEETING ON MARCH I ,

1944

Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman; Mr.
Szymczak, Mr. McKee, Mr. Ransom, Mr. Draper, Mr. Evans, Mr. Leach,
Mr. Young, Mr. Davis, Mr. Peyton.

52.

ANNUAL REPORT OF BOARD OF GOVERNORS

1. Purchase by Federal Reserve Banks of Treasury Bills at Posted Discount Rate.
Upon motion duly made and seconded, the following direction to the Federal Reserve Banks was approved by unanimous
vote, with the understanding that resales of Treasury bills held
under option would be for immediate delivery when so requested by the option holder:
"Until otherwise directed by the Federal Open Market Committee,
the twelve Federal Reserve Banks are directed to purchase all Treasury
bills that may be offered to such Banks on a discount basis at the rate
of % per cent per annum, any such purchases to be upon the condition
that the Federal Reserve Bank, upon the request of the seller before the
maturity of the bills, will sell to him Treasury bills of like amount and
maturity at the same rate of discount. All bills purchased under
this direction are to be held by the purchasing Federal Reserve Bank in
its own account and prompt reports of all such purchases are to be made
to the Manager of the System Open Market Account."
This was the first meeting of the Federal Open Market Committee attended
by the representatives of the Federal Reserve Banks who were elected for a
term of one year beginning March i, 1944. Because of the change in the
membership of the committee, it was agreed that it would be desirable to
review and renew the above direction, which was in the same form as the
direction issued by the Committee on June 2.8, 1943. It was approved
unanimously for substantially the same reasons as prompted the earlier
action.
2. Authority to Effect Transactions in System Account.
Upon motion duly made and seconded and by unanimous
vote, the following direction was approved:
"That the executive committee be directed, until otherwise directed
by the Federal Open Market Committee, to arrange for such transactions
for the System open market account, either in the open market or
directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without
replacement), as may be necessary in the practical administration of the
account, or for the purpose of maintaining about the present ^general
level of prices and yields of Government securities, or for the purpose
of maintaining an adequate supply of funds in the market; provided that
the aggregate amount of securities held in the account at the close of
this date (other than (1) bills purchased outright in the market on a
discount basis at the rate of % per cent per annum and bills redeemed
at maturity and (z) special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the
Treasury) shall not be increased or decreased bymore than $1,500,000,000.
"That the executive committee be further directed, until otherwise
directed by the Federal Open Market Committee, to arrange for the
purchase for the System open market account direct from the Treasury
of such amounts of special short-term certificates of indebtedness as may
be necessary from time to time for the temporary accommodation of the
Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed $1,500,000,000."

FEDERAL RESERVE SYSTEM

The policy of the Federal Reserve System of facilitating the Treasury program of war financing by assuring the existence at all times of an ample
supply of member bank reserves, and of exerting an influence toward the
maintenance of conditions in the Government security market that would
be satisfactory from the standpoint of the Government's requirements, continued during the year 1943 to be the all-important factor in the System's
open market operations. The borrowings of the Government to finance the
war continued to be large and it was necessary for the Federal Reserve System, largely through open market purchases, to make funds available to the
banks for required reserves against increased deposits resulting from bank
purchases of Government securities as well as to enable the banks to meet an
increase in the volume of currency in circulation and a reduction in the monetary gold stock of this country.
This was the situation when this meeting of the Federal Open Market
Committee was held and it was the unanimous decision of the Committee
that the open market policies followed during the previous year should be
continued for substantially the reasons stated in connection with the adoption of these policies. The direction set forth above was issued in furtherance of that purpose. It differed from the direction previously in effect in
that it exempted from the limitation in the direction the redemption of
maturing Treasury bills held in the System account. The redemption of
such bills and the purchase of a like amount of new bills in the market
amounted, in effect, to the replacement of maturing securities in the System
account, and for that reason it was felt that there was no need to include
these redemptions in the limitation imposed by the direction.
MEETING ON MAY 4,

1944

Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;
Mr. Szymczak, Mr. McKee, Mr. Draper, Mr. Evans, Mr. Leach, Mr. Young,
Mr. Davis, Mr. Peyton.
1. Authority to Effect Transactions in System Account.

Upon motion duly made and seconded, the following direction to the executive committee was approved by unanimous
vote:
"That the executive committee be directed, until otherwise directed
by the Federal Open Market Committee, to arrange for such transactions
for the System open market account, either in the open market or
directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without
replacement), as may be necessary in the practical administration of the
account, or for the purpose of maintaining about the present general
level of prices and yields of Government securities, or for the purpose
of maintaining an adequate supply of funds in the market; provided that
the aggregate amount of securities held in the account at the close of
this date (other than (1) bills purchased outright in the market on a
discount basis at the rate of ^ per cent per annum and bills redeemed
at maturity and (2.) special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the
Treasury) shall not be increased or decreased by more than $1,500,000,000.
"That the executive committee be further directed, until otherwise
directed by the Federal Open Market Committee, to arrange for the
purchase for the System open market account direct from the Treasury

ANNUAL REPORT OF BOARD OF GOVERNORS

of such amounts of special short-term certificates of indebtedness as
may be necessary from time to time for the temporary accommodation
of the Treasury; provided that the amount of such certificates held in
the account at any one time shall not exceed $1,500,000,000."
The discussions of open market policy at this meeting were in the light
of the announced plans of the Treasury for the Fifth War Loan Drive and it
was agreed that there should be no change in the existing policies of the
Committee. Therefore, the above direction was in the same form as the
direction approved at the meeting of the Federal Open Market Committee
on March i, 1944, and was issued for substantially the same reasons as the
earlier direction.
MEETING ON SEPTEMBER 2.1, 1944

Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;
Mr. McKee, Mr. Ransom, Mr. Draper, Mr. Evans, Mr. Leach, Mr. Young,
Mr. Davis, Mr. Peyton.
1. Authority to Effect Transactions in System Account.
Upon motion duly made and seconded, and by unanimous
vote, the following direction to the executive committee was
approved:
"That the executive committee be directed, until otherwise directed
by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market
or directly with the Treasury (including purchases, sales, exchanges,
replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration
of the account, or for the purpose of maintaining about the present
general level of prices and yields of Government securities, or for the
purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at
the close of this date (other than (1) bills purchased outright in the
market on a discount basis at the rate of ^ per cent per annum and bills
redeemed at maturity and (2.) special short-term certificates of indebtedness purchased from time to time for the temporary accommodation
of the Treasury) shall not be increased or decreased by more than
$1,500,000,000.

"That the executive committee be further directed, until otherwise
directed by the Federal Open Market Committee, to arrange for the
purchase for the System open market account direct from the Treasury
of such amounts of special short-term certificates of indebtedness as
may be necessary from time to time for the temporary accommodation
of the Treasury; provided that the amount of such certificates held in
the account at any one time shall not exceed $1,500,000,000."
Since the last meeting of the Federal Open Market Committee on May 4,
1944, there had been no change in the monetary and credit situation that
called for any revision of the open market policies adopted by the Federal
Open Market Committee. It also appeared that the plans for the Sixth
War Loan Drive would be best served by the continuation of the existing
policies. The Committee decided, therefore, that these policies should be
continued for the reasons previously stated and the above direction, which
was in the same form as the directions issued at the meetings on March 1
and May A, 1944, was issued for that purpose.

FEDERAL RESERVE SYSTEM

M E E T I N G ON DECEMBER I I , 1944

Upon motion duly made and seconded, and by unanimous
vote, the following direction to the executive committee was
approved:
"That the executive committee be directed, until otherwise directed
by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or
directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement), as may be necessary in the practical administration
of the account, or for the purpose of maintaining about the present
general level of prices and yields of Government securities, or for the
purpose of maintaining an adequate supply of funds in the market; provided that the aggregate amount of securities held in the account at
the close of this date (other than (1) bills purchased outright in the
market on a discount basis at the rate of % per cent per annum and bills
redeemed at maturity and (z) special short-term certificates of indebtedness purchased from time to time for the temporary accommodation
of the Treasury) shall not be increased or decreased by more than
$1,500,000,000.

"That the executive committee be further directed, until otherwise
directed by the Federal Open Market Committee, to arrange for the
purchase for the System open market account direct from the Treasury
of such amounts of special short-term certificates of indebtedness as
may be necessary from time to time for the temporary accommodation
of the Treasury; provided that the amount of such certificates held in
the account at any one time shall not exceed $1,500,000,000."
The reasons which formed the basis for the current open market policies
of the System continued to exist when this meeting was held and the aboye
direction, which was in the same form as the directions issued to the executive committee at the earlier meetings of the Committee during 1944, was
adopted in order to continue these policies in effect.

OF AUTHORITY TO FLEDGE UNITED STATES
GOVERNMENT OBLIGATIONS AS COLLATERAL FOR FEDERAL RESERVE NOTES
The statement below was submitted to the Banking and Currency Committees of the Senate and the House of Representatives at hearings on S. 510
held in February 1945.
The bill under consideration (S. 510) would accomplish the following
purposes: (1) Extend indefinitely the authority of the Federal Reserve Banks
to pledge United States Government securities against Federal Reserve notes
issued by the Federal Reserve Agents (existing authority will expire June 30,
1945); and (2.) reduce the requirements of reserves to be held by Federal Reserve Banks from their present level of 40 per cent in gold certificates against
Federal Reserve notes in circulation and 35 per cent in gold certificates or
lawful money against deposits, to a uniform minimum of 2.5 per cent in gold
certificates against combined note and deposit liabilities.
The need for reducing the high reserve requirements of the Federal Reserve
Banks was mentioned by the President in his Budget message transmitted
to the Congress on January 3, 1945.
Pledging of United States Government securities against Federal Reserve notes.—In conditions prevailing today, with Federal Reserve notes outstanding in an amount of 2.1.7 billion dollars and deposit liabilities of the
Federal Reserve Banks in an amount of 16.4 billion, it is imperative to extend
the power to pledge United States Governments as collateral for the notes.
Without this authority the Federal Reserve Banks would be obligated to engage in a series of operations for the sole purpose of obtaining other assets that
would be eligible as collateral for Federal Reserve notes in place of United
States Government securities which would not be eligible. They would
have to sell a large enough volume of Government securities to make it
necessary for banks to borrow as much as 10 billion dollars from the Federal
Reserve Banks at this time and possibly as much as 18 billions by the end of
the year. The manner in which this would work is that the Reserve Banks
would sell the securities in the open market; payment for them would take
out an equivalent amount of funds from the market, and member banks would
have to borrow this amount from the Federal Reserve Banks in order to
replenish their reserves. The promissory notes of member banks at the
Reserve Banks would be eligible under the law as collateral for Federal
Reserve notes. No public interest would be served, but in the process the
market for United States Government war obligations would be disrupted
at a time when the Treasury must still raise vast sums to finance the war.
It is clear that this must not occur and that, therefore, the power to pledge
Government securities against Federal Reserve notes must be continued.
In proposing to permit the Reserve Banks to pledge United States Government obligations as collateral for Federal Reserve notes, it is recommended
that no time limit be placed on this authorization. In view of the fact that
the Federal Reserve Banks' assets, other than gold certificates, consist at
present almost entirely of Government securities, most of which were acquired during the war, and the improbability that these Banks will have
any considerable volume of other earning assets in the foreseeable future,
it would not be in the public interest to have the authority to use United
States
securities as backing for notes terminate at a predetermined date.

http://fraser.stlouisfed.org/
Federal Reserve 56
Bank of St. Louis

FEDERAL RESERVE SYSTEM

Periodic renewal of this authority not only involves delay, unnecessary
expenditure of effort for the Congress and the Board, and the necessity of
rehearsing the same arguments over and over again, but it also may result
in a period of uncertainty which is disturbing to the United States Government security market. Maintenance of stable conditions in this market is
essential in view of the dominant role that Government securities have come
to play in our financial structure, and this stability has been and must remain
indefinitely a primary objective of Federal Reserve policy. Uncertainty
about continued eligibility of Government securities as collateral for Federal
Reserve notes would have an adverse effect on this stability.
The pledging of Government securities as collateral was first authorized
thirteen years ago as an emergency measure at the depth of the depression
when the Federal Reserve Banks needed to buy Government securities in
order to ease the pressure of debt on member banks and thus create easier
credit conditions. The authority has been renewed from time to time. It
is apparent that it will have to be renewed for many years to come. It would
be far wiser to extend the authority for an indefinite period, the Congress
of course always retaining the right to repeal the authority if this should
appear to be desirable.
When the collateral provisions for Federal Reserve notes were first formulated there were practically no Government securities in the market, member
banks had a large volume of so-called eligible commercial paper, and were
expected to borrow on that paper when they required additional reserves or
currency. The situation has radically changed since then. There is now
an enormous public debt which constitutes a large part of the earning assets
of member banks; the total volume of eligible paper has declined, and many
banks have practically no such paper. Banks are also reluctant to borrow
from the Reserve Banks and, if they should borrow in considerable volume,
this would result in a tightening of credit conditions with disturbing effects
on the price of Government securities. Furthermore, if they borrowed,
they would borrow on their promissory notes secured by Government obligations. Consequently, what would be back of the notes would still be United
States Government securities but with an endorsement by a member bank.
Surely an obligation of the United States Government is not improved in
credit standing by endorsement of some member bank.
Collateral requirements are not an effective limitation on credit expansion
by the Federal Reserve Banks. Open-market operations of these Banks are
governed by considerations of the public interest and not of Federal Reserve
Bank earnings. When the Reserve Banks purchase United States Government securities they pay for them by deposit credit. Once these deposit
liabilities have been incurred the Federal Reserve Banks are obliged to permit
their withdrawal in currency. The public demand for currency, in turn,
depends on business conditions, activity of trade, the volume of wage payments, the price level, and the extent of the people's wish to hold their
liquid assets in the form of cash rather than bank deposits or Government
securities. Member banks, to avoid insolvency, must permit their customers to withdraw their deposits in currency; Federal Reserve Banks in
turn must permit the member banks to obtain the currency by drawing on
their balances with the Reserve Banks. Consequently, the Reserve Banks
have no choice in the matter because they have no control over the demand
for currency. It serves no useful purpose to encumber these unavoidable
operations by legal restrictions which inevitably must give way as soon as
they would actually restrict.
In any case Federal Reserve notes have a prior lien on. all assets of the

ANNUAL REPORT OF BOARD OF GOVERNORS

Federal Reserve Banks and are obligations of the United States GovernmentSegregation of special assets of the Federal Reserve Banks as collateral for
these notes adds nothing to their quality. It is merely an absolete piece of
machinery conceived at a time when conditions were radically different from
those that prevail today. By authorizing the pledging of Government
securities as collateral for Federal Reserve notes the collateral requirement is
extended to practically all the assets of the Reserve Banks and ceases to be
an interference with the performance of their duties and the discharge of
their responsibilities. This extension should, therefore, be a permanent
part of the law.
Reduction of reserve ratio.—Conditions arising out of the war have caused
the reserve ratio of Federal Reserve Banks to decline from 91 per cent at the
end of 1941, soon after our entry into the war, to 49 per cent at the end of
1944. If developments continue at the rate of recent months the ratio will
fall almost to the legal minimum by the end of the present calendar year.
If gold export or currency withdrawals or both should be greater than in
1944, the legal minimum will be reached sooner. The following table shows
the factors in the situation, together with hypothetical projections through
1945 based on probable trends of currency, deposit, and gold movements.
Projections
Federal Reserve Bank

Dec. 31, 1941 Dec. 31, 1944
June 30, 1945 Dec. 31, 1945

Reserves

20.8

Deposits
Federal Reserve notes outstanding

14 7

Liabilities requiring reserves
Reserve ratio

(In billions of dollars)
18.2
18.7

8.2

16 4
21.7

22.9

38.1

90.8

(Per cent)
49.0

17.7

17.4
23.7

18 4
26.7

41.1

45.1

44,3

39.2

It wTill be seen that the decline in the reserve ratio has been due to a reduction in Federal Reserve Bank reserves and to increases in Federal Reserve
note and deposit liabilities. Reduction of reserves has reflected the fact
that most of this country's exports have been on lend-lease, while our imports have been on a cash basis. Countries that have sold commodities to
the United States have not been able to buy goods here, on account of war
restrictions, and have either withdrawn or earmarked gold against the time
when goods will once more be available for sale.
Growth of Federal Reserve note circulation has been a part of the general
expansion of currency which has accompanied war activity in every country
in the world. Expansion of both notes and deposits has reflected growth of
Government war expenditures, enlargement of national money income, and
advancement of payrolls and trade at higher prices. So long as the Federal
Reserve Banks continue to do their part, as they surely must, to assist the
Treasury in Government financing and in maintaining stable conditions in
the market for United States Government securities, these Banks must not
be restricted by an arbitrary reserve ratio.
While the reserve ratio for all the Federal Reserve Banks combined is at
present still nearly 49 per cent, that is, considerably above the legal minimum, individual Reserve Banks have ratios that are much nearer to the low
point required by law. A table is attached showing the reserve position of
individual Reserve Banks at selected typical dates. While adjustment in
individual Bank ratios is made periodically by changing their participation

FEDERAL RESERVE SYSTEM

In the System holdings of United States Government securities, this involves
a great deal of unnecessary work in practical operation. Since it is apparent
that means must be found to handle the ratio problem, it is highly desirable
that action be taken promptly. This would not only allay fears and uncertainties among holders and prospective purchasers of United States
Government securities, but would also eliminate the necessity of making
frequent and complicated adjustments among the Reserve Banks.
RESERVE RATIO OF EACH FEDERAL RESERVE BANK
O N THE 15TH OF THE MONTH FROM JULY 1944 TO FEBRUARY 1945

[Per cent]
July
1944

October
1944

January
1945

February
1945

Boston
New York.
Philadelphia
Cleveland

53.8
50.6
48.8
52.9

43.6
46.4
48.6
43.3

45.4
52.8
43.8
45.3

45.8
50.7
44.4
43.6

Richmond
Atlanta . .
Chicago
St. Louis

47.6
51.7
63.6
58.0

45.6
52.0
49.7
43.3

46.6
52.1
51.7
46.5

Minneapolis
Kansas City
Dallas
San Francisco

57.5
57.0
64.7
54.2
49.6
53.2
51 1
66.5

51.5
45.7
46 6
63.8

44.9
45.0
45.5
54.2

44.8
45.9
44.1
51.3

Total

56.0

52.0

49.3

48.8

Federal Reserve Bank

There are several ways to meet the situation, all of which have been carefully considered. One way would be to issue Federal Reserve Bank notes,
which require no reserves, in place of Federal Reserve notes; another way
would be suspension of reserve requirements by the Board of Governors of
the Federal Reserve System, which is authorized by law, and a third way
would be a reduction of reserve requirements by the Congress. Other devices, such as issuance of currency by the Treasury, or reduction of member
bank reserve requirements, have been reviewed and found to be inadequate
or inappropriate. Reduction of the ratio by law, which is proposed in the
bill, is the most clear-cut method, as well as the most consistent with the
responsibility of the Congress to regulate the country's monetary policy.
Issue of Federal Reserve Bank notes in their present form was authorized
by the Emergency Banking Act of March 1933, and the authority will expire
when the President declares that the emergency is over. The need for the
lower ratio may continue beyond that date. Furthermore, the difference
between Federal Reserve notes and Federal Reserve Bank notes gives rise to
misunderstanding, and it would be simpler and less confusing to the public
if Federal Reserve currency were all of one kind. It would be best at a time
like this to have a Federal Reserve ratio that indicated to the Congress and
to the people the amount of gold certificates held by the Reserve Banks
against their total deposit and note liabilities of all kinds.
The authority in section n ( c ) of the Federal Reserve Act to suspend reserve requirements does not appear to be the best method of meeting the situation, because the power was not designed for a situation like the present
which is of indefinite duration. Suspension must be for a period not to
exceed thirty days, renewable at intervals of fifteen days. It also requires
a penalty in the form of a progressive interest rate, to be determined by the
Board, and added to the discount rate of the Federal Reserve Banks. At

ANNUAL REPORT OF BOARD OF GOVERNORS

a time like the present, when discount rate charges must fit into the general
rate policy adopted for war financing, this would not be the best procedure.
Consequently the bill provides for a direct reduction of the required ratio.
Such an action would be entirely consistent with the changes in conditions
which have occurred since the ratio was first established by the Congress.
The original purposes of the ratio were ( i ) to assure adequate resources for
the Reserve Banks to meet demands for gold or lawful money by depositors
and note holders, (z) to limit the expansion of Federal Reserve Bank credit,
and (3) to assure the public that there was at least 40 per cent in gold back
of the Federal Reserve notes which were then being introduced for the first
time.
The first purpose is no longer compelling since gold redemption is now not
permitted for domestic use, and gold can be exported only under license.
While the country's aggregate gold reserves are ample to meet any conceivable foreign demand, a reserve ratio high enough to meet possible demands
for both domestic and foreign use is no longer appropriate under present
conditions. The second purpose—limitation of Federal Reserve Bank expansion—is not relevant at a time when expansion by the Reserve Banks is
essential to the needs of war finance. Thirdly, confidence in Federal Reserve
notes is well established, and whether the amount of gold back of the notes
is 40 per cent or Z5 per cent makes no practical difference.
War conditions have caused all belligerents to reduce or abolish central
bank reserve requirements. Mechanical limitations on the ability of a central banking organization to extend credit must inevitably give way in time
of war to the paramount obligation to support the war effort.
A reduction to 2.5 per cent is proposed because it would be sufficient for
all forseeable contingencies. It would enable the Reserve Banks to meet
such additional demands for currency by the public and for reserve balances
by member banks as are likely to occur. The currency supply and the bank
deposit structure could nearly double before the legal minimum would be
reached.
The bill provides for elimination of the distinction made in the present
law between reserves required against notes and against deposits both as to
percentage and as to composition of the reserves. Since the two liabilities
are interconvertible at the option of the owners, the same requirements should
apply to both. The provision in the bill that legal reserves should consist
only of gold certificates would also eliminate controversy as to what constitutes lawful money, and whether the Federal Reserve Banks could, if so
minded, use their own notes (Federal Reserve notes or Federal Reserve Bank
notes) as reserves against their own deposits.
A clean-cut uniform requirement of gold certificate reserves of 2.5 per cent
against both notes and deposits appears to be the best solution of the problem.
In conformity with the proposed reduction of the ratio to 2.5 per cent the
bill decreases proportionately the levels of the ratio at which the imposition
of the different penalty rates provided in the law when reserves are suspended
would be prescribed.

PROPOSED GUARANTEE BY FEDERAL
RESERVE OF LOANS TO BUSINESS
ENTERPRISES
Letter of the Board of Governors of the Federal Reserve System to
Honorable Robert F. Wagner, Chairman of the Committee on Banking and
Currency of the United States Senate.
February 2.6, 1945.
My dear Mr. Chairman:
This refers to your request of February 13, 1945, for an opinion with respect
to the merits of the bill S. 511 4 To amend section 13b of the Federal Reserve
Act, as amended," which was introduced by you on February 12..
This bill would authorize the Federal Reserve Banks to guarantee financing
institutions against loss on loans made to business enterprises or to make
commitments to purchase such loans from financing institutions. The percentage of the loan to be guaranteed would vary with specific cases, but in
no case could it exceed 90 per cent. In other words, the commercial bank
would be required to assume at least 10 per cent of the risk involved in any
loan.
It will be recalled that the Baruch-Hancock Report on War and Postwar
Adjustment Policies of February 19, 1944, recommended that the Federal
Reserve System's authority to make industrial loans or commitments be
expanded and liberalized to provide a permanent source of credit for small
and medium-sized enterprises, such loans to be made in such a way as to
supplement and not to compete with private investment. As you know,
the Wagner-Spence Bill in the last Congress, which was substantially the
same as S. 511, was strongly recommended by Honorable James F. Byrnes,
Director of War Mobilization and Reconversion. In his report to the
Congress dated January 1, 1945, it is stated on page 14:
"Small business has been the backbone of American prosperity.
Its future requires the establishment of a readily available source of
credit. The Wagner-Spence bill has this purpose in view. In revoking the present authority of the Federal Reserve banks to make
loans direct to industry, it substitutes authority for them to guarantee the principal and interest of loans by commercial banks to business enterprise. It, or other forms of legislation to this end, deserves the immediate consideration of the Congress."
The Board believes that in many cases the financial needs of worthy industrial enterprises, particularly during the reconversion period, will represent degrees of credit risk that banks ordinarily should not be expected to
assume. Such needs may be met either by encouraging the private banking
and credit system of the nation to perform the task or by further expansion
in direct lending by the Government. The Board emphatically favors the
former course.
The bill S. 511 would authorize the Federal Reserve Banks to guarantee,
up to 90 per cent, loans made by private banking institutions to business
enterprises, rather than to make direct loans to such enterprises. Thus,
the Federal Reserve Banks would not be in competition with the private
banking system. On the contrary, the bill would encourage a greater flow
of funds from the private banking and credit system into those marginal
credit risks which banks would not assume without a guarantee. All loans

ANNUAL REPORT OF BOARD OF GOVERNORS

would originate with banks or other private financing institutions. Consequently the operation of this plan of financing would be decentralized
throughout the United States, but with the cooperation of the Federal
Reserve Banks and under the general supervision of the Board of Governors
of the Federal Reserve System.
No new appropriation would be required by this bill. An appropriation
made by Congress in 1934, amounting to $139,000,000 would be adequate
to guarantee a total of more than $500,000,000 of loans outstanding at any
one time.
Because of the experience of the Federal Reserve Banks in this field, particularly in connection with the administration of the V-loan program inaugurated under the President's Executive Order No. 91 iz and the more
recent T-loan program authorized by the Contract Settlement Act of 1944,
the guaranteeing, up to 90 per cent, of loans to business enterprises contemplated by this bill could be put into effect without delay and the credits
consummated expeditiously.
In further explanation of the Board's views on this subject, there is enclosed a copy of a letter dated December 18, 1944, which the Board addressed
to Senator James E. Murray, Chairman of the Special Committee to Study
Problems of American Small Business, in reply to a circular letter which was
sent by Senator Murray to individual members of the Board of Governors
asking for expressions of opinion on reconversion credit legislation for small
business.
For the reasons above stated, the Board of Governors favors S. 511 and
hopes that it will be enacted.
Very truly yours,
CHESTER MORRILL,

Secretary

Enclosure
Letter of the Board of Governors to Honorable James E. Murray, Chairman of the Special Committee of the Senate to Study Problems of American
Small Business.
December 18, 1944.
Dear Senator Murray:
In response to your circular letter addressed to the individual members of
the Board of Governors asking for expressions of opinion on reconversion
credit legislation for small business, the Board submits this reply. The ten
specific points set forth in the letter are having further study.
The Board is already on record as favoring the enactment of the WagnerSpence bill (S. 1918) which would authorize the Federal Reserve Banks to
guarantee business loans. It regards this measure as the simplest and most
effective means of aiding reconversion and postwar economic readjustment
by stimulating the greatest possible use of private credit. Although the
liquid resources of business as a whole, including small business, have increased greatly during the war, there will be enterprises that must resort to
credit in order to accomplish their individual reconversion and readjustment.
The credit needs of a substantial number of these can be met by the banks in
the form of regular bank loans. The Board believes, however, that in many
cases the financial needs of worthy enterprises, particularly during the reconversion period, will represent degrees of credit risk that banks ordinarily
should not be expected to assume.
The desired extension of the credit area to cover these situations may be

FEDERAL RESERVE SYSTEM

brought about either by encouraging the private banking and credit system
of the nation to perform the task or by further expansions and innovations
in direct lending by the Government. The Board emphatically favors the
former course.
The Board recognizes that whenever private credit appears to be restricted
or otherwise inadequate, pressure for increased Government lending is inevitable. However, no expansions of Government activity in the field of
credit should be permitted unless and until it is clearly demonstrated that
the private financial system is either unable, or able but unwilling, to do the
job. The supply of funds today in the hands of the private banking system
is abundantly adequate for all demands of reconversion and readjustment of
business. Bankers are actively seeking outlets for increased commercial and
industrial lending. The Board believes that as long as private enterprise
in finance can and will do the work, it should be encouraged and aided in
doing so.
The Wagner-Spence bill embodies principles which the Board considers
sound. It abolishes the direct lending features of Section 13OO of the
Federal Reserve Act and, without additional Congressional appropriation,
extends and makes more workable a loan-guarantee mechanism by which
the private banking system could meet more fully the credit needs of business
and industry.
Arguments in behalf of this bill have already been presented by Chairman
Eccles to the Senate and House Committees on Banking and Currency. The
arguments in favor of the bill, as changed by three limiting amendments
suggested by the Chairman in the hearings, may be summarized as follows:
The bill would encourage a greater flow of funds from the private
banking and credit system into those marginal credit risks which banks
would not assume without a guarantee.
All loans would originate with banks or other private financing institutions. Amounts, terms, collateral and other details of proposed
loans would be worked out between the borrower and the financing
institution to which he applies. Thus the operation of the plan would
be decentralized throughout the United States.
Credit extensions in the marginal area of risk would be encouraged
by guarantees up to 90 per cent of those loans on which banks may desire guarantees. The lender would share in the risk to the extent of 10
per cent or more, which would be a sufficient exposure to prevent lending
institutions from involving the guarantee fund in careless or excessive
credit hazards.
No new appropriation would be required. An appropriation made
by Congress in 1934, amounting to $139,000,000, would be adequate to
guarantee a total of more than $500,000,000 of loans outstanding at
any one time.
The benefits of the guarantee would go primarily to the smaller units
of business and industry. For the small businesses that are regarded by
bankers as marginal or debatable credit risks, the guarantee would be
the decisive factor in establishing their credit. Term lending, in which
the risk factor is generally higher, would be especially encouraged.
The plan would be administered by experienced personnel in the
Federal Reserve Banks who are administering the V-loan and T-loan
programs, a similar credit mechanism. Financing institutions are already familiar with services of the Federal Reserve Banks in this field.
Thus no new personnel, controls over banking, or untried activities or
principles, are involved.

ANNUAL REPORT OF BOARD OF GOVERNORS

Finally, no competition between direct Government lending and the
private credit system would be involved. On the contrary, the guarantee plan would encourage the existing private system to extend credit
which otherwise might be furnished by the Government or not at all.
The trend toward multiplication of Government credit agencies, if continued, may threaten the destruction of the private banking system.
Thus far, legislative emphasis, as is natural, has been on the immediate
and temporary problems of war contract termination and disposal of surplus
Government property. Beyond this is the general need of devoting the
nation's resources to the revival and resumption of civilian operations of
every type, including increased lending activities of the smaller commercial
banks. This need also involves every form of business and industrial financing. On the one hand will be those businesses that have been deprived of
materials, markets and manpower, and must revive. On the other hand are
small war plants whose expanded borrowings have been guaranteed by war
agencies, but who must approach their banks for financing during a period
of uncertain changes with the wartime guarantees discontinued. Only the
Wagner-Spence bill, among all the proposals for legislation that have come
to the attention of the Board, is directed toward meeting this broad and
manifold problem within the framework of the private credit system.
The foregoing are the general views of the Board as it sees the problem at
this time and on the basis of information available to it. The discussion
has been limited to the credit needs of small business, as specified by your
letter. The Board wishes, however, to emphasize its view that the problem
of small business cannot be met satisfactorily by pumping out more and more
credit. Programs in other fields would have greater importance. Chief
among them would be a modification of the corporation income tax giving
substantial and preferential advantages to smaller corporations and to new
ventures. This would encourage the flow of equity capital to such enterprises and correspondingly reduce the need for credit not obtainable from
banks on the usual basis. Another aid to small business would be a provision for better access to industrial research and the use of patents. In the
opinion of the Board, such measures would be much more effective in maintaining the competitive position of small business than any of the current
proposals to provide more credit through some form of governmental assistance.
Should your Committee hold hearings on this matter, the Board would
welcome an opportunity to be heard.
Very truly yours,

CHESTER MORRILL,

Secretary

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
[December 31, 1944]
MARRINER S. ECCLES, of Utah, Chairman
RONALD RANSOM, of Georgia, Vice Chairman
M. S. SZYMCZAK, of Illinois

Term expires
January 31, 1958
January 31, 1956
January 31, 1948

JOHN K. MCKEE, of Ohio
ERNEST G. DRAPER, of Connecticut

January 31, 1946
January 31, 1950

R. M. EVANS, of Virginia

January 31, 1954

LAWRENCE CLAYTON, Assistant to the Chairman

ELLIOTT THURSTON, Special Assistant to the Chairman
CHESTER MORRILL, Secretary

S. R, CARPENTER, Assistant Secretary
BRAY HAMMOND, Assistant Secretary
WALTER WYATT, General Counsel

J. P. DREIBELBIS, General Attorney
GEORGE B. VEST, Assistant General Attorney
E. A. GOLDENWEISER, Director, Division of Research and Statistics
WOODLIEF THOMAS, Assistant Director, Division of Research and Statistics
LEO H. PAULGER, Director, Division of Examinations
C. E. CAGLE, Assistant Director, Division of Examinations
WILLIAM B. POLLARD, Assistant Director, Division of Examinations
EDWARD L. SMEAD, Director, Division of Bank Operations
J. R. VAN FOSSEN, Assistant Director, Division of Bank Operations
J. E. HORBETT, Assistant Director, Division of Bank Operations
CARL E. PARRY, Director, Division of Security Loans
BONNAR BROWN, Assistant Director, Division of Security Loans
ROBERT F. LEONARD, Director, Division of Personnel Administration
LISTON P. BETHEA, Director, Division of Administrative Services
FRED A. NELSON, Assistant Director, Division of Administrative Services
EDWARD L. SMEAD, Administrator, Office of Administrator for War Loans Committee
GARDNER L. BOOTHE, II, Assistant Administrator, Office of Administrator for War Loans Committe,
O. E. FOULK, Fiscal Agent
JOSEPHINE E. LALLY, Deputy Fiscal Agent

FEDERAL OPEN MARKET COMMITTEE
[December 31, 1944]
MEMBERS
MARRINER S. ECCLES, Chairman (Board of Governors)
ALLAN SPROUL, Vice Chairman (Elected by Federal Reserve Bank of New York)
CHESTER C. DAVIS (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas)
ERNEST G. DRAPER (Board of Governors)

R. M. EVANS (Board of Governors)
HUGH LEACH (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond)
JOHN K. MCKEE (Board of Governors)

J. N. PEYTON (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco)
RONALD RANSOM (Board of Governors)

M. S. SZYMCZAK (Board of Governors)
C. S. YOUNG (Elected by Federal Reserve Banks of Cleveland and Chicago)
OFFICERS

EXECUTIVE COMMITTEE

CHESTER MORRILL, Secretary

MARRINER S. ECCLES, Chairman

S. R. CARPENTER, Assistant Secretary

ALLAN SPROUL, Vice Chairman

WALTER WYATT, General Counsel

ERNEST G. DRAPER

J. P. DREIBELBIS, Assistant General Counsel

HUGH LEACH

E. A. GOLDENWEISER, Economist

HENRY H. EDMISTON, Associate Economist
E. A. KINCAID, Associate Economist
JOHN K. LANGUM, Associate Economist

ARTHUR R. UPGREN, Associate Economist
JOHN H. WILLIAMS, Associate Economist

JOHN K. MCKEE

AGENT
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FEDERAL ADVISORY COUNCIL
[December 31, 1944]
OFFICERS
President, EDWARD E. BROWN
Vice President, CHARLES E. SPENCER, J R .
Secretary, WALTER LICHTENSTEIN

EXECUTIVE COMMITTEE
EDWARD E. BROWN, ex officio

CHARLES E. SPENCER, J R . , ex officio

ROBERT V. FLEMING

WILLIAM F. KURTZ

B. G . HUNTINGTON

JOHN C. TRAPHAGEN

MEMBERS
District No. 1—CHARLES E. SPENCER, JR., President, The First National Bank of Boston, Boston,
Massachusetts.
District No. 2.—JOHN C. TRAPHAGEN, President, Bank of New York, New York, New York.
District No. 3—WILLIAM F. KURTZ, President, The Pennsylvania Company for Insurances on
•t. Lives and Granting Annuities, Philadelphia, Pennsylvania.
District No. 4—B. G. HUNTINGTOM, President, The Huntington National Bank of Columbus,
Columbus, Ohio
District No. 5—ROBERT V. FLEMING, President, The Riggs National Bank of Washington, D. C ,
Washington, D. C.
District No. 6—KEEHN W. BERRY, President, Whitney National Bank of New Orleans, New
Orleans, Louisiana.
District No. 7—EDWARD E. BROWN, President, The First National Bank of Chicago, Chicago,
Illinois.
District No. 8—RALPH C. GIFFORD, Chairman, First National Bank, Louisville, Kentucky.
District No. 9—LYMAN E. WAKEFIELD, President, First National Bank of Minneapolis, Minneapolis, Minnesota.
District No. 10—A. E. BRADSHAW, President, National Bank of Tulsa, Tulsa, Oklahoma.
District No. 11—ED. H. WINTON, President, Continental National Bank of Fort Worth, Fort
Worth, Texas.
District No. 12.—GEORGE M. WALLACE, President, Security-First National Bank of Los Angeles,
Los Angeles, California.
NOTE.—In accordance with the requirement of the law that the Federal Advisory Council meet in Washington
at least four times a year, meetings were held in Washington on February 13-14, May 14-15, September 17-18,
and December 3-4, 1944.

SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS
[December 31, 1944]
CHAIRMEN AND DEPUTY CHAIRMEN
Federal Reserve Bank of—

Chairman

Deputy Chairman

Boston

Albert M. Creighton

Henry S. Dcnnison

New York

Beardsley Ruml

William I. Myers

Philadelphia

Thomas B. McCabe

Warren F. Whittier

Cleveland

George C. Brainard

Reynold E. Klages

Richmond

Robert Lassiter

W. G. Wysor

Atlanta

Frank H.Neely

J. F. Porter

Chicago

Simeon E. Leland

W. W. Waymack

St. Louis

Wm. T. Nardin

Douglas W. Brooks

Minneapolis

W. C. Coffey

Roger B. Shepard

Kansas City

Robert B. Caldwell

Robert L. Mehornay

Dallas

Jay Taylor

J. R. Parten

San Francisco

Henry F. Grady

Harry R. Wellman

CONFERENCE OF CHAIRMEN

The Chairmen of the Federal Reserve Banks are organized into a Conference of Chairmen
which meets from time to time to consider matters of common interest, and to consult with
and advise the Board of Governors.
During the first part of the year, Mr. Brainard, Chairman of the Federal Reserve Bank
of Cleveland served as Chairman of the Conference and as Chairman of the Executive Committee of the Conference. The other members of the Executive Committee were Mr.
Creighton, Chairman of the Federal Reserve Bank of Boston, and Mr. Neely, Chairman of
the Federal Reserve Bank of Atlanta.
During the latter part of the year, Mr. Creighton served as Chairman of the Conference
and as Chairman of the Executive Committee of the Conference. The other members of
the Executive Committee were Mr. Leland, Chairman of the Federal Reserve Bank of
Chicago, and Mr. Nardin, Chairman of the Federal Reserve Bank of St- Louis.
CONFERENCE OF PRESIDENTS

The Presidents of the Federal Reserve Banks are organized into a Conference of Presidents
which meets from time to time to consider matters of common interest, and to consult with
and advise the Board of Governors.
During the year Mr. Day, President of the Federal Reserve Bank of San Francisco, served
as Chairman of the Conference, Mr. Sproul, President of the Federal Reserve Bank of New
York, served as Vice Chairman, and Mr. Sienkiewicz, Vice President of the Federal Reserve
Bank of Philadelphia, served as Secretary.

SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, DEC. 31, 1944-Cont.
PRESIDENTS AND VICE PRESIDENTS
Federal Reserve
Bank of—

President
First Vice President

Boston

Ralph E. Flanders
William Willett

E. G. Hult
J. C. Hunteri

Carl B. Pitman
O. A. Schlaikjer

New York. ...

Allan Sproul
L. R. Rounds

J. W. Jones
L. W. Knoke
Walter S. Logan
A. Phelan

J. M. Rice
Robert G. Rouse
John H. Williams
V. Willis

Philadelphia. ..

Alfred H. Williams
Frank J. Drinnen

W. J. Davis
E. C. Hill

C. A. Mcllhenny2
C. A. Sienkiewicz

Cleveland

Ray M. Gidney
Reuben B. Hays

Wm. H. Fletcher
J. W. Kossin
A. H. Laning 2

B. J. Lazar
K. H. MacKenzie
W. F. Taylor

Richmond. . . . .

Hugh Leach
J. S. Walden, Jr.

J. G. Fry
Geo. H. Keesee1

R. W. Mercer
Edw. A. Wayne

Atlanta........

W. S. McLarin, Jr.
Malcolm H. Bryan

V. K. Bowman
L. M. Clark

H. F. Conniff

Chicago.......

C. S. Young
H. P. Preston

Allan M. Black1
Neil B. Dawes
J. H. Dillard
Charles B. Dunn

E. C. Harris
John K. Langum
O. J. Netterstrom
A. L. Olson
Alfred T. Sihler

St. Louis

Chester C. Davis
F. Guy Hitt

O. M. Attebery
Henry H. Edmiston

Wm. E. Peterson
C. M. Stewart

Minneapolis....

J. N. Peyton
O. S. Powell

A. W. Mills1
Otis R. Preston
E. W. Swanson

Sigurd Ueland
A. R. Upgren
Harry I. Ziemer

Kansas City... .

H. G. Leedy
Henry O. Koppang

L. H. Earhart
Raymond W. Hall
C. O. Hardy

Jos. E. Olson
G. H. Pipkin
D. W. Woolley2

Dallas

R. R. Gilbert
W. D. Gentry

E. B. Austin 2
R. B. Coleman
W. J. Evans

W. O. Ford
W. H. Holloway
L. G. Pondrom

San Francisco. .

WTm. A. Day
Ira Clerk

C. E. Earhart
J. M. Leisner1

H. N. Mangels
H. F. Slade

Cashier.

Vice Presidents

Also Cashier.

DIRECTORS OF FEDERAL RESERVE BANKS

Class A and Class B directors are elected by the member banks of the district. Class
C directors are appointed by the Board of Governors of the Federal Reserve System.
The Class A directors are chosen as representatives of the member banks and, as a matter
of practice, are active officers of member banks. The Class B directors may not, under the
law, be officers, directors, or employees of banks. At the time of their election they must
be actively engaged in their district in commerce, agriculture, or some other industrial
pursuit.
The Class C directors may not, under the law, be officers, directors, employees, or stock
holders
of b-anks. They are appointed by the Board of Governors as representatives not of
http://fraser.stlouisfed.org/
any particular group or interest, but of the public interest as a whole.
Federal Reserve Bank of St. Louis

FEDERAL RESERVE SYSTEM

SENIOR OFFICERS AND DIRECTORS OF FEDERAL RESERVE BANKS, Dec. 31, 1944-Cont.
DIRECTORS OF FEDERAL RESERVE BANKS

District No. 1—Boston
Class A:
Allan Forbes
Leon A. Dodge
Allen W. Holmes
Class B.Philip R. Allen
Laurence F. Whittemore
Roy L. Patrick
Class C.Albert M. Creighton
Henry S. Dennison
Henry I. Harriman

Term
Expires
Dec. 31
President, State Street Trust Company, Boston, Mass
1944
President, The First National Bank of Damariscotta, Damariscotta, Maine
1945
President, The Middletown National Bank, Middletown,
Conn
1946
Director, Bird & Son, inc., East Walpole, Mass
1944
Assistant to President, Boston & Maine Railroad, Pembroke,
N. H
1945
President and Director, Rock of Ages Corporation, Burlington, Vermont
1946
Chairman of the Board
1944
President, Dennison Manufacturing Co., Framingham, Mass.. 1945
Director and Vice Chairman, New England Power Association,
Boston, Mass
1946

District No. 2—New York
Class A:
William J. Field
Warren W. Clute, Jr
S. Sloan Colt
Class B:
Vacancy
Carle C. Conway
Donaldson Brown
Class C:
Beardsley Ruml
William I. Myers
Robert D. Calkins

President, Commercial Trust Company of New Jersey, Jersey
City, N. J
1944
President, Glen National Bank of Watkins Glen, Watkins
Glen, N. Y
1945
President, Bankers Trust Company, New York, N. Y
1946
1944
;
Chairman of the Board and President, Continental Can Company, Inc., New York, N. Y
1945
Vice Chairman of the Board, General Motors Corporation,
New York, N. Y
1946
Treasurer, R. H. Macy & Company, Inc., New York, N. Y... 1944
Dean, New York State College of Agriculture, Cornell University, Ithaca, N. Y
.#
1945
Dean, School of Business, Columbia University, New York,
N. Y
1946
Buffalo Branch

Appointed by Federal Reserve Bank:
Reginald B. Wiltse
Robert R Dew
Lewis G. Harriman
Elmer B. Milliman
Appointed by Board of Governors:
Marion B. Folsom
Gilbert A. Prole
Thomas Robins, Jr

Managing Director, Buffalo, N. Y
President, Dunkirk Trust Company, Dunkirk, N. Y
President, Manufacturers and Traders Trust Company,
Buffalo, N. Y
President, Central Trust Company, Rochester, N. Y

1944
1944

Treasurer, Eastman Kodak Company, Rochester, N. Y
Farmer, Batavia, N. Y
President, Hewitt Rubber Corporation, Buffalo, N. Y

1944
1945
1946

1945
1946

District No. 3—Philadelphia
Class A:
Howard A. Loeb
George W. Reily
John B. Henning
Class B:
Vacancy
Ward D. Kerlin
James T. Buckley
Class C:
C. Canby Balderston
Thomas B. McCabe
Warren F. Whittier

Chairman, Tradesmens National Bank and Trust Co., Philadelphia, Pa
1944
President, Harrisburg National Bank, Harrisburg, Pa
1945
President, Wyoming National Bank, Tunkhannock, Pa
1946
1944
Secretary & Treasurer, Camden Forge Company, Camden,
N. J
1945
Chairman, Executive Committee, Philco Corporation, Philadelphia, Pa
1946
Dean, Wharton School of Finance and Commerce, University
of Pennsylvania, Philadelphia, Pa
1944
President, Scott Paper Company, Chester, Pa
1945
Farmer, dairyman and cattle breeder, Chester Springs, Pa
1946

ANNUAL REPORT OF BOARD OF GOVERNORS

District No. 4—Cleveland
Class A:
F. F. Brooks
Ben R. Conner
H. B. McDowell
Class B:
G. D. Crabbs
Thomas E. Millsop
R. P. Wright
Class C:
A. Z. Baker
Reynold E. Klages
Geo. C. Brainard

Term
Expires
Dec. 31
President, First National Bank at Pittsburgh, Pittsburgh, Pa.. 1944
President, The First National Bank of Ada, Ada, Ohio
1945
President, The McDowell National Bank of Sharon, Sharon,
Pa
1946
Chairman of Board, Philip Carey Manufacturing Company,
Cincinnati, Ohio
1944
President, Weirton Steel Company, Weirton, W. Va
1945
Secretary-Treasurer, Reed Manufacturing Company, Erie,
Pa
1946
President and General Manager, The Cleveland Union Stock
Yards Company, Cleveland, Ohio
1944
President, Columbus Auto Parts Company, Columbus, Ohio.. 1945
President, The General Fireproofing Company, Youngstown,
Ohio
1946
Cincinnati Branch

Appointed by Federal Reserve Bank:
J. G. Gutting
Frederick V. Geier
Buckner Woodford
Appointed by Board of Governors:
Frank_ A. Brown
Francis H. Bird

President, The Second National Bank of Cincinnati, Cincinnati, Ohio
1944
President, The Cincinnati Milling Machine Company, Cincinnati, Ohio
1945
Vice President and Cashier, Bourbon-Agricultural Bank and
Trust Company, Paris, Ky
1945
Farmer, Chillicothe, Ohio
:. 1944
Professor of Commerce, College of Engineering and Commerce, University of Cincinnati, Cincinnati, Ohio
1945
Pittsburgh Branch

Appointed by Federal Reserve Bank:
E. B. Harshaw
Archie J. McFarland
Clarance Stanley
Appointed by Board of Governors:
W. C. Arthur
Robert E. Doherty

Vice President and Cashier, Grove City National Bank, Grove
City, Pa
1944
President, Wheeling Steel Corporation, Wheeling, W. Va
1945
President, The Union Trust Company of Pittsburgh, Pittsburgh, Pa
1945
Meadville, Pa
1944
President, Carnegie Institute of Technology, Pittsburgh, Pa... 1945

District No. 5—Richmond
Class A:
John A. Sydenstricker
Charles E. Rieman
James C. Braswell
Class B:
Edwin Malloy
Charles C. Reed
H. L. Rust, Jr
Class C.Charles P. McCormick
W. G. Wysor
Robert Lassiter

Cashier, First National Bank inMarlinton,Marlinton, W. Va.. 1944
President, Western National Bank, Baltimore, Md
1945
Chairman of Board, Planters National Bank & Trust Company,
Rocky Mount, N. C
1946
President & Treasurer, Cheraw Cotton Mills, Inc., Cheraw,
S. C
1944
President, Williams & Reed, Inc., Richmond, Va
1945
President, H. L. Rust Company, Washington, D. C
1946
President,McCormick & Company, Inc., Baltimore, M d . . . . . . . 1944
General Manager, Southern States Cooperative, Inc., Richmond, Va
1945
Chairman, Mooresville Cotton Mills, Mooresville,N. C
1946
Baltimore Branch

Appointed by Federal Reserve Bank:
W. R. Milford
George W. Reed
,
James C. Fenhagen
George M. Moore
Appointed by Board of Governors:
W. Frank Thomas
Joseph D. Baker, Jr
W. Frank Roberts

Managing Director, Baltimore, Md
President, National Marine Bank, Baltimore, Md
Vice Chairman of Board, Baltimore National Bank, Baltimore,
Md
Vice President, Union National Bank, Clarksburg, W. Va

1944
1944
1945
1946

Construction Engineer and Real Estate Management, Westminster, Md
1944
Secretary and Treasurer, The Standard Lime and Stone Co.,
Baltimore, Md
1945
President, Standard Gas Equipment Corporation, Baltimore,
Md
1946

FEDERAL RESERVE SYSTEM

Charlotte Branch
Term
Expires
Dec. 31
Appointed by Federal Reserve Bank:
W. T Clements
J. Gerald Cowan
Angus E. Bird
Allen H . Sims
Appointed by Board of Governors:
Charles L. Creech, Sr
D. W. Watkins
George M. Wright

Managing Director, Charlotte, N.C
Vice President, Wachovia Bank & Trust Company, Asheville,
N. C
Chairman of Board, The Citizens and Southern National Bank
of South Carolina, Charleston, S. C
Executive Vice President and Trust Officer, Citizens National
Bank in Gastonia, Gastonia, N.C

1944
1944
1945
1946

Chairman of Board, B. F . Huntley Furniture Company, Winston-Salem, N . C
1944
Director of Extension,Clemson College, Clemson, S. C
1945
President, Republic Cotton Mills, Great Falls, S.C
1946

District No. 6—Atlanta
Class A:
George J. White
Thomas K. Glenn
W. D. Cook
Class B:
Ernest T. George
J. A. McCrary
Fitzgerald Hall
Class C.Frank H . Neely
J. F . Porter
Rufus C. Harris

President, The First National Bank of Mount Dora, Mount
Dora, Fla
_
1944
Chairman of the Board, Trust Company of Georgia, Atlanta,
Ga
1945
President, First National Bank in Meridian, Meridian, Miss... 1946
President and Chairman, Seaboard Refining Company, Ltd.,
New Orleans, La
1944
Vice President and Treasurer, J. B. McCrary Company, Inc.,
Atlanta, Ga
1945
President, Nashville, Chattenooga & St. Louis Railway, Nashville, Tenn
1946
Executive Vice President and Secretary, Rich's, Inc., Atlanta,
Ga
1944
President and General Manager, Tennessee Farm Bureau
Federation, Columbia, Tenn
1945
President, The Tulane University of Louisiana, New Orleans,
La
1946
B i r m i n g h a m Branch

Appointed by Federal Reserve Bank:
P. L. T. Beavers
Gordon D. Palmer
M. B. Spragins
James G. Hall
Appointed by Board of Governors:
Donald Comer
Win. Howard Smith
Edward L. Norton

Managing Director, Birmingham, Ala
President,The First National Bank of Tuskaloosa, Tuscaloosa,
Ala
President, The First National Bank of Huntsville, Huntsville, Ala
Executive Vice President, The First National Bank of Birmingham, Birmingham, Ala

1944
1944
1945
1946

Chairman of the Board, Avondale Mills, Birmingham, Ala
1944
Planter and cattle raiser, Prattville, Ala
1945
Chairman of the Board, Voice of Alabama, Inc., Birmingham,
Ala
1946
Jacksonville Branch

Appointed by Federal Reserve Bank:
Geo.
S. Vardeman, Jr
G
J . L. Dart
B. C. Teed
J. C. McCrocklin
Appointed by Board of Governors:
Walter J. Matherly
Charles S. Lee
F. D. Jackson

Managing Director, Jacksonville, Fla
President, The Florida National Bank of Jacksonville, Jacksonville, Fla
Executive First Vice President, First National Bank in Palm
Beach, Palm Beach, Fla
President, First National Bank in Tarpon Springs, Tarpon
Springs, Fla

1944
1944
1945
1946

Dean, College of Business Administration, University of
Florida, Gainesville, Fla
1944
Farmer, Oviedo, Fla.
1945
President and General Manager, Jackson Grain Company,
Tampa, Fla
1946
Nashville Branch

Appointed by Federal Reserve Bank:
Joel B. Fort, Jr
B. L. Sadler
Edward Potter, Jr
Leslie R. Driver

Managing Director, Nashville, Tenn
President, First National Bank in Harriman, Harriman, Tenn.
President, Commerce Union Bank, Nashville, Tenn
President, The First National Bank in Bristol, Bristol, Tenn...

1944
1944
1945
1946

72-

ANNUAL REPORT OF BOARD OF GOVERNORS

Appointed by Board of Governors:
Clyde B. Austin
W. E. McEwen
W. Bratten Evans

Term
Expires
Dec. 31
President, Austin Company, Inc., Greeneville, Tenn
1944
Director, County Farm Bureau, Williamsport, Tenn
1945
President, Tennessee Enamel Manufacturing Company,
Nashville, Tenn
1946
New Orleans Branch

Appointed by Federal Reserve Bank:
E. P. Paris
J. F. McRae
T.G.Nicholson
John Legier
Appointed by Board of Governors:
Alexander Fitz-Hugh
John J. Shaffer, Jr
E. F. Billington

Managing Director, New Orleans, La
President, The Merchants National Bank of Mobile, Mobile,
Ala
President, The First National Bank of Jefferson Parish,
Gretna, La
President, National American Bank of New Orleans, New
Orleans, La

1944

President, P. P.Williams Company, Vicksburg, Miss
Farmer, Ellendale, La
Vice President, Soule Steam Feed Works, Meridian, Miss

1944
1945
1946

District No. 7—Chicago
Class A:
Frank D. Williams
Walter J. Cummings
Horace S. French
Class B:
Nicholas H. Noyes
William C. Heath
Clarence W. Avery
Class C.Simeon E. Leland
W. W. Waymack
Paul G. Hoffman

President, First Capital National Bank, Iowa City, Iowa
1944
Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111
1945
President, The Milwaukee Avenue National Bank of Chicago,
Chicago, 111
1946
Vice President in Charge of Finances, Eli Lilly and Company,
Indianapolis, Tnd
1944
President, A. O. Smith Corporation, Milwaukee, Wis
1945
President and Chairman, The Murray Corporation of America,
Detroit, Mich
1946
Chairman, Department of Economics, and Professor of Government Finance, Universitv of Chicago, Chicago, 111
1944
Editor and Vice President, The Register & Tribune, Des
Moines, Iowa
1945
President, The Studebaker Corporation, South Bend, Ind
1946
Detroit Branch

Appointed by Federal Reserve Bank:
Joseph M. Dodge
Rudolph E. Reichert
Walter S. McLucas

President, The Detroit Bank, Detroit, Mich
President, Ann ArborBank, Ann Arbor, Mich
Chairman, The National Bank of Detroit, Detroit, Mich

1944
1944
1945

Appointed by Board of Governors:
L. Whitney Watkins
H. L. Pierson

Farmer, Manchester, Mich
President, Detroit Harvester Co., Detroit, Mich

1944
1945

District No. 8—St. Louis
Sidney Maestre
Max B. Nahm
G. R. Corlis
Class B:
Tohn R. Stanley
A. Wessel Shapleigh
H. H. Tucker
Class C.Douglas W. Brooks
Wm. T. Nardin
Wm. H. Stead

President, Mississippi Valley Trust Company, St. Louis, Mo.. . 1944
Vice President, Citizens National Bank, Bowling Green, Ky... 1945
Cashier, Anna National Bank, Anna, 111
1946
Secretary-Treasurer, Stanley Clothing Company, Evansville,
Ind
1944
President, Shapleigh Hardware Company, St.Louis, Mo
1945
President, Fones Bros. Hardware Company, Little Rock, Ark.. 1946
President, The Newburger Company, Memphis, Tenn
1944
Vice President and General Manager, Pet Milk Company, St.
Louis, Mo
1945
Dean, School of Business and Public Administration, Washington University, St. Louis, Mo
1946
Little Rock Branch

Appointed by Federal Reserve Bank:
A. F. Bailey
Paul R. McCoy
Chas. A. Gordon
W. A. McDonnell

Managing Director, Little Rock, Ark
1944
Chairman, Peoples National Bank, Stuttgart, Ark
1944
Vice President, Simmons National Bank, Pine Bluff, Ark
1945
Vice President, Mercantile-Commerce Bank & Trust Company, St. Louis, Mo
1946
(Resigned effective December 31, 1944)

FEDERAL RESERVE SYSTEM

73
Term
Expires
Dec. 31

Appointed by Board of Governors:
S.M.Brooks
R. E. Short
I. N. Barnett

President, Brooks Advertising Agency, Little Rock, Ark
Farmer, Brinkley, Ark
Manager, Barnett Bros. Mercantile Company, Batesville,
Ark

1944
1945
1946

Louisville Branch
Appointed by Federal Reserve Bank
C. A. Schacht
Wallace M . D a v i s
Lee L. Persise
P h i l E . Chappell
Appointed by Board of Governors:
E. J. O'Brien, Jr
G. O. Boomer
Rosco Stone

Managing Director, Louisville, Ky
1944
Vice President, Citizens Fidelity Bank & Trust Co., Louisville,
Ky
1944
. President, The State Bank of Salem, Salem, Ind
1945
.President, Planters Bank & Trust Company, Hopkinsville,
Ky
1946
. President, E. J. O'Brien & Company, Louisville, Ky
Vice President, The Girdler Corporation, Louisville, Ky
. Farmer, Hickman, Ky

1944
1945
1946

Memphis Branch
Appointed by Federal Reserve Bank:
W. H. Glasgow
Oliver Benton
V.J.Alexander
W. W. Campbell
Appointed by Board of Governors:
J. Holmes Sherard
J. P . Norfleet
Rufus C. Branch

.Managing Director, Memphis, Tenn
. President, National Bank of Commerce, Jackson, Tenn
.President, Union Planters National Bank & Trust Company,
Memphis, Tenn
President, National Bank of Eastern Arkansas, Forrest City,
Ark
President, Jno. II. Sherard & Son, Sherard, Miss
President, Sledge and Norfleet, Memphis, Tenn
Cotton planter and ginner, Pecan Point, Ark

1944
1944
1945
1946
1944
1945
1946

District No. 9—Minneapolis
Class A:
J. R. McKnight...
F. D . McCartney..
S. S. Ford

President, Pierre National Bank, Pierre, S. D
Vice President, First National Bank, Oakes, N . D
President, Northwestern National Bank, Minneapolis, Minn...

1944
1945
1946

Class B:
J. E. O'Connell....
Ray C. Lange
Homer P. Clark. ..

President, Eddy's Bakeries, Inc., Helena, Mont
President, Chippewa Canning Company, Chippewa Falls, Wis..
Chairman, West Publishing Company, St. Paul, Minn

1944
1945
1946

Class C.Roger B. Shepard.
W. C. Coflfey
W. D. Cochran. .. .

President, Finch, Van Slyck & McConville, St. Paul, Minn
President, University of Minnesota, Minneapolis, Minn
W. D. Cochran Freight Lines, Iron Mountain, Mich

1944
1945
1946

Helena Branch
Appointed
R. E.
P. B.
Peter

by Federal Reserve Bank
Towle
McClintock
Pauly

Appointed by Board of Governors:
R. B. Richardson
Malcolm E. Holtz

Managing Director, Helena, Mont
Vice President, Farmers National Bank, Chinook, Mont
President, Deer Lodge Bank & Trust Co., Deer Lodge, Mont.. .

1944
1944
1945

President, Western Life Insurance Co., Helena, Mont
Farmer and stockman, Great Falls, Mont

1944
1945

District No. 10—Kansas City
Class A:
W. L. Bunten
T. A. Dines
M. A. Limbocker..

Vice President and Cashier, Goodland State Bank, Goodland,
Kan
1944
President, United States National Bank, Denver, Colo
1945
President and Chairman, Citizens National Bank, Emporia,
Kan
1946

Class B:
L. C. Hutson
W i l l a r d D . Hosford...
J. M . Bernardin
Class C.Robert L. Mehornay..
Lyle L. Hague
Robert B.Caldwell....

President and General Manager, Chickasha Cotton Oil Company, Chickasha, Okla
1944
Vice President and General Manager, John Deere Plow Company, Omaha, Neb
1945
Lumberman, Kansas City, Mo
1946
President, North-Mehornay Furniture Company, Kansas City,
Mo
'.. 1944
Farmer and stockman, Cherokee, Okla
1945
Caldwell, Downing, Noble and Garrity, Kansas City, Mo
1946

A N N U A L REPORT OF BOARD OF GOVERNORS

Denver Branch
Term
Expires
Dec. 31
Appointed by Federal Reserve Bank:
Harold Kountze
P. K. Alexander
W. C. Kurtz
Vacancy
Appointed by Board of Governors:
J. B. Grant
W. A. Alexander
M. E. Noonen

President, Colorado National Bank, Denver, Colo
1944
Vice President, The First National Bank, Denver, Colo
1945
President and General Manager, Independent Lumber Company, Grand Junction, Colo
1946
1946
Lewis and Grant, Denver, Colo
Vice President and Assistant General Manager, The Denver
Tramway Corporation, Denver, Colo
Sheep rancher, Kremmling, Colo..

1944
1945
1946

Oklahoma City Branch
Appointed by Federal Reserve Bank:

Hugh L. Harrell

A. E. Stephenson
D.M.Tyler
Appointed by Board of Governors:
Neil R. Johnson
Lloyd Noble

Vice President, First National Bank and Trust Company,
Oklahoma City, Okla
1944
Chairman, Central National Bank, Enid, Okla
1945
First Vice President, Dewey Portland Cement Company,
Dewey, Okla
1946
Rancher and farmer, Norman, Okla
President, Noble Drilling Corporation, Tulsa, Okla

1944
1945

Omaha Branch
Appointed by Federal Reserve Bank:
George W. Holmes
T. L. Davis
George A. Bible
Vacancy
Appointed by Board of Governors:
L. E. Hurtz
Walter S. Byrne
John D. Clark

President, First National Bank, Lincoln, Neb
President, First National Bank, Omaha, Neb
President, First National Bank, Rawlins, Wyo

1944
1945
1946
1946

President, Fairmont Creamery Company, Omaha, Neb
General Manager, Metropolitan Utilities District of Omaha,
Omaha, Neb
Dean, College of Business Administration, University of
Nebraska, Lincoln, Neb

1944
1945
1946

District No. 11—Dallas
Class A:
J. E. Woods
Walter P. Napier
Frank Turner
Class B:
E. L. Kurth
J. R. Milam
Geo. A. Hill, Jr
Class C:
Vacancy
Jay Taylor
J. R. Parten

Chairman of Board, Temple National Bank, Temple, Texas..
President, Alamo National Bank, San Antonio, Texas
President, First National Bank, Decatur, Texas

1944
1945
1946

President and General Manager, Angelina County Lumber
Company, Keltys, Texas
President, The Cooper Company, Inc., Waco, Texas
President, Houston Oil Company of Texas, Houston, Texas..

1944
1945
1946

;

Ranching and stockyards, Amarillo, Texas
President, Woodley Petroleum Company, Houston, Texas....

1944
1945
1946

El P a s o Branch
Appointed by Federal Reserve Bank:
J. E. Moore
H. A Jacobs
John K Hicks
R. W. McAfee
Appointed by Board of Governors:
Frank M. Hayner
R. E. Sherman
Jack B. Martin

Vice President, First National Bank, Roswell, N . M
Vice President, El Paso National Bank, El Paso, Texas
President and Manager, Hicks-Hayward Company, El Paso,
Texas
President, State National Bank, El Paso, Texas
President, Las Cruces Lumber Company, Las Cruces.N.M
Leavell and Sherman, Realtors, El Paso, Texas
President, Arizona Ice and Cold Storage Company, Tucson,
Ariz

1944
1945
1945
1946
1944
1945
1946

Houston Branch
Appointed by Federal Reserve Bank:
John W. McCullough
B. C. Roberts
James A. Elkins
W. N . Greer
Appointed by Board of Governors:
Henry Renfert
J. S. Abercrombie
George A. Slaughter
for FRASER

Digitized

President, Hutchings-Sealy National Bank, Galveston, Texas.
President, Wharton Bank & Trust Co., Wharton, Texas
President, City National Bank, Houston, Texas
President, Citizens State Bank, Houston, Texas

1944
1945
1945
1946

Cotton shipper, Galveston, Texas
President, J. S. Abercrombie Company, Houston, Texas
Farming, Wharton, Texas
:

1944
1945
1946

F E D E R A L RESERVE

SYSTEM

San Antonio Branch
Term
Expires
Dec. 31
Appointed by Federal Reserve Bank:
T. C. Frost, Jr
E. J. Miller
R. D. Barclay
n
J. A. Walker
•TT

Appointed by Board of Governors:
J. M. Odom
George W. Stocking
Holman M. Cartwright

Vice President, Frost National Bank, San Antonio, Texas.. . 1944
President, South Texas National Bank, San Antonio, Texas, . 1945
President, National Bank of Commerce, San Antonio, T e x a s . . . 1945
.
" 1
^ 1 *O * _
x. _ 1 T>
1_
.Executive_ Vice
President,
Del
Rio National
Bank,
DelZ —.Rio,
Texas
1946
T^

i.'

IT!

"n.

T"v

XT_

T^^l

"T>

General Contractor, Austin, Texas
Professor of Economics, University of Texas, Austin, Texas...
Livestock and farming, Twin Oaks Ranch, Dinero, Texas

1944
1945
1946

District No. 12—San Francisco
Class A:
Reno Odlin
Carroll F . Byrd
C. K. Mclntosh
Class B:
St. George Holden.
Reese H. Taylor....
Elmer H. Cox
Class C.Henry F. Grady
Harry R. Wellman.
Brayton Wilbur

.President, Puget Sound National Bank of Tacoma, Tacoma,
Wash
1944
. Chairman and Executive Vice President, The First National
Bank of Willows, Willows, Calif
1945
.Chairman, The Bank of California, N . A., San Francisco,
Calif
1946
. St. George Holden Realty Company, San Francisco, Calif
.President, Union Oil Company of California, Los Angeles,
Calif
. President, Columbia Timber Company, San Francisco, Calif...
.President, American President Lines, Ltd., San Francisco,
Calif
.Director, Giannini Foundation of Agricultural Economics,
University of California, Berkeley, Calif
. President, Wilbur-Ellis Company, San Francisco, Calif

1944
1945
1946

Los Angeles Branch
Appointed by Federal Reserve Bank:
W. N . Ambrose
Herbert D. Ivey. ;
F. E. Snedecor
Appointed by Board of Governors:
C. E.Myers
Y. Frank Freeman

.Managing Director, Los Angeles, Calif
1944
.President, Citizens National Trust & Savings Bank of Los
Angeles, Los Angeles, Calif
1944
. President, The First National Bank of Corona, Corona, Calif.. 1945
.Agriculturist, Covina, Calif
Vice President, Paramount Pictures, Inc., Hollywood, Calif...

1944
1945

Portland Branch
Appointed by Federal Reserve Bank:
D. L. Davis
William C. Christensen
Paul S. Dick.
Appointed by Board of Governors:
William H. Steen
George T. Gerlinger

.managing Director, Portland, Ore
.President, The Commercial National Bank of Hillsboro, Hillsboro, Ore
.President, The United States National Bank of Portland,
Portland, Ore

1944

.Livestock and farming, Milton, Ore
. President, Willamette Valley Lumber Co., Dallas, Ore

1944
1945

Salt Lake City B r a n c h
Appointed by Federal Reserve Bank:
W. L. Partner
Orval W. Adams
Frederick P . Champ
Appointed by Board of Governors:
R. C. Rich
Henry A. Dixon

. .Managing Director, Salt Lake City, Utah
1944
. .Executive Vice President, T h e Utah State N a t i o n a l Bank of
Salt Lake City, Salt Lake City,Utah
1944
. .President, Cache Valley Banking Company, Logan, Utah
1945
. .Livestock and farming, Burley, Idaho
. .President, Weber College, Ogden, Utah

1944
1945

Seattle B r a n c h
Appointed by Federal Reserve Bank:
C.R.Shaw
Fred. L. Stan ton
Andrew Price
Appointed by Board of Governors:
Fred Nelsen
Charles F . Larrabec

. .Managing Director, Seattle, Wash
1944.
. .President, The Washington T r u s t Company, Spokane, W a s h . . . 1944
. .President, T h e National Bank of Commerce of Seattle, Seattle,
Wash
1945
. Farmer and dairyman, Ren ton, Wash
.President, Roslyn-Cascade Coal Company,
Wash

1944
Bellingham,
1945

<7\

STATEMENT OF CONDITION OF ALL FEDERAL RESERVE BANKS COMBINED AT END OF 1943 AND 1944 AND OF EACH FEDERAL RESERVE BANK
AT END OF 1944
[In thousands of dollars]
Item

Total
1943

Total
1944

ASSETS
19,532,580 17,850,365
Gold certificates
233,671
594,126
Redemption fund—Federal Reserve notes..
329,822
242,189
Other cash
Total reserves
Discounts and advances
Industrial loans
U. S. Government securities:
Bills
Certificates
Notes
Bonds

20,096,073 18,686,680
5,255
10,134

79,825
3,751

6,768,268 11,147,918
2,467,300 4,886,640
677,900 1,568,221
1,629,479 1,243,426

PhilaBoston New York delphia

Cleveland

Richmond

San
Francisco

890,388 ,236,811
38,521
97,907
19,481
29,840

619,419 345,553
32,783 14,820
5,933
13,473

649,877
25,779
14,151

527,145 2',388,208
17,755
69,204
9,434
21,993

937,147 5,313,259 1,005,844 1,391,697

970,258

948,390 3,364,558

665,675 366,306

689,807

554,334 2,479,405

245
201

77,775
12

832,508 2,259,370
233,390 1,622,723
74,900 520,764
59,387 412,

308

650
126

787,511 1,258,178
295,001 284,067
91,164
94,670
72,283
75,063

764,847
255,244
81,913
64,948

505
2,570

450
25
714,028 1,453,730
171,197 906,499
54,940 290,914
43,561 230,663

459,871 326,202
232,353 88,636
74,567 28,444
59,124 22,553

527,505
188,719
60,565
48,021

200
488

461,372 1,302,796
133,449 475,362
42,827 152,553
33,957 120,958

983,726 2,881,806

825,915 465,835

824,810

671,605 2,051,669

983,747 2,881,806
17

825,915 465,835

825,285
4

671,805 2,052,157
11

12,160
119,603
1,611
2,471

108,109
2,116
3,058

3,913
44,130
1,252
1,274

5,214
119,635
2,667
2,591

14,752
361,579
2,879
10,154

8,426

5,802
80,740
901
1,787

20,532
232,442
1,938
6,044

33,954,566 40,268,611 2,329,765 10,819,655 2,425,930 3,384,517 2,355,892 2,067,986 6,635,745 1,613,303 882,713 1,645,203 1,315,373 4,792,529

After deducting $87,000 participations of other Federal Reserve Banks.

Dallas

905,275
49,204
15,779

11,558,336 18,929,781 1,200,631 4,893,552 1,255,320 1,706,000 1 ,167,728
Total loans and securities
149
6
136
136
12
Due from foreign banks
10
12
Federal Reserve notes of other Federal
112,514
6,072
10,539
90,598
17,759
4,042
Reserve Banks
3,303
2,113,044 2,448,145
184,062
569,682 153,977 272,593 201,593
Uncollected items
4,101
35,205
2,852
34,278
1,610
8,894
3,457
Bank premises
61,174
4,042
2,916
57,077
3,002
16,460
3,278
Other assets

Kansas
Chicago St. Louis Minneapolis
City

945/229 1[,314,819
42,799
57,694
17,816
19,184

878,238 5,149,403
40,929
106,731
17,980
57,125

Total U. S. Government securities
(including guaranteed securities)... 11,542,947 18,846,205 1,200,185 4,815,765 1,252,245 1,705,692 1,166,952

Total assets

Atlanta

3
w
o

u
0

3
2

LIABILITIES
Federal
Reserve notes in actual circulation1
16,906,359 21,731,017 1,366,544 4,851,017 1,427,509 1,893,593 1,487,766 1,276,563 3,978,835
Deposits:
Member bank—reserve account
U. S. Treasurer—general account
Foreign
Other deposits

930,849

475,794

796,543

546,527 2,699,477
642,981 1,705,543
12,085
28,482
33,524 90,316
57,528
3,721

12,885,984 14,372,899
578,617
440,487
1,360,488 1,203,703
393,881
355,936

677,659 4,554,844
31,269 2 175,050
83,042 466,212
4,730 287,54"

710,778 1,128,014
28,722
46,017
106,353 102,885
4,578
7,662

636,754
23,385
46,241
2,324

628,914 2!, 169,950 528,95!
27,827
9,566
15,916
36,992 143,346
35,836
4,802
2,850
11,790

317,789
15,877
25,432
2,109

670,715
26,291
33,524
4,240

15,181,025 16,410,970
Total deposits
Deferred availability items
1,432,303 1,633,226
Other liabilities including accrued dividends
5,589
7,071

796,700 5,483,653
133,586 319,639

850,431 1,284,578
105,809 160,573

708,704
136,942

678,322 2,345,925
94,140 245,947

361,207
32,597

734,770
97,541

Total liabilities
CAPITAL ACCOUNTS
Capital paid in
Surplus (Section 7)
Surplus (Section 13b)
Other capital accounts
Total liabilities and capital accounts
Commitments to make industrial loans

76:

1,139

614

827

396

373

927

154,104
188,097
26,965
60,124

162,531
228,153
27,165
68,478

10,053
15,239
2,'
4,000

59,281
84,903
7,143
12, r-

33,954,566 40,268,611 2,329,765 10,819,655
9,270

4,165

Collateral held by agent for notes issued to
banks:
Gold certificates on hand and due from
XL S. Treasury
13,266,
,298,000
Eligible paper
4,990
79,625
U. S. securities
4,488,690 11 ,534,902

12,227
19,872
4,468
5,000

16,339
19,071
1,007
8,529

6,517
7,813
3,290
4,464

5,851
7,936
762
4,039

19,599
33,201
1,429
9,882

5,142
7,048
527
3,872

,384,517 2,355,892 2,067,986 6,635,745 1,613,303
50

415

610,000 3,020,000 623,000 812,000
77,775;
245
505
810,000 2,000,000 850,000 1,150,000

615,000
650
950,000

229

1,881,869
692
^ 2 0 7 173,143
703
279
558

869,827 1,629,133 1,299,603 4,755,192
3,501
4,950
1,073
3,362

5,237
6,196
1,137
3,500

605,000 2,200,000

5,238
6,025
1,307
3,200

13,546
15,899
2,142
5,750

882,713 1,645,203 1,315,373 4,792,529

597

971,228
40,379

486,557
10,763

822,824
26,281

586,551 ,834,012
40,029 134,535

930,849

475,794

796,543

546,527 2,699,477

375,000

195,000

320,000 249, 000 1,674,000
450
525,000 '345,000 1,'300,'000

750,000 1,900,'000 '654,902 '300,000

17,759,680 22,912,527 1,420,245 5,097,775 1,473,505 1,962,000 1,565,650 1,355,000 4,100,000 1,029,902

Includes Federal Reserve notes held by the U. S. Treasury or by a Federal Reserve Bank other than the issuing bank.
2
After deducting $735,225,000 participations of other Federal Reserve Banks.

263

33,525,276 39,782,284 2,297,593 10,655,448 2,384,363 3,339,571 2,333,808 2,049,398 6,571,634 1,596,714

FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes:
Issued to Federal Reserve Bank by- 17,512,088 22,507,705 1,414,389 5,020,53811,472,713 1,958,442 ,536,494 1,335,337 4,068,615
Federal Reserve agent
47,845
605,729
776, "
169,521
45,204
48,728
64,849
89,7
58,774
Held by Federal Reserve Bank
16,906,359 21,731,017 1,366,544 4,851,017 1,427,509 1,893,593 1,487,766 1,276,563 3,978,835
In actual circulation1

Total collateral held...

592,500
73,102

495,000

845,450

594,000 2,974,000

FEDERAL RESERVE SYSTEM
BOUNDARIES OF FEDERAL RESERVE DISTRICTS
AND THEIR BRANCH TERRITORIES

o
w
o
&
a
o
o
o

I BOUNDARIES OF FEDERAL RESERVE DISTRICTS
1

BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
FEDERAL RESERVE BANK CITIES
FEDERAL RESERVE BRANCH CITIES
FEDERAL RESERVE BANK AGENCY

JANUARY 2, 1943
BOARD OF GOVERNORS Of THE. FLOCRAL RtSCRVE.

SfSTlU

NOTE.—There has been no change in district or branch territory boundaries since the publication of the description in the Annual Report
of the Board of Governors for 1942, pp. 138-145. The Agency of the Federal Reserve Bank of Atlanta, located in Savannah, Georgia, was discontinued on Jan. 31, 1945.

INDEX
Page
Absorption of exchange charges
15
Statement of Marriner S. Eccles before Senate Banking and Currency Committee
15
Amendments t o Federal Reserve A c t : (See Legislation)
Assets, accumulation of liquid
6
Assets and liabilities of Federal Reserve Banks
75
Audit of accounts of Board of Governors
37
Bank holding company voting permits authorized
31
Bank premises, purchase of property during year
30
Banking developments during year
8
Banks:
Changes in number of offices
2.6
Number of, b y States
2.2.
Number of par and nonpar banking offices by States
2.3
Par and nonpar, summary of
2.7
Bethea, Liston P . , appointed Director of Division of Administrative Services
35
Board of Governors:
Audit of accounts for year
37
Division of Administrative Services, creation of
35
Expenditures for year
36
Members:
Eccles, Marriner S.:
Attendance as delegate at United Nations Monetary and Financial Conference. . 43
Redesignated Chairman for four years
35
Redesignated for term of fourteen years
35
Statement on S. 1642. at hearings before Senate Banking and Currency Committee
15
List of
6y
Ransom, Ronald, redesignated Vice Chairman for term of four years.
35
Officers
65
Policy actions: (See Policy actions)
Receipts and disbursements for year
36
Regulations: (See Regulations)
Research and advisory services
34
Staff: (See Staff of Board of Governors)
Bonds: (See Government securities)
Borrowings by banks
12.
Branch banks:
Domestic, changes during year
2.6
Federal Reserve System:
Building operations of
30
Charlotte, property purchased during year
36
Directors, list of
69
Detroit, purchase of property authorized
30
Examination of
32.
Los Angeles, property purchased during year
30
Memphis, property purchased during year
30
Foreign, applications approved during year
33
Number or
2.6
Brooks, Douglas W., appointed Deputy Chairman at St. Louis
30
Brown, Bonnar, appointed Assistant Director of Division of Security Loans
35
Building operations of Federal Reserve Banks and branches
30
Capital:
Accounts
2.5
Federal Reserve Bank
77
Chairmen of Federal Reserve Banks:
Designation for year
30
Executive Committee
67
List of
6y
Charts:
Deposits of par and nonpar banks
2.1
Liquid asset holdings
7
Number of par and nonpar banking offices
2.0
Ownership of United States Government securities
3

INDEX

Clearing and collection:
Absorption of exchange charges
Par list, number of banks on list and number not on list
Commitment fees, loans under Regulation V, entry for policy record
Committees:
Executive, of Conference of Chairmen
Executive, of Federal Advisory Council
Federal Open Market Committee: (See Federal Open Market Committee)
Condition statement of Federal Reserve Banks
Congress, reports by Board on proposed legislation
Consumer credit:
Amendments to Regulation W
Discussion of
Consumption of goods during year
Credit developments during year
Currency, expansion of
Deposits:
Commercial banks classified according to Federal Reserve par list status
Growth of
Ownership of
Directors:
Federal Reserve Banks:
Brooks, Douglas W., appointed Deputy Chairman at St. Louis
List of
Parten, J. R., appointed Class C director and Deputy Chairman at Dallas
Stead, William H., appointed Class C at St. Louis
Wellman, Harry R., appointed Deputy Chairman at San Francisco
Wilbur, Bray ton, appointed Class C at San Francisco
Federal Reserve Branch Banks:
Dixon, Henry A., appointed at Salt Lake City Branch
Evans, W. Bratten, appointed at Nashville Branch
Holtz, Malcolm E., appointed at Helena Branch
List of
Robins, Thomas, Jr., appointed at Buffalo Branch
Slaughter, George A., appointed at Houston Branch
Smith, William Howard, appointed at Birmingham Branch
Stone, Rosco, appointed at Louisville Branch
Dividends, Federal Reserve Banks
Dixon, Henry A., appointed director at Salt Lake City Branch
Earnings and expenses of Federal Reserve Banks
Earnings of banks
Eccles, Marriner S.:
Attendance as delegate at United Nations Monetary and Financial Conference
Reappointed member of Board of Governors for term of fourteen years
Redesignated Chairman of Board of Governors for four years
Statement on S. 1642. at hearings before Senate Banking and Currency Committee
Economic activity during year
Employees:
Board of Governors
Federal Reserve Banks
Evans, W. Bratten, appointed director at Nashville Branch
Examinations:
Federal Reserve Banks
State member banks
Expenses:
Board of Governors
Federal Government
Federal Reserve Banks
Federal Advisory Council, members and officers
Federal Open Market Committee:
Members and officers
Policy actions: (See Policy actions)
Federal Reserve Act, reports on bills introduced in Congress
Federal Reserve Bank of Atlanta:
Property purchased during year
Federal Reserve Bank of Boston:
Property purchased during year

Page
15
2.3
46
67
66
76
38
38
13
5
8
10
2.2.
8
9
30
69
30, 31
31
30
31
31
31
31
69
31
31
31
31
2.9
31
2.9
2.5
43
35
35
15
4
35
31
31
31
32.
36
1
2.9
66
65
38
30
30

INDEX

Federal Reserve Bank of Boston—Continued
Page
Staff:
Flanders, Ralph E., appointment as President
31
Paddock, William W., retirement as President
31
Federal Reserve Bank of Cleveland:
Staff:
Fleming, Matthew J., retirement as President
32.
Gidney, R a y M . , appointment as President
31
Federal Reserve Bank of Dallas:
Staff:
Gentry, W . D . , appointment as First Vice President
3Z
Stroud, E . B . , resignation as First Vice President and General Counsel
32.
Federal Reserve Bank of N e w Y o r k :
Foreign transactions of
2.8
Staff:
Gidney, R a y M . , appointment as President of Federal Reserve Bank of Cleveland.. 32.
Terms upon w h i c h i t will transact business w i t h brokers and dealers in Government
securities for t h e System open market account
48
Federal Reserve Bank of R i c h m o n d :
Audit of accounts of Board
38
Federal Reserve Bank of St. Louis:
Property purchased during year
30
Federal Reserve Bank of San Francisco:
Property purchased during year
30
Federal Reserve Banks:
Assessment for expenses of Board of Governors
36
Branches:
Building operations of
30
Directors, list of
69
Examination of
31
Building operations during year
30
Chairmen:
Designation for year
30
List of
67
Deputy Chairmen:
Changes during year
30
List of
67
Directors: (See directors)
Dividends paid
2.9
Earnings and expenses for 1944
2.9
Earnings on loans and securities
30
Employees, number of
32.
Examination of
32.
Fiscal agency operations
2.7
Loss sharing agreement, expansion of
30
Officers, list of
68
Officers and employees, number of
32.
Operations of, volume
2.7
Presidents, list of
68
Reserve ratio
12.
Retirement system
36
Statement of condition
76
Vice presidents, list of
70
Volume of operations
2.-/
Federal Reserve districts, map showing outline
78
Federal Reserve notes:
Renewal of authority to pledge United States Government obligations as collateral for,
statement on bill S. 510
56
Federal Reserve System
Map of
78
Membership, changes in
,
2.6
Fiduciary powers:
National banks granted authority to exercise
33
Financing the war
1
Fiscal agency operations of Federal Reserve Banks
2.7
Flanders, Ralph E., appointment as President of Federal Reserve Bank of Boston
31
Fleming, Matthew J., retirement as President of Federal Reserve Bank of Cleveland
32.

82.

INDEX

Page
Foreign banking corporations :
Applications for branches approved during year
33
Foreign banks and bankers:
Relations w i t h , revision of Regulation N
38
Foreign branches of member banks and foreign banking corporations
33
Foreign trade
24
Foreign transactions of Federal Reserve Bank of N e w York
28
G e n t r y , W. D . , appointment as First Vice President of Federal Reserve Bank of Dallas
32.
Gidney, Ray M . , appointment as President of Federal Reserve Bank of Cleveland
32.
Government securities:
Classification of holdings
2.
Earnings of Federal Reserve Banks on
30
G r o w t h and composition of
'
10
Policy as to distribution
2.
Purchase directly from United States by Federal Reserve Banks
38
Renewal of a u t h o r i t y to pledge as collateral for Federal Reserve notes, statement on
S. 510
56
Resolutions of Federal Open M a r k e t Committee authorizing transactions in
52.
Yields on
4
Guarantee charges and rates under Regulation V
46
H a m m o n d , Bray, appointed Assistant Secretary of Board
35
Hearings:
S. 510, statement submitted to Senate and House Banking and Currency Committees. . . .
56
H o l t z , Malcolm E., appointed director at Helena Branch
31
Income, national, and its distribution
4
International bank for reconstruction and development, discussion of
2.4
International monetary fund, discussion of
24
International trade and finance
24
Legislation:
Bank holding companies, to prevent creation of new or further expansion of old
33
Contract Settlement Act of 1944
37
Purchase of Government obligations direct from United States
38
Reports to Congress on bills
38
5.510, reduction in reserve ratio and renewal of authority to pledge United States Government obligations as collateral for Federal Reserve notes, statement to Banking and
Currency Committees on
56
5.511, proposed guarantee by Federal Reserve of loans to business enterprises, letter to
Senator Wagner
61
Loans:
Business enterprises, proposed guarantee by Federal Reserve, letter to Senator Wagner on. 61
Commercial banks, g r o w t h of
11
Earnings of Federal Reserve Banks on
30
Industrial under Regulation V
:
13
T loans, extent of
14
1944 V loans, amount of
14
Loss sharing agreement of Federal Reserve Banks, expansion of
30
M a p of Federal Reserve districts
78
Member b a n k s :
Increase during year
2.6
Number of
2.2
M u r r a y , Senator James E., reconversion credit legislation for small business, reply to letter on. 62
National banks:
Trust powers of
33
Nelson, Fred A., appointed Assistant Director of Division of Administrative Services
35
Nonmember b a n k s :
Number of
2.2
Par list, number of banks on list and number n o t on list
13
Open market account: QSee Policy actions, Federal Open M a r k e t Committee)
Open market operations, objectives of
3
Paddock, William W., retirement as President of Federal Reserve Bank of Boston
31
Par list:
Number of banks on list and number not on list
2.3
Summary of banks on
2.7
Pay roll savings plan, amount of bonds purchased under
2
Parten, J. R., appointed Class C director and Deputy Chairman at Dallas
30

INDEX

Page
Policy actions:
Board of Governors:
Attendance of Chairman Eccles as a delegate at the United Nations Monetary and
Financial Conference
43
Guarantee and commitment fees and rates on loans under Regulation V
46
Regulation A, Discounts for and Advances to Member Banks by Federal Reserve
Banks, amendment to
46
Regulation V, Financing of War Production and War Contract Termination, revision of
44
Regulation W, Consumer Credit, amendments to
41, 43, 44, 47
Federal Open Market Committee:
Authority to effect transactions in System account:
Meeting of March 1
52.
Meeting of May 4
53
Meeting of September 2.1
54
Meeting of December 11
55
Purchase of Treasury bills at posted discount rates
$7.
Purchase of Treasury bills for System account
48
Terms upon which Federal Reserve Bank of New York will transact business with
brokers and dealers in Government securities for the System open market account
48
Presidents of Federal Reserve Banks, list of
68
Prices, changes during year
5
Production of goods during year
5
Ransom, Ronald, redesignated Vice Chairman of Board of Governors for term of four years. . . 35
Regulations, Board of Governors:
A, Discounts for and Advances to Member Banks by Federal Reserve Banks:
Amendment to
39
Policy record
46
N , Relations by Federal Reserve Banks with Foreign Banks and Bankers, revision of. . . . 38
V, Financing of War Production and War Contract Termination:
Loans to industry, discussion of
13
Revision of
39
Policy record
44
W, Consumer Credit:
Amendments to
38
Policy record
42., 43, 44, 47
Effect of
13
Reports to Congress on bills
38
Research and advisory services
34
Reserve position of banks
11
Reserve ratio of Federal Reserve Banks
12.
Reserves, reduction in, statement on S.510
56
Retirement system, new plan put into effect for Board's employees
36
Robins, Thomas, Jr., appointed director at Buffalo Branch
31
Savings, classification or.
6
Slaughter, George A., appointed director at Houston Branch
31
Smith, William Howard, appointed director at Birmingham Branch
31
Staff of Board of Governors:
Bethea, Liston P., appointed Director of Division of Administrative Services
35
Brown, Bonnar, appointed Assistant Director of Division of Security Loans
35
Hammond, Bray, appointed Assistant Secretary
35
Nelson, Fred A., appointed Assistant Director of Division of Administrative Services.... 35
Number of employees
35
Retirement System, new plan put into effect for
36
Wingfield, B. Magruder, resignation as Assistant General Attorney
36
State member banks:
Examination of
32.
Increase in membership during year
2.6
Stead, William H., appointed Class C director at St. Louis
31
Stone, Rosco, appointed director at Louisville Branch.. .t
31
Stroud, E. B., resignation as First Vice President and General Counsel of Federal Reserve
Bank of Dallas
32.
Surplus of Federal Reserve Banks
77
Termination of war contracts, financing of
37

INDEX

Page
Treasury bills and notes outstanding
11
Treasury receipts during year
2.
Trust powers of national banks
33
Voting permits to bank holding companies authorized during year
yi.
Wagner, Senator Robert F., letter on proposed guarantee by Federal Reserve of loans to
business enterprises
61
War finance, summary
1
War loan drives, summary of sales for three during year
2.
War loans, revision of Regulation V
39
Wellman, Harry R., appointed Deputy Chairman at San Francisco
30
Wilbur, Bray ton, appointed Class C director at San Francisco
31
Wingfield, B. Magruder, resignation as Assistant General Attorney
36