Full text of Annual Report of the Board of Governors of the Federal Reserve System : 1946

View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

THIRTY-THIRD

ANNUAL RE
0/ the

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM

COVERING OPERATIONS FOR
THE YEAR

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

Washington, June 17, 1947.
T H E 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-third Annual Report, prepared by direction of the Board of Governors of the Federal Reserve System,
covering operations during the calendar year 1946.
Yours respectfully,
M. S. EcCLES, Chairman.

CONTENTS

TEXT OF REPORT
Page

Introduction
Monetary Situation in 1946
Postwar Monetary Policy
Legislative Proposals
Government Finance in Transition
Money Rates and Bond Yields
Bank Credit during Reconversion
Consumer Credit
Stock Market Credit
Slackened Growth in Liquid Assets
Demand, Production, and Prices
International Trade and Finance
Changes in Regulations of the Board of Governors
Consumer credit
Margin requirements for purchasing securities
Acceptances by member banks
Administrative procedure rules
Litigation
Injunction under Regulation W
Conviction for violating injunction
Suit regarding condition of membership
Suit regarding removal of bank directors
Legislation
Purchase of Government obligations by Federal Reserve
Banks
Limitation on claims connected with Government checks. .
Farm tenant loans
Cessation of hostilities
Banking Operations and Structure
Bank earnings and earning assets
Capital accounts
Changes in number of banking offices
Increase in Federal Reserve membership
Par and nonpar banks
Check routing symbols

i
1
4
7
11
14
16
19
21
22
25
35
42
42
42
42
43
43
43
43
43
44
44
44
45
45
45
45
45
47
49
50
50
51
in

Page

Bank Supervision by the Federal Reserve System
Examination of Federal Reserve Banks
Examination of State member banks
Bank holding companies
'
Trust powers of national banks
Acceptance powers of member banks
Foreign branches and banking corporations
Reserve Bank Operations
Volume of operations
Earnings and expenses
Foreign transactions
Bank premises
Reserve Bank Personnel
Chairmen and Deputy Chairmen
Directors
Changes in Presidents and First Vice Presidents
Staff
Board of Governors—Staff and Expenditures
Appointment of Board member
Staff
Change in Board's organization
Expenditures
Research and Advisory Services
Publications and Releases
Federal Reserve Meetings

51
51
51
^2
52
53
53
54
54
55
56
57
57
57
58
60
61
61
61
61
62
63
64
66
67

TABLES
1. Statement of Condition of the Federal Reserve Banks (In
Detail), Dec. 31, 1946
2. Statement of Condition of Each Federal Reserve Bank, End
of 1946 and 1945
3. Holdings of United States Government Securities by Federal
Reserve Banks, End of December 1944, 194S, and 1946. .
4. Holdings of Special Short-Term Treasury Certificates by the
Federal Reserve Banks, 1942-46.
5. Volume of Operations in Principal Departments of Federal
Reserve Banks, 1942-46
6. Earnings and Expenses of Federal Reserve Banks during 1946.
7. Current Earnings, Current Expenses, and Net Earnings of
Federal Reserve Banks and Disposition of Net Earnings,
1914-46
8. Bank Premises of Federal Reserve Banks and Branches,
Dec. 31, 1946
9. Number and Salaries of Officers and Employees oi Federal
Reserve Banks, Dec. 31, 1946
IV

70-71
72—75
76
77
77
78-79

80-81
82
83

Page

10. Federal Reserve Bank Discount, Interest, and Commitment
Rates, and Buying Rates on Bills (in effect Dec. 31, 1946). .
11. Member Banks Reserve Requirements
ia. Maximum Rates on Time Deposits
13. Margin Requirements
14. Minimum Down Payments and Maximum Maturities on
Consumer Credit Subject to Regulation W
15. Analysis of Changes in Number of Banking Offices during 1946.
16. Number of Banking Offices on Federal Reserve Par List and
Not on Par List, by Federal Reserve Districts and States,
Dec. 31, 1946

84
85
85
85
86
87

APPENDIX
Record of Policy Actions—Board of Governors
Record of Policy Actions—Federal Open Market Committee. . . .
United States v. Motor City Credit Jewelry Company, Inc
In Re: Consumers Home Equipment Company
Peoples Bank v. Eccles, et al
Board of Governors of the Federal Reserve System v. Agnew,
et al
Board of Governors of the Federal Reserve System
Federal Open Market Committee
Federal Advisory Council
Directors and Senior Officers of Federal Reserve Banks
Map of Federal Reserve Districts
Index

90-100
101-104
105-108
109-110
111-113
114-118
119
119
] 20
121-131
132
133-14 2

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

During 1946 inflationary developments gained impetus in the United
States. In the last half of the year, after the abandonment of most of the
stabilization controls, commodity prices in general rose more sharply than in
any period of similar length since 1917- Many prices were close to or
above previous peaks. Unusually wide variations in rates of increase for different commodities and services were creating serious distortions in the price
structure. As the year ended it remained to be seen how far inflationary
influences had spent their force or whether they might lead to further price
rises.
This inflationary aftermath of wartime monetary expansion and shortages
of goods occurred notwithstanding rapid reconversion to peacetime production and a lessening of the inflationary impact of current fiscal and monetary
developments. During the war, as explained in the Board's Annual Report
for 1945, requirements of war finance had necessarily dominated fiscal and
monetary policies. Because of the wartime excess of current incomes (after
taxes) over goods and services available for purchase, there was an inevitable
growth in liquid assets, i.e., bank deposits, currency, and Government securities, held by individuals and businesses. This high degree of liquidity, together with heavy current and deferred demands and continued shortages of
goods and services, generated strong pressures toward rising prices during
the transition period.
Notwithstanding shortages of materials, industrial strife, and other obstacles, production of civilian goods increased rapidly to new high levels in
1946. Millions of demobilized veterans and workers released from other
war activities were quickly absorbed in peacetime pursuits. Incomes rose
above the wartime peak. Consumers' expenditures showed a phenomenal and
generally unexpected expansion; business inventories increased rapidly, and
there were unusually large additions to plant and equipment. Construction increased greatly as additional supplies of materials became available.
Finally, the endeavor to meet urgent shortages in other countries resulted in
a volume of exports larger than in any previous peacetime year. These demands more than offset the effects of the further decline in Government war
expenditures.
MONETARY SITUATION IN 1946
Monetary and credit expansion slackened in 1946. Following the ending
of hostilities the Federal Government's budgetary deficit was drastically reduced, and for the year as a whole the Treasury's cash receipts exceeded cash
payments. About 23 billion of the 280 billion dollar public debt outstanding

ANNUAL REPORT OF BOARD OF GOVERNORS

at the end of February was paid off in 1946 by drawing upon large Treasury
deposits built up at commercial banks during the Victory Loan Drive. The
reduction in public debt was reflected in a decrease in bank holdings of Government securities and in bank loans on such securities, as well as in Government deposits at banks. Important trends of war years were thus reversed.
Bank loans increased sharply in 1946 and at the end of the year total loans
of all banks were larger than at any time since 1930. Loans to commerce
and industry, to owners of farms, homes, and other real estate, and to consumers accounted for the 1946 expansion. In part, these increased loans
to private borrowers reflected the credit needs of the expanding peacetime
economy, but some of the credit extended was probably used for speculative
purposes. In either case the loans added to the capacity of borrowers to bid
for scarce resources and augmented inflationary pressures. The increase in
consumer loans, which reflected in part the growing supply of consumers'
durable goods, was restricted somewhat by the Board's Regulation W. Toward
the end of the year this regulation was substantially amended, principally by
releasing noninstalment credits from its restrictions.
Bank loans on securities declined sharply over the year. Most of the decrease was in loans to finance the purchase of Government securities, but
stock market credit also declined. In the early months, when stock prices
were rising and the market was active, the reduction in credit reflected action
by the Board in January raising margin requirements from 75 to 100
per cent to prohibit further extensions of credit for purchasing or carrying
stocks. Later in the year declining stock prices also contributed to liquidation of stock market credit.
Total bank deposits decreased during the year, owing to the use of Treasury balances to retire bank-held Government securities. Deposits held by
the public, however, continued to increase, although at a slower rate than
during the wTar years. The public's total holdings of liquid assets also expanded at a more moderate pace than in the war years. Corporations maintained their bank deposits at a high level, but reduced their holdings of Government securities, while individuals continued to expand their deposits and
made little change in their holdings of Government securities. Growth of
currency in circulation, wThich had been rapid in wartime, virtually ceased
in 1946.
Retirement of the public debt by the Treasury had the effect of putting
some pressure on the reserve positions of banks and thus tended to restrict
further expansion of bank credit. Of the securities retired 4.5 billion dollars were held by the Federal Reserve Banks and the redemption of these
securities with funds drawn from commercial banks reduced bank reserves.
Retirement of securities held by nonbank holders resulted in a shift of deposits from Treasury war loan accounts, against which no reserves were

FEDERAL RESERVE SYSTEM

required to be held, to other accounts, against which reserves were
required, and thus increased the reserve needs of banks. Retirement of
bank-held debt reduced Treasury deposits at banks and bank holdings of
short-term securities by corresponding amounts and had no effect on the
reserve position of banks. In addition to these pressures, the deposit growth
resulting from loan expansion also increased the reserve needs of banks.
Banks, therefore, in addition to having their securities portfolios reduced by
debt retirement, had to sell Government securities to the Reserve System in
order to maintain their reserve positions.
Another factor putting some restraint on expansion of bank credit was the
discontinuance by the Federal Reserve Banks of their preferential discount
rate of */2 per cent on advances to member banks secured by Government
securities maturing or callable within one year. This action, taken in the
spring, made it necessary for borrowing banks to pay the regular discount
rate of one per cent and thereby discouraged the practice being followed by
some banks of borrowing to meet reserve needs instead of liquidating Government securities.
Pressures resulting from these developments greatly diminished further
rnonetization of the public debt by the banking system, to which attention
was called in the Board's Annual Report for 1945. During 1945 and the
early part of 1946 banks had increased their holdings of Government securities, particularly of long-term issues. This expansion was based in part
on excess reserves temporarily available during war loan drives and more
permanently on reserve funds obtained through sales of short-term low-rate
issues to the Federal Reserve System at the established pattern of rates. The
reserves created provided the basis for a multiple credit expansion. This
practice had the effect of expanding bank deposits and of depressing longterm interest rates. Under the changed banking conditions prevailing during
most of 1946, banks were less inclined to sell short-term securities for the
purpose of expanding further their holdings of longer-term securities, and
largely confined such sales to meeting deficiencies in required reserves in part
resulting from increased loans. This readjustment in banking practice helped
to retard the pace of bank credit and monetary expansion during 1946 and
to lessen the creation of new inflationary pressures from this source.
Federal Reserve policy continued, as throughout the war, to be directed
toward maintaining orderly conditions in the Government securities market
and the general level of prices and yields of such securities. These policies
facilitated the operation of the Treasury's vast financing program, helped to
maintain the confidence of investors in the value of Government securities,
and prevented unsettlement of the Government securities market such as
followed the previous world war. Notwithstanding inflationary tendencies
otherwise present, the prices of Government bonds continued substantially
above their par values.

ANNUAL REPORT OF BOARD OF GOVERNORS

POSTWAR MONETARY POLICY

Authorities continue to be faced with the problem of adapting to peacetime
requirements the monetary and fiscal structure inherited from wartime financing. In this, monetary policy will need to be closely related to the
management of the public debt, and will require continued cooperation between the policies of the Treasury and the Federal Reserve.
Unless appropriate policies are devised to deal with the problems arising
from an overly ample money supply, a vast public debt, extensive holdings of
Government securities by the commercial banking system, and the existing
structure of interest rates, the monetary and credit situation can be an unstabilizing element in the economy for many years. The Federal Reserve
System will need to regain control over the volume of credit and to exercise
some measure of flexibility in credit policy, while maintaining the low cost
of debt service and continued stability in the Government security market.
Although developments in 1946 restrained the expansion in total bank
credit and money supply and halted the decline in long-term interest rates
that had resulted in the course of war finance, some of the conditions responsible for these tendencies continue to exist. Commercial bank holdings of
Government securities at the end of 1946 were 50 billion dollars above prewar holdings. Over 40 billion of the bank holdings mature or are callable
within five years. Commercial banks can readily obtain additional reserves
by selling some of these securities to the Reserve System, which will have to
purchase them if it wishes to maintain stability in the Government securities
market. The assurance of stability in turn renders long-term securities
the more attractive to bank investors. With a slowing down of the
debt-retirement program and a decline of bank earnings in prospect, shifting
into longer-term issues may be resumed in the future. Continued credit expansion and further downward pressure upon long-term rates of interest
would result.
Under existing powers of the Federal Reserve System and with the necessity for maintaining stability in the market for the vast and widely distributed
public debt, it is not possible for the Reserve System to maintain the same
degree of control over the supply of bank reserves, and hence over potential
credit expansion, that it formerly had. Certain measures of monetary regulation that can be adopted might exercise a degree of restraint, although
they would not be sufficient to counteract strong tendencies toward inflationary or speculative credit expansion. Some of these measures are discussed in the following paragraphs.
Treasury refunding policies. To prevent further credit expansion at this
time, the sale of Government securities to banks by nonbank holders should
be discouraged. A shift of holdings from banks to other investors should be
encouraged, so as to absorb available savings not attracted into private investment outlets. Much can be accomplished toward these ends through

FEDERAL RESERVE SYSTEM

the selection of securities to be offered by the Treasury in its large-scale refunding of maturing issues during the years to come.
Securities offered to absorb the savings of the public should not be marketable issues of the conventional types. Long-term marketable issues, being
subject to Federal Reserve support in case they should tend to decline in
price, are in effect demand obligations bearing a higher rate of return than is
customary for short-term securities. Because of the excess of long- over
short-term rates, moreover, prices of long-term bonds rise for a period as
they approach maturity; holders may, therefore, sell them before maturity at a
premium and thus obtain an even higher return than that offered by the interest coupon.
Additional offerings of long-term marketable securities, even though
initially ineligible for purchase by banks, would encourage some holders to
sell existing issues of eligible securities to banks in order to purchase new
issues. The resulting increase in available longer-term issues would again
offer banks an opportunity to sell short-term securities to the Reserve Banks
and to purchase longer issues, thus leading to creation of reserves and further
multiple credit expansion. The refunding of short-term securities held by
banks with marketable securities at existing long-term rates, therefore, would
raise the interest cost of the Treasury without accomplishing the purpose of
curtailing bank holdings or checking their expansion.
Such long-term bonds as need be issued to absorb the savings of the public
not invested in private outlets should be in a nonmarketable form. They
should be redeemable on demand prior to maturity at a discount so as to give
a lower yield if not held until maturity, and sales should be limited to the
amount of current savings or net additions to investment funds of the purchasers. These bonds would be similar to the present Series G savings bonds,
with differences as to purchase limits and maturities. Through such an instrument an appropriate rate could be paid for genuine long-term savings, and
the income of bona fide investors could be protected and their capital safeguarded against loss in case of necessary liquidation before maturity. Through
these issues, the Treasury at the same time would be protected against having
to pay a high coupon rate on highly liquid securities to purchasers who hold
for a short period only.
Interest rates. In view of the large supply of Government securities of
various types and issues outstanding and the possibility that banks may wish
to increase their earnings, the tendency for banks to sell short-term securities
to the Reserve System and purchase longer-term issues may recur at any time.
The inducement for such shifts could be diminished by a narrowing of the
margin between short-term and long-term rates on market issues of securities.
If short-term rates are kept down, however, and such shifting in bank holdings does recur, rates on long-term marketable issues would tend to decline.

ANNUAL REPORT OF BOARD OF GOVERNORS

In view of the large public debt outstanding, it is desirable to maintain
at the existing low levels the rate at which the Government can borrow on
its long-term obligations. At the same time, it will be desirable to avoid
further declines in rates which reflect the pressure of excessive bank credit
expansion rather than a surplus of current savings over the capital demands
of business. Further declines in long-term rates would reduce the return on
savings invested in marketable issues and lower the incomes of endowed and
savings institutions which depend on earnings from investments. This would
seriously impair the functions of these institutions and lead to a weakening
of our social and economic structure.
If the tendency for banks to shift from short-term to longer-term securities
should be resumed, it could be discouraged by discontinuance of the Federal
Reserve policy of purchasing short-term Government securities at present
low rates. This would result in a rise in short-term interest rates and thus
reduce the incentive for further monetization of the public debt. While it
would continue to be necessary for the System to support Government securities and maintain an orderly market, the relationship between rates for
various types of market issues might be permitted to become more responsive
to demand and a greater degree of flexibility would be restored to control of
credit through the money market.
New credit control powers needed. It should be recognized, however, that
higher rates on short-term Government securities would not in themselves
restore to the Federal Reserve System an adequate degree of control over the
supply of bank credit. A readjustment of short-term rates and the introduction of some flexibility into rate policy would provide some check to further
bank shifting and credit expansion, but it would not wholly solve the problem. As banks become accustomed to the higher level of short-term rates,
and restricted longer-term issues become eligible for bank purchase in the market, a tendency to shift may reappear.
More important, an increase in short-term rates would not prevent the
shifting by banks from holdings of Government securities to private loans
or corporate securities, if attractive loans or investments were available. On
the basis of such shifts the banking system would be in a position to create
reserves and to engage in uncontrolled credit expansion. Under existing
Federal Reserve powers there is no assurance that such a development could be
prevented except by permitting interest rates to rise to a point that would
unstabilize and perhaps demoralize the entire Government securities market.
Effective regulation of bank credit expansion in the future can be assured
only by providing for a more direct way of decreasing the ability of banks
to shift at will their holdings of Government securities to the Reserve System
and thus to engage in excessive credit expansion. An attempt to restrict
credit through sale by the System of securities in the open market or even
by limiting the System's purchases might cause sharp declines in prices of

FEDERAL RESERVE SYSTEM

Government securities which could not be tolerated and which might fail to
accomplish the desired purpose. In Canada and England monetization of
the public debt by banks is limited by well-established banking traditions,
and by informal understanding between the authorities and the relatively
small number of banks operating in those countries. These arrangements are
not possible in this country with its 14,000 independent commercial banks.
If, in the changed postwar situation, the Reserve System is to be able to
perform the function for which it was established, namely, to adjust the
supply of bank credit and money to the needs of the economy, and, especially,
to prevent undue credit expansion in periods of inflation, additional powers
will be required. In its 1945 Annual Report the Board proposed for consideration by the Congress various measures which, if adopted, singly or in
combination, would give the Reserve System a more effective degree of
control over bank credit and over the level of interest rates. The problems
then presented will continue for many years. Action along these lines will be
needed to rehabilitate the traditional instruments of Federal Reserve policy—
open-market operations, discount rates, and reserve requirments—and to
assure a reasonable degree of financial stability in the future.
LEGISLATIVE PROPOSALS
Purchase of Government securities directly from Treasury. Under existing law the Federal Reserve Banks have temporary authority to purchase
Government securities directly from the United States, subject to the limitation that the amount of securities so purchased and held by them at one time
shall not exceed 5 billion dollars. There was practically no limitation on such
purchases until they were prohibited by the Banking Act of 1935. Largescale Treasury operations during the war led to the modification of that
restriction under the War Powers Act, which expired on March 31, 1947.
The Board, with the concurrence of the Treasury Department, recommended
to the Congess that this authority be extended, and a bill granting a threeyear extension was signed by the President on April 28, 1947.
While not used extensively, the authority has proved a useful means of
facilitating Treasury operations and of effecting temporary adjustments in
the money market. It has provided the Treasury with a line of credit to
which it may turn to obtain funds to meet temporary contingencies, ordinarily around tax payment dates, and has made it possible for the Treasury
to operate with a smaller cash balance than might otherwise have been necessary, thus effecting savings in the cost of carrying the public debt.
Consumer credit regulation. In its 1945 Annual Report, the Board recommended that Congress give consideration to legislation which wTould authorize
the Federal Reserve System to continue regulation of consumer credit. The
use of consumer credit has been increasing rapidly since V-J Day, notwithstanding the restraint imposed by the Board's Regulation W, and is likely

ANNUAL REPORT OF BOARD OF GOVERNORS

to increase more rapidly in the future as more consumers' durable goods become available, as wartime savings are drawn down, and as instalment sellers,
sales finance companies, banks, and other credit-granting institutions increase their competitive efforts to expand their business. The Economic Report of the President to the Congress on January 8, 1947, stated that "undue
expansion of deficit financing on the part of millions of American families can
gravely hurt our business system."
The experience of this country over the quarter century before the war
suggests that increased use of consumer credit, particularly instalment credit,
to finance the purchase of durable goods, may be needed to sustain long-term
economic growth. This experience also shows, however, that over-expansion
and subsequent severe contraction of consumer credit can have highly unstabilizing effects on the national economy.
Excessive fluctuations in consumer credit could be restrained by regulation, flexibly administered, such as the Board has maintained since 1941 on
the basis of a wartime Executive Order. The Board does not feel, however,
that the authority should be continued on this basis beyond the time required
for appropriate legislative review and determination by the Congress as to
whether the consumer credit problem should have specific legislation.
Regulation of this type is particularly appropriate at the present time when
the supply of money is already excessive in relation to the available volume
of goods. It can restrain excessive demands for credit by limiting the borrowing capacity of prospective purchasers of goods without operating, as general
instruments of credit policy must do, by increasing the cost of credit to the
Government or to industry.
In present circumstances producers and distributors of consumers' durable
goods have a broad and active market, at prevailing prices. In course of
time, however, as production catches up with deferred demand, they will
need to take steps to broaden the market. In the long run, the sound and
tested method of free enterprise would be to find ways of gradually lowering
prevailing prices. That is the direction which competition should take, and
will sooner or later have to take. To stave it off by attempting to maintain
prevailing prices through the competitive granting of easier and easier credit
terms might work for a short time, but only at the cost of eventual convulsive
readjustment. Continuance of consumer credit regulation of the type now
in effect can do much, both now and later on, to prevent competition from
taking that economically unsound direction.
Reserve Bank guarantee of loans to business. In order that there may be
a means of prompt financial assistance to small- and medium-size business
enterprises whenever the need occurs, the Federal Reserve Banks should have
authority to guarantee in part business loans made through established banking channels. Accordingly, the Board has recommended to the Congress that
such authority be provided. Under the proposal the Reserve Banks would
guarantee business loans made by chartered banks. Guarantees would

FEDERAL RESERVE SYSTEM

be subject to a fee charge which would increase with the guarantee percentage. The maximum guarantee would be 90 per cent. A major purpose
of the recommendation is to strengthen and make more effective existing facilities for financing small enterprises, and particularly to assure an adequate
and continuing availability of long-term loans to these businesses.
In proposing the legislation to provide this authority, the Board has also
recommended repeal of Section 13b of the Federal Reserve Act, adopted in
I
934> which empowers the Federal Reserve Banks to make and to guarantee
industrial loans. Certain provisions of this section have proved so restrictive
as seriously to impair the ability of the Reserve Banks to lend directly to
business or to assist banks and other lenders in such lending. In lieu of Section 13b, the Board has recommended that a paragraph be added to Section 13
of the Federal Reserve Act authorizing the Federal Reserve Banks to
guarantee loans made by chartered banking institutions to business enterprises
on a much more effective basis than that permitted by present law.
By the repeal of Section 13b, the Federal Reserve Banks would be required to return funds heretofore advanced to them by the Treasury to help
support their industrial loan activities. The appropriation of about 139
million dollars available under existing law for industrial loan operations of
the Reserve Banks would be repealed and Government appropriations would
no longer be used for this purpose. A bill containing these provisions was
introduced in Congress early in 1947*
This legislation, which would be strictly permissive, would not place the
Reserve Banks in competition with the private banking system. Loans guaranteed would originate with local banks dealing with local people whom they
know and with whose character, capability, and capacity they are
familiar. No loan would be considered for guarantee except on request of
the lender prior to extension of credit, and the Reserve Bank to which the
guarantee request was made would have full responsibility for acting on it.
The twelve Federal Reserve Banks and their twenty-four branches afford a
regional organization through which established banks in all areas of the
country would have convenient access to a guaranteeing agency.
The principal purpose of the legislation would be to make term loans,
especially to smaller businesses, for the purpose of providing them with
necessary capital that they could not otherwise obtain. It would fill a gap in
private financing that now exists by enabling these enterprises to obtain
essential financing. The costs of going to the capital markets for small
business are prohibitive. Also, many banks properly feel that they cannot
extend some term credits without a degree of protection. The bill provides
for a way of spreading the risk through insurance for a fee. It is not the purpose of the bill to provide guarantees for either short- or long-term financing
which banks can and should extend without assistance.
The basic need of the smaller, independently owned business enterprises is
for long-term funds. Some businesses need funds for modernization of plant

ANNUAL REPORT OF BOARD OF GOVERNORS

and equipment and additional facilities. The need also arises from the sharp
increase in prices and greatly expanded volume of business resulting in a
much larger volume of accounts receivable and of inventories. Because of
these various factors many enterprises whose financing needs have ordinarily
been met through current borrowings now need a funding of their shortterm obligations into a term loan.
Owners of small enterprises, as a rule, prefer to obtain funds on a loan
rather than on an equity basis because they do not wish their stock ownership
to be diluted or to run the risk of losing control of the business. Term loans
amortized out of profits meet this need. This type of financing is particularly
suitable for small businesses that can retire loans only gradually.
The proposed guarantee procedure established by the Federal Reserve Banks
would be subject to general regulations prescribed by the Board and to several
statutory limitations. No guaranteed loan could have a maturity of more
than io years. The guarantee would not exceed 90 per cent of any loan.
The aggregate amount of all guarantees would not exceed the combined surplus of the twelve Federal Reserve Banks. The total amount of all guarantees which are individually in excess of $100,000 would not be permitted to
exceed 50 per cent of the combined surplus of the Reserve Banks.
Authorization of the Reserve Banks to guarantee business loans in part
would apply tested principles and procedures. Even under the restricted
powers granted in 1934, the Reserve Banks have approved 3,542
applications amounting to a total of nearly 570 million dollars. For the
System as a whole the interest and fees collected have exceeded expenses
and losses. During the war, the Reserve Banks acquired further loan guarantee experience in their administration as fiscal agents of the War Department,
Navy Department, and United States Maritime Commission of the V-loan
program for guaranteeing war production loans. They processed authorizations for 8,771 of such loans, aggregating 10.5 billion dollars. Guarantee
fees collected by the Reserve Banks far exceeded their expenses and the
losses sustained by the guarantors.
Limitation on Federal Reserve branch buildings. As the result of the
tremendous increase in the operations of the Federal Reserve Banks and their
branches, especially in their fiscal agency operations for the Treasury Department and other Government agencies, the building facilities of many of the
branches of the Federal Reserve Banks have become inadequate for the effective performance of their functions. Consequently, the Board has recommended legislation which would permit necessary construction of Federal Reserve Bank branch buildings, exclusive of vaults, machinery, etc. The cost
would be met entirely from Federal Reserve Bank resources.
Bank holding company legislation. The need for new legislation to provide more effective supervision and control of bank holding companies and
to curb abuses in that field continues to be a matter of serious concern to the
Board. As pointed out in the Board's Annual Report for 1943, Congress

FEDERAL RESERVE SYSTEM

attempted to deal with this matter in the Banking Act of 1933, but experience has demonstrated that the existing law is clearly inadequate to accomplish its purposes. To correct this situation, the Board has recommended
legislation which would treat bank holding companies in much the same
manner as banks themselves and would include provisions regulating expansion and requiring the divorce of activities unrelated to banking. Bills designed to carry out the Board's recommendations were introduced in Congress in 1945 and 1946, but no action was taken. The abuses described in the
Board's 1943 Report continue and the urgent need for legislation still exists.
Capital requirements for member banks. The Board has recommended
repeatedly the enactment of legislation which, particularly so far as capital
requirements are concerned, would eliminate existing discriminations against
national and State member banks with respect to the operation of branches
and in this regard place them on a comparable basis with State nonmember
banks. The Board continues to feel that such legislation is necessary. The
laws of many States permit State banks to operate branches with much less
capital than that required of national and State member banks under Federal
law. This results in unfair discrimination against member banks and, in
effect and without justification, closes the door in many instances to membership of sound banks in the Federal Reserve System. There are also other
provisions of the law with respect to capital requirements for membership in
the System which prevent State banks, that otherwise would be entitled to
the privilege, from becoming members, and the Board believes consideration
should be given by the Congress to changes in these provisions.
GOVERNMENT FINANCE IN TRANSITION
Following drastic reduction of Federal Government expenditures during
the second half of 1945, the decline during 1946 was at a much slower rate.
Budget expenditures, which reached a wartime peak of 27 billion dollars in
the second quarter of 1945, fell to 12 billion dollars by the first quarter of
1946, and amounted to 9 billion in the last quarter. Notwithstanding lowered
individual income tax rates in 1946, receipts remained large, reflecting the
continued high level of national income.
For the year as a whole, as shown in the accompanying table, budget expenditures were only slightly larger than budget receipts, compared with a
deficit of 44 billion dollars in 1945. The large cash balance, built up to 26
BUDGET EXPENDITURES AND RECEIPTS AND CHANGES IN PUBLIC DEBT

[In billions of dollars, for calendar years]
1946
Expenditures
Net receipts

Budget deficit
Change in general fund balance. . .
Change in gross public debt: total.
1

Including net expenditures of trust accounts, etc.

1945

45.1
41.6

89.8
46.0

3.5
-22.5
-19.0

+ 3.8
+47.5

43.7

ANNUAL REPORT OF BOARD OF GOVERNORS

billion dollars during the Victory Loan Drive, was drawn upon to retire
outstanding public debt, which was reduced by 19 billion dollars during 1946.
The publicly-held marketable debt decreased by 22 billion dollars in 1946
and savings notes outstanding by 2.5 billion. Savings bonds, on the other
hand, increased by 1.6 billion dollars; Series F and G bonds continued to
increase, while redemptions of Series E bonds, although declining from the
high rate at the beginning of the year, continued to exceed sales. Special
Treasury issues to Government trust accounts and to members of the Armed
Forces (leave bonds) increased by more than 5 billion dollars.
The total public debt continued to increase somewhat in the first two
months of the year, reaching a peak of 280 billion dollars at the end of
February, and then was reduced to 259 billion at the end of the year. From
the beginning of the debt-retirement program on March 1 to the end of the
year, marketable public debt was reduced by 23 billion dollars. Maturing bonds amounting to 2 billion dollars and about half of the 13
billion of maturing notes were paid off in cash, as were somewhat over 14
billion dollars out of 38 billion of maturing certificates. The remaining notes
and certificates retired were replaced by new certificate issues. At the end of
1946 the total amount of certificates and notes outstanding was smaller than
at any time since early 1944, but owing to the amount of bonds approaching maturity, the total volume of outstanding issues maturing within one
year continued relatively large.
The debt-retirement program was the major factor bringing about changes
in the ownership of marketable debt throughout the year, but there were
also some shifts through market purchases and sales. By far the largest reduction in holdings of Government securities occurred in the case of commerCHANGES IN OWNERSHIP OF UNITED STATES GOVERNMENT SECURITIES DURING

1946

[Partly estimated; par value , in billions of dollars]
Type of issue
Marketable public issues: total.
Treasury bills
Certificates .
Treasury notes
Treasury bonds: total
Due or callable—
Within 5 years
5 to 10 years
10 to 20 years
Over 20 years
Nonmarketable public issues:
total
Savings bonds 2 . .
Savings notes
Other.
Total interest-bearing securities3

Total
U.S.Gov't Federal Comoutagencies and Reserve mercial
standing trust funds Banks banks 1
-22.2
-8.2
-12.9
— 1.1

+9.7

-5.7
-2.6
-2.4

-0.7

-0.9

+ 1.9
-0.7

-0.9
- 1 .8
-0.2

-0.3

-0.1

+0.2
-0.7

-15.9
-1.3
— 6.9
-9.6

+1.9
+ 7.3
-4.4
-1.3

+0.2

—0.5

Mutual Insurance Indiv's,
savings
banks

companies

corp's,
and others

+11

+ 0.9

+6 2
+0.8
+0.4
-0.2
+0.6

+0 1
+0.8
+0.6
-0.1
+0.6
-0.3

-6.7
-0.6
—0 7
-1.5
-3.7

+4.6

-18.3

+3.9

+1 6
—2 5
+0 6

—0.1
-0.9

-16.0

-0.8
-1.9
-2.2

—0 4

-0.1

+ 1.6
—2 5
+0.5
+4.6

+ 1.4

+1.1

+0.9

-7.3

1
Includes holdings by commercial banks covered in the Treasury Survey of Ownership of Govern
ment securities.
2
Series A-D, E, and F savings bonds included at current redemption values.
3
Total includes guaranteed securities not included in preceding groups
NOTE: Detailed figures may not add to totals because of rounding.

FEDERAL RESERVE SYSTEM

cial banks, which held about half of the issues retired. As shown in the
table, commercial bank holdings declined by 16 billion dollars. This reflected
retirement of about 12 billion and sales of about 4 billion. The sales were
mostly to the Reserve Banks to replace reserves absorbed by retirement of Reserve Bank holdings. As a result there was little net change in the System's
portfolio, although 4.5 billion dollars of its holdings were retired.
Other groups, which received nearly 7 billion dollars for retired issues, repurchased about 2.5 billion of Government securities in the market. Individuals and corporations, however, sold long-term issues (mostly acquired in war
loan drives) to institutional investors and apparently increased their holdings
of short-term issues, after allowance for retirements.
The reduction in United States Government security holdings by commercial banks was mostly in Treasury certificates and notes. Notwithstanding the loss of reserve funds under the retirement program, bank .investment in bonds continued in moderate amount and was made possible on
the basis of reserves gained from the sale of short-term issues to the Federal
Reserve Banks and from other sources. The expansion of bond holdings was
considerably less, however, than during earlier years when current financing
made available a rapidly growing supply of long-term bonds and nonbank
investors sold existing issues to commercial banks in order to buy new issues.
Reduction in bank holdings of short-term issues during 1946 lengthened
OWNERSHIP OF U S. GOVERNMENT SECURITIES
BILLIONS OF DOLLARS

BILLIONS OF DOLLARS

100

300

250

TOTA

200

150

{
\ I

100

OTHER
INVESTORS

J
"COMME RCIAL ^
BAN KS
!

• —

FEDERAL

- ^ > ^ F

•—•—*—•—*

1940

*—,

R BNS
AK

1942

1944

1946

1940

1942

1944

1946

NOTE: All data are end-of-month figures, for June and December, 1939-41; monthly thereafter.
The groups shown on the rigkt-hand ^side of the chart are the components of the "Other investors" group shown on the left-hand side.

ANNUAL REPORT OF BOARD OF GOVERNORS

the average maturity distribution of bank holdings somewhat, more than
offsetting the effects of passing time in shortening the average maturity. By
maturity groups, the largest increase in holdings occurred in the 1-5-year
class although there was also some increase in maturities over 20 years.
Changes in the ownership of total interest-bearing United States Government securities—marketable plus nonmarketable—are shown in the chart.
The reduction in holdings of marketable debt was offset, to a small extent,
by increased holdings of nonmarketable issues. Holdings of special issues
by Government agencies and trust funds continued to increase; savings bonds,
held largely by individuals, also increased further, while tax and savings
notes, held principally by corporations, declined.
MONEY RATES AND BOND YIELDS
Increased pressure on bank reserves and the lengthened average maturity
of bank portfolios resulting from debt retirement, together with elimination
of the preferential discount rate, contributed to a slight firming of rates in
the money market. It was not possible for rates to rise much since the Federal Reserve System continued to purchase and sell Treasury bills at Y% per
cent and to support the certificate rate at % per cent. Under this policy,
the large holdings of short-term securities by the banking system provided the
basis for an almost unlimited supply of low-cost bank credit altogether at the
discretion of individual banks.
By early May all of the Reserve Banks had discontinued the preferential
discount rate on advances to member banks secured by Government obligations maturing or callable within one year.1 Following elimination of this
special rate of T/^ P e r cent > which had been put into effect during October 1942,
the discount rate of one per cent became applicable to advances secured by
all maturities of Government obligations. In July following this action
several large commercial banks raised their charges on loans secured by Treasury certificates of indebtedness from J/g to one per cent and on those secured
by longer-term Treasury issues from J4 t o o n e per cent. Also, the rate on
brokers' borrowings was advanced from 1 to 1 ^ per cent.
During April and May 1946, the open market rate on 90-day bankers' acceptances in New York City was increased from 7/16 to J/2 per cent, that is,
to the buying rate of the Federal Reserve Bank. In view of the increase in
other short-term rates, however, bankers' acceptances became practically unsalable in the market, so that in July an upward adjustment to Y\ per cent
was made in the Federal Reserve buying rate for bankers' acceptances matur1
The preferential discount rate of one per cent on advances to nonmember banks secured by
direct obligations of the United States was eliminated at all Reserve Banks by the end of April.
The discount rates at each Federal Reserve Bank on Dec. 31, 1946, are shown in Table 10, p. 84.

FEDERAL RESERVE SYSTEM

ing within three months. This action was followed by further advances in
the buying and selling rates of acceptance dealers, and in August by an increase to one per cent in the minimum buying rate offered by the Reserve
Bank. There were also slight increases in open market rates on commerical
paper and stock exchange call and time loans.
Bank rates to commercial borrowers have generally averaged slightly below
those for earlier years. Short-term rates in 19 principal cities averaged 2.34
per cent for the four quarterly report periods in 1946, or about the same
level as in 1945 and slightly under the level obtaining in 1944.
YIELDS ON TREASURY AND CORPORATE SECURITIES
WEEKLY AVERAGES OF DAILY FIGURES

5 HIGH GRADE
CORPORATE BONDS

U. S. GOVERNMENT BONDS:

(l5

TAXABLE
(7-9 YEARS)

SELECTED NOTES AND BONDS
TAXABLE
(3-5 YEARS)

f CERTIFICATES OF INDEBTEDNESS
( 9 - 1 2 MONTHS)

TREASURY BILLS
(NEW ISSUES)

1944

1945

1946

Yields on long-term Treasury securities declined sharply in the early part
of the year, when the yield on the longest outstanding issue dropped from
2.46 per cent to 2.12 per cent. For the remainder of the year there was a
slight upward trend in yields and at the end of the year the longest-term issue
had returned to 2.32 per cent. Long-term yields were nevertheless lower
than for any period before 1946. Yields on medium-term issues showed similar fluctuations. High-grade corporate security yields also declined in the
early part of the year, as shown in the chart. However, by the end of the
year they had regained their initial level and the spread between corporate
and long-term Treasury bond yields widened.

ANNUAL REPORT OF BOARD OF GOVERNORS

BANK CREDIT DURING RECONVERSION

Banking and credit developments during 1946 continued to be greatly influenced by Government financing, but expansion of private credit at banks
again became important and was greater than for any year since 1919. Bank
reserves were under some pressure because of Treasury retirement of Government securities held by Federal Reserve Banks, because of transfers of deposits from Government to private accounts accompanying Treasury retirement of publicly held debt, and because of loan expansion associated with the
rising level of production and consumption and advancing prices. The trend
of commercial bank loans and investments during the past 30 years is shown
on the chart.
LOANS AND INVESTMENTS OF MEMBER BANKS
BILLIONS OF DOLLARS

CALL REPORT DATES

BILLIONS OF DOLLARS

120

100

1915

1920

1925

1930

1935

1940

1945

The withdrawal by the Treasury of nearly 22 billion dollars of war loan
deposits caused no reduction in member bank required reserves, as no reserves
have been required against these deposits since early in the war. The further
growth in other deposits, however, did increase required reserves of member banks by over a billion dollars during the year. These needs were
partly met by a reduction in excess reserves, which were temporarily large
a year earlier, so that the growth in total reserves was limited to about 500
million dollars. Losses of reserves due to Treasury retirement of securities
held by Reserve Banks were about offset by Reserve System purchases of
securities in the market. Under existing Federal Reserve policies, as previ

FEDERAL RESERVE SYSTEM

ously pointed out, potential credit expansion is limited only by the available
supply of suitable loan and investment assets.
Reduction in Government security holdings. Retirement of public debt
by drawing on accumulated Treasury balances, discussed earlier, caused a
sharp decline in commercial bank holdings of Government securities, particularly of short-term issues, from the extremely high level reached at the
end of 1945. In addition to securities redeemed, banks sold short-term securities from their portfolios in order to maintain their reserve positions and to
expand loans. Some purchases were made of medium- and long-term issues,
but in much smaller amounts than during the war years.
Expansion in bank loans. Bank lending to businesses and individuals became increasingly important during 1946. As shown in the chart, many types
of loans at member banks increased to new high levels. There was a
sharp advance in loans to business concerns, to real estate owners, particularly
of urban property, and to consumers. Bank loans for purchasing or carrying
securities, however, declined from the high level prevailing early in the year;
the reduction of loans secured by Government obligations was particularly
large. Relatively little change occurred in loans to finance farm production.
CLASSIFICATION OF MEMBER BANK LOANS AND INVESTMENTS
OTHER THAN U. S. GOVERNMENT SECURITIES
CALL REPORT DATES

BILLIONS OF DOLLARS

16
•
ALL OTHER LOANS

O-AMELY COMMERCIAL)
_ 1
1

ONCLUI

IN6

-^V

1
\

/ " *

cot4MER CIAL IOAN

LOAN

4
LOANS TO B ROKE RS A 4D DEALE IS
JRITII-<? !

^-AGRICULTURAL LO

8
3ANS ON SECU *ITIE
OTH :R L<

- ^ ——

REAL

^CONSUMER

ESI ATE LOAN J

LOANS

L LOANS ON SECUR TIES TO <JTHEF

OT -IER

. —

—•

1
STATE

, L
"

>ECU *ITIE

s—

4
0

1 ^

AND LOCAL GOV'T OBLI NATIONS

1920 1922 1924 1926 1928 1930 1932 1934 1936 1938 1940 1942 1944 1946
* Indicates change in series.
NOTE: Figures are partly estimated for street loans, 1925 to 1928, and for all classifications
prior to 1925. Street loans include loans made by member banks to New York City brokers
and dealers in securities. Commercial loans include commercial and industrial loans, open
market commercial paper, and acceptances.
Comparability of both commercial and agricultural loans is affected somewhat by changes in
reporting in December 1942 and again in December 1945. Consumer loans are partly estimated
prior to Dec. 31, 1942.

ANNUAL REPORT OF BOARD OF GOVERNORS

More than half of the expansion in private credit at banks in 1946 resulted
from loans to businesses. Total business loans outstanding at all member
banks, other than those secured by real estate, increased more than 4 billion
dollars during the year. The increase reflected borrowings by business of all
sizes at banks in all parts of the country. Loans expanded moderately until
mid-year and at an exceptionally rapid rate from then until close to the
year end.
Increased business borrowing at banks resulted to some extent from the
general expansion in operations which required additional plant and equipment
as well as larger inventories and extension of credits to customers. Expenditures on plant and equipment increased sharply; the total for the year as a
whole was about 80 per cent above that of 1945 and about one-third above
that of 1929. At times during the year, especially in the early months, bank
credit was used temporarily to finance fixed expenditures while long-term
financing through security issues was being arranged.
The accumulation of an unprecedented volume of inventories and receivables at rapidly rising prices during the last half of the year necessitated, to a considerable extent, the marked expansion in bank credit in that
period. The dollar expansion of inventories by manufacturing and trade
concerns in 1946 was almost 50 per cent greater than the large increase in
1941, and the indications are that customer receivables also increased by a
record amount.
It became clear in 1946 that the exceptional volume of liquid assets—bank
deposits, currency, and United States Government securities—accumulated
by business during the war would not act as a damper on external financing.
Despite these holdings and an unusually large volume of retained earnings,
the volume of new funds obtained through bank loans and security issues
exceeded that of any year since the late 1920's. Aggregate liquid assets of
businesses were reduced moderately, and the major part of the reduction was
in holdings of Government securities. In some cases, as would be expected,
such assets were not held by the individual businesses that were most acutely
in need of funds. Other firms apparently planned to retain the increased
liquidity acquired during the war years, even at the cost of obtaining credit,
until postwar demands for products and opportunities for profitable investment were more clearly discernible.
Late in the year, the Federal Reserve System conducted a national survey
of member bank loans to commercial and industrial businesses. Member banks
as a whole were found to have some 672,000 of such loans outstanding, aggregating over 13 billion dollars. Loans to medium and small concerns
accounted for the bulk of the loans in number and for over one-third of the
total amount. Dollar volume was heaviest among large manufacturing and
mining corporations while numerical importance was greatest among small
retail stores. Enterprises in all principal industries were included among the
borrowers. A particularly noteworthy finding was that more than one-third

FEDERAL RESERVE SYSTEM

of the business loans outstanding were term loans having maturities of more
than one year and that these loans were a significant source of funds for
medium and small concerns as well as for large business corporations. At
large banks the major portion of the loans were to businesses engaged in
manufacturing and mining, with substantial amounts to wholesalers and
public utilities, while at small banks retailers made up the largest group of
business borrowers. Small business units did the bulk of their borrowing
from medium-size and small banks.
Bank loans to consumers reflected the recovery of expenditures for durable
items and the rise in prices of these goods. Consumer credit and its regulation are discussed in other sections of this report.
Expansion of real estate loans has reflected particularly the strong postwar
demand for housing and the consequent inflation of real estate activity and
prices. These conditions produced a larger number of mortgages available
for purchase, and commercial banks apparently increased their share of mortgage holdings relative to other lenders. A large portion of the new loans were
in part guaranteed by the Federal Government under the Servicemen's Readjustment Act.
Rapid expansion in bank loans for business, real estate ownership, and consumption purposes was offset in part by a reduction of about 3.5 billion dollars in loans to brokers and dealers and to others for purchasing and carrying securities. Such loans, after reaching a peak at the end of 1945 during
the Victory Loan Drive, declined rapidly and almost without interruption. The
decline reflected primarily the reduction in loans on Government securities
but also some decline in loans on other securities. At the end of 1946 member bank loans for purchasing or carrying securities amounted to 3 billion
dollars as compared with 6.5 billion at the end of 1945 and somewhat over
one billion at the end of 1941. As pointed out in a later section of this report, loans for purchasing or carrying stocks declined in 1946 to the lowest
level in many years.
CONSUMER CREDIT
During 1946, as in the late months of 1945, consumer credit increased
rapidly. The total amount outstanding increased during the year by more
than 3 billion dollars, or by about 50 per cent. This was a much greater expansion than had taken place in any prewar year and an annual rate of growth
without recent precedent. Consumers' goods were again coming on the market
in quantity, at prices much higher than before the war, consumers were eager
to buy them and in a position to go into debt for the purpose, and both merchants and financial institutions were active in promoting credit extension.
Changes in the various components of consumer credit over the past 18 years
are shown by the chart on page 20. Although the total amount of consumer
credit outstanding at the end of 1946 approached the prewar high, it was still
low in relation to the level of national income and this was particularly true
of instalment credit.

ANNUAL REPORT OF BOARD OF GOVERNORS

The large increase in consumer indebtedness during the year had been foreshadowed by the findings with respect to consumer intentions that were
brought out by a survey early in the year of liquid assets held by the public,
referred to elsewhere. People were intending, it was found, to make extensive use of credit if they could get goods they wanted, notwithstanding their
having in hand cash and other liquid assets in unprecedented amounts.
CONSUMER CREDIT OUTSTANDING
END OF MONTH FIGURES

BILLIONS OF DOLLARS

1930

1932

1934

1936

1938

1940

1942

1944

1946

Large as the year's increase turned out to be, it would have been larger—
and more inflationary—except for the continued restraining influence of the
Board's consumer credit regulation, Regulation W. The principal methods
of restraint applied by the regulation are requirements ( i ) that a substantial
down payment, usually one-third, shall be obtained on instalment sales of specified consumers' durables, such as automobiles and household appliances, and
(2) that the length of instalment contracts, whether arising from instalment
sales or instalment loans, shall not exceed a certain number of months, such as
12 or 15 or 18 months. Under this regulation, the typical maximum maturity permissible throughout most of the year 1946 was 15 months. For certain loans 18 months was permissible during the first two-thirds of the year,
and for instalment sales, except in the case of automobiles, the permissible
maturity was 12 months until this was changed to 15 toward the end of the
year.
Effective December 1, 1946, for peacetime administrative reasons,, the
Board made an extensive revision of Regulation W. This was the first gen

FEDERAL RESERVE SYSTEM

eral revision since May 6,- 1942, when the regulation had been expanded to
cover noninstalment forms of consumer credit—charge accounts and singlepayment loans—and to prescribe terms for a much longer list of consumers'
goods, including many minor durables and semidurables. By the 1946 revision the regulation was again confined to instalment financing, the list of
consumers' goods was cut down to major durables, including automobiles,
household appliances, and a few other items, and numerous simplifying changes
were made in the supporting rules. After the general revision, the regulation
no longer covered the whole field of consumer credit but it continued to apply
to that large part of the field which is subject to the widest range of expansion
and contraction and is accordingly of most consequence as a strategic factor
of business stability or instability.
In announcing this revision, the Board stated that the basic terms of the
regulation would need to be modified in accordance with the course of economic events, and repeated the earlier recommendation that Congress consider
legislation for the permanent regulation of consumer credit.
STOCK MARKET CREDIT
In January 1946 the Board's regulations governing margin requirements
were tightened to require full cash payment for listed stocks, following an increase in margin requirements to 75 per cent of market value in July 1945/
Owing in part to the influence of these restrictions, and to a tapering off and
recession in stock prices, stock market credit declined sharply during 1946 by
600 million dollars. As shown by the chart, the amount owed by customers
to members of the New York Stock Exchange at the end of the year was at
about the lowest level reached in many years.
The rise in stock prices, which had continued without marked interruption
since the spring of 1942, tapered off in the summer of 1946 and was
followed by a decline of about 25 per cent from peak levels. Average prices
fluctuated within a narrow range during the last three months of the year and
at the end were about 10 per cent lower than at the beginning of the year.
The high margin requirements no doubt prevented an increase in the use
of stock market credit, which has ordinarily in the past accompanied rising
prices. They thus helped to limit the extent of the price rise early in the year
and also to remove the pressure of forced liquidation in the decline, thereby
contributing to greater long-run stability in the stock market and the general
economy. The decline in credit offset to some extent the inflationary pressures present in other fields.
In view of the fact that stock market conditions, as well as general economic
prospects, had altered materially by early 1947, the Board on January 17
amended its regulations on margin requirements, effective February 1, to permit credit on the basis of 75 per cent margins. This action, which made the
requirements slightly less restrictive than they had been in 1946, was taken

ANNUAL REPORT OF BOARD OF GOVERNORS

in recognition of the apparent abatement of many of the inflationary forces
that had operated during that year.
STOCK MARKET
PER CENT

MILLIONS OF DOLLARS

180

1800
1600

160

140
120
100

J
-/
/

1400

rXrr
STOCK PRICES
SCALE

w
r

AJI

1000

As*

I AW
/

\jf

1200

600

CU!3T0MERS DEBIT BALA NCES

800

400

SCALE

200

1936

1938

1940

1942

1944

1946

Since the end of the war, stock market credit has declined to a level lower
in relation to stock prices than at any time for which data are available. Such
a change in this relationship is consistent with the new and unprecedented
economic situation which has developed out of the war, particularly the large
amount of liquid assets held by people who engage in stock market operations.
SLACKENED GROWTH IN LIQUID ASSETS
Growth in liquid asset holdings was considerably retarded in 1946 compared
with the rapid wartime rate of expansion. This retardation reflected the
diminished margin between incomes of individuals and their current expenditures, the growth in capital expenditures, and the sharp reduction in the Federal Government deficit. Total liquid assets—bank deposits, currency, and
United States Government securities—amounted to an estimated 225 billion
dollars as of December 31, 1946, as compared with 221 billion a year earlier.
Bank deposits, both demand and time, continued to increase although at a
reduced rate, particularly time deposits. Currency holdings increased only
slightly, compared with an average annual growth of somewhat more than 4
billion dollars during the war years. Although most of the public debt retirement came from holdings of banks, a part of it was from business and in-

FEDERAL RESERVE SYSTEM

dividual holdings, and businesses also used a part of their savings notes to
meet tax liabilities.
Changes in deposits. Deposits held by individuals and businesses at all
banks increased by about 13 billion dollars in 1946. This growth was almost
as large as the average for the war period and added substantially to the
inflationary pressures. During 1945 and other war years, the expansion
in liquid assets had resulted from financing the war in substantial part
through the sale of Government securities to banks, and the large and
relatively inactive deposit balances many businesses and individuals accumulated. In contrast, during 1946 the retirement of Government securities
held by nonbank investors and a revival in private demand for bank credit
were the dominant factors in sustaining expansion of the public's deposits.
These changes are shown in the table below.
FACTORS IN POSTWAR EXPANSION OF DEPOSITS AND CURRENCY HOLDINGS OF INDIVIDUALS AND BUSINESSES

[Figures partly estimated, in billions of dollars]
1946
Expansive factors:
Decrease in U. S. Government deposits
Increase in bank holdings of U. S. Government securities.
Increase in bank holdings of other securities
Increase in bank loans
Net of other factors
Total factors increasing deposits.
Contractive factors:
Increase in U. S. Government deposits
Decrease in bank holdings of U. S. Government securities.
Net of other factors

21.5
0.9
5.3
0.8
28.5

20.8
1.0
4.3
26.1
3.8

15.6
2.3

Total factors contracting deposits.
Increase in deposits and currency—total. . .
Demand deposits adjusted
Time deposits
,
Currency outside banks
NOTE: Figures cover all commercial banks, mutual savings banks, and Federal Reserve Banks;
interbank items are excluded.

In 1946 the growth of demand deposits of individuals and businesses was
almost as large as the average for the last two war years. The growth of
time deposits, which were used widely in late war years as media for individual savings, slackened considerably in the latter half of 1946, especially
in the last quarter.
During the first half of 1946 the increase in demand deposits of individuals and businesses was distributed broadly among the balances of all major
groups of holders. This is in contrast both with late war years, when virtually
all of the demand deposit growth occurred in accounts of individuals and
trade and service concerns, and with the reconversion period in the last half
of 1945 when balances of manufacturers fell off sharply.
In 1946 all regions showed increases in deposits of individuals and busi-

ANNUAL REPORT OF BOARD OF GOVERNORS

nesses close to the average for the country as a whole, whereas during the war
deposits had expanded more rapidly in the South and West than in other
areas. The wartime shift of funds resulted largely because in these two areas
the Government was spending much more money than it was raising from
taxes and the sale of securities. This development reflected the concentration
of special military camps and depots and the relatively greater expansion of
industrial facilities in these areas, together with the very substantial rise in
prices of farm products. In 1946 two of these factors became less important.
Government expenditures declined, and shifts in funds out of the money
centers resulting from current Treasury budget operations may have been offset
in part by some return of funds as a consequence of Treasury debt retirement. The further rise in agricultural prices toward the end of the year,
however, appears to have moderated considerably any tendency in recent
months for funds to shift to the North and East as a consequence of the
increasing production and sale of manufactured goods.
Currency. Currency in circulation, which had expanded rapidly throughout the war period, increased only slightly in 1946. After a substantial post-Christmas decline its volume changed little until the latter part of
May. In the summer and fall, however, expansion was somewhat more than
the usual seasonal amount and at the end of 1946 circulation was about 500
million greater than at the end of the previous year. An increase of this
amount is not large in view of the sharp rise in the volume of private transactions during the year. The increase occurred in bills of $20, $50, and $100 denominations, while bills of small and of very large denominations declined.
These shifts reflect in part the effect of higher prices and income and perhaps
in part the use of moderately large denomination currency to hold idle funds
or for tax evasion and other illegal transactions. The shift from very large
denominations reflects the influence of increased vigilance in reporting and
investigating large currency transactions.
Printing of Federal Reserve notes in denominations of $500 and over
was discontinued during 1946, but notes of these denominations will continue
to be paid out by the Federal Reserve Banks to member banks as long as
present stocks last.
Ownership and uses of liquid assets. A survey of liquid asset holdings of
individuals conducted for the Board in January 1946 showed that a relatively
small portion of the owners held a relatively large portion of the assets, but
that in all probability the distribution was much broader than had characterized the prewar period. This result was apparently to be accounted for by
the rapid growth of income among low-income groups during wartime.
Liquid asset holdings were widely distributed among the various income
groups, consumers with annual incomes below $5,000 holding nearly twothirds of all liquid assets, other than currency, held by individuals. The survey also showed that most consumers regarded their liquid assets as permanent or rainy-day reserves, not to be disposed of in capricious or improvident

FEDERAL RESERVE SYSTEM

spending. At the same time the amounts they intended to spend in 1946, although a small portion of total holdings, were significant additions to other
demands for the limited supplies of goods available.
In addition to these primary findings, the survey provided a number of
items of information foreshadowing developments of the year. For example:
(1) Expenditures, including those for durable goods, would be at such a
level in relation to income for most groups that the volume of current saving
would decline.
(2) The use of instalment and mortgage credit during the year would be
substantial, and would add to funds available from income for expenditures on durable goods and housing.
(3) Use of liquid assets for down payments on durable goods and houses
would add significantly to available funds from income for spending.
(4) Transfers of liquid assets to other forms of investment would exert
some inflationary pressure in investment and realty markets.
All in all, the picture presented by the survey as of the first quarter of 1946
was one of strong inflationary developments in consumer goods and investment markets over the months then ahead. The composite of plans and expectations of various consumer groups as assembled in the survey was substantially borne out by consumer income, expenditure, saving, and debt developments in 1946.
DEMAND, PRODUCTION, AND PRICES
During all of 1946 demand from both domestic and foreign sources continued strong and widespread shortages persisted despite a sharp curtailment
in purchases for military purposes, a substantial increase in the working force
as veterans returned to civilian life, and a large expansion in production for
peacetime purposes. As a result of continued shortages of goods, and often of
manpower, and of drastic and irregular alterations in the stabilization program, prices increased sharply. The greatest increases occurred in the summer during the lapse of price controls and late in the autumn when controls
were largely abandoned, but in the early part of 1947 there were further general price increases. With prices up sharply over the year, with some prices
apparently very high in relation to other prices and to costs, and with inventories considerably increased, there was some question at the beginning
of 1947 concerning the continuance of prevailing prices and of the high levels
of demand, activity, and employment that had characterized 1946. There
were many elements of strength in the situation, including large backlogs
of deferred requirements and purchasing power, and as the year 1946 ended
production and employment were still increasing. It was yet to be determined
whether inflationary influences had spent their force or whether they might
lead to still further price advances, and what the nature, extent, and timing
of subsequent readjustments might be.

ANNUAL REPORT OF BOARD OF GOVERNORS

Increased production and continued shortages. Industrial production,
once again consisting almost entirely of production of goods for civilian use,
was about 55 per cent larger in 1946 than in 1939; agricultural output was
about 25 per cent larger; and activity was substantially above prewar levels
in the transportation, trade, and service industries. In comparison with the
war years, industrial production for civilian purposes was up about 100 per
cent, as shown on the chart, although total industrial production was down
about one-third. Drastic reduction of output for war purposes was reflected in
these changes. War production—including munitions and supplies for the
armed forces of the United States, industrial equipment essential for war production, and all such goods provided to Allied nations under lend-lease—in
1943 and 1944 n a d been roughly two-thirds of all output in industry while in
the economy as a whole war activities had represented something over twofifths of the total.
INDUSTRIAL PRODUCTION
FOR WAR AND CIVILIAN PURPOSES
1935-1939 AVERAGE = 100

POINTS IN TOTAL INDEX

250

200

150

100

1939

1941

1943

1946

Shortages of finished goods persisted in 1946, partly because some of the increased output went to build up depleted business inventories of materials,
goods in process, and finished products. In certain instances, also, products
were accumulated and temporarily withheld from the market in anticipation
of higher prices. The volume of output, while large as compared with prewar output, fell short of postwar capacity, especially during the early part of
1946, owing to lack of balanced supplies of materials and component parts
and to prolonged labor-management disputes in important industries, includ

FEDERAL RESERVE SYSTEM

ing those producing steel, automobiles, electrical equipment, and coal. And,
even at capacity, production would not have been sufficient to meet all demands
quickly, chiefly because many demands had been accumulated over a period of
several years. Such deferred demands were particularly large for new housing, for some types of industrial and commercial facilities, and for durable
consumers' goods, especially automobiles and major electrical appliances. But
in this initial period there were also important deferred demands for semidurable goods, such as men's clothing and textile housefurnishings.
Strong demand, especially for nondurable goods and services, reflected
in part a disposition on the part of buyers to spend freely to meet their requirements. This disposition was evident in markets for both consumers' and producers' goods and could be attributed in part to the unusually strong financial
positions prevailing at the beginning of the year. Funds had been accumulated
in large volume when goods were not available for purchase and when prices
in general were being effectively controlled. As pointed out elsewhere in this
report, these accumulated funds not only provided a backlog of purchasing
power for immediate use but also encouraged the spending of current incomes,
which were more than double those of prewar years. In the war period net
current savings of individuals, representing the difference between new savings and drafts on past savings, had risen to over 30 per cent of income after
personal taxes. In the latter part of 1945 they began to decline and by the
end of 1946 they were down to only about 11 per cent of current income.
This was only slightly above the level prevailing before the war when incomes
were not so high and all sorts of goods were available for purchase. In the
case of foreign buyers, needs for food and for equipment for rehabilitation
were urgent in many countries and sufficient funds were available, on either
a relief or a commercial basis, to finance purchase of more goods than could
be obtained here under prevailing conditions.
Modification of stabilization program. With shortages continuing in many
lines and with no important surpluses in evidence, the problem of preventing
inflationary price increases continued to be of great significance for the economy. The necessity of stabilization as a wartime measure, however, no longer
provided over-riding support for the various types of direct and indirect controls designed to curb inflationary developments in prices and costs—controls
which had never extended to prices of existing properties such as urban and
farm real estate. Consequently, in a series of administrative and legislative
actions, beginning immediately after the end of the war with Japan in August
1945, the stabilization program was modified, and finally, in October and November of 1946, largely abandoned.
Modification of the stabilization program proceeded at an uneven pace and
at times controls previously set aside were reinstituted. Thus, controls over
activity in the building field, largely withdrawn in the autumn of 1945, were
reinstated and extended in the early part of 1946 in an attempt to stimulate
construction of housing for veterans. Also, action was taken in the spring to

ANNUAL REPORT OF BOARD OF GOVERNORS

restrict wheat consumption in order to provide aid to people in countries where
starvation threatened. And in the commodity price field, after a brief period
of experimentation with free markets in July, controls were reimposed in
modified form.
In general, however, there was growing opposition to restrictive measures.
This opposition was based partly on doubt about the effectiveness of selected
control measures. There was skepticism of their efficacy in preventing price
increases, providing a reasonable balance between costs and prices, promoting
production of peacetime essentials, and attracting to this country a proper
share of the materials available abroad. In some lines supplies were withheld
from the market in protest against continued price controls. In these circumstances, formulation and enforcement of a stabilization program appropriate
to the times became increasingly difficult and in the end controls were removed
while shortages still constituted a real threat of further inflationary price
advances.
Higher prices. The continued shortages of goods and services and the
weakening of the stabilization program contributed largely to widespread increases in commodity prices, wage rates, and property values during 1946.
These increases were to a degree interdependent and cumulative, and they all
affected the nature of the stabilization program. Increases in prices reflected
the strong sellers' market as well as higher costs, and returns to business and
agriculture increased sharply during the year.
The increases in wage rates came in greater part during the early months
of the year when new contracts were negotiated in a number of leading industries following strikes. As increases spread to other lines, however, the
general course of rates continued upward throughout the year. In manufacturing, with average hours of work per week practically unchanged, average
hourly earnings rose from $1.00 in December 1945 t 0 $ I - I 5 m December
1946. In nonmanufacturing industries, also, wage rates rose throughout the
year.
Commodity prices generally moved upward in the first half of 1946,
especially in wholesale markets, although most of the year's large advance
came later. The official index showed a rise of 5 per cent in wholesale
prices in the first half-year and the actual rise appears to have been somewhat greater, reflecting in part the transaction of an increasing volume of
business at above ceiling prices, as, for example, in the building materials
field. During the lapse of price control in July, prices of agricultural products and their manufactures increased sharply. In the autumn, when most
remaining controls were abolished, there were further increases in the prices
of these products and sharp advances in the prices of other commodities,
such as metals and metal products. At the end of the year wholesale prices
of commodities were about one-third higher than at the beginning of the

FEDERAL RESERVE SYSTEM

year and consumer prices, including rents, which showed little change, were
up 18 per cent.
The rise during the year of one-third in wholesale prices as a group reflected
advances of nearly 50 per cent for foods, due in part to withdrawal of subsidies ; about the same percentage for hides and leather products; about 30 per
cent for farm products, textile products, chemicals, metal products, and building materials; and less marked increases for other groups of products. The
level reached by wholesale prices, as shown in the chart, was three-fourths
above the 1935-39 average, with by far the greatest increase shown by agricultural products.
PRICES
MONTHLY, 1935-39 » 100

A-

A
f
1 JA
h«

200
160
120

./
/

)

200

40
-

1914

1916

1918

1920

1922

NOTE: Bureau of Labor Statistics indexes.
base by Federal Reserve.

1938

1940

1942

1944

1946

Index of wholesale prices converted to 1935-39

Consumer prices reached a level one-half above the prewar average despite
stability in rents. In general, except for agricultural products and their
manufactures, the increases in prices over prewar levels were not so large
as those shown for the First World War period. The changes in consumers'
prices and in wholesale prices shown in the accompanying chart are overstated somewhat, since the indexes contained fewer quotations for the more
slowly moving finished products in the earlier period than they have in
recent years.
In markets for real property, price advances were marked in 1946, with
sharp increases in urban values through the summer and with continued in-

ANNUAL REPORT OF BOARD OF GOVERNORS

creases in farm values of a more gradual sort, amounting to about 14 per cent
for the year as a whole. Urban residential property values in many instances
reached levels more than double those prevailing before the war and on the average were probably three-fourths above the prewar level. Farm real estate
values in November were 83 per cent above the 1935-39 average, with increases
ranging from about 40 per cent in the Boston Reserve District to around
100 per cent in the Cleveland, Richmond, Atlanta, St. Louis, and San
Francisco Districts.
Increased incomes. Higher prices, higher wage rates, and higher profit
rates, together with increased production and employment for civilian purposes, raised the dollar volume of gross national product steadily throughout
1946, despite further curtailment of military activities. In the fourth
quarter, at an annual rate of nearly 205 billion dollars, the gross product
was close to the wartime peak of 208 billion dollars reached in the second
quarter of 1945 and about 20 billion dollars above the level of the fourth
quarter of 1945.
The decline in military activities during 1946 was reflected in a reduction
of 10 billion d.ollars in the annual rate of payments to the armed forces
(from 14 billion dollars in the last quarter of 1945 t 0 4 billion in the last
quarter of 1946) as their number was reduced sharply from 10 million to
2 million. In the same period there was a sharp decline in Federal outlays
for goods, chiefly for military purposes.
Meanwhile employment in the production of goods and services for civilian
purposes increased sharply and the total number of persons employed, excluding those in the armed forces, rose from 51.4 million in the fourth
quarter of 1945 to 56.8 million in the fourth quarter of 1946. This rise in
employment, with average hours of work per week showing little decline
and with wage rates rising, was reflected in an increase of 17 billion
dollars or nearly one-fourth in the annual rate of private wage and salary
payments. This increase more than offset the decline of 10 billion dollars in
payments to the armed forces. The sharpest percentage increase was in the
construction industry but there were substantial increases in trade, manufacturing, and mining and less marked increases in other lines.
From the last quarter of 1945 to the corresponding period in 1946, the
estimated annual rate of corporate profits after taxes rose from about 7
billion dollars to fully twice that amount, and the rise for farm and other
entrepreneurial income, excluding net rents and royalties, was from 26
billion dollars to 35 billion, reflecting increases both for farmers and for small
businesses, chiefly in trade and service activities. The sharp rise in corporate
earnings reflected not only the transaction of a larger volume of business at
higher prices, but also elimination of the excess profits tax, a reduction in
corporate income tax rates, and a considerable increase in inventory profits.
In agriculture price advances were of special importance and, although the
volume of marketings showed little rise from the fourth quarter of 1945 to

FEDERAL RESERVE SYSTEM

the fourth quarter of 1946, net income of farm operators increased by about
one-half. For the year as a whole the rise, as estimated by the Department of
Agriculture, was 14 per cent, from 13 billion dollars to 15 billion. Cash receipts from marketings showed a rise of 15 per cent, with the greatest increases in cotton (60 per cent) and in feed grains (40 per cent). Cash returns from marketings of meat animals and dairy products were up about 18
per cent. Returns from most crops other than cotton and food grains showed
less increase.
INDIVIDUAL INCOMES, EXPENDITURES, AND TAXES
SEASONALLY ADJUSTED, ANNUAL BASIS
QUARTERLY

BILLIONS OF DOLLARS

180

1939

1940

1941

1942

1943

1944

1945

1946

NOTE^ Department of Commerce estimates. Amounts indicated as "Savings" represent excess
of individual incomes over consumer expenditures and taxes.

Income payments to individuals, as shown on the chart, rose to a new
peak rate of 173 billion dollars in the fourth quarter of 1946, notwithstanding continued reductions in payments to the armed forces. This
rate was about 16 billion dollars or 10 per cent higher than that in the
fourth quarter of 1945 and nearly two and a half times the 1939 rate of 71
billion dollars.
Rise in consumer expenditures. Consumers were in a position to buy additional supplies of goods as they became available even though prices were
considerably higher. Incomes were higher, Federal personal tax rates had been
lowered somewhat at the beginning of 1946, holdings of liquid assets were
substantial, and credit was readily available. In particular instances consumers

ANNUAL REPORT OF BOARD OF GOVERNORS

showed an unwillingness to pay the advanced prices, but in general they spent
rather freely. Consequently the rapid rise in consumer expenditures which
had begun soon after the surrender of Japan continued through 1946. Such
outlays in the fourth quarter of 1946 were about 20 per cent larger than in
the fourth quarter of 1945 and nearly 35 per cent larger than in the second
quarter of 1945.
In the initial stages of the transition period during the latter part of 1945,
the rise in consumer expenditures was mostly in outlays for food, clothing
and other nondurable or semidurable goods, as shown in the table. This rise
was due primarily to the increased availability of such goods for civilian consumption and to the increase in the civilian population as veterans returned.
In the first half of 1946 supplies of furniture, electrical appliances, and
various other durable consumers' goods increased and for this group as a whole
the rise in outlays from the fourth quarter level was about as large as it was
for nondurable goods, although supplies of new passenger automobiles and
some other durable consumers* goods continued to be very restricted. In this
period there was an increase also in expenditures for services, as manpower
and supplies became more readily available.
In the second half of 1946 price advances accounted for the major share of
the further rise in outlays. The physical volume of nondurable goods sold
to consumers apparently did not increase after the middle of the year and
in some lines declined. Supplies of durable goods generally increased and
for the first time in the postwar period deliveries of new passenger cars were
in substantial volume.
CONSUMER EXPENDITURES, 1945

AND

1946

[Seasonally adjusted annual rates, in billions of dollars]

Year and quarter
1945—First.. .
Second
Third . .
Fourth
1946—First
Second
Third
Fourth

Total
105.0
101.8
106.0
113.0
121.0
122.1
129.6
136.0

Durable
goods

Nondurable
goods

Services

7.4
7.1
7.4

65.0
61.5
65.1
70.6
75.1
74.0
78.3
81.8

32.6
33.2
33.5
33.3
34.2
35.0
36.3
37.5

9.0

11.7
13.1
15.0
16.7

SOURCE: Department of Commerce.

Rise in business outlays. Throughout the year business outlays for nearly
all purposes were large and growing. Producers and distributors were increasing their inventories, which quite generally had been depleted, and were
improving their plant and other operating facilities either through repair and
modernization or through expansion. In the early part of the year business
enterprises were able to increase their inventories at an annual rate of only
about 4 billion dollars. Demands for finished products continued to be
insistent and supplies of materials continued short. In the second half of the

FEDERAL RESERVE SYSTEM

year business holdings of inventories increased at an estimated annual rate of
around 9 billion dollars, not counting upward revaluation of inventories as
prices advanced. At this exceptionally high rate, inventory accumulation
accounted for an important part of current production.
Outlays for capital improvements increased considerably during 1946,
continuing the advance begun in the early part of 1945. Business expenditures
for durable goods rose from an annual rate of 8 billion dollars in the fourth
quarter of 1945 to a rate of nearly 16 billion in the fourth quarter of 1946.
Substantial amounts of machine tools were being acquired from the surplus
supplies of the Federal Government. Outlays for new plant facilities also
rose during this period, although they were restricted somewhat by shortages
of materials and by Federal action aimed to channel a substantial share of
lumber and other scarce building materials and supplies into new housing for
veterans.
The value of private residential building, which had already increased
considerably in the latter part of 1945, rose sharply through the summer of
1946, reflecting increasing supplies of materials, strong demand conditions,
and increasing costs. Later there was a marked decline in the number of
new houses started and some reduction in the amount of work under way,
but the level at the end of the year was considerably more than double that
of a year earlier. Expenditures for private residential building during the
year totaled 3.3 billion dollars, as compared with 0.7 billion in 1945 and
2.8 billion in 1941, when building costs were not so high by a considerable
margin.
Costs of building rose rapidly in 1946 partly as a result of ceiling price
adjustments made in the early part of the year, but mainly because of increasing black-market operations, growing disruptions resulting from uneven
flow of materials, and, in the latter part of the year, the removal of controls
over prices of materials.
During the year as a whole, with special efforts to stimulate production of
materials and to allocate them to residential building for veterans, approximately 670,000 privately financed permanent nonfarm dwelling units
were started. About half of these were completed during the year along
with 125,000 units started in 1945. These new units, together with 45,000
units in converted structures, made a total of about a half million units added
to the existing supply of 31.5 million. In addition, accommodations of a temporary sort were provided for 200,000 families and many single persons.
Roughly 350,000 permanent units were carried over unfinished into 1947.
Further decline in Government outlays. Government expenditures for
goods and services declined further during 1946, especially during the first
three quarters, as continued sharp decreases in Federal war outlays were
offset only in small part by increases in Federal nonwar outlays and in State
and local government expenditures. The annual rate of expenditures for
goods and services by all governmental units in the fourth quarter was about

ANNUAL REPORT OF BOARD OF GOVERNORS

30 billion dollars, divided evenly among Federal war outlays, Federal nonwar outlays, and State and local outlays taken together. These figures do not
include various other governmental expenditures such as payments to veterans and social security benefits.
The course of consumer expenditures, private outlays for capital formation,
and Government expenditures for goods and services is shown in the accompanying table for the years 1945 and 1946. The figures for private capital
formation, it may be noted, include figures representing the excess of exports
over imports of goods and services, as well as the various business outlays
discussed above. Foreign trade is discussed in another section of this report.
EXPENDITURES FOR GOODS AND SERVICES, 1945

AND

1946

[Seasonally adjusted annual rates, in billions of dollars]

Year and quarter

1939
1940
1941
1942
1943
1944
1945
1946

Total
Government
expenditures expenditures
(Gross nafor goods
tional product) and services

Private
gross
capital
formation

Consumer
expenditures
for goods
and services

88.6
97.1
120.2
152.3
187.4
197.6
199.2
194 0

16.0
16.7
26.5
62.7
93.5
97.1
83.6
34 7

10.9
14.8
19.1
7.6
2.5
2.0
9.1
32.1

61.7
65.7
74.6
82.0
91.3
98.5
106.4
127 2

1945—Fi rs t
Second
Third
Fourth

205.1
208.2
198 2
185.2

96.5
99.8
81.0
57.2

3.6
6.6
11.2
15.0

105.0
101.8
106.0
113.0

1946—First
Second
Third
Fourth

183 7
190.2
196.6
204.7

39 6
36.7
31.3
30.8

23.1
31.4
35.7
37.9

121.0
122.1
129.6
136.0

SOURCE: Department of Commerce.

General situation at end of 1946. The general situation throughout the
year 1946, then, was one of strong demand for goods and services, of high
incomes, and of little unemployment. In many quarters, however, doubt was
being expressed in the latter part of the year concerning the maintenance of
these conditions, in view of various unstable elements in the situation. Price
advances had been large, in some cases very large, and increases in income
uneven. In consequence, the real incomes of many people in terms of command over goods and services were reduced. Moreover, many new price relationships had developed, as, for examph, between agricultural and nonagricultural commodities, and they appeared unstable from a longer-range
point of view. Similarly, many of the adjustments of production to meet
the unusual demand situation of the immediate postwar period seemed likely
to prove of a temporary nature. Production for inventory had become an
important part of the total and one which clearly could not be sustained. It
may be expected that backlogs of demand will eventually be exploited, business

FEDERAL RESERVE SYSTEM

inventory requirements will be met and exceeded, and unusual limitations on
supplies of commodities, both domestic and imported, will disappear.
In the latter part of the year inflationary developments in a few lines
were being followed by reactions. Such reactions as occurred, however, were
limited to reductions in buying, as by department stores following a leveling
off in their sales, and to reductions in prices of some basic commodities
such as cotton and corn and certain finished luxury goods such as fur coats
and sport clothes. Prices in futures markets, particularly for grains, were
below spot prices, reflecting the prospect of future increases in supply. The
quality of products was generally improving and the terms of sale in many
instances were being readjusted to peacetime standards, as in cases where
escalator clauses in contracts were being eliminated. On the other hand,
prices were still advancing for some types of commodities, particularly metals
and metal products and building materials, in which there were continued
shortages. Export demand was increasing further. Production and incomes
generally were continuing to expand. Thus the year 1947 was beginning with
economic activity and prices at levels much higher than a year earlier but much
less certain to be maintained throughout the year.
INTERNATIONAL TRADE AND FINANCE
Since the end of the war a substantial part of the productive power of the
United States has been devoted to meeting the urgent requirements of
foreign countries, especially the devastated areas of Europe and Asia. Gross
United States exports of goods and services during 1946 amounted to 7 per
cent of our gross national product. By providing this flow of supplies, accompanied by substantial measures of financial assistance, the United States made
a large contribution to relief and reconstruction abroad, without which
world recovery would have been seriously retarded, if not made impossible.
The value of recorded exports from the United States for the year 1946,
amounting to 9.7 billion dollars, was about the same as in the previous year.
Though well below the wartime level, when vast shipments of munitions
were made under the lend-lease program, the value of exports last year was
more than three times that of the immediate prewar years, while the volume
was about twice as great. Total sales of United States merchandise during
the year, including surplus property located abroad and civilian supplies
furnished to occupied areas (neither of which is shown in the recorded
trade data), are estimated by the Department of Commerce at 12.2 billion
dollars, and total services rendered by this country at 3.1 billion dollars.
Many of the devastated areasof Europe and Asia, while dependent upon
the United States for a large share of their relief and reconstruction requirements, were incapable of supplying even their normal volume of exports
to this country. The dollars earned by foreign countries as suppliers of
merchandise to the United States, amounting to 5.2 billion dollars, and

ANNUAL REPORT OF BOARD OF GOVERNORS

United States payments of 1.9 billion dollars to foreign countries on seivice
account, covered less than half of United States exports of goods and services
during the year. The balance was financed mainly through grants and credits
extended by the United States Government, but there-were also substantial
drafts upon foreign holdings of gold and dollar resources. A broad summary
of the balance of payments for the year, based mainly upon figures compiled
by the Department of Commerce, is shown in the accompanying table.
INTERNATIONAL TRANSACTIONS OF THE UNITED STATES, 1946

[In billions of dollars]
Item

Net
Credits Debits credits (+)
or debits (—)

Goods and services:
Recorded exports and imports.
Other transfers of goods
Services
Total goods and services.
Donations ("unilateral transfers") by the United States:
United Nations Relief and Rehabilitation Administration
Supplies to occupied areas
Lend-lease
Other Government aid (net)
Private donations (net)

9.7
2.5
3.1

4.9
0.3
1.9

15.3

7.1

Total.
Transfers on U. S. Government credits:
Export-Import Bank disbursements.
British credit
Lend-lease pipeline credits
Surplus property credits
Total.
Use of foreign gold and dollar resources (net)1
Miscellaneous (net)
1

+4.8
+2.2
+1.2
+8.2
-1.5
-0.6
-0.1
-0.2
-0.7

-1.0
-0.6
-0.5
-0.9
-3.0
-2.0
-0.1

Excluding reduction of foreign claims on United States Government.

Distribution by areas. These global figures conceal marked differences in
the economic and financial relations of the United States with different geographic areas. It is not feasible on the basis of existing information to present
a full balance of payments of the United States with particular foreign areas,
but the following table shows the recorded export and import transactions
of the United States by country groups. The table has been designed to
group the more significant deficit balances in accordance with the methods
by which they were financed. The bilateral balances shown bear a reasonably close relation to the dollar requirements of the countries concerned even
though they exclude an important volume of service transactions. The bilateral approach to the financing problem necessarily ignores the existence of
multilateral settlements, but these were of relatively minor importance during
1946.

FEDERAL RESERVE SYSTEM
UNITED STATES FOREIGN TRADE IN

1946

[In millions of dollars]

Region and country-

Exports
including
re-exports

General
imports

Export or
import ( —)
balance

Europe
United Kingdom
Western Europe (France, Belgium, Luxembourg, and
Netherlands)
Northern Europe (Denmark, Norway, and Sweden)
Eastern and Southern Europe (U.S.S.R., Poland, Czechoslovakia, Austria,Yugoslavia, Albania, Italy, and Greece). ..
All other

4,098
856

796
156

3,302
700

1,213
323

163
65

1,050
258

1,339
367

215
197

1,124
170

Asia

1,343

908

435
373
257
-195

China
Philippine Islands
All other

93
40

466
297
580

675

North America
Canada
Mexico
Another

2,544
1,442
505
597

1,647
882
233
532

897

South America
Australia and Oceania
Africa

1,152
117
488

1,095
183
306

57
-66
182

Total

9,742

4,935

4,807

560
272
65

In the case of the United Kingdom, for example, the 700 million dollar
deficit in its recorded trade with the United States was closely matched by its
drafts upon credits provided by this country. The sum of 600 million dollars
was drawn during the year upon the 3,750 million dollar British credit from
the United States Treasury approved in July, and a further 100 million dollars
in goods was shipped during the year under the general British war settlement credit.
In the case of Western Europe (France, Belgium-Luxembourg, and the
Netherlands), the 1,050 million dollar merchandise import balance with
the United States also corresponded closely with drafts upon United States
credits by the countries in that area. During 1946 the Export-Import Bank
disbursed 819 million dollars to these countries (626 million dollars to
France alone), while 250 million dollars of United- States exports to these
countries represented deliveries under lend-lease "pipeline" credits (covering
lend-lease goods on order at the end of the war).
Northern Europe (Denmark, Norway, and Sweden), on the other hand,
was able to finance the bulk of its net imports from the United States out
of existing dollar resources and out of earnings on service account (especially
from shipping). The Swedish central bank reported a loss in its gold
reserves of 100 million dollars during the year, and much of this decline
may be attributed to settlement of accounts with the United States. ExportImport Bank disbursements of about 7 million dollars were made to Denmark during the year.
The needs of Eastern and Southern Europe were covered mainly

ANNUAL REPORT OF BOARD OF GOVERNORS

through UNRRA shipments for relief and rehabilitation. Nearly 0.9 billion
dollars out of the 1.1 billion dollars of UNRRA exports from the United
States during 1946 was sent to the countries grouped under this heading
in the accompanying table, and these deliveries covered four-fifths of the
merchandise trade deficit of these countries with the United States. Much of
the remaining gap was closed by United States credits, in particular 150
million dollars of deliveries to the U.S.S.R. under a lend-lease "pipeline"
credit and 38 million dollars of disbursements by the Export-Import Bank
on loans to Poland, Czechoslovakia, Italy, and Greece.
In the case of the Far East, a considerable contribution to the financing of
the Chinese deficit was made through UNRRA deliveries amounting to perhaps 150 million dollars during the year, while the Philippine situation was
met in large part by United States Government expenditures in that country.
Credits to this area played a minor role during the year, and both China
and the Philippines found it necessary to draw extensively upon their existing
dollar resources. A number of other Asiatic countries, on the other hand
(notably India and British Malaya), had a substantial export surplus to the
United States.
Canada and Mexico both showed large deficits in their bilateral merchandise trade with the United States during 1946, much of which had to be
met by liquidation of their existing dollar resources. Both countries, however, realized net earnings on service account, mainly as a result of tourist
trade. The case of Canada is of special interest because that country, despite
its deficit with the United States, had an over-all merchandise export surplus
of some 400 million dollars during the year. Exports to countries other than
the United States, however, were financed to a large extent by Canadian
loans and relief grants so that they produced little free exchange for use by
Canada in meeting payments to the United States.
The approximate balance in merchandise trade between this country and
South America, taken as a whole, conceals certain import and export surpluses
which are of substantial importance to the South American countries concerned, but of secondary importance in the general foreign trade of the
United States. It is significant that the total gold and dollar holdings of
South American countries, which increased from 1.0 billion dollars at the end
of 1941 to about 2.8 billion at the end of 1945, remained practically unchanged during 1946. Although these holdings are not equally distributed
among the countries on the Continent, to a considerable extent they represent
funds readily available for meeting future trade requirements.
Trade with the remaining areas of the world (Africa, Australia, and
Oceania) produced a small net balance in favor of the United States. On
the other hand, there were substantial imports of South African gold.
In addition to recorded exports, the United States transferred merchandise
valued at some 2.5 billion dollars to foreign countries during the year, the
major portion of which consisted of surplus property sales and provision of

FEDERAL RESERVE SYSTEM

civilian supplies to occupied areas. Surplus property disposals amounted to
about 1.6 billion dollars. Approximately 250 million dollars of these sales
were made against the cancellation of dollar claims upon the United States
by China, the Philippines, and India, while ioo million represented a free
grant to the Philippines. Most of the remainder was made against payment
on deferred terms, at a moderate interest rate and with amortization over an
extended period. By the end of 1946 sales had been negotiated for nearly 85
per cent of the surplus property located abroad and declared as of that date.
The transfers of civilian supplies to occupied areas have been estimated at
550 million dollars and were financed from War Department appropriations
under its authority to provide minimum supplies to prevent "starvation,
disease, or unrest" in areas under occupation by United States armed forces.
The transfers give rise to general claims against the recipient countries, but
the status of these claims is not well defined and deliveries under this program have been tentatively classified by the Department of Commerce as
"unilateral transfers." These supplies, although shipped for the most part
from the United States, do not appear in recorded merchandise exports.
Foreign gold and dollar resources. Despite the large amount of foreign
grants and credits made available by the United States during 1946, foreign
contries as a whole found it necessary to make substantial drafts upon their
holdings of gold and dollar resources.
The net gold inflow to the United States from abroad (including net
releases from earmark in this country) amounted to about 775 million
dollars during the year. This movement represented a marked change from
the war period, during which the United States lost gold on a substantial
scale. The monetary gold stock of the United States, which reached a peak of
22.8 billion dollars shortly before Pearl Harbor, had fallen by the end of
1945 to about 20.0 billion, largely as a result of sales of gold by the United
States to foreign countries supplying this market. By the end of 1946, however, it had again reached more than 20.5 billion.
The net gold inflow during the year was only slightly in excess of the
amount of new gold mined in foreign countries other than the U.S.S..R.
Soviet production, though not reported for many years, was undoubtedly substantial, but an even larger amount of gold was probably absorbed in private
hoards throughout the world. On the whole, therefore, it is likely that
aggregate holdings of gold by foreign monetary authorities declined somewhat
during the year. By the end of 1946, however, these authorities probably still
held nearly 16 billion dollars" in gold, or 43 per cent of the world's total
monetary gold reserves, whereas at the end of 1941 they held only about
10.5 billion dollars or 31 per cent of a substantially smaller total. The
United States share, therefore, declined from 69 to 57 per cent during this
period.
In view of the fact that such important holders of gold as the U.S.S.R., the
United Kingdom, and Canada do not publish their current gold reserve posi

ANNUAL REPORT OF BOARD OF GOVERNORS

tions, it is difficult to trace shifts in gold holdings among particular countries.
On the basis of published figures, Tiowever, it would appear that France
was the principal loser of gold during 1946. Whereas total French gold
holdings exceeded 1,500 million dollars at the end of 1945, by the end of
1946 reported holdings of the Bank of France (excluding such gold as may
have been held by the French Stabilization Fund on that date) amounted to
only 800 million dollars. Sweden and Mexico each reported losses of about
100 million dollars in gold during the year, while scattered gains were reported by a number of other countries. It would appear that larger gains
must have been realized by some of the major nonreporting countries.
Dollar balances held in the United States by foreign countries supplied a
net amount of some 875 million dollars toward meeting foreign requirements
during 1946. The dollar balances of foreign central banks and governments
were drawn upon to the extent of over 1,100 million dollars net, mainly as
a result of heavy drafts upon the British, Canadian, Philippine, and French
accounts. This decline in official funds was compensated in part, however, by
a widely distributed expansion of balances held for private foreign account.
Both categories of foreign funds remain far above prewar levels. At the
end of 1946, official balances still amounted to 3.0 billion dollars as compared
with only 0.5 billion at the end of 1938 and private balances came to 3.0
billion dollars as compared with 1.7 billion in 1938.
Foreign countries also made net sales to the United States of marketable
domestic securities (both stocks and bonds, including United States Government bonds) amounting to 335 million dollars during 1946. This reflected
mainly liquidation of Chinese, British, and Netherlands holdings; several
Latin American countries, on the other hand, were small net purchasers of
securities in this country.
Prospects for 1947. With increasing supplies of goods available in the
United States and with substantially higher prices on exported commodities,
especially foodstuffs, the value of merchandise exports from this country during the early months of 1947 n a s reached record figures, far surpassing the
1946 level. The world food shortage continues to be critical, and there are
immense requirements for other American products in connection with recovery and reconstruction abroad. Even in countries which escaped serious
war damage and disruption, there exists a very large demand for imports
arising from high levels of current domestic income and accumulated liquid
funds, combined with large deferred demands for both consumers' and producers' goods which could not be satisfied under wartime conditions. United
States exports may soon come to be limited mainly by the volume of available
purchasing power in foreign hands. Some of this purchasing power must
also be used to meet net payments to the United States on service transactions,
which may again be as large as in 1946 in view of the very high level of earnings by United States shipping; small additional amounts may still be required for purchases of United States surplus property located abroad.

FEDERAL RESERVE SYSTEM

Foreign purchasing power for United States exports is derived from United
States imports, from United States grants and credits to foreign countries,
and from liquidation of foreign gold and dollar assets. It appears that the
latter source may be relied upon much more heavily in 1947 than in the
previous year. United States merchandise imports were far smaller in
1946 than might have been anticipated in view of the high level of domestic
production and income. As supplies become more readily available in foreign
areas, shipments to this country should expand considerably; merchandise
imports of over 6 billion dollars may be expected for 1947.
Unilateral transfers, including the civilian supply program for occupied
countries, public relief grants, and private relief and remittances will probably
provide some 2.5 billion dollars. The civilian supply program is likely to be no
smaller in 1947 than during the past year. UNRRA deliveries to Europe will
continue through the first quarter of 1947 and shipments to the Far East some
three months longer. In addition, the Congress has authorized 350
million dollars to provide supplementary relief for the period following
cessation of UNRRA operations, as well as 400 million dollars for special
assistance to Greece and Turkey; however, these sums will not all be delivered in 1947.
Dollar credits from various sources may provide as much as 4 billion
dollars. The United Kingdom may need to draw up to 2 billion dollars
upon its line of credit during 1947, both to finance its own purchases in
the United States and to provide freely convertible currency for other net
suppliers of the British market after the middle of the year. Export-Import
Bank disbursements in 1947 have been estimated by that agency at a minimum of one billion dollars. Various other United States lending agencies,
plus some private long-term American investment in foreign countries, may
supply half a billion dollars, and a further half billion is likely to be forthcoming during 1947 from the International Fund and Bank, which had not
yet commenced active financial operations by the end of 1946.
If grants and credits become available in this volume during 1947, foreign
countries may be able, after meeting other current demands upon their
supply of dollars, to finance purchases of at least 11.5 billion dollars of United
States merchandise exports without drawing upon their gold and dollar
assets. However, in view of urgent foreign requirements, it appears likely
that foreign countries will in fact be prepared to make large further inroads
upon their holdings of such assets if they can find the goods available in the
United States to meet their needs. Over one billion dollars of these assets
were actually liquidated in the first quarter of the year. Total exports, recorded and unrecorded, may therefore be substantially greater than the figure
named above, and foreign gold and dollar reserves may suffer substantial depletion during the coming year. Such depletion of reserves, together with
the rapid consumption of available grants and credits, promises to create a
serious dollar financing problem for foreign countries by the end of the year.

ANNUAL REPORT OF BOARD OF GOVERNORS

CHANGES IN REGULATIONS OF THE BOARD OF GOVERNORS

Consumer credit. Regulation W, relating to consumer credit, was amended
on three occasions during 1946. The first amendment, effective July 5, 1946,
made the regulation applicable to sales of listed articles in a principal amount
of $1,500 or less (there had previously been no dollar limit with respect to
sales); it eliminated attic ventilating fans and automobile tires, batteries and
accessories from the list of articles, and made certain technical changes. The
second amendment, effective September 3, 1946, changed the regulation in
two respects: The regulation was made applicable to all consumer credits up
to $2,000 instead of only those up to $1,500; and the maximum maturity for
instalment loans not connected with the purchase of listed articles was reduced from 18 months to 15 months.
The regulation was extensively revised effective December 1, 1946. The
principal changes made by the revision were to confine it to instalment credit
(by eliminating the provisions relating to charge accounts and single-payment loans) and to center it on purchases of major durable goods (by
eliminating many of the articles, including all articles priced at less than $50,
which had previously been listed in the regulation). In addition, the revision
simplified the regulation in many respects, making it administratively more
workable. The changes made by this revision and the reasons therefor are
discussed more fully elsewhere in this Report.
Margin requirements for purchasing securities. As stated in the previous
Annual Report, the Board's Regulation T, entitled "Extension and Maintenance of Credit by Brokers, Dealers, and Members of National Securities
Exchanges" and Regulation U, entitled ''Loans by Banks for the Purpose of
Purchasing or Carrying Stocks Registered on a National Securities Exchange"
were amended effective January 21, 1946 to increase margin requirements to
100 per cent both for purchases of registered securities and for short sales.
Effective February 1, 1947, these requirements were reduced to 75 per cent,
which was the level prevailing from July 5, 1945 to January 21, 1946.
Effective December 1, 1946, both regulations were amended so as to permit
stockholders of any corporation who receive rights to subscribe to new issues
to obtain credit for the purpose of exercising these rights. Securities pledged
for this purpose were given a loan value of 50 per cent by the amendment.
The new provision applies also to cases in which a public utility holding
company, when simplifying its structure as required by the Public Utility
Holding Company Act of 1935, issues to its stockholders rights to subscribe
to its holdings of outstanding securities of operating companies.
Acceptances by member banks. Regulation C, relating to the acceptance
by member banks of drafts or bills of exchange drawn against domestic or
foreign shipments of goods or secured by warehouse receipts covering readily
marketable staples and the acceptance of drafts or bills drawn for the purpose
of creating dollar exchange, was revised effective August 31, 1946. The revision made no major changes of substance in the regulation, but made certain

FEDERAL RESERVE SYSTEM

changes designed to simplify and clarify its provisions in the light of experience
over a number of years.
Administrative procedure rules. Pursuant to the Administrative Procedure Act and other relevant provisions of law, the Board, effective September I I , 1946, adopted Rules of Organization and Rules of Procedure. As
specified in the Administrative Procedure Act, the Rules of Organization
describe the Board's central and field organization, including delegations of
final authority and the places and methods by which the public may secure
information or make submittals or requests, and the Rules of Procedure
describe the method by which the Board's functions are carried out, its procedures and its forms.
Rules on Organization and Information and Rules on Procedure were likewise adopted effective the same date by the Federal Open Market Committee.
LITIGATION

Injunction under Regulation W. A decree restraining Motor City Credit
Jewelry Co., Inc., Van Dyke, Michigan, it officers and employees from
violating the Board's Regulation W was entered on February 14, 1946, in the
United States District Court in Detroit. The Company was charged with
numerous and repeated violations of the regulation, including failure to obtain
the down payment required and falsification of its records for the purpose of
concealing the failure to obtain the down payments. The effect of the decree,
to which the defendants consented, is to render them liable to punishment for
contempt in the event they are found in the future to have violated the regulation in any of the respects described in the decree. The text of the decree
appears in the Appendix at page 105.
In addition, the Board after a full hearing suspended the license of the
Company for 60 days, which had the effect of prohibiting the Company from
making credit sales during the period of suspension. The Board's Order, and
the Findings and Opinion upon which it was based, appear in the Appendix
at pages 106-08.
Conviction for violating injunction. The United States District Court in
Detroit on June 14, 1946, found that Consumers Home Equipment Company
and its President had violated an injunction previously issued by that Court
restricting them from violating the Board's Regulation W (see Board's
Annual Report for 1945), and adjudged them guilty of contempt, for
which it fined the Company $2,500 and sentenced its president to one year in
prison. The case has been appealed to the Circuit Court of Appeals. The
text of the oral Opinion of the District Court appears in the Appendix at
pages 109-10.
Suit regarding condition of membership. On June 3, 1946, the suit of
the Peoples Bank, Lakewood Village, California, against the individual members of the Board (which was instituted following the dismissal of a somewhat similar suit in California, as described in the Board's previous Annual

ANNUAL REPORT OF BOARD OF GOVERNORS

Report) was decided in favor of the defendants by the United States District
Court for the District of Columbia. The complaint alleged that a condition
of membership which had been prescribed when the bank became a member
of the Federal Reserve System was unauthorized by law and asked for a
declaratory judgment and for an injunction restraining the defendants from
enforcing the condition. The court granted the defendants' motion for a
summary judgment. The plaintiff has appealed to the Circuit Court of
Appeals. The opinion of the District Court appears in the Appendix at pages
m-13.
Suit regarding removal of bank directors. On January 6, 1947, the
Supreme Court of the United States sustained an order of the Board of
Governors removing from office two directors of a national bank in Paterson,
New Jersey. The case had reached the Supreme Court on certiorari to the
United States Court of Appeals for the District of Columbia, which had
reversed the decision of the District Court sustaining the Board's order (as
described in the Board's previous Annual Report).
The Board's removal order, issued under Section 30 of the Banking Act
of 1933, was predicted upon a finding that the directors had violated Section
32 of the Banking Act of 1933, which prohibits any officer, director or employee of a firm primarily engaged in the business of underwriting or distributing securities from serving at the same time as an officer, director or
employee of a member bank of the Federal Reserve System. The suit was
based upon the contention that the Board had transcended its authority by
applying Section 32 to a situation where underwriting was not actually first in
volume as compared with other businesses of the firm but was merely one
of its primary activities.
The Court was unanimous in holding that the Board had not transcended
its authority. On the question of jurisdiction, a majority of the Court was
of the opinion that the determination of the extent of the authority granted
to the Board to issue removal orders under Section 30 is subject to judicial
review; but in a concurring opinion, two Justices were of the view that the
question presented on the merits should be reviewable only for abuse of discretion. The opinions in the Supreme Court appear in the Appendix at
pages 114-18.
LEGISLATION
Purchase of Government obligations by Federal Reserve Banks. The
Second War Powers Act, enacted March 27, 1942, amended Section I4(b)
of the Federal Reserve Act so as to authorize the purchase or sale by Federal
Reserve Banks, directly from or to the United States, of bonds, notes, or
other obligations which are direct obligations of the United States or which
are fully guaranteed as to principal and interest, but limited the aggregate
amount acquired directly from the United States and held at any one time
by the twelve Federal Reserve Banks to not exceed 5 billion dollars. An

FEDERAL RESERVE SYSTEM

other provision of the Second War Powers Act provided that such authority should terminate on December 31, 1944, or at such earlier time as Congress, by concurrent resolution, or the President, might designate. This time
limit, which had been extended from time to time, was further extended until
March 31, 1947, by an Act approved June 29, 1946.
Limitation on claims connected with Government checks. An Act approved March 6, 1946, gives relief to banks, merchants, and others who handle
Government checks which turn out to have had forged or unauthorized endorsements. The relief given is a six-year statute of limitations on claims
by the United States in such cases.
Farm tenant loans. Section 24 of the Federal Reserve Act contains limitations and restrictions upon real estate loans by national banks. By an Act
approved August 14, 1946, the section was amended so as to make these limitations and restrictions inapplicable to loans for the purpose of enabling farm
tenants to acquire farms when such loans are insured under the BankheadJones Farm Tenant Act.
Cessation of hostilities. Although not technically legislation, reference
should also be made here to the Proclamation of the President of the United
States issued on December 31, 1946, terminating the period of hostilities of
World War II, effective as of noon on that date. The Proclamation does
not have the effect of terminating the war or of terminating the emergencies
declared by the President on September 8, 1939 and May 27, 1941. Accordingly, the only statutory provisions directly concerning the Federal Reserve System which are affected by the Proclamation are those of Section 12B
(h) (1) and the last paragraph of Section 19 of the Federal Reserve Act, as
amended by the Act of April 13, 1943, exempting war loan accounts of the
United States from deposit insurance assessments and from reserve requirements of member banks, both of which will expire six months from the date
of the Proclamation.
BANKING OPERATIONS AND STRUCTURE
Bank earnings and earning assets. Member bank net profits after taxes
were 758 million dollars in 1946, compared with the peak of 788 million
earned in 1945. All major items of current earnings were larger, but expenses and charge-offs also were larger and profits on securities sold were
considerably smaller than in the previous year. About one-third of net profits was paid out as dividends and the remainder was added to capital accounts.
Net profits of member banks in 1946 were 9.6 per cent of total capital
accounts as compared with nearly 11 per cent in 1945. The decline was
due in part to an increase in capital accounts. As shown in the accompanying
chart, profits in 1945 as a percentage of capital accounts were at a higher
level than had been previously reached. Net current earnings before income
taxes continued the upward trend of recent years and were nearly 12 per cent
of total capital accounts in 1946; this compared with a level of about 8 per

ANNUAL REPORT OF BOARD OF GOVERNORS

cent during the 1930's. The ratio of net profits to capital at country banks
was higher in 1946 than in 1945, while ratios for the central reserve and reserve city banks declined.
MEMBER BANK EARNINGS AND PROFITS
AS PERCENTAGES OF CAPITAL ACCOUNTS
ANNUAL FIGURES

rnings from current operations less current operating

Earning assets of member banks amounted to 96 billion dollars at the close
of 1946, a decrease of 11 billion during the year. A decline of over 15
billion dollars in holdings of United States Government obligations during
the year was partly offset by an increase of over 4 billion in loans and other
securities.
Two factors moderated the effect on bank earnings of the decline in holdings of Government securities. First, the decrease was entirely in short-term,
low-yield Government securities, and as a result the average yield on holdings
of United States Government securities increased from 1.39 per cent in
1945 to 1.48 per cent in 1946. Second, the increase in holdings of commercial and industrial, real estate, and consumer loans, with their higher yields,
was an important factor in sustaining bank earnings in the face of sizable
declines in low-yielding, short-term Government securities and loans for
purchasing or carrying securities. Total loans of member banks, as well as

FEDERAL RESERVE SYSTEM

commercial and industrial, real estate, and consumer loans, increased during
the year and at the end of 1946 were larger than at any previous time.
Changes in earning assets during the year are shown in the accompanying
table.
MEMBER BANK LOANS AND INVESTMENTS

[In billions of dollars]
Outstanding
Dec. 31, 1946
Loans and investments: total
Loans: total

Commercial and industrial loans
Agricultural loans
.-;•••
Loans for purchasing or carrying securities..
Real estate loans
Consumer loans
All other, including loans to banks

Change during year
1946

1945

96.4
26.7
13.2
0.9
3.0
5.4
3.3
1.0

-10.8
+3.9
+4.2

+15.6
+4.1

63.0
16.8
46.2

-3^5
+ 1.9
+1.4
-0.1

State and local government securities

3.5

-15.3
-16.7
+ 1.4
+0.3

Other securities

3.1

+0.3

U. S. Goverment securities direct and guaranteed: total

Bills, certificates and notes.
Bonds

+1.4
-0.3
+2.2
+0.2
+0.4
+0.2
+10.7
+ 1.7
+9.0
+0.4
+0.5

Shifts in the volume and composition of bank earning assets during 1946
had their effect on earnings of the various classes of member banks. The
Treasury's debt-retirement program affected the earning assets of large banks
more than small ones. At central reserve city banks, the decline in holdings
of Treasury certificates of indebtedness and notes and in loans on Government
securities, only partly offset by increases in other loans and securities, reduced
earning assets by more than 6.5 billion dollars, or 20 per cent. As a result,
net current earnings of these banks were somewhat lower than in 1945. Net
profits were 23 per cent lower.
At reserve city banks there was a decrease in earning assets of 4.8 billion
dollars, or 12 per cent. Total loans held by these banks increased 2.3
billion dollars, although loans on securities declined about 1.0 billion. Net
current earnings of these banks were higher than in 1945 and net profits
were but little lower.
At country banks, instead of a decline in earning assets, there was an increase of 400 million dollars. A decrease of 2.4 billion dollars in holdings of
Government securities was more than offset by increases in loans and other
securities. The bulk of the increase in loans was in such high-yielding categories as real estate and consumer loans. Net current earnings of country
banks were nearly one-third higher than in 1945 and net profits about 12
per cent higher.
Capital accounts. Capital accounts of member banks increased 510 million dollars in 1946, compared with 620 and 490 million in 1945 and 1944
respectively; most of the increase resulted from the retention of profits.

ANNUAL REPORT OF BOARD OF GOVERNORS

There were some sales of additional capital stock, and also some retirement
of preferred stocks and capital notes held by the Reconstruction Finance
Corporation. "Dividend payments aggregated 267 million dollars, 21 million
higher than in 1945.
As a result of the further increase in capital accounts and the decline in
Government securities and deposits during the year, the ratio of member
bank average capital accounts to average total assets increased slightly during
the year. As shown in the accompanying chart, this was the first annual increase since 1938. While total assets of member banks have nearly tripled
during the past 10 years, capital accounts have less than doubled.
MEMBER BANK CAPITAL ACpOUNTS
AS PERCENTAGE OF TOTAL ASSETS AND "RISK ASSETS"
ANNUAL FIGURES

30
*

^ \
\

y'AS
/

PEFVENTAGE OF
"RIS K ASSETS"

20
/
4

15
^

— — ^ ^ A S PEFVENTAGE 0 F >
TOT/XL ASSETS

—

1920

1925

1930

1 1

1935

1 1

1940

. 1

1945

NOTE: "Risk assets" represent total assets othei than cash assets and U. S. Government securities. Capital and asset figures are based on aveuges of June and December call date figures
1919-40 and of three or four call date figures thereafter.
* Indicates Dec. 31, 1946, call date ratio.

The increased volume of assets during the period from 1939 to 1945 was
largely represented by increased holdings of Government securities and cash
assets. As a result, the percentage ratio of member bank capital accounts
to total assets other than cash assets and Government securities, also shown
on the chart, changed very little. In 1946, with the decline in holdings of
Government securities and the increase in loans, this ratio declined somewhat.
In contrast to the ratio of capital to total assets, the ratio of capital to what
may be called the "risk assets" is at a much higher level than it was in the
1920's. Smaller banks generally have higher capital ratios, measured on
either basis, than larger banks.

FEDERAL KiiSJiKVJi SYSTEM

The increase in capital accounts in the aggregate kept pace with the growth
of assets other than cash assets and Government securities, but the volume
of bank premises, furniture and fixtures, and other real estate included in
these assets has steadily declined. This has resulted from the sale of other
real estate, regular depreciation charges, and substantial additional charge-offs
of these assets. Real estate assets now amount to only 11 per cent of member
bank capital accounts as compared with 23 per cent in 1940.
In view of the decline in holdings of Government securities and increase
in loans since the end of the war, the capital accounts of some individual
banks are now disproportionately low relative to their risk assets. It is important, therefore, that bank managements keep continuously under observation the composition of the assets of their institutions and, as the degree of
risk in such assets increases, take such steps to strengthen the capital account
by the retention of a larger share of earnings or the sale of additional stock
or both as their individual situations may require.
Changes in number of banking offices. For the third successive year the
number of banking offices in the United States, exclusive of offices at military
reservations, has shown an increase, and the net growth in 1946 was twice
that of the previous year. The net increases during the last three years
were: 225 in 1946, i n in 1945, and 12 in 1944. The gross increase in
number of de novo banks and branches was considerably higher: 301 in
1946, 185 in 1945, and 108 in 1944. The gross increase in number of new
banks (head offices) opened in the last three years was nearly as large as the
number of new banks organized in the eight-year period 1936-43, while the
number of new branches opened in 1946 was nearly as large as the total for the
four preceding years. At the end of 1946 there were 18,644 banking offices,
comprising 14,585 banks and 4,059 branches, besides 79 "banking facilities"
at military reservations.
The number of banks (head offices) increased by 32 in 1946 following
an increase of 18 in 1945. These were the first increases since 1934, when
many banks were reopened after the banking holiday. During 1946, 144
new banks opened for business, of which 30 were member banks, 98 insured
nonmember banks, and 16 noninsured banks. Two nonmember banks that
had previously been placed in voluntary liquidation resumed business. However, through consolidations and liquidations, 112 head offices were discontinued, 54 of which became branches. These changes resulted in a total of
14,585 banks in operation at the end of 1946—14,044 commercial banks and
541 mutual savings banks.
During 1946 there was a net increase of 193 in the number of branches and
additional offices, exclusive of facilities at military reservations. This was
more than double the increase of 94 in 1945, and resulted in a year-end total
of 4,059. The number of such offices has increased in every year since 1933,
except in 1942 when it remained unchanged. There were about 350 banking
facilities (not included in the foregoing figures) in operation at military

ANNUAL REPORT OF BOARD OF GOVERNORS

reservations at the end of the war. This number had declined to 241 by the
end of 1945 and to 79 by the end of 1946.
Increase in Federal Reserve membership. Membership in the Federal
Reserve System continued to increase in 1946, registering a net gain of 16
banks for the year compared with a net gain of 70 banks during 1945. The
number of national banks decreased by 10 while the number of State member
banks increased by 26. Of the 65 State banks admitted to membership, 9
were newly organized and 56 were already in operation. All but 5 of the
56 had previously been admitted to membership in the Federal Deposit Insurance Corporation. Total deposits of these 56 banks were about 300 million
dollars. About one-half of the State banks admitted to membership were
located in three Federal Reserve Districts—Cleveland, Chicago, and Dallas.
The 6,900 member banks in operation at the end of 1946 accounted for
49 per cent of the number and 85 per cent of the volume of the deposits of all
commercial banks in the country; these percentages were 49 and 86 respectively
at the end of 1945. The State member banks accounted for 21 per cent of
the number and 65 per cent of the volume of the deposits of all State commercial banks; corresponding percentages were 21 and 69 respectively the previous
year.
Par and nonpar banks. At the end of 1946 there were 11,957 banks on
the Federal Reserve Par List, a net increase of 88 during the year, and
2,086 banks not on the Par List, a net decrease of 47.2 These changes represent a continuation of the trend of several years. The banks on the Par
List constituted about 85 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. In addition, 3,576 or 92 per cent of the 3,902 branches of commercial banks in existence at the end of 1946 were remitting at par.
During 1946, 198 banks were added to the Par List, 8 withdrew from
the Par List, and 103 par banks terminated existence. Of the 103 par banks
that terminated existence, 85 were absorbed by other par banks, and 50 of
the banks thus absorbed were converted into branches. Net increases of
more than 10 par banks occurred during the year in the following five States:
Illinois 19, Texas 15, South Carolina 13, and Florida and Virginia 11 each.
At the end of 1946 all banks in 25 States and the District of Columbia
were on the Federal Reserve Par List. In each of 8 other States the number
of nonpar banks was small: Montana 1, Illinois and Kansas 2 each, West
Virginia 3, Washington 5, Nebraska 8, Oklahoma 10, and Virginia 11. The
remaining 15 States had approximately 98 per cent of the banks not on the
Par List and were: Minnesota 416, Georgia 283, Mississippi 165, Arkansas
130, North Carolina 119, Alabama 113, Wisconsin 112, North Dakota 106,
Tennessee 103, Louisiana and South Dakota 102 each, South Carolina 95,
Missouri 72, Florida 64, and Texas 62.
2
The Federal Reserve Par List comprises all member banks, which are required under the law
to remit at par for checks forwarded to them by the Reserve Banks for payment, and such nonmember banks as have agreed to remit at par.

FEDERAL RESERVE SYSTEM

Check routing symbols. Considerable progress was made during 1946 in
the use of routing symbols on checks to facilitate their collection, pursuant
to the program inaugurated by the American Bankers Association and the
Federal Reserve System in June 1945. Of the 11,957 banks on the Federal
Reserve Par List as of December 31, 1946, almost 85 per cent have had check
routing symbols printed in the approved location on some of their checks,
i,e. in the upper righthand corner of the checks. The routing symbol is
written as if it were the denominator of a fraction, the numerator of which
is the ABA transit number. About 50 per cent of the out-of-town branches
of par banks to which individual ABA transit numbers have been assigned
were using some checks with the routing symbol printed in the approved
location.
On the basis of a survey made in December 1946, it was found that 25
per cent of all checks clearing through Federal Reserve Banks carried routing
symbols in the approved location. The high percentage of par banks and
their out-of-town branches using the routing symbol is not yet reflected in the
volume of checks handled because of the large stocks of checks that were
on hand at the inception of the program (destruction of these inventories was
not advised), and because of personnel and material shortages in the check
printing industry. With the gradual exhaustion of previously existing stocks
of checks and the solution of printing difficulties, it is anticipated that the
coming year will see a considerable increase in the volume of checks with
routing symbols.
BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM
The volume of banking activity continued at a high level in 1946. The
year was marked by increase in demand for commercial and consumer credit
and the development of the expected shifting in character of bank assets
incident to conversion to peacetime activity. By the end of the year total
loans of all banks in the United States were larger than in any year since
1930, and member bank loans were at the highest level on record. Commercial and industrial loans of member banks increased during the year by
4.2 billion dollars or 47 per cent.
The great and increasing volume of loans brings a new phase of banking
to many who have entered the banking and supervisory fields since 1932 and
whose banking and credit experience has been largely during periods of recovery and the abnormal conditions of wartime. Bank management and the
supervisory authorities have also been faced with problems incident to the
development of new types of financing and the entry of commercial banks
into new credit fields.
Examination of Federal Reserve Banks. The Board's Division of Examinations examined the twelve Federal Reserve Banks and their twenty-four
branches during the year as required by law.
Examination of State member banks. State member banks are subject to

ANNUAL REPORT OF BOARD OF GOVERNORS

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 have 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. The program for the examination of State member banks in 1946 was substantially
completed. In order to avoid duplication and to minimize inconvenience to
the banks examined, wherever practicable joint examinations are made in
cooperation with the State banking authorities or alternate examinations are
made by agreement with State authorities.
The practice of holding periodic conferences with representatives of the
bank examination departments of the twelve Federal Reserve Banks, which
was curtailed during the war years, was resumed in 1946. A conference
was held in the Board's offices in Washington on September 11 through
September 13, in which representatives of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation, and the Reconstruction Finance
Corporation participated. Particular consideration was given to the broad
problems incident to reconversion as well as to technical developments. The
Secretary of the Treasury and representatives of the Federal Housing Administration and the Farm Credit Administration addressed the Conference.
Bank holding companies. During 1946 the Board acted upon applications
for voting permits submitted by holding company affiliates of banks and authorized the issuance of three permits for general purposes and -four permits
for limited purposes.
The regular annual reports were obtained from holding company affiliates
to provide information with respect to the organizations to which voting
permits have been granted. As in previous years, a substantial number of
the holding company affiliates were examined during the year by examiners
for the Federal Reserve Banks in whose districts the principal offices of the
holding companies are located.
The existing statutes do not provide adequate means for regulation of
bank holding companies. Recommendations have heretofore been made by
the Board with a view toward the strengthening of such regulation, and
such recommendations are included elsewhere in this report.
Trust powers of national banks. During the year 1946, 18 national banks
were granted authority by the Board to exercise one or more trust powers
under the provisions of Section n ( k ) of the Federal Reserve Act. This
number includes the grant of additional powers to 3 banks which previously
had been granted certain trust powers. Trust powers of 20 national banks
were terminated, 12 by voluntary liquidation or consolidation and 8 by
voluntary surrender. At the end of 1946, there were 1,783 national banks
holding permits to exercise trust powers. A list of such banks, with indica

FEDERAL RESERVE SYSTEM

tion of the power or powers each bank is authorized to exercise, will be
supplied to those requesting it.
Acceptance powers of member banks. During the year the Board approved three applications made by member banks, pursuant to the provisions of
Section 13 of the Federal Reserve Act, for increased acceptance powers. One
member bank was granted permission to accept drafts or bills of exchange
to an amount not exceeding at any one time, in the aggregate, 100 per cent
of its paid-up and unimpaired capital stock and surplus, and the applications
of two member banks for permission to accept drafts or bills drawn to furnish dollar exchange were also approved.
The Reserve Banks, during the year, reviewed the list of member banks
in their districts holding increased acceptance powers to ascertain whether
such powers were needed. The powers had been granted many years
ago in most cases and, in view of changed conditions, up to the end of the
year 33 member banks had voluntarily surrendered the power to accept up to
100 per cent of their capital stock and surplus and one member bank had
voluntarily relinquished its power to accept drafts or bills drawn to furnish
dollar exchange.
Foreign branches and banking corporations. During 1946 the Board
approved two applications made by a member bank pursuant to the provisions
of Section 25 of the Federal Reserve Act for permission to establish foreign
branches. No new foreign branches of member banks were opened during
the year but the Tokyo Branch of the National City Bank of New York,
which had been closed at the outbreak of the war, resumed limited operations,
and no branches were closed. The establishment of four foreign branches,
authorized by the Board in previous years, was not consummated and the
authorities granted with respect thereto lapsed during the year. Still in
effect at the end of the year were authorizations granted in previous years
for the establishment of three foreign branches which, however, had not
been established as of that date.
At the end of 1946, seven member banks were operating a total of 73
branches in 21 foreign countries and possessions of the United States. Of
the 73 branches, four national banks were operating 67, and three 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
Continental Europe.'. .
Belgium
France

10
4
2
3
16
1
3
1
1
1

England.
Far East
China
Hong Kong.. .
India
Japan.
Philippines
Singapore
U. S. Possessions
Canal Zone
Puerto Rico
Total

ANNUAL REPORT OF BOARD OF GOVERNORS

There was no change during the year in the list of the five corporations
organized under State laws which operate under agreements entered into
with the Board pursuant to Section 25 of the Federal Reserve Act relating
to the investment by member banks in the stock of corporations engaged
principally in international or foreign banking. These corporations are: First
of Boston International Corporation, French American Banking Corporation,
International Banking Corporation, Morgan & Cie., Incorporated, and
Bankers Company of New York. Two of the five have no foreign branches,
one operates a branch in England, one operates a branch in France, and one
has an English fiduciary affiliate.
There is in operation one banking corporation, The Chase Bank, organized
under the provisions of Section 25 (a) of the Federal Reserve Act to engage
in international or foreign banking. The bank operates a branch in France,
two branches in China, a branch in Hong Kong, and has a fiduciary affiliate
in England. Its head office was examined during the year by the Board's
Division of Examinations.
RESERVE BANK OPERATIONS
Volume of operations. During 1946 the operations of the Federal Reserve
Banks as a whole declined, primarily because of the sharp decrease in volume
of Government security issues and redemptions. Certain other fiscal agency
operations also decreased, such as those pertaining to guaranteed loans under
Regulation V, ration checks, and various loan, purchasing, and subsidy programs carried on by the Commodity Credit Corporation and the Reconstruction Finance Corporation. The volume of Government checks handled decreased substantially. On the other hand, the volume of other checks and of
paper currency and coin handled continued to increase and reached new peaks.
The V loan program carried on by the Federal Reserve Banks under the
general supervision of the Board of Governors for the War Department, the
Navy Department, and the United States Maritime Commission has been
rapidly drawing to a close, and liquidation of the loans made under the plan
has been vigorously pursued. The amount of guaranteed loans outstanding
declined from 510 million dollars at the first of the year to 19 million at the
end of the year. In the same period the amount of credit available to borrowers, in addition to loans outstanding, decreased from 967 million to 29
million dollars. Only 14 guarantee agreements, for loans of about 5 million
dollars in the aggregate, were authorized during 1946. The last authorization was in May 1946.
Reserve Bank holdings of discounts and advances in 1946 were below the
level of 1945 for the System as a whole, some Reserve Banks having increases and some decreases. A considerable volume of bankers' acceptances was offered to the Reserve Banks for purchase at the established buying
rate. These offerings were made within a short period—from March through
July. Government securities held in the System Open Market Account, and

FEDERAL RESERVE SYSTEM

Treasury bills acquired from member banks and others under agreements
to resell upon demand prior to maturity at the established buying rate, were
larger in 1946 than in 1945. The amount of industrial loans made to provide
working capital for industry under Section 13b of the Federal Reserve Act
declined, but commitments to make industrial loans increased and at the
end of the year were larger than in any other year since 1943.
Table 5 on page 77 shows the volume of operations in the principal
departments of the Federal Reserve Banks for the past five years. Average
holdings of loans and securities, and earnings thereon, are given in the table
below:
RESERVE BANK EARNINGS ON LOANS AND SECURITIES, 1943-46

[Dollar amounts in thousands]

Item and year

Total

Daily average holdings:
1943
1944
1945
1946
. . . .
Earnings:
1943
1944
1945
1946

u. s.

Government
securities,
direct and
guaranteed

Industrial
loans

$12 404
9,936
3,365
1,300

$ 7,761,651
14,917,596
21,742,589
23,570,260

$ 24 759
135,459
375,958
310,308

8,457

$ 7,724,488
14,772,201
21,363,244
23,250,195

68,656
103,837
141,631
149,703

152
724
1,977
2,497

68,090
102,810
139,553
147,125

414
303
101
38

0.88
0.70
0.65
0.64

0.61
0.53
0.53
0.80

0.50
0.51

0.88
0.70
0.65
0.63

3.34
3.05
2.99
2.90

Average rate of earnings (per cent):
1943
1944
1945
1946
1

AcceptDiscounts
and
ances
advances purchased

Less than $500.

Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of the various Federal Reserve Banks are given in
detail in Table 6 on page 78, and a condensed annual statement since 1913
for all the Reserve Banks combined is given on page 80. The table below
shows a condensed summary for all of the Reserve Banks for the years 1945
and 1946. Current earnings were 150 million dollars in 1946 as compared
EARNINGS, EXPENSES, AND DISTRIBUTION OF N E T EARNINGS OF FEDERAL RESERVE BANKS,
1945 AND 1946

[In thousands of dollars]
Item
Current earnings
Current expenses
Current net earnings
Net deductions from current net earnings
Net earnings
Paid U. S. Treasury (Sec. 13b)
Dividends paid
Transferred to surplus (Sec. 13b)
Transferred to surplus (Sec. 7).
Total

1945
150,385
57,235

142,209
48,717

93,150
626

93,492
830

92,524

92,662

67
10,962
28
81,467

248
10,182
262
81,970

92,524

92,662

ANNUAL REPORT OF BOARD OF GOVERNORS

with 142 million in 1945. Current expenses increased by about the same
amount, 8 million dollars, so that net earnings were approximately equal to
those in 1945. After payments totaling 11 million dollars for the dividend to
member banks as provided in the Federal Reserve Act and payments to the
United States Treasury under Section 13b of the Act relating to industrial
loans, 81 million was added to the surplus of the Reserve Banks.
Foreign transactions. In the first full calendar year since V-J Day, considerable progress was made in the return of the System's foreign transactions
to a peacetime basis. A number of foreign central bank accounts which had
been closed or become dormant during the war were reopened, and conversely
many of the foreign government accounts which had been set up as a wartime
measure were closed. In addition to the reactivated accounts, five new
foreign accounts were opened in 1946.
There was a further reduction in the total amount of assets held at the
Federal Reserve Bank of New York for foreign central banks and governments, reflecting in part heavy postwar expenditures in this country, and in
part repatriation of gold held under earmark. At the end of the year foreignowned dollar deposits, earmarked gold, and securities held for all accounts,
including accounts maintained by foreign depositors with the Federal Reserve
Bank of New York acting as fiscal agent of the United States, amounted to
5,330 million dollars, as compared with 6,830 million at the end of 1945.
There was, however, a noticeable increase in the total volume of foreign
transactions handled by the Federal Reserve Bank of New York, despite a further curtailment in operations on behalf of United States departments and
agencies. Investment transactions for foreign accounts during the year
included not only substantial operations in United States Government securities, as in the past, but also (for the first time since 1939) some small purchases for a number of foreign central banks of prime endorsed bankers'
acceptances.
Another operation in which there was a considerable increase in volume
during the year was the granting of loans to foreign central banks by the
Federal Reserve Banks against gold held under earmark at the Federal Reserve
Bank of New York. Unlike long-term reconstruction loans of the type
that has been made by the Export-Import Bank and is expected to be made
by the International Bank for Reconstruction and Development, gold loans
made by the Federal Reserve Banks are of a short-term nature and designed
to meet temporary deficiencies in a foreign country's balance of international
payments. Interest was charged on such loans at the rate of one per cent per
annum.
The largest loan arrangement during the year was one with a European
central bank, under which a series of short-term advances was made, the
largest amount outstanding at any one time under this arrangement having
been in excess of 100 million dollars. Three Latin American central banks
and another European central bank also availed themselves of this facility

FEDERAL RESERVE SYSTEM

in smaller amounts. At the end of the year a total of nearly 150 million
dollars of gold-secured loans to foreign central banks was outstanding.
The Federal Reserve Bank of New York, as fiscal agent of the United
States, continued to operate the United States Exchange Stabilization Fund
under authorizations and instructions from the Treasury Department. All
Federal Reserve Banks continued to act as agents for the Treasury in the
administration of foreign funds control until February 1946, when the work
was concentrated in the Federal Reserve Banks of New York, Chicago,
and San Francisco. At the end of the year, all such operations were turned
over to the New York Reserve Bank. In addition, the Federal Reserve
Banks, acting under the Executive Order of January 15, 1934, and Treasury
regulations, continued to collect and analyze reports from banks, security
brokers and dealers, and others on international movements of capital.
Pursuant to the Bretton Woods Agreements Act, the Federal Reserve
Bank of New York was appointed depositary of the International Monetary
Fund and of the International Bank for Reconstruction and Development.
In June 1946, the New York Reserve Bank was authorized by the Treasury
to act as fiscal agent for the Export-Import Bank in connection with a
200 million dollar loan granted by the latter to The Netherlands Government and subsequently participated in by some 40 commercial banks in
the amount of nearly 100 million dollars. Pursuant to this authorization,
the New York Reserve Bank, and the other Reserve Banks through it, set
up the necessary procedures for such participation.
Bank premises.
With the decline during 1946 in the fiscal agency
operations of the Federal Reserve Banks, it became possible at certain Banks
and branches to relinquish some of the outside space being rented, thus
reversing the trend throughout the war years. As stated in the Annual Report
for 1945, it appears that most of the Federal Reserve Banks and branches
will have to continue to rent outside space until such time as they can make
additions to their present inadequate quarters or, in some cases, erect new
buildings. The policy of making only necessary repairs and alterations to
buildings and deferring construction of additions or of new buildings remained
in effect because of the continued shortage of manpower and materials.
The Board advised the Federal Reserve Banks, however, that there was no
objection to employing architects to make preliminary plans for future building
construction. A site for a building to house the Portland Branch, which
now occupies rented quarters, was acquired during the year.
RESERVE BANK PERSONNEL
Chairmen and Deputy Chairmen. One of the three Class C directors
appointed by the Board of Governors for each Federal Reserve Bank is
designated annually to serve as Chairman of the Board of Directors and as
Federal Reserve Agent, and another Class C director is appointed annually

ANNUAL REPORT OF BOARD OF GOVERNORS

as Deputy Chairman. A list of the Chairmen and Deputy Chairmen is
shown on page 121.
The Chairmen and Deputy Chairmen at the Federal Reserve Banks were
redesignated to serve as such for the year 1946, except for the following
changes:
Henry I. Harriman, Director and Vice Chairman of the New England
Power Association, Boston, Massachusetts, who had been a Class C director
of the Federal Reserve Bank of Boston since March 12, 1938, was appointed
Deputy Chairman for the year 1946.
Russell L. Dearmont, Chief Counsel for Trustee of the Missouri-Pacific
Lines, St. Louis, Missouri, who was appointed a Class C director of the
Federal Reserve Bank of St. Louis on December 7, 1945, was designated
Chairman and Federal Reserve Agent for the year 1946.
Roger B. Shepard of Newport, Minnesota, who had been a Class C
director of the Federal Reserve Bank of Minneapolis since December 28,
1939, a n d Deputy Chairman since March 11, 1940, was designated Chairman and Federal Reserve Agent for the year 1946.
W. D. Cochran of the W. D. Cochran Freight Lines, Iron Mountain,
Michigan, who had been a Class C director of the Federal Reserve Bank of
Minneapolis since January 28, 1939, was appointed Deputy Chairman for
the year 1946.
J. R. Parten, President of the Woodley Petroleum Company, Houston,
Texas, who had been a Class C director of the Federal Reserve Bank of
Dallas and Deputy Chairman since January 1, 1944, was designated Chairman and Federal Reserve Agent for the year 1946.
R. B. Anderson, General Manager of the Waggoner Estate, Vernon,
Texas, was appointed a Class C director of the Federal Reserve Bank of
Dallas for the term beginning January 1, 1946, and Deputy Chairman for
the year 1946.
Directors. A list of the directors of the Federal Reserve Banks and
branches as of the close of the year is shown on pages 122-29.
The Board made the following appointments of new directors either for
terms beginning January 1, 1946, or to fill vacancies during the year:
Class C Directors. Donald K. David, Dean of the Graduate School of
Business Administration of Harvard University, Cambridge, Massachusetts,
was appointed a Class C director of the Federal Reserve Bank of Boston
for the term beginning January 1, 1946.
J. P. Redman of Cairo, Illinois, was appointed a Class C director of the
Federal Reserve Bank of St. Louis on September 20. Mr. Redman is engaged in farming.
Paul E. Miller, Director of the Agricultural Extension Division of the
University of Minnesota, Minneapolis, Minnesota, was appointed a Class C
director of the Federal Reserve Bank of Minneapolis for the term beginning
January 1, 1946.

FEDERAL RESERVE SYSTEM

Branch Directors. Carl G. Wooster of Union Hill, New York, was appointed a director of the Buffalo Branch of the Federal Reserve Bank of
New York for the term beginning January i, 1946. Mr. Wooster is engaged
in farming.
Albert H. Burchfield, Jr., Vice President of the Joseph Home Company,
Pittsburgh, Pennsylvania, was appointed a director of the Pittsburgh Branch
of the Federal Reserve Bank of Cleveland for the term beginning January
1, 1946.
J. M. Koch, Vice President and Director of the Quaker State Oil Refining Corporation, Oil City, Pennsylvania, was appointed a director of the
Pittsburgh Branch of the Federal Reserve Bank of Cleveland on November 18.
James E. Hooper, Vice President of William E. Hooper and Sons Company, Baltimore, Maryland, was appointed a director of the Baltimore
Branch of the Federal Reserve Bank of Richmond for the term beginning
January 1, 1946.
R. Flake Shaw, Executive Secretary of the North Carolina Farm Bureau
Federation, Greensboro, North Carolina, was appointed a director of the
Charlotte Branch of the Federal Reserve Bank of Richmond for the term
beginning January 1, 1946.
John C. Curry, Administrative Assistant to Algernon Blair, Contractor,
Montgomery, Alabama, was appointed a director of the Birmingham Branch
of the Federal Reserve Bank of Atlanta on August 2.
H. C. Meacham of Franklin, Tennessee, was appointed a director of the
Nashville Branch of the Federal Reserve Bank of Atlanta on February 14.
Mr. Meacham is engaged in farming.
H. G. Chalkley, Jr., President of The Sweet Lake Land and Oil Company,
Inc., Lake Charles, Louisiana, was appointed a director of the New Orleans
Branch of the Federal Reserve Bank of Atlanta on January 3. Mr. Chalkley
was serving as a director of the New Orleans Branch in 1941, when he
was called to active duty as an officer in the Navy.
D. P. Cameron, President, The Merchants Company, Hattiesburg, Mississippi, was appointed a director of the New Orleans Branch of the Federal
Reserve Bank of Atlanta on August 6.
Prentiss M. Brown, Chairman of the Detroit Edison Company, Detroit,
Michigan, was appointed a director of the Detroit Branch of the Federal
Reserve Bank of Chicago for the term beginning January 1, 1946.
Cecil C. Cox of Stuttgart, Arkansas, was appointed a director of the
Little Rock Branch of the Federal Reserve Bank of St. Louis for the term
beginning January 1, 1946. Mr. Cox is engaged in farming.
Leslie M. Stratton, Jr., Executive Vice President of the Stratton-Warren
Hardware Company, Memphis, Tennessee, was appointed a director of the
Memphis Branch of the Federal Reserve Bank of St. Louis for the term
beginning January 1, 1946.

ANNUAL REPORT OF BOARD OF GOVERNORS

Fred S. Wallace of Gibbon, Nebraska, was appointed a director of the
Omaha Branch of the Federal Reserve Bank of Kansas City on November i.
Mr. Wallace is engaged in farming.
Dorrance D. Roderick, President of the Newspaper Printing Corporation,
El Paso, Texas, was appointed a director of the El Paso Branch of the
Federal Reserve Bank of Dallas for the term beginning January I, 1946.
Ross Stewart, General Manager of C. Jim Stewart and Stevenson,
Houston, Texas, was appointed a director of the Houston Branch of the
Federal Reserve Bank of Dallas on January 29.
H. P. Drought, an attorney of San Antonio, Texas, was appointed a
director of the San Antonio Branch of the Federal Reserve Bank of Dallas
on November 6.
Fred G. Sherrill, Vice President of the J. G. Boswell Company, Los
Angeles, California, was appointed a director of the Los Angeles Branch of
the Federal Reserve Bank of San Francisco on April 4.
Aaron M. Frank, President of the Meier and Frank Company, Inc.,
Portland, Oregon, was appointed a director of the Portland Branch of the
Federal Reserve Bank of San Francisco on April 5.
John T. Tenneson, President, Superior Packing Company, Seattle, Washington, was appointed a director of the Seattle Branch of the Federal Reserve
Bank of San Francisco on March 7.
Changes in Presidents and First Vice Presidents. Ralph E. Flanders,
who had reached retirement age under the retirement plan, resigned as President of the Federal Reserve Bank of Boston and was succeeded by Laurence
F. Whittemore, effective March 1, 1946. Mr. Whittemore was formerly
Assistant to President of the Boston and Maine Railroad and a Class B
director of the Federal Reserve Bank of Boston.
Ira Clerk, who had been an officer of the Federal Reserve Bank of San
Francisco since its organization in November 1914, and President since January 1, 1946, died on September 28, 1946. Mr. Clerk was succeeded as
President by C. E. Earhart. Mr. Earhart has been with the Bank since
1917, has served as an officer since 1920, and as First Vice President since
January 1, 1946.
Frank J. Drinnen, who had been associated with the Federal Reserve
System since 1919, and had served as First Vice President of the Federal
Reserve Bank of Philadelphia since 1936, resigned effective February 28,
1946. Mr. Drinnen was succeeded by W. J. Davis as First Vice President.
Mr. Davis has been an officer of the Bank since 1917.
Malcolm H. Bryan, who had been First Vice President of the Federal
Reserve Bank of Atlanta since May 15, 1941, resigned effective October 18,
1946, to become associated with the Trust Company of Georgia. Mr. Bryan
was succeeded as First Vice President by L. M. Clark. Mr. Clark has
been a member of the Bank's staff since 1918, and has served as an officer
since 1930.

FEDERAL RESERVE SYSTEM

Staff. At the end of 1946 the total number of officers and employees of the
twelve Federal Reserve Banks and their twenty-four branches was 21,430,
representing a decline of 2,092 since the end of 1945. This was the third
successive year of decline following several successive years of increase due
to the great expansion in the volume of operations during the war years.
The total number of officers and employees of the Reserve Banks and branches
at the end of each year beginning with 1939 was as follows:
1939
1940
1941
1942

11,355
11,640
14,083
19,972

1943
1944
1945
1946

24,741
24,442
23,522
21,430

BOARD OF GOVERNORS—STAFF AND EXPENDITURES
Appointment of Board Member. The appointment of Commodore James
K. Vardaman, Jr., as a member of the Board of Governors for the term
ending January 31, i960, was approved by the Senate on April 3, 1946, and
he assumed his duties as a member of the Board on April 4. Commodore
Vardaman succeeded Mr. John K. McKee, whose term expired January 31,
1946, but who under the law continued to serve until April 2, 1946.
Staff. On December 31, 1946, the Board's staff, exclusive of those on
military leave or leave without pay, numbered 480, as compared with 455
at the end of 1945.
During the year 25 of the Board's permanent employees who had been on
military leave rejoined the staff: 19 elected not to return after their discharge from military service, and only 4 employees who had entered military
service were still on leave at the end of the year.
Howard S. Ellis resigned as Assistant Director of the Division of Research
and Statistics, effective January 20, 1946, to return to his position as Professor
of Economics at the University of California. Mr. Ellis had been on leave
of absence from the University since he joined the Board's staff in September
1943, as an Economic Specialist. He was appointed Assistant Director of
the Division of Research and Statistics, effective February 1, 1945.
Ralph A. Young was appointed an Assistant Director of the Division of
Research and Statistics and assumed his new duties on March 20, 1946.
Mr. Young had for some time been serving on the staff of the National
Bureau of Economic Research in connection with its financial research program and also as Professor of Economics at the University of Pennsylvania.
J. Burke Knapp was appointed an Assistant Director of the Division of
Research and Statistics effective June 1, 1946. Mr. Knapp was associated
with the Board's Division of Research and Statistics from February 1940
to August 1944, when he resigned to accept a position with the Department
of State. He returned to the Board in October 1945, and was serving in
the capacity of Special Assistant to the Chairman on International Finance
at the time of his appointment as Assistant Director of the Division of Research and Statistics.

ANNUAL REPORT OF BOARD OF GOVERNORS

Walter Wyatt, who had been a member of the Board's staff since 1917,
and its General Counsel since 1922, resigned effective February 28, 1946 to
accept the position of Reporter of Decisions for the Supreme Court of the
United States, effective March 1, 1946.
The designation of George B. Vest was changed from General Attorney
to General Counsel, and that of J. Leonard Townsend from Assistant General Attorney to Assistant General Counsel, effective March 1, 1946.
David M. Kennedy was appointed Special Assistant to the Chairman
effective June 1, 1946. Mr. Kennedy was originally employed in the Board's
Division of Bank Operations in April 1930, and became associated with the
Board's Division of Research and Statistics in May 1941. Immediately prior
to his appointment as Special Assistant to the Chairman he was serving in
the capacity of Assistant Chief of the Government Securities Section. Mr.
Kennedy resigned in October to become associated with the Continental
Illinois National Bank and Trust Company of Chicago.
Leo H. Paulger, who had been Director of the Division of Examinations
since January 16, 1932, was appointed Special Adviser to the Board of Governors, effective August 1, 1946.
Robert F. Leonard, who had been Director of the Division of Personnel
Administration, was appointed Director of the Division of Examinations,
effective August 1, 1946.
C. E. Cagle, who had joined the Board's staff as a Federal Reserve Examiner on February 1, 1933 and who had been an Assistant Director of the
Division of Examinations since May 1, 1935, resigned effective October 31, to
return to private enterprise.
Edwin R. Millard and George S. Sloan were appointed Assistant Directors
of the Division of Examinations, effective November 1. Mr. Millard had
been a Federal Reserve Examiner since 1932, and the Examiner in charge
of the field force since 1941. Mr. Sloan had been a Federal Reserve Examiner since June 1934.
Fred A. Nelson, who had been Assistant Director of the Division of Administrative Services, was appointed Director of the Division of Personnel
Administration, effective August 1, 1946.
Gardner L. Boothe, II, who had been Assistant Administrator for War
Loans, was appointed Assistant Director of the Division of Administrative
Services, effective August 9, 1946.
Merritt Sherman was appointed an Assistant Secretary of the Board, effective October 1, 1946. Mr. Sherman had been with the Federal Reserve
Bank of San Francisco since September 1926, and had been an officer of the
Bank since May 1, 1941.
Change in Board's organization. Effective August 20, 1946, the Board
of Governors abolished its Office of Administrator for War Loans, and
transferred the functions and duties remaining in that office to the Division
of Bank Operations,

FEDERAL RESERVE SYSTEM

Expenditures. The current expenses of the Board for the year 1946 aggregated $2,405,676. Two assessments were levied on the Federal Reserve
Banks, representing about four-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 A N D DISBURSEMENTS OF THE BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM FOR THE YEAR 1946
General fund account:
Balance January 1, 1946:
For general expenses of the Board
For expenses chargeable to Federal Reserve Banks
For purchase of United States Savings Bonds for employees under
Board's Voluntary Pay Roll Savings Plan
For income tax withholdings due Collector of Internal Revenue.

$602 ,973.57
266,242.24
10,428.75
60,525.10

$940,169.66

RECEIPTS
For general expenses of the Board:
Assessments on Federal Reserve Banks for estimated
general expenses of the Board
$2 ,259,783. 78
Subscriptions to the Federal Reserve Bulletin
11,157.84
Other publications, sales
9,551.50
Reimbursements for leased wire service
47,226.99
Cafeteria operations
55,305.92
Miscellaneous receipts, refunds, and reimbursements.
13,316.85

2,396,342.88

For expenses chargeable to Federal Reserve Banks:
Assessments on Federal Reserve Banks for:
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

60,656.93
2,931.68

3,002,909.72

Employees' pay roll allotments for purchase of United States Savings Bonds
Income tax withheld from salaries

149 ,692.50
243 ,175.08

2,871,193.55
58,915.12
9,212.44

Total receipts

5 , 792 ,120.18

Total available for disbursement

6,732,289.84

DISBURSEMENTS

For expenses of the Board:
Current expenses of 1946 (per detailed
statement)
$2,405,675.68
Less accounts unpaid December 31,
1946
144,870.89

Expenses of pripr years paid in 1946
Expenses of leased wire service, reimbursable
Retirement System (salary computation adjustment).
Cafeteria operations
Miscellaneous disbursements, refunds and items
reimbursable
For expenses chargeable to Federal Reserve Banks:
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

2,260,804.79
143,195.68
47,127.64
13 ,104.00
50,915.96
18,764.42

2,533,912.49

2 ,987,772.25
57,440. 74
10,519.94
60,656.93
5,271.09

3,121,660.95

Purchase of United States Savings Bonds and refunds under Board's
pay roll plan
Collector of Internal Revenue—income tax withheld from salaries

153,728.50
243 ,205.54

Total disbursements
Balance in general fund account December 31, 1946:
For general expenses of the Board
For expenses chargeable to Federal Reserve Banks
For purchase of United States Sayings Bonds for employees under
Board's Voluntary Pay Roll Savings Plan
For income tax withholdings due Collector of Internal Revenue

6,052 ,507.48
465 ,403 .96
147 ,491.01
6,392.75
60,494.64
$ 679,782.36

ANNUAL REPORT OF BOARD OF GOVERNORS
RECEIPTS AND DISBURSEMENTS—Continued
CURRENT EXPENSES

Personal services:
Salaries
Retirement contributions

Total personal services
Nonpersonal services:
Traveling expenses
Postage and expressage
Telephone and telegraph
Printing and binding
Stationery and supplies
Furniture and equipment
Books and subscriptions
Heat, light and power
Repairs and alterations (building and grounds)
Repairs and maintenance (furniture and equipment)
Medical service and supplies
Insurance
Miscellaneous:
Cafeteria operations
Liquid assets survey
All other

$1,777,629.12
152,917.85
$1,930,546.97
124,508.27
18,362.30
47,995.60
95,884.78
15,541.81
16,536.89
7,758.72
26,398.58
15,552.02
3,619.73
1,003.20
6,001.97
$25, 726.52
52,500.00
17,738.32

Total nonpersonal services
GRAND TOTAL

95,964.84
$475,128. 71
$2,405,675.68

Under an arrangement with the Federal Reserve Bank of New York, the
accounts of the Board for the year 1946 were audited by the Auditor of
the Bank, who certified them to be correct.
RESEARCH AND ADVISORY SERVICES
Changes in the Board's research activities during 1946 were designed to
facilitate current analysis of immediate postwar developments and to permit
more extended study of basic economic conditions, which were altered in many
important respects during the war. Current developments in the field of
Treasury financing, bank credit, the labor and commodity markets, and international finance continued to receive close attention. The data for current
analyses in the field of business finance and the procedures for making projections of the gross national product and related factors were further developed. Some of the regular statistical series were revised, including those
on department store stocks. Progress was also made in revising certain of
the component series in the Federal Reserve index of industrial production.
In addition, a number of special investigations were initiated, primarily for
the purpose of improving information concerning wartime changes in the conditions affecting the availability and use of money and credit.
In order to provide information concerning contemporary lending activities of banks, the Board of Governors and the Reserve Banks conducted a
sample survey of member bank loans to commercial and industrial concerns
outstanding as of November 20, 1946. The survey provided comprehensive
information on the characteristics of outstanding bank loans to business
borrowers and on the structure of the business credit market. The facts
when analyzed and presented in 1947 will be useful to the Reserve System in considering credit policies that will contribute to the maintenance

FEDERAL RESERVE SYSTEM

of high levels of economic activity. In addition, the information should be
helpful to banks in reviewing their loan policies, with long-run objectives in
mind, as well as to others interested in the availability of bank credit for
business purposes. A similar survey of agricultural loans by commercial
banks, to be conducted in cooperation with the Federal Deposit Insurance
Corporation, has also been projected for 1947.
Another special feature of the Board's research program during the year
was a national survey of liquid asset holdings, savings, incomes, and expectations of individual consumer units, carried out under special arrangement
by the Division of Program Surveys of the Bureau of Agricultural Economics,
Department of Agriculture. The results of this survey, which were presented
in the Federal Reserve Bulletin and are summarized briefly elsewhere in this
report, aroused widespread interest and comment and were particularly relevant to current problems of bank credit and monetary policy. Because of the
value of the 1946 survey, not only to the Board and various Government
agencies, but also to others in illuminating matters of broad public interest,
the Board authorized a second nation-wide survey of consumer finances, to be
made by the Survey Research Center of the University of Michigan. The
1947 survey, which was planned in cooperation with interested Government
agencies, is being conducted in the same manner as in 1946, but coverage
includes some data on nonliquid assets in addition to information similar to
that obtained in 1946. Studies of this type are still in an experimental stage
of development, and one important contribution of a second survey will
be to provide a test of some of the major findings of the first survey.
Studies in the field of business finance on the basis of data from financial
statements of manufacturing and trade concerns, obtained in part through
a cooperative survey with the Robert Morris Associates, were continued.
Over the past two years the Board's staff has cooperated in the planning
and conduct of an exploratory study to trace the flow of money payments
through major sectors of the economy. The study has been conducted by the
National Bureau of Economic Research at the suggestion of, and under a
grant of funds from, the Committee for Economic Development. Preliminary results of the exploratory work covering a selected historical period
have demonstrated the feasibility of the undertaking, and the Board has authorized a special project to construct money flow measurements on a current
basis. This activity will build upon the statistical work begun under the
National Bureau's auspices and will also undertake to extend the scope of the
investigation of the flow of money.
In the international field extensive demands were made upon the Board's
staff, especially in connection with the work of the National Advisory Council
on International Monetary and Financial Problems, of which the Chairman
of the Board is a member. The Staff Committee of the Council assures
coordination of research work in the various member agencies on current

ANNUAL REPORT OF BOARD OF GOVERNORS

international financial problems. Members of the Board's staff also served
as technical advisers to the United States Governor of the International
Fund and Bank during the two meetings of the Boards of Governors
of those institutions which took place during the year. Library and other
research facilities and assistance were made available to the newly organized
research departments of the Fund and the Bank following their establishment in Washington, and two members of the Board's staff were lent temporarily to the International Bank to assist in developing a system of accounting control.
Representatives of the Federal Reserve System participated in a conference
on economic and statistical methods held in Mexico City in August, to which
the Bank of Mexico invited representatives from all central banks of the
Western Hemisphere. This conference afforded the participants an opportunity to become better acquainted with general economic conditions in other
countries of the Western Hemisphere and to exchange views on the monetary
and banking problems of their respective countries and of the Hemisphere
as a whole.
Members of the Board's staff continued collaboration on new monetary and
banking legislation in several Latin American countries undertaken at the
request of those countries and of the State Department. These advisory
services were made available to the Dominican Republic and Guatemala. The
services of members of the staff were also made available to the Military
Government authorities in Germany and Korea.
The Board had numerous visitors from foreign central banks and governments, some of whom were making extended tours in the United States for
consultation with Government officials and observation of American administrative, supervisory, and research methods. The Board made facilities for
study available to students from foreign central banks and governments who
were pursuing studies in the United States.
PUBLICATIONS AND RELEASES
During the year 1946 there was a growing demand for material issued by
the Board. Increased enrollments in schools and colleges resulted in greater
use of the Board's publications for classroom purposes; and the resumption of
more normal foreign mail service brought about additional requests for both
current publications and those issued during the war period. The publications
listed below were issued during the year and several periodic releases were
initiated.
FEDERAL RESERVE BULLETIN. Issued monthly.
MEMBER BANK CALL REPORT. Three issues, one each in April, October,
and December.
PAR LIST, and list of STATE.BANK MEMBERS OF THE FEDERAL RESERVE
SYSTEM AND NONMEMBER BANKS T H A T MAINTAIN CLEARING ACCOUNTS

FEDERAL RESERVE SYSTEM

WITH FEDERAL RESERVE BANKS. Complete lists released in October and
January, respectively, with supplements in other months.
LIST OF STOCKS REGISTERED ON NATIONAL SECURITIES

EXCHANGES.

Published in February with quarterly supplements in May, August, and
November.
FEDERAL RESERVE CHARTS ON BANK
BUSINESS.

CREDIT,

MONEY

RATES, AND

Revised edition published in March.

PRICES, WAGES, AND EMPLOYMENT (Postwar Economic Studies No. 4).

Published in July.
PRIVATE CAPITAL REQUIREMENTS (Postwar Economic Studies No. 5).

Published in October.
HOUSING, SOCIAL SECURITY, AND PUBLIC WORKS

(Postwar Economic

Studies No. 6 ) . Published in August.
RETAIL CREDIT SURVEY—1945.

Published in August.

MONETARY AND BANKING REFORM IN PARAGUAY.

Published in August.
(Board of Gov-

RULES OF ORGANIZATION AND RULES OF PROCEDURE

ernors). Published in September.
FEDERAL RESERVE ACT AS AMENDED TO NOVEMBER I , 1946.

Published

in November.
FEDERAL RESERVE MEETINGS
The Federal Open Market Committee met in Washington on February
28, March 1, June 10, and October 3, 1946, and the executive committee
of the full Committee met from time to time during the year. Under the
provisions of Section 12A of the Federal Reserve Act, the Federal Open
Market Committee has responsibility for determining the policies under which
the open market operations of the Reserve Banks will be carried out. A record
of the actions taken by the Committee on questions of policy will be found on
pages 101-04 of this report.
A Conference of the Chairmen of the Federal Reserve Banks was held
on December 5 and 6, 1946, and was attended by members of the Board
of Governors.
The Conference of Presidents of the Federal Reserve Banks held meetings on February 25-26, June 7-8, and October 1-2, 1946, and the Board
of Governors met with the Presidents on February 28, June 11, and October 4.
Meetings of the Federal Advisory Council were held on February 17-18,
May 19-20, October 6-7, and December 1-3, 1946, and the executive committee of the Council met on April 24, June 26, and November 6. The
Board of Governors met with the Council or its executive committee on
each of these occasions. The Council is required by law to meet in Washington at least four times each year and is authorized by the Federal Reserve

ANNUAL REPORT OF BOARD OF GOVERNORS

Act to consult with and advise the Board on all matters within the jurisdiction of the Board.
During the year several conferences, attended by representatives of the
Federal Reserve Banks and the Board of Governors, were held to discuss
questions relating to international monetary and credit matters, research
and credit problems and policy, examinations, fiscal agency functions, Federal Reserve Bank collection systems, functional expense reports, bank and
public relations, the personnel of the Federal Reserve Banks, and the
Board's consumer credit regulations.

TABLES

7<3

ANNUAL

REPORT OF BOARD OF GOVERNORS

N O . 1—STATEMENT OF C O N D I T I O N OF T H E FEDERAL RESERVE BANKS (IN DETAIL)
DECEMBER 3 1 , 1946 i

ASSETS
(Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars.
Interdistrict settlement fund
Gold certificates on hand
Gold certificates with Federal Reserve Agent

5,523,733
1,010,444
11,053,000

Gold certificates on hand and due from U. S. Treasury
Redemption fund for Federal Reserve notes
Total gold certificate reserves
Other cash:
United States notes
Silver certificates
Standard silver dollars
National and Federal Reserve Bank notes
Subsidiary silver, nickels, and cents
Total other cash
Discounts and advances secured by U. S. Government securities:
Discounted for member banks
Discounted for individuals, etc
Other discounts and advances:
Discounted for member banks
Foreign loans on gold

17,587,177
794,116
18,381,293
'

267,890
15 ,739
40

147,300

Total discounts and advances
Industrial loans
U. S. Government securities in System open market account:
Bills
Certificates
Notes
Bonds
U. S. securities—repurchase option (Treasury bills)

27,228
207,338
2,539
6,572
24,213

15,779

147,300
163 ,079
550

9,839,366
7 ,496,012
355,300
753 ,390
4,905,617

Total U. S. Government securities

23 ,349,685

Total loans and securities
Due from foreign banks
Federal Reserve notes of other Federal Reserve Banks
Uncollected items:
Transit items
Exchanges for clearing house
Other cash items

23,513 ,314
102
163 ,385
2,309,786
184,629
105,159

Total uncollected items
Bank premises:
Land
Buildings (including vaults)
Fixed machinery and equipment

2,599 ,574
12,796
44,388
17,069

Total bank premises
Less depreciation
Bank premises, net
Other assets:
Industrial loans past due
Miscellaneous assets acquired account industrial loans
Miscellaneous assets acquired account closed banks
Total
Less valuation allowances
Net
Federal Deposit Insurance Corporation stock2
Fiscal Agency and other expenses, reimbursable
Interest accrued
Premium on securities
Deferred charges
Sundry items receivable
Real estate acquired for banking house purposes
Suspense account
All other

74,253
41,821
32,432
4
246
46
296
270
26
5 ,572
27,353
9,920
1,147
1,420
2 ,450
604
78

Total other assets

48,570

Total assets
1

Before closing books at end of year.

45 ,006,560
2

Charged off.

See footnote 4, Table 7.

FEDERAL RESERVE SYSTEM
NO.

1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL)
—Continued

LIABILITIES
Federal Reserve notes outstanding (issued to Federal Reserve Banks)
Less: Held by issuing Federal Reserve Banks
741,169
Forwarded for redemption
55 ,133

25,741,606
796,302

Federal Reserve notes, net (includes notes held by Treasury and by Federal Reserve Banks other than issuing Bank)
Deposits:
Member bank—reserve account
U. S. Treasurer—general account
Foreign
Other deposits:
Nonmember bank—clearing accounts
Officers' and certified checks
Federal Reserve exchange drafts
All other

24 ,945 ,304
16,137,996
392,804
508,016

147,231
6,128
614
159,665

Total other deposits

313 ,638

Total deposits
Deferred availability items
Other liabilities:
Accrued dividends unpaid
Unearned discount
Discount on securities
Sundry items payable
Suspense account
All other liabilities

17,352,454
2 ,019,896
882
60
6,708
2,523
96
26

Total other liabilities

10 ,295

Total liabilities

44 ,327,949

CAPITAL ACCOUNTS
Capital paid in
^
Surplus (Sec. 7)
Surplus (Sec. 13b)
Other capital accounts:
Reserves for contingencies:
Reserve for registered mail losses
All other
Earnings and expenses:
Current earnings
Current expenses
Current net earnings
Add—profit and loss
Deduct—dividends accrued since January 1
Net earnings available for charge-offs, reserves, and surplus
Total other capital accounts
Total liabilities and capital accounts

186 ,830
358,355
27 ,428
6,180
18,000
150,385
57,235
93 ,150
—370
10,962
81,818
105,998
45,006,560

NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1946 AND 1945
[In thousands of dollars]
Item

Total
1945

Total gold certificate reserves
18,381,293 17,862,924
267,890
236,315
Other cash
Discounts and advances:
15,779
201,905
Secured by U. S. Govt. securities. .
147,300
Other
47,000

U. S. Government securities:
Bills
Certificates
Notes
Bonds

1946

ASSETS
Gold certificates
17,587,177 17,062,565
Redemption fund for Federal Reserve
notes
794,116
800,359

Total discounts and advances. . .
Industrial loans

1945

726,779

747,953 5,061,375 4,908,821

55,555
782,334
20,586

59,189

1946

1945

858,145

124,283

919,154
19,235

1946

Richmond

1945

1946

878,051 1,124,166 1,070,132
61,134

61,009

807,142 5,185,383 5,033,104
36,867
44,537
18,536

124,008

Cleveland

Philadelphia

New York

Boston

77,620

78,031

1945

,103,170 1,042,110
59,914

60,083

939,185 1,201,786 1,148,163 1,163,084 1,102,193
18,487
15,577
21,706
15,768
25,076

1,285
8,736

1,060
3,149

2,680
56,255

197,330
17,014

4,217
11,330

250
4,136

2,316
12,694

450
4,089

901
6,415

775
1,974

248,905
1,941

10,021
27

4,209
110

58,935

214,344

15,547
523

4,386
1,763

15,010

4,539

7,316

2,749
53

14,744,983 12,831,245
7,496.012 8,364,461
355,300 2,119,650
753,390
946,892

825,149
554,672
26,291
55,748

760,805 1,452,547 1,129,195
621,726 632,265 802,373
157,554
29,968 203,332
90,833
70,383
63,546

799.397
448,280
21,248
45.054

675,894
513,908
130,229
58,176

163,079
550

718,776 3,630,224 3,052,191 1,026,460
583,354 1,890,027 2,098,442 538,956
531,769
25,546
147,829
89,585
54,168
189,958
237,552
66,038

w
o

3
Cd
O

Total U. S. Govt. securities

23,349,685 24,262,248 1,461,860 1,515,997 5,799,794 5,919,954 1,645,130 1,610,468 2,178,326 2,225,733 1,313,979 1,378,207

Total loans and securities

23,513,314 24,513,094 1,471,908 1,520,316 5,858,729 6,134,298 1,661,200 1,616,617 2,193,336 2,230,272 1,321,295 1,381,009

Due from foreign banks
Federal Reserve notes of other Federal
Reserve Banks
Uncollected items
Bank premises
Other assets
Total assets
1

102

110

134

10,569
37,399
7,298
5,897
8,181
10,825
29,092
4,463
153,226
19,882
17,675
163,385
193,426 160,798
576,280
420,234 157,813 139,850 227,369 217,034 227,699 192,767
2,599,574 2,197,932
3,313
3,989
2,686
3,170
3,850|
1.297
2,769
1,352
32,406
8,459
8,674
33,382
6,349
4,353
2,746
3,399
2,912
4,320
4,650
3,955
48,449
11,182;
15,382
65,915
45,006,413 45,062,898 2,478,854 2,517,264 11,704,486 11,666,274 2,771,673 2,726,203 3,663,201 3,632,154 2,779,990 2,730,277

After deducting $68,000 participations of other Federal Reserve Banks on Dec. 31. 1946, and $70,000 on Dec. 31, 1945.

LIABILITIES
Federal Reserve notes
Deposits:
Member bank—reserve account. .
U. S. Treasurer—general account.
Foreign
Other
Total deposits
Deferred availability items
Other liabilities including accrued
dividends
Total liabilities
CAPITAL ACCOUNTS
Capital paid in
Surplus (Sec. 7)
Surplus (Sec. 13b)
Other capital accounts
Total liabilities and capital accounts
Contingent liability on bills purchased
for foreign correspondents
Commitments to make industrial loans
FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes:
Issued to Federal Reserve Bank
by Federal Reserve Agent
Held by Federal Reserve Bank...
Federal Reserve notes, net3. . . .
Collateral held by Federal Reserve
Agent for notes issued to Bank:
Gold certificates
Eligible paper
U. S. Government securities
Total collateral held
1
2 After
3 After

24,945,304 24,649,132

1,491,783 1,478,972 5,714,364

5,407,924 1,699,277 1,635,243 2,124,731 2,096,342 1,781,923 1,738,344

16,138,878 15,914,950
392,869
976,668
508,016
862.320
313,638
445,572

715,408
29,866
30,769
5,027

709,430 4,903,039 4,855,437
293,764
89,027
94,716
1
^337,584
56,168
189,873
343,765
224,947
4,379

818,125
34,511
39,555
2,424

799,634 1,199,768 1,156,889
32,896
59,678
84,773
44,320
72,195
71,375
10,896
4,308
9,671

733,111
13,889
22,398
2,317

727,247
42,299
34,457
3,758

17,353,401 18,199,510
2,019,896 1,619,770

781,070
161,770

859,004 5,412,575 5,830,550
236,189
140,710
362,569

894,615
122,081

935,815 1,287.880 1,322,708
106,130
187,075
157,950

771,715
192,135

807,761
155,713

7,661

448

385

338

9,392

406

2,811

1,413

528

500

186,830
439,823
27,455
24,312

177,095
358,355
27,428
23,947

11,095
27,557
3,012
2,119

10,635
22,439
3,012
2,086

65,801
136,549
7,253
2,564

63,630
116,860
7,205
2,503

13,926
34,720
4,489
2,037

13,064
28,946
4,501
2,004

790

18,304
41,394
1,007
1,986

17,654'
33,745
1,007
1,958

7,771
20,676
3,325
2,060

7,177
15,593
3,326
2,025

45,006,413 45,062,898 2,478,854 2,517,264 11,704,486 11,666,274 2,771,673 2,726,203 3,663,201 3,632,154 2,779,9902,730,277
6,547
8,309

2,181

1,644

543
1,281

703

609
1,596

308
37

200

25,741,606 25 ,633,380 1,537,175 1,539,012 5,876,605 5,555,137 1,747,079 1,699,231 2,191,393 2!,183,181 1,835,075 1,799,845
984,248
63,988
53,152
61,501
796,302
45,392
60,040
162,241
147,213
47,802
66,662
86,839
24,945,304 24,649,132 1,491,783 1,478,972 5,714,364

5,407,924 1,699,277 1,635,243 2,124,731 2,096,342 1,781,923 1,738,344

455,000 460,000 3,470,000 3,120,000
760,000 670,000
550,000 500,000 645,000 635,000
11,053,000 10,523,000
1,060
2,680
197,330
800
775
201,455
1,285
4,217
250
12,812
15,403,201 1,100,000 1,100,000 2,500,000 2,400,000 1,200,000 1,200,000 1,550^000 1,550',000 1,100,000 1 ,175,000
15,226,565
26,292,377 26,127,656 1,556,285 1,561,060 5,972,680

5,717,330 1,754,217 1,700,250 2,195,000 2,185,000 1,860,800 1,845,775

deducting $317,868,000 participations of other Federal Reserve Banks on Dec. 31, 1946, and $523,414,000 on Dec. 31, 1945.
deducting $4,366,000 participations of other Federal Reserve Banks.
Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank.

824

44,327,993 44,476,073 2,435,071 2,479,092 11,492,319 11,476,076 2,716,501 2,677,688 3,600,510 3,577,790 2,746,158 2,702,156

NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1946 AND

1945—Continued

[In thousands of dollars]
Chicago

Atlanta

Item

1946

1945

1946

1945

1946

Kansas City

Minneapolis

St. Louis

1946

1945

1946

Dallas
1946

1945

San Francisco

1945

1946

1945

2
ASSETS
Gold certificates
1,024,326 1,022,330 3,369,273 3,027,003
Redemption fund for Federal Reserve
notes
46,254
45,950 136,644 135,309

596,006

588,990

357,057

331,936

586,156

584,231

466,064

46,456

42,997

21,360

20,145

34,018

35,246

25,003

Total gold certificate reserves.. 1,070,580 1,068,280 3,505,9173,162,312 642,462
20,753
25,352
31,560
Other cash
28,148
15,515

631,987
15,293

378,417
5,734

352,081
7,685

620,174
18,520

619,477
15,130

491,067
12,396

250
1,410

Discounts and advances:
Secured by U. S. Government
securities

465,459 2,314,660 2,395,549
26,155

106,275

111,837

491,614 2,420,935 2,507,386
11,800
32,272
27,672

O
H
O

1,410

100
11,466

3,572

1,410

11,566

3,572

6,110

280
4,641

1,790
1,410

3,413

1,081

3,450
4,504

4,368

6,110

4,921

3,200

3,413

1,081

7,954

1,660
15

4,368

634,373 2,362,852 2,299,424
420,812 951,778 1,095,666
106,637
45,113 277,655
47,637
95,659 124,034

631,259
412,831
19,567
41,492

493,510
427,625

108,365
48,409

374,253
228,144
10,814
22,929

312,354
232,112
58,818

648,399
372,398
17,651
37,428

531,497
417,570
105,817
47,271

487,959
374,852
17,767
37,675

444,765 1,803,907 1,778,461
364,886 710,457 785,987
92,466
33,675 199,179
41,306
88,978
71,405

Total U. S. Govt. securities. . . 1,140,332 1,209,459 3,455,402 3,796,779 1,105,149 1,077,909

636,140

629,559 1,075,876 1,102,155

918,253

943,423 2,619,444 2,852,605

Total loans and securities.... 1,146,069 ,211,104 3,473,693 3,802,889 1,110,070 1,081,109

639,553

630,640 1,083,830 1,103,830

922,621

944,833 2,631,010 2,856,177

Other

Total discounts and advances.
Industrial loans

Total assets.

1,645

18,291

5,737

1,645

18,291

U. S. Government securities:
Bills
Certificates
Notes
Bonds

Due from foreign banks
Federal Reserve notes of
Federal Reserve Banks
Uncollected items
Bank premises
Other assets

550
5,187

702,577
381,352

18,075
38,328

other

14
,

14,290
168,736

1,526
2,641

2,424,599

12,545
150,104
1,568
3,699

26,275

5,812
17,562
24,172
9,287
4,815
7,583
83,162 213,584 219,219
136,969 115,564 100,078
829
1,788
1,863
2,597
795
2,527
2,912
4,974
6,306
3,134
2,355
2,308
2,472,656 7,431,459 7,363,861 1,930,994 1,847,136 1,092,979 1,054,283 1,871,914 1,869,022 1,534,130 1,540,965 5,322,134 5,642,803
22,944
387,336
3,057
6,938

16,558
341,424
3,106
9,410

9,669
148,065
2,011
3,199

9,042
103,677
2,059
3,966

4,338
62,219
1,240
1,475

6,713
54,099
1,263
1,799

o
73

LIABILITIES
Federal Reserve notes

1,449,774 1,483,961 4,573,144 4,444,533 1,120,120 1,063,366

Deposits:
Member bank—reserve account.
U. S. Treasurer—general account
Foreign
Other
Total deposits
Deferred availability items
Other liabilities including accrued
dividends
Total liabilities.

592,688

551,859

922,170

910,750

604,311

618,639 2,871,019 3,219,199

748,101
21,855
18,109
1,814

762,425 2,366,137 2,347,115
65,227 139,437
53,726
63,860 106,652
28,714
4,907
4.303
4,087

607,336
21,768
16,203
9,338

599,150
37,877
24,612
16,301

398,589
20,505
11,914
2,527

385,403
38,287
18,869
2,425

772,506
19,010
15,727
635

774,851
42,323
24,612
1,281

783,090
19,791
15,250
869

764,670 2,093,668 2,032,699
58,933
18,835
36,544
62,470
40,038
24,612
49,330
48,541
1,360

789,879
156,051

848,952 2,499,527 2,598,111
115,889 265,651 241,594

654,645
130,928

677,940
84,735

433,535
48,689

444,984
41,673

807,878
116,746

843,067
94,418

819,000
86,868

827,186 2,201,082 2,203,432
75,172 189,333 169,597

1,825

364

299

285

332

289

241

365

322

1,886

239

923

908

2,396,069 2,449,124 7,340,208 7,286,063 1,906,057 1,826,340 1,075,197 1,038,848 1,847,126 1,848,524 1,510,420 1,521,236 5,262,357 5,593,136

CAPITAL ACCOUNTS
Capital paid in
Surplus (Sec. 7)
Surplus (Sec. 13b)
Other capital accounts

7,109
18,663

14,450

762

1,996

6,354

1,966

22,435
65,078
1,429
2,309

21,074
53,029
1,429
2,266

6,103
16,577
521
1,736

5,611
12,939
527
1,719

4,071
10,997
1,073
1,641

3,861
8,869
1,073
1,632

6,167
15,729
1,137
1,755

5,731
11,891
1,137
1,739

6,865
13,777
1,307
1,761

6,007
10,670
1,307
1,745

17,183
38,106
2,140
2,348

16,297
28,924
2,142
2,304

Total liabilities and capital
accounts
2,424,599 2,472,656 7,431,459 7,363,861 1,930,994 1,847,136 1,092,979 1,054,283 1,871,914 1,869,022 1,534,130 1,540,965 5,322,134 5,642,803
Contingent liability on bills purchased
for foreign correspondents
Commitments to make industrial
loans

249

877

222

382

4,225

164

Federal Reserve notes, net . . . 1,449,774 1.483,961 4,573,144 4,444,533 1,120,120 1,063,366
Collateral held by Federal Reserve
Agent for notes issued to Bank:
Gold certificates
Eligible paper
U. S. Government securities
Total collatera

155

185

183

608,201
15,513

569,076
17,217

949,614
27,444

948,173
37,423

641,294
36,983

663,464 2,996,936 3,419,443
44,825 125,917 200,244

592,688

551,859

922,170

910,750

604,311

618,639 2,871,019 3,219,199

300,000
1,790
878,201

189,000

170,000

280,000
250
700,000

169,000 1,600,000 1,649,000

400,000

280,000
3,450
700,000

169,000

425,666

500,000

500,000 1,600,000 1,900,000

1,515,000 1,580,000 4,720,000 4,590,000 1,251,845 1,179,991

614,000

570,000

983,450

980,250

669,000

669,000 3,200,100 3,549,000

615,000
900,000

680,000 2,020,000 1,890,000 300,000
280
900,000 2,700,000 2,700,666. 951,565

i Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank.

550

209

450

FEDERAL RESERVE NOTE
STATEMENT
Federal Reserve notes:
Issued to Federal Reserve Bank
by Federal Reserve Agent. . . 1,503,304 1,566,911 4,694,621 4,570,154 1,160,309 1,119,753
53,530
82,950 121,477 125,621
Held by Federal Reserve Bank.
40,189
56,387

216

100

ANNUAL REPORT OF BOARD OF GOVERNORS

NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL
RESERVE BANKS, END OF DECEMBER 1944, 1945, AND 1946
[In thousands of dollars]

Type of issue

Treasury bonds:
1945-47
1945
1946-56
1946-48
1946-49
1947-52
1948-50*
1948-51
1948*
1949-51*. June
1949-51*. Sept
1949-52
1949-53
1950-52*. Sept
1950-52
1951-54
1951-55
1951-53*
1951-53
1952-55*
1952-54*. Dec
1953-55
1955-60
1956-58*
1956-59
1958-63
1960-65
1963-68*
1964-69*, June
1964-69*, Dec
1967-72*, Sept

Rate of
interest
(Per cent)

2X
2K

3*
4K
2
2H
IX
2
3H
2%
2K
2H
2
2X
2X
2
2
2H
2K
2X
2X
2X
2M
2K
2K
2K

Total Treasury
bonds
Treasury notes:
Mar. 1,1945*
Mar. 15. 1945
Mar. 15. 1945*.
Jan. 1, 1946*
Mar. 15, 1946*
July 1, 1946*
Dec. 15, 1946*
Mar. 15, 1947*
Sept. 15, 1947*
Sept. 15, 1947*
Sept. 15, 1948*

.90

X
IX

* Taxable issues.

43,950
99,700
47,952
12,000
39,600
100,500
25,000
7,750
500
31,500
74,100
36,800
70,000
81,800
16,000
21,150
31,500
31,600
13,700
14,500
6,940
5,000
40,900
37,250

57,200
946,892

Dec. 31,
1946

Change during
1945

1946

-135,250
-17,800

12,000
39,600
100,500
25,000
7,750
500
31,500
74,100
36,800
70,000
81,800
16,000
21,150
31,500
31,600

.90

IK
IK
IK
IK
IK

-43,950
-99,700
-47,952

-2^500
-1^500
+

500

-1\650

-60,930
13,700
14,500
6,940 " " - " 850'
5,000
40,900
37,250
- 2 " 595
-15,699
-20,800
55,300
-37,460 " " — i ! 966
753,390

-296,534
—320 400
-20,600
-152,371
+159,300

268,800

"576;550'
74,400
899,500
273,800

'3il!900

295^400

3\500
10,000
46,400
295,400

2,119,650

355,300

4,886,640

8,364,461

7,496,012

+3,477,821

3,983,771
7,164,147

.90

Total Treasury
bills

Total holdings...

320,400
20,600
152,371
417,250
74,400

Dec. 31,
1945

1,565,721

Treasury bills:
Bought under repurchase option*
Other*

Guaranteed securities:
CCC Feb. 15, 1945*..

135,250
17,800
43,950
99,700
47,952
12,000
39,600
100,500
25,000
7,750
3,000
31,500
74,100
38,300
70,000
81,300
16,000
22,800
31,500
31,600
60,930
13,700
14,500
7,790
5,000
40,900
37,250
2,595
15,699
20,800
94,660
1,243,426

Total Treasury
notes ..
Certificates of indebtedness*.

Dec. 31,
1944

4,851,923
7,979,322

4,905,617
9,839,366

+868,152

' "+899^500'
+5,000

-16,500

-193,502

"-576!550
-74,400
-899,500
-273,800
+3,500
+10,000
+46,400

+553,929 -1,764,350

+815,175

-868,449
+53,694
+1,860,044

11,147,918 12,831,245 14,744,983 + 1,683,327 +1,913,738

2,500
18,846,205 24,262,248 23,349,685

-2,500
+5,416,043

-912,563

FEDERAL RESERVE SYSTEM
NO.

-HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES BY THE
FEDERAL RESERVE BANKS, 1942-46 1
fin millions of dollars]
Date

1942—June 16
19
20
22
23
Sept. 15
16
17
18
19
Nov. 27
28
30
Dec. 1
10
15
1943—Jan. 29
30
Mar. 2
4
1

Date

Amount

1943—Mar.

70
47
34
94
324
189
286

....

53
139
329
422

98
16
145
115
202

Amount

543

9
10
11
12..
.
13
15
16
17 ...
18
19
20
22...
23
24 ...
25
26
27
29

76
...

Date

Amount

1943—June 15

648
632
790
.
940
1,043
1,302
1,250
981
836
778
768

17
18
19
Sept. 8
9
10
11

603
700

805
659
350
256
212
11
126
243

246

214
179
424
258

14
15
16
1945—Mar. 15
Dec. 4

4
107

512
432
384

318
374
484

6
7

3
304
8
104
10
174
5
30
40
354
There were no issues during the years 1944 and 1946. Interest rate % per cent throughout.

484
202

NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL
RESERVE BANKS, 1942-46
[Number in thousands; amounts in thousands of dollars]
1942

1943

1944

1945

.2
2,678,801
3,761,445

.1
2,874,099
3,810,300

()
3,006,898
4,167,265

130,895
1,204,648

266,686
1,246,384

426,460
1,288,465

()
3,016,719
4,562,709
510,608
1,341,342

()
3,423,547
5,743,862
380,634
1,597,377

14,990
5,833

16,527
5,072

17,054
4,622

18,292
4,483

20,192
4,551

117.425
473
842

*27O,358
250
865

<356,845
937
906

<381,593
474
939

<245,593
311
1,059

1946

NUMBER OF PIECES HANDLED 1

Discounts and advances:
Applications
Notes discounted and advances made
Industrial loans:
Loans made
Commitments to make industrial loans
Currency received and counted....
Coin received and counted
Checks handled:
U. S. Government checks
All other
Collection items handled:
U. S. 3 Government coupons
paid
All other
Issues, redemptions, and exchanges
by fiscal agency department:
U. S. Government direct obligations
All other
Transfer of funds

1
1
1

AMOUNTS HANDLED

2,840,341
193,278
Discounts and advances
14,922,128
34,778,804
Industrial loans:
68,032
60,265
20,381
14,043
Loans made
Commitments to make indus22,207
10,221
4,769
2,350
trial loans
Currency received and counted.... 13,010,185 15,599,680 17,157,034 18,307.687
Coin received and counted
355,581
417,014
381,254
445,892
Checks handled:
67,834,790 113,791,554 127,931,710 124,610,917
U. S. Government checks
409,273,478 509,640,311 532,755,045 563,498,349
All other
Collection items handled:
U. S. 3 Government coupons
1,082,321
1,481,520
1,840,647
paid
2,348,172
6,167,564
7,962,994
7,882,053
All other
9,295,666
Issues, redemptions, and exchanges
by fiscal agency department:
U. S. Government direct obli90,338,225 4209,762,970 4261,297,489 4299,624,101
gations
3,260,660
1,986,425
2,840,687
All other
2,729,452
140,444,452 203,510,209 215,006,532 223,490,280
Transfer of funds
1
Two or more checks, coupons, etc., handled as a single item are counted as one "piece."
2 Less than 500.
.
3
Includes coupons from obligations guaranteed by the United States.
4
Except Treasury savings certificates and war savings stamps received for redemption.

20,133,819
3,445
8,845
20,945,847
519,892
80,419,096
651,457,054
2,817,311
9,312,790

4276,436,077

1,986,608
252,991,164

NO.

Item

System

6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1946

Boston

New York

Philadelphia

Cleveland

Richmond

Atlanta

Chicago

St. Louis

Minneapolis

Kansas
City

Dallas

San
Francisco

CURRENT EARNINGS
Discounted bills
$2,497,339
Purchased bills. .
42,872
Industrial loans
37,676
Commitments to make in15,298
dustrial loans
U. S. Government securities. . 147,124,827
667,021
All other
Total current earnings. . 150,385,033

$136,277
3,233

$148,391

$237,266

$133,717

33,435

$858,542
42,872

134

864

$95,400

$404,338

$88,389

$109,270

$43,739

$108,084

1,527
282
150
82
3,456
9,508,955 3 6,'485,6 76 10,599,887 13,510,504 9,107,158 ' 7,597,185 20,683,338
12,483
147,233
10,782
56,441
10,040
122,219
26,133
9,659,397 37,443,531 10,791,835 13,873,579 9,255,749

$133,926

7,718,718 21,235,191

1,086
1,013
7,702
7,115,299 '4,084,184 ' 6,968,7 i 7 5,991,157 15,472,767
62,140
44,373
8,115
6,786
160,276
7,319,067 4,179,359

7,238,273 6,044,024 15,626,310

CURRENT EXPENSES
Operating expenses:
Salaries:
3,134,646
Officers
48.666.323j
Employees
Retirement System con4,932,727
tributions
15,957
Legal fees
Directors' fees and ex136,212
penses
Federal Advisory Coun16,903
cil, fees and expenses..
Traveling expenses
(other than of directors and members of
Federal Advisory
579,042
Council)
6,696,927
Postage and expressage..
507,411
Telephone and telegraph.
Printing, stationery, and
3,179,437
supplies
459,167
Insurance
1,615,314
Taxes' on real estate....
999,910
Depreciation (building)..
Light, heat, power, and
585,756
water
424,912
Repairs and alterations..
900,066
Rent
Furniture and equipment,
2,518,688
including rental
979,653
All other
Inter-Bank expenses....
Total operating expenses

76,349,051

156,311
2,848,299

258,577
650,772
216,857
209,879
400,078
165,658
171,409
184,288
302,528
211,024
207,265
11,460,819 3,071,662 4,195,236 2,865,285 2,553,083 7,704,157 2,851,796 1,409,876 2,463,712 2,379,042 4,863,356

293,458

1,206,588
37

313,148
8,568

.428,687
5,046

289,706

282,323
788

727,427
-506

289,880
17

138,302

258,887
433

246,644
1,521

457,677
53

8,298

11,430

7,760

9,018

8,392

15,103

8,389

9,843

13,118

17,735

10,201

16,925

1,550

937

642

1,157

996

848

1,429

1,350

1,560

1,949

1,135

3,350

32,336
652,791
22,458

73,645
1,023,192
90,876

26,225
469,628
32,168

52,342
582,575
46,527

50,501
587,427
25,512

46,903
504,887
43,757

78,047
809,111
38,540

53,146
328,059
40,751

35,592
233,461
22,471

40,112
380,673
40,828

37,084
340,515
34,675

53,109
784,608
68,848

251,258
27,242
150,293
55,832

652,945
111,782
438,362
221,060

217,192
23,813
91,436
143,275

201,910
39,111
144,256
115,376

175,016
34,301
85,397
85,552

228,228
20,356
69,460
42,548

494,275
72,645
225,737
71,148

199,799
32,780
67,910
50,833

79,600
9,457
80,990
29,086

182,049
20,216
101,656
70,312

157,801
29,097
38,311
36,584

339,364
38,367
121,506
78,304

40,057
11,411
22,222

121,894
37,798
19,451

35,804
60,932
84,888

71,840
34,639
130,032

39,471
15,713
21,699

37,345
32,437
88,338

68,034
49,476
276,772

39,265
46,187
19,192

22,576
24,220
17,565

38,139
71,975
33,903

35,613
16,449
19,487

35,718
23,675
166,517

120,685
65,906
19,813

398,091
177,494
-206,486

162,958
66,953
25,695

217,521
98,562
28,790

133,146
38,310
14,550

232,226
55,627
11,764

465,207
141,918
41,483

197,801
78,480
10,526

72,047
64,204
7,739

136,458
60,106
10,216

134,031
47,853
9,906

248,517
84,240
26,004

4,780,220 16,490,687 5,008,405 6,661,202 4,687,831 4,475,900 11,673,367 4,528,639 2,433,273 4,136,624 3,760,237 7,712,666

Less reimbursement for
certain fiscal agency
and other expenses... . 25,855,805
Net operating expenses.. 50,493,246
Assessment for expenses of
2,259,784
Board of Governors
Federal Reserve currency:
3,891,470
Original cost
Cost of redemption
590,607
Total current expenses. . 57,235,107

1,332,002

4,592,072 1,304,222 2,116,357 1,499,256 1,833,860 4,820,022 1,636,178

840,128 1,361,123 1,468,281 3,052,304

3,448,218 11,898,615 3,704,183 4,544,845 3,188,575 2,642,040 •6,853,345 2,892,461 1,593,145 2,775,501 2,291,956 4,660,362
144,443

750,764

186,602

210,659

105,239

87,185

303,484

76,771

55,330

75,547

73,305

190,455

173,491
315,577
267,025
534,368
260,483
92,857
113,755
105,067
456,581
44,421
56,593
98,147
34,589
13,205
28,859
32,022
74,642
53,578
3,855,991 13,740,033 4,263,618 4,982,573 3,653,812 3,052,843 7,789,344 3,264,304 1,754,537 2,993,662 2,502,350 5,382,040
227,762
35,568

1,002,412
88,242

342,092
30,741

PROFIT AND LOSS
93,149,926 5,803,406 23,703,498 6,528,217 8,891,006 5,601,937 4,665,875 13,445,847 4,054,763 2,424,822 4,244,611 3,541,674(10,244,270
Current net earnings
Additions to current net
earnings:
Profits on sales of U. S.
114,920
231,046
88,083
Government securities. 1,807,989
180,206
77,998| 181,522
129,579
433,503
138,165
94,994
86,925
51,048
Recoveries of, and withdrawals from allowances for, losses on
699
94,956
565
116,186
!22,897
197
industrial loans (net)..
500
143,380
1,381
15,559
3,153
3,294
7,200
97
All other
101
89,140
5,660
12,090
4,864
841
2,046,325
Total additions
131,525
565,248
184,973
118,772
227,305
100,654
243,136
67,322
52,389
95,283
78,095
181,623
Deductions from current net
earnings:
Charge-off s on Bank
26,364
53,678
27,314
premises
Retirement System (salary computation ad2,086,896
72,807
101,493! 188,832
justment)
_
126,378
531,195
179,676
120,162
143,304
99,309
281,169
116,949
125,622
Reserves for contingen31,380
376,200
63,914
28,616
35,848
33,026
45,982
33,735
10,171
cies
45,478
16,805
15,406
15,839j
97,714
8,031
24,260
12,147
1,064
155,542
4,259
1,089
All other
1,350
2,487
2,212
354
575i
332,370
Total deductions. . . 2,672,316
142,836
117,907! 235,660
164,372
180,270
178,817
603,140
328,215
135,966
111,381
141,382

Net deductions
Net earnings

625,991
92,523,935

Paid to U. S. Treasury (Sec.
67,054
13b)
#
10,962,160
Dividends paid
Transferred to surplus (Sec.
27,708
13b)
Transferred to surplus (Sec. 7) 81,467,013

32,847

37,892

+48,488

147,397

61,498

42,182

85,079

68,644

58,992

46,099

39,8121

54,037

5,770,559 23,665,606 6,576,705 8,743,609 5,540,439 4,623,693 13,360,768 3,986,119 2,365,830 4,198,512 3,501,862 10,190,233
2,150
649,743

63,166
3,865,093

872
814,440 1,094,157

457,887

411,467 1,311,792

353,160

238,372

361,190

866
393,903 1,010,956

48,026 -11,840
-427
-5,297
-286
-2,468
5,118,666 19,689,321 5,774,105 7,648,580 5,082,979 4,212,226 12,048,976 3,638,256 '2,127,458 3,837,608 3,107,093 9,181,745

Surplus (Sec. 7), January 1. . 358,355,245 22,438,554 116,859,805 28,945,785 33,745,117 15,593,072 14,450,586 53,028,930 12,938,821 8,869,500 11,891,485 10,669,643 28,923,947
81,467,013 5,118,666 19,689,321 5,774,105 7,648,580 5,082,979 4,212,226 12,048,976 3,638,256 2,127,458 3,837,608 3,107,093 9,181,745
Additions, as above
Surplus (Sec. 7), December 31. 439,822,258 27,557,220 136,549,126 34,719,890 41,393,697 20,676,051 18,662,812 65,077,906 16,577,077 10,996,958 15,729,093 13,776,736 38,105,692
1
Net losses.

NO. 7—CURRENT EARNINGS, CURRENT EXPENSES, AND NET EARNINGS OF FEDERAL RESERVE BANKS AND DISPOSITION OF NET
EARNINGS, 1914-46
Disposition of net earnings

Earnings and expenses
Bank and period
Current
earnings

Current
expenses

2,173,252
5,217,998
16,128,339
67,584,417
102,380,583

$ 2,320,586
2,273,999
5,159,727
10,959,533
19,339,633

1920
1921
1922
1923
1924

181,296,711
122,865,866
50,498,699
50,708,566
38,340,449

28,258,030
34,463,845
29,559,049
29,764,173
28,431,126

1925
1926
1927
1928
1929

41,800,706
47,599,595
43,024,484
64,052,860
70,955,496

1930
1931
1932
1933
1934

All Federal Reserve Banks by years
1914-15
1916
1917
1918
1919

Net
earnings1

-141,459
2,750,998
9,582,067
52,716,310
78,367,504

Dividends
paid

Paid to U. S.
Treasury
(Sec. 13b)

Transferred
to surplus
(Sec. 13b)

Transferred
to surplus
(Sec. 7)

217,463
1,742,774
6,804,186
5,540,684
5,011,832

$ 1,134,234
2,703,894

$ 1,134,234
48,334,341
70,651,778

149,294,774
82,087,225
16,497,736
12,711,286
3,718,180

5,654,018
6,119,673
6,307,035
6,552,717
6,682,496

60,724,742
59,974,466
10,850,605
3,613,056
113,646

82,916,014
15,993,086
-659,904
2,545,513
-3,077,962

27,528,163
27,350,182
27,518,443
26,904,810
29,691,113

9,449,066
16,611,745
13,048,249
32,122,021
36,402,741

6,915,958
7,329,169
7,754,539
8,458,463
9,583,913

59,300
818,150
249,591
2,584,659
4,283,231

2,473,808
8,464,426
5,044,119
21,078,899
22,535,597

36,424,044
29,701,279
50,018,817
49,487,318
48,902,813

28,342,726
27,040,664
26,291,381
29,222,837
29,241,396

7,988,182
2,972,066
22,314,244
7,957,407
15,231,409

10,268,598
10,029,760
9,282,244
8,874,262
8,781,661

17,308

-2,297,724
-7,057,694
11,020,582
-916,855
6,510,071

1935
1936
1937
1938
1939

42,751,959
37,900,639
41,233,135
36,261,428
38,500,665

31,577,443
29,874,023
28,800,614
28,911,608
28,646,855

9,437,758
8,512,433
10,801,247
9,581,954
12,243,365

8,504,974
7,829,581
7,940,966
8,019,137
8,110,462

297,667
227,448
176,625
119,524
24,579

27,695
102,880
67,304
-419,140
-425,653

607,422
352,524
2,616,352
1,862,433
4,533,977

1940
1941
J942
1943
1944

43,537,805
41,380,095
52,662,704
69,305,715
104,391,829

29,165,477
32,963,150
38,624,044
43,545,564
49,175,921

25,860,025
9,137,581
12,470,451
49,528,433
58,437,788

8,214,971
8,429,936
8,669,076
8,911,342
9,500,126

82,152
141,465
197,672
244,726
326,717

-54,456
-4,333
49,602
135,003
201,150

17,617,358
570,513
3,554,101
40,237,362
48,409,795

1945
1946

142,209,546
150,385,033

48,717,271
57,235,107

92,662,268
92,523,935

10,182,851
10,962,160

247,659
67,054

262,133
27,708

81,969,625
81,467,013

1,919,682,845

916,898,493

962,878,989

243,187,027

2,153,288

J -90,430

4568,490,804

Total—1914-46

Franchise tax
paid to U. 2S.
Treasury

2,011,418
$-60,323

149,138,300

>
w
o
H
O

u
o
a
o
w

Aggregate for each Federal Reserve Bank
1914-46:
Boston
New York
Philadelphia
'.
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

129,154,242
546,298,853
147,701,569
174,387,818
98,701,326
90,773,616
263,304,185
84,833,129
59,188,009
91,830,774
70,369,618
163,139,706

65,534,865
221,198,458
69,763,679
85,037,622
52,926,379
43,918,238
120,515,270
47,296,393
31,587,806
53,885,463
40,697,495
84,536,825

62,510,902
324,449,135
78,205,139
84,128,073
42,999,931
41,647,131
134,179,235
32,904,190
26,174,272
35,027,526
26,670,260
73,983,195

17,194,581
83,225,261
22,299,457
24,593,558
10,240,295
8,677,059
28,285,067
8,497,822
5,912,337
8,172,528
7,843,325
18,245,737

7,111,395
68,006,262
5,558,901
4,842,447
6,200,189
8,950,561
25,313,526
2,755,629
5,202,900
6,939,100
560,049
7,697,341

280,843
344,307
715,347
82,930
170,501
79,177
150,618
7,063
55,115
64,201
102,000
101,186

+ 136,626
-498,979
+290,661
-8,446
-95,397
+5,491
+ 11,681
-26,514
+64,875
-8,674
+55,336
-17,090

37,787,457
173,372,284
49,340,773
54,617,584
26,484,343
23,934,843
80,418,343
21,670,190
14,939,045
19,860,371
18,109,550
47,956,021

1
2 Current earnings less current expenses, plus other additions and less other deductions.
3The Banking Act of 1933 eliminated the provision in the Federal Reserve Act requiring

payment of a franchise tax.
On Dec. 31, 1946, surplus (Sec. 13b)—relating to funds received from the Secretary of the Treasury under Section 13b of the Federal Reserve Act for the purpose of making
loans to industry—amounted to $27,455,881 ($27,546,311 received from the Secretary of the Treasury minus the $90,430 net debits shown here).
4
On Dec. 31, 1946, surplus (Sec. 7)—accumulated pursuant to Section 7 of the Federal Reserve Act—amounted to $439,822,258 ($568,490,804 retained net earnings, shown
here, minus $139,299,557, charge-off cost of Federal Deposit Insurance Corporation stock, and $500,000, charge-off on bank premises, plus $11,131,011 transferred from reserves
or contingencies).

o
w

73
>
73

in
W
73
W

A N N U A L REPORT OF BOARD OF GOVERNORS
NO. 8—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES
DECEMBER 31, 1946
Cost
Federal Reserve Bank or
Branch

Land

Building
(including
vaults)

Fixed machinery and
equipment

$ 1,246,726 $ 3,542,603 $

Boston

5,215,656
592,679
255,000

12,183,528
1,451,570
465,707

Philadelphia

1,884,357

4,413,792

Cleveland
Pittsburgh

1,295,490
781,364

6,464,253
1,049,451

271,924
80,333
250,487
105,701

2,101,178
482,482
1,247,262
291,175

283,000
124,137
45,842
48,000
201,250

Total

Net
book value

662.157 $ 5,451,486 $ 1,296,612
22,222,307
2 259,667
720,707

7,178,342
894,598
386,100

857,882

7,156,031

3,169,956

1,624,302
352,411

9,384,045
2,183,226

2,555,278
1,294,725

663,667
109,132
331,970
115,569

3,036,769
671,947
1 829,719
512,445

1,138,773
160,727
960,761
425,763

1,423,762
330,680
238,231
211,616
762,455

287,941
65,491
39,669
35,091
212,281

1,994,703
520,308
323,742
294,707
1,175,986

722,939
145,925
94,101
105,050
457,815

2,963,548
996,930

6,241,150
1,048,815

1,434,332
156,350

10,639,030
2,202,095

2,139,311
917,427

1,355,374
85,007
131,177
128,542

2,111,809
233,079
226,259
287,469

1,296,893
151,092
72,463
102,270

4,764,076
469,178
429,899
518.281

1,369,520
188,962
174,177
277,899

600,521
15,710

2,316,746
126,401

664,969
44,142

3,582,236
186,253

1,119,159
120,686

Kansas City
Denver
Oklahoma City
Omaha

495,300
101,512
65,021
176,427

3,391,101
449,876
409,890
397,938

931,949
79,268
95,480
91,455

4 818,350
630,656
570,391
665,820

1,638,710
290,275
235,786
361,745

Dallas
El Paso
Houston
San Antonio .

189,831
39,003
78,812
75,002

1,350,945
114,644
313,335
159,743

451,242
29,858
103,278
23,480

1,992,018
183,505
495,425
258,225

480,272
47,889
165,672
101,144

412,996
443,488
114,075

3,144,407
988,109
341,449

784,102
323,195
84,814

4,341,505
1,754,792
540,338

1,024,418
525,901
237,697

21,150,222

60,312,910

17,316,736

98,779,868

32,404,115

New York
Annex
Buffalo

Richmond. . .
Annex
Baltimore
.
Charlotte...

. . . .

Atlanta
Birmingham .
Jacksonville
Nashville
New Orleans
Chicago
Detroit

. .

St. Louis
Little Rock
Louisville
^Memphis
IMinneapolis
Helena

San Francisco
Los Angeles
Salt Lake City

. ...

Total

4,823,123
215,418

OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES
Boston
New York.. . .
Cincinnati1. . .
Pittsburgh
Richmond. . . .
Charlotte
Atlanta
Jacksonville. .
New Orleans..
St. Louis
San Francisco
Los Angeles. .
Portland1
Seattle1

i 364,188
45,000
380,744
2 316,537
85,334
10,868
35,000
'155,617
2 75,200
'751,040
60,000
35,000
160,000
2
250,000

$ 78,773
125,864
270,994

Total

2,724,528

476,730

$89,241

1,099

89,241

442,961
170,864
740,979
316,537
86,433
10,868
35,000
155,617
75,200
751,040
60,000
35,000
160,000
250,000

282,921
65,900
200,000
220,000
51,000
10,868
35,000
155,617
75,200
751,040
60,000
35,000
160,000
250,000

3,290,499

2,352,546

1
The Cincinnati, Portland, and Seattle Branches occupy rented quarters. The Cincinnati Branch
quarters are in a building erected on a site owned by the Federal Reserve Bank of Cleveland. Amounts
shown for building and fixed machinery and equipment represent cost of vaults and other improvements.
* Includes building on site.
8
Includes building on site and some expense of repairs and alterations.

NO. 9—NUMBER AND SALARIES OF OFFICERS A N D EMPLOYEES OF FEDERAL RESERVE BANKS
[December 31, 1946]

Federal Reserve Bank
(Including branches)

President
Annual Salary

Other officers
Number

Annual salaries

Employees, except those whose
salaries are reimbursed to bank
Number

Annual salaries

Employees whose salaries are
reimbursed to bank
Number

Annual salaries

Total
Number

Annual salaries

$ 25,000

141,500

968

$ 2,050,075

386

764,981

1,369

$ 2,981,556

New York

50,000

627,260

3,132

8,473,178

1,231

3,269,484

4,414

12,419,922

Philadelphia

25,000

145,350

951

2,332,088

300

676,983

1,265

3,179,421

o
w

Boston

Cleveland

25,000

248,700

1,357

2,876,110

528

1,061,238

1,916

4,211,048

Richmond

25,000

200,100

929

1,798,673

457

839,109

1,411

2,862,882

Atlanta

25,000

184,500

773

1,549,905

520

991,334

1,320

2,750,739

Chicago

35,000

348,950

1,797

4,447,308

1,323

2,977,756

3,156

7,809,014

St. Louis

25,000

190,790

884

1,853,010

450

942,074

1,359

3,010,874

Minneapolis

25,000

147,500

445

982,309

235

489,202

699

1,644,011

Kansas City

25,000

179,900

746

1,470,488

453

866,834

1,223

2,542,222

Dallas

25,000

166,900

694

1,478,709

380

805,408

1,097

2,476,017

San Francisco

25,000

282,900

1,388

3,062,473

777

1,696,239

2,201

5,066,612

$335,000

1314

i$2,864,350

14,064

$32,374,326

7,040

$15,380,642

21,430

$50,954,318

Total
1

Includes $456,323 reimbursed to the Banks on account of salaries of 61 officers.

ANNUAL REPORT OF BOARD OF GOVERNORS

NO. 10—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT
RATES, AND BUYING RATES ON BILLS
[Per cent per annum]
In effect December 31, 1946

Type of transaction

Discounts for and advances to
member banks under Sees.
13 and 13a of the Federal
Reserve Act
Advances to member banks
under Sec. 10(b) of the Federal Reserve Act
Advances to individuals, partnerships, or corporations
other than member banks
secured by direct obligations
of the United States (last
paragraph of Sec. 13 of the
Federal Reserve Act)
Loans to industrial or commercial businesses under Sec.
13b of the Federal Reserve
Act, direct or in participation
with financing institutions
Discounts for and purchases
from financing institutions
under Sec. 13b of the Federal
Reserve Act:
On portion for which institution is obligated
On remaining portion
Commitments to make loans
under Sec. 13b of the Federal
Reserve Act:
To industrial or commercial businesses
To financing institutions...
Minimum buying rates on
prime bankers' acceptances
payable in dollars
1-90 days
91-120 days
121-180 days
Buying rate on Treasury bills6..
1

New
York

Boston

Chicago

Phil- Cleve- Rich- Atadel- land mond lanta
phia

St.
MinLouis neapolis

Kansas
City

San
Francisco

Dallas

2i^-5 2i^-5 2^-5

0)
(3)

2
2
0) ( ) (3)
(3)

K-l K-l 34
K-i K-1M
(5)
H

l
l
i

0)
(3)

2i^_5 21^-5 2K~5 2K-5 2K-5 2K-5 2K-5 2K-5

0)
(3)

0) 2K~5 1-lK
(3)
(3)

K-134 K~134 K-iM

K-ik

x-ix

(5)

(5)
H

2K"~5

(5)

0)
(3)

1
C)
(3)

(J)
(3)

()
J

K - l 34 K-i/4 K~1M K~134 K-iM
34-134 K-l 34 K-iM (4) -K- (4) K ;

(51

(6)

(5)

Rate charged borrower by financing institution less commitment rate.
May charge same rate as charged borrower by financing institution, if lower.
Rate charged borrower.
4
Financing institution is charged }4 per cent on undisbursed portion of loan.
6
The same minimum rates in effect at the Federal Reserve Bank of New York apply to any purchases made by other
Federal Reserve Banks.
6
Established rate at which Federal Reserve Banks stand ready to buy all Treasury bills offered. Purchases of such bills,
if desired by the seller, are made on condition that the Reserve Bank, upon request before maturity, will sell back bills of like
amount and maturity at the same rate of discount.
NOTE: Maximum maturities for discounts and advances to member banks are: 15 days for advances secured by obligations of the Federal Farm Mortgage Corporation or the Home Owners Loan Corporation guaranteed as to principal and
interest by the United States, or by obligations of Federal Intermediate Credit Banks maturing within 6 months; 90 days
for other advances and discounts made under Sections 13 and 13a of the Federal Reserve Act (except that discounts of certain bankers' acceptances and of agricultural paper may have maturities not exceeding 6 months and 9 months respectively);
and 4 months for advances under Section 10(b). The maximum maturity for advances to individuals, partnerships, or
corporations made under the last paragraph of Section 13 is 90 days. Industrial loans and commitments made under Section
13b of the Federal Reserve Act may have maturities not exceeding 5 years.
2

FEDERAL RESERVE SYSTEM
NO. 11—MEMBER BANK RESERVE REQUIREMENTS
[Per cent of deposits]
Net demand deposits1
Period in effect

June
Aug.
Mar.
May
Apr.
Nov.
Aug.
Sept.
Oct.

Reserve
city banks

Country
banks

223/<
26

10
15
17^
20

26
24
22
20

20
20
20
20

7
IOK
12X
14
12
14
14
14
14

Central reserve
city banks

21, 1917-Aug. 15, 1936
16, 1936-Feb. 28, 1937
1, 1937-Apr. 30, 1937
1, 1937-Apr. 15,1938
16, 1938-Oct. 31, 1941
1, 1941-Aug. 19, 1942
20, 1942-Sept. 13, 1942
14, 1942-Oct. 2, 1942
3, 1942 and after

19K

17K

22K

Time deposits
(all member
banks)

3
4K

6
5
6
6
6
6

1
Demand deposits subject to reserve requirements; i.e., total demand deposits minus (1) cash items in
process of collection, (.2) demand balances due from domestic banks, and (3) war loan and Series E bond
accounts, during the period April 13, 1943 to June 30, 1947, both inclusive.

NO. 12—MAXIMUM RATES ON TIME DEPOSITS
Maximum rates that may be paid by member banks as established by the Board of Governors under
provisions of Regulation Q
[Per cent per annum]
Nov. 1, 1933,
to
Jan. 31, 1935

Savings deposits
Postal Savings deposits
Other time deposits payable:
In 6 months or more
In 90 days to 6 months
In less than 90 days

Feb. 1, 1935,
to
Dec. 31, 1935

In effect
beginning
Jan. 1, 1936

3
3

Type of deposit

2K
2K
2K
2K
2%

2K
2^

3
3
3

2%
2
1

NOTE: Maximum rates that may be paid by insured nonmember banks as established by the Federal
Deposit Insurance Corporation, effective Feb. 1, 1936, are the same as those in effect for member banks.
Under Regulation Q the rate payable by a member bank may not in any event exceed the maximum
rate payable by State banks or trust companies on like deposits under the laws of the State in which the
member bank is located.

NO. 13—MARGIN REQUIREMENTS 1
Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange
Act of 1934
[Per cent of market value]
Nov. 1, 1937- Feb. 5, 1945- Tulv 5, 1945- Tan. 21,1946- Effective
Feb. 4, 1945 July 4, 1945 Jan. 20, 1946 Jan. 31, 1947 Feb. 1, 1947
Regulation T:
For extensions of credit by
brokers and dealers on
listed securities
For short sales
Regulation U:
For loans by banks on stocks.

40
50

50
50

75
75

100
100

75
75

100

ANNUAL REPORT OF BOARD OF GOVERNORS

NO. 14—MINIMUM DOWN PAYMENTS AND MAXIMUM MATURITIES ON CONSUMER
CREDIT SUBJECT TO REGULATION W
Prescribed by Board of Governors of the Federal Reserve System in accordance with Executive Order
No. 8843 dated August 9, 1941
As revised effective
December 1, 1946
Type of credit

Instalment sales:
Mechanical refrigerators
Washing machines, dishwashers and ironers
Cooking stoves and ranges
_
Combination units incorporating foregoing
Sewing machines and vacuum cleaners
Radios and phonographs
Room-unit air conditioners
Furniture and soft-surface floor coverings
Automobiles
Instalment loans:
To purchase listed articles
Other
Renewals, revisions, and consolidations of instalment credit .
1
2

Down payments determined after deduction of any trade-in, except in case of automobiles.
Where credit is to purchase listed articles, requirements same as on instalment sales of the respective
articles.
NOTE: The above limitations are subject to various exceptions; for exceptions in detail, and for additional provisions not reflected in this table, the regulation should be consulted.

FEDERAL RESERVE SYSTEM

NO. 15—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 1946
Commercial banks

All
banks

Number of banks, Dec. 31, 1945.. 14,553
Changes during 1946:
New banks 3
.
. .
4+144
Consolidations and absorptions:
Banks converted into
-54
branches
-41
Other
Voluntary liquidations 6
-17
Inter-class changes:
Conversions—
National into State
State into national...
Federal Reserve membership:'
Admissions of State
banks
Withdrawals of State
banks
Federal deposit insurance :7
Admissions of State
banks
Withdrawals of State
banks
+32
Net increase or decrease
Number of banks, Dec. 31, 1946.. 14,585
Number of branches8, Dec. 31,1945. 3,866
Changes during 1946:
+ 157
De novo branches
+54
Banks converted into branches
Branches discontinued
-18
Inter-class branch changes:
National to State member.
National to nonmember. .
State member to national.
State member to nonmember
Nonmember to State
member
+193
Net increase or decrease
Number of branches8, Dec. 31.1946. 4,059
Number of banking facilities at
224
military reservations9, Dec. 31,1945
Changes during 1946:
Established
+2
+6
Reopened at veterans hospitals
-153
Discontinued
Inter-class chancre
-145
Net decrease
Number of banking; facilities at
9
79
military reservations , Dec. 31,1946

Member
banks
Total

InNaState
tional member sured
2

NonIninsured sured

1,867

6,416

714

+21

+98

-21
-19
-3

-12
-3
-2

-20
-16
-8

-1
-2
-4

5,017

+144
-54
-40
-17

-2

+ 14

-11

350

—i"

-3

-51

-5

-11

+ 10

+30

+142
+54
-17

192

+56

14,044
3,723

Noninsured

+16

14,011

+33

Mutual
savings
banks

Nonmember
banks 1

-30

-1
+41
6,457
964

-24
690
57

+26

-10
5,007
1,641

1,893
1,061

+51
+22

+38
+23

-2

-4

-1
-1

+11

+1
-ii'

+80

+11
+57

-1

+49

-11

+4
+2

-1
191
101

+14

350
42

+1
"'Hi'

+1
+1
-10

-1

+37

+14

115

+179
3,902

1,721

1,118

1,001

224

170

+2
+6

+2
+4

-153

-117

-145

-110

-23
-1
-23

-13
-12

5
14
Includes such unincorporated (private) banks as report to State banking departments.
a The State member bank figures and the insured mutual savings bank figures both include three member
mutual savings banks. These bank* are not included in the total for "commercial banks" and are included
only once in "all banks."
3
Exclusive of new banks organized to succeed operating banks.
4
Includes two nonmember banks, one insured and one npninsured, which resumed business after having
previously been placed in voluntary liquidation.
5
Exclusive of liquidations incident to the succession, conversion, and absorption of banks.
• Exclusive of conversions of national banks into State member banks, or vice versa. Such changes do
not affect Federal Reserve membership; they are included under "conversions."
7
Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve
membership, or vice versa. Such changes do not affect Federal Deposit Insurance Corporation membership; they are included in the appropriate groups under "inter-class bank changes."
1
Covers all branches and other additional offices at which deposits are received, checks paid, or money
79

• "Banking facilities" are provided through arrangements made by the Treasury Department with banks
designated as depositaries and financial agents of the Government. The figures shown do not include
branches that have also been designated by the Treasury Department as "banking facilities."

ANNUAL REPORT OF BOARD OF GOVERNORS
N O . 16—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST A N D N O T
ON PAR LIST, BY FEDERAL RESERVE DISTRICTS A N D STATES, DECEMBER 3 1 , 1946

Federal Reserve
district or State

Total banks,
branches, and
offices on which
hecks are drawn 1

Banks

Branches
and
offices

On par list
Not on par list
(Nonmember) 1
Total

Banks

Member

Branches
and
offices

Banks

Nonmember

Branches
Branches
branches
and
Banks
Banks
and
and
offices
offices
offices

DISTRICT

Boston
New York
Philadelphia. . .
Cleveland.....
Richmond
Atlanta
Chicago
St. Louis. .
Minneapolis. . .
Kansas City. . .
Dallas
San Francisco..

490
936
846
,168
,013
L 144
2,473
1,467
1,272
L.75O
981
503

281
810
127
214
406
159
540
127
110
7
34
1,166

490
936
846
1,168
785
516
2,416
1,111
592
1,731
868
498

281
810
127
214
281
124
513
69
36
7
26
1,166

336
801
649
722
475
331
999
495
470
753
595
268

203
743
89
186
185
109
205
38
26
5
18
1,106

154
135
197
446
310
185
,417
616
122
978
273
230

14 ,043

3,981

11,957

3,654

6,894

2,913

Alabama
Arizona
Arkansas
California
Colorado .

219
10
227
192
141

23
35
20
880
1

106
10
97
192
141

23
35
5
880
1

85
5
66
112
92

23
28
1
841
1

Connecticut.. . .
Delaware
Dist. of Col
Florida
Georgia

114
39
20
174
370

20
14
35
3
30

114
39
20
110
87

20
14
35
3
27

63
17
16
70
60

9
4
33
2
26

51
22
4
40
27

Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky. . . .
Louisiana
Maine
Maryland. . . .
Massachusetts

47
870
488
659
612

47
868
488
659
610
386
53
63
170
186

42
3
83
161
1

25
500
238
164
213
114
43
38
79
149

40
3
28

22
368
250
495
397

Michigan
Minnesota.. . .
Mississippi. . .
Missouri
Montana

443
674
203
593
110

42
3
83
161
1
34
62
68
94
144
198
6
52

443
258
38
521
109

198
6
7

228
208
30
181
77

Nebraska
Nevada
New Hampshir
New J e r s e y . . .
New Mexico. .

409
8
64
343
44

2
17
2
133
6

401
8
64
343
44

2
17
2
133
6

145
6
52
294
31

2
16
1
117

256
2
12
49
13

New York
North Carolina
North Dakota.
Ohio
Oklahoma....

666
204
150
674
383

692
161
25
176
1

666
85
44
674
373

692
39

637
23

88
32
3
248
153

55
16

176
1

578
53
41
426
220

Oregon
Pennsylvania.
Rhode Island.
South Carolina
South Dakota.

68
1,009
20
149
169

75
125
44
30
44
68
4
12
9
86

68
1,009
20
54
67

75
125
44
28
21

33
769
11
29
63

70
100
28
26
20

35
240
9
25
4

5
25
16
2
1

191
806
59
71
304

81
550
34
40
203

117
177
44255

43
4
10
2
41
108

110
256
25
31
101

115

53
4
12
9
85
115

Total

78
67
38
28
96
15
308
31
10
2
8
60

'228'
628
57
356
680
19
113
5

125
35
27
58
74

5,063

741 2,086

327

21
5
31
80
49

113

STATE

386
155
63
170
186

Tennessee....
Texas
Utah . . .
Vermont
Virginia

294
868
59
71
315

Washington...
West Virginia.
Wisconsin. . . .
Wyoming

122
180
554
55

145

34
39
68
94
144

54
108
163
37

1
24
34
35
62
133
155
6
1

154

7
4
39
11
10
2
1
1
2

130

'64
283

2
55
161
2

272
10
25
91
37

10
5
33
32
11

215
50
8
340
32

63
69
279
18

102

23'

416
165
72
1

8
1
1
16
6
119
106

122
25

22
10

2
7
44
7
72

95
102

2
23

103
62

5
3
112

Does not include mutual savings banks, on a few of which some checks are drawn but does include 79
banking facilities (see footnote 9, Table 15). The difference of two between the number of nonmember
commercial banks on Dec. 31, 1946 shown in this table and in Table 15 is due to the fact that this table
excludes 109 banks and trust companies on which no checks are drawn, and includes 99 unincorporated
banks and 12 other banks on which checks are drawn but which are not reporting to a State banking
department.
Back figures.—See Banking and Monetary Statistics, Table 15, and previous Annual Reports.

RECORD OF POLICY ACTIONS
BOARD OF GOVERNORS
JANUARY 17,

1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman ;
Mr. Szymczak; Mr. Draper.
Amendments to Regulation T, Extension and Maintenance of Credit by Brokers,
Dealers, and Members of National Securities Exchanges, and Regulation U,
Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered on
a National Securities Exchange.

By unanimous vote and effective January 21, 1946, Regulations T
and U were amended to increase from 75 per cent to 100 per cent the
margin requirements prescribed on registered securities (other than
exempted securities) in a general account and on short sales under Regulation T, and on stocks under Regulation U. The increase related
only to future purchases and sales of and loans on securities except that
under provisions incorporated in the regulations in July, 1945, the
amendments required that the proceeds of sales of securities in an undermargined account (or held as collateral for a loan) be used to the
extent necessary to increase the margin on the remaining securities
until they were on a 100 per cent basis.
In taking this action the Board was guided by the following considerations:
During the period of reconversion from a wartime to a peacetime economy,
the country was being exposed to powerful inflationary pressures. They arose
from the accumulated demands for many types of civilian goods, the temporary
shortage of such goods, and the unprecedented volume of liquid assets in the
hands of individuals and corporations. Following the end of hostilities this
period had also been characterized by public pressure for premature removal of
governmental wartime controls, with the consequent effect of promoting
speculative activity. Restriction of the use of credit in the securities market
would tend to discourage speculative activity which was both a characteristic
and a feeder of inflation. In these circumstances, any expansion in the use of
credit for the purpose of buying or trading in registered securities was, in the
judgment of the Board, an excessive use of credit and consequently should be
prevented under the legislative mandate to the Board. While the Board
recognized that action in this field could have only a limited effect in combating general inflation, it believed that this action was not only in accordance
with its legal obligation, but would help, though to a necessarily limited extent,
to protect the national economy from the dangers of inflation.
During the past year the Board advanced margin requirements on two occasions by a total of 35 points from a 40 per cent level to a 75 per cent level,
and also tightened the provisions in connection with the use of outstanding
accounts. These measures were followed by a decrease in the use of credit for
purchasing or carrying securities, which had been increasing rapidly in 1943
and 1944, and the volume of trading on credit, which was mainly speculative,
decreased substantially. Nevertheless, this type of trading had continued in
90

FEDERAL RESERVE SYSTEM

considerable volume amounting to several hundred thousand shares per day,
the volume of stock market credit had begun to increase again, and the level
of stock prices had advanced. Consequently, it was the judgment of the Board
that further restraining action was in the public interest.
Under the new requirements, much the larger part of the trading in registered securities was expected to be on a cash basis. If further restraint should
seem to be appropriate in the future, the Board would consider the desirability
of making some of its margin rules more rigid or requiring some liquidation
of outstanding credits used for carrying securities.
MARCH 5,

1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman ;
Mr. Szymczak; Mr. McKee; Mr. Draper; Mr. Evans.
Change in Rules for Uniform Application by Federal Reserve Banks in Waiving
Penalties for Deficiencies in Reserves of Member Banks.
By unanimous vote, the rules prescribed by the Board of Governors
under which the Federal Reserve Banks were authorized, in their discretion, to waive penalties for deficiencies in reserves of member banks
were changed, effective immediately, to permit the waiver of penalties
(1) of not to exceed $2.00 in any weekly or semimonthly reserve computation period, instead of in any calendar month, and (2) when, for
the first time within two years, a member bank had a deficiency in its
reserves of not to exceed 2 per cent of its required reserves. The revised rules did not contemplate that the penalties would be waived in
all such cases but only when, in the judgment of the Federal Reserve
Banks, such waiver was justified.
The first change was made to simplify the administration of reserve requirements by eliminating the necessity for a Federal Reserve Bank to maintain a
cumulative record to determine whether the aggregate penalty for any bank
in any calendar month was in excess of $2.00. Because of the large increase
in deposits of member banks and in their required reserves, the change did not
amount to a liberalization of what was contemplated when the rule was originally adopted in 1933.
The second change was for the purpose of permitting the Federal Reserve
Banks somewhat wider scope in waiving minor penalties which did not occur
frequently and which were the result of bona fide clerical errors or inexperienced help.
MARCH 8,

1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Elimination of Rate on Advances to Nonmember Banks Secured by Direct Obligations of the United States.
By unanimous vote, approval was given to the elimination by the
Federal Reserve Bank of Cleveland, effective March 9, 1946, of the
rate of one per cent in effect at the Bank on advances to nonmember
banks secured by direct obligations of the United States under the last

ANNUAL REPORT OF BOARD OF GOVERNORS

paragraph of section 13 of the Federal Reserve Act, ft being understood
that the rate in effect at the Bank on advances to individuals, partnerships, and corporations other than banks, under the last paragraph of
section 13, would thereafter apply to such advances to nonmember
banks.
In accordance with the policy established by this action the Board
subsequently, by unanimous votes of the members present, approved the
elimination of the one per cent rate by other Federal Reserve Banks,
effective as of the date shown below:
Boston
New York
Philadelphia
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco

March
April
March
March
March
March
March
March
April
March
April

29, 1946
6, 1946
23, 1946
16, 1946
16, 1946
16, 1946
16, 1946
23, 1946
13, 1946
16, 1946
25, 1946

On September 1, 1939, the Board of Governors announced that the Federal
Reserve Banks were prepared to make advances to member and nonmember
banks on Government obligations at par at the rates prevailing for member
banks. At that time war had broken out in Europe, with sharp repercussions
on the money and securities markets of this country, and the policy was
adopted as a further means of lending stability to the markets. Action was
taken at this time to discontinue the privilege accorded to nonmember banks
to borrow on Government securities at the same rate as member banks because
the privilege had served its purpose and was no longer necessary.
APRIL 23, 1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans.
Elimination of the Preferential Rate of V2 Per Cent on Advances to Member Banks
Secured by Direct Obligations of the United States.
By unanimous vote the Board approved the elimination by the Federal Reserve Banks of New York, Philadelphia, and San Francisco,
effective April 25, 1946, of the preferential rate of J/2 per cent per
annum in effect at the Banks on advances to member banks secured
by obligations of the United States having one year or less to run to
call date or to maturity if no call date, it being understood that the
rate of one per cent in effect at the Banks on advances to member
banks would thereafter be applicable to all advances to member banks
secured by such obligations irrespective of the date upon which they
matured or were callable.
In accordance with the policy established by this action, the Board
subsequently, by unanimous vote of the members present, approved the
discontinuance of the preferential rate by the other Federal Reserve
Banks, effective as of the dates shown below:

FEDERAL RESERVE SYSTEM

Boston
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas

April
May
May
May
April
April
April
April
May

27,
3,
10,
10,
26,
26,
26,
27,
10,

1946
1946
1946
1946
1946
1946
1946
1946
1946

The reasons for the Board's action were set forth in the following statement which was given to the press for release in the morning papers of April
25, 1946:
"The boards of directors of the Federal Reserve Banks of Philadelphia, New York, and San Francisco have voted to discontinue the special wartime preferential discount rate of ^2 of 1 per cent per annum
on advances to member banks secured by Government obligations due
or callable in not more than one year. Changes in rates, to become
effective at the Reserve Banks, must be approved by the Board of
Governors.
"The Board has approved discontinuance of the preferential rate
because it has served the purpose of facilitating the war-financing program for which-it was adopted in 1942. The Board does not favor a
higher level of interest rates on U. S. securities than the Government
is now paying. Discontinuance of the special rate will not involve any
increase in the cost to the Government of carrying the public debt.
"The preferential rate encourages member banks to borrow at Federal Reserve Banks in order to hold or to purchase additional Government securities, or to lend to others at low rates for the purpose of
holding or purchasing Government securities. While such encouragement was justified early in the war to induce the banks to utilize their
reserves more fully in financing huge war expenditures, it has subsequently made for speculation in Government securities and has resulted
in unnecessary expansion of the money supply through monetization of
the public debt. The Government's program no longer calls for expansion of bank credit to help finance huge war expenditures. Instead,
it calls for action that will stop additions to and bring about reductions
in the country's monetary supply in order to reduce inflationary pressures. Discontinuance of the preferential rate, therefore, signifies an
appropriate adjustment from wartime to postwar conditions in accordance with the Government's program of economic stabilization."
J U N E 20,

1946

Members present: Mr. Eccles, Chairman; Mr. Szymczak; Mr. Draper;
Mr. Evans.
Amendments to Regulation W, Consumer Credit.
By unanimous vote, Regulation W was amended, effective July 5,
1946, (1) to limit the application of the regulation to instalment sale
credits of $1,500 or less instead of all such credits regardless of amount,
(2) to provide that home improvement loans would be subject to the

ANNUAL REPORT OF BOARD OF GOVERNORS

regulation to the extent that they covered listed articles and combination units which incorporated in one unit unlisted articles and one or
more listed articles, (3) to discontinue as listed articles attic ventilating fans, automobile batteries and accessories, and passenger automobile tires and tubes, and (4) to provide that the certificate given by a
borrower in connection with a loan for educational, medical, hospital,
dental, and funeral expenses should include a statement (in addition
to other statements previously required) that the proceeds of the loan
(unless they were to be used exclusively for educational expenses) were
to be paid in the amounts specified to persons whose names, addresses,
and occupations were set forth in the statement.
The principal reason for the amendments was to simplify the administration
of the regulation without liberalizing its terms or encouraging the growth of
consumer credit to any material extent. The reasons for the changes specifically referred to were:
1. Under the regulation as previously in effect instalment loan credits in
excess of $1,500 were exempted from the regulation and it was felt that the
same exemption should be provided for instalment sale credits.
2. Combination units were appearing on the market in which were included
such listed articles as refrigerators, ranges, etc., and it was the opinion of the
Board that these articles should be covered by the regulation. Therefore, the
amendment was adopted to make the regulation applicable to the extension of
credits for the purpose of making repairs, alterations or improvements if they
included any listed article or combination units which included a cooking stove
or range, dish washer, ironer, refrigerator, or washing machine. Attic ventilating fans were discontinued as a listed article for the same reason as home
alterations, repairs, and improvements generally were exempted from the
terms of the regulation in December 1945.
3. Automobile batteries, accessories, tires and tubes were discontinued as
listed articles as they were mainly in the nature of repairs and maintenance of
existing equipment.
4. The change with respect to emergency loan credits was for the purpose of
preventing abuse of the exemption of such credits by the use of vague general
statements as to the use to which the proceeds of the credits were to be put.
J U N E 26, 1946

Members present: Mr. Eccles, Chairman; Mr. Szymczak; Mr. Draper;
Mr. Evans; Mr. Vardaman.
Discontinuance of Further Printings of Federal Reserve Notes in the Higher Denominations.
By unanimous vote, approval was given to a letter to all of the Federal Reserve Banks in which it was stated that the Board had decided
to direct that no further printings of Federal Reserve notes in denominations of $500 and above be requested, but that it would offer no
objection to the Federal Reserve Banks' paying out Federal Reserve
notes of such denominations as long as the existing stocks lasted.
This action was taken because notes in denominations of $500 and above
were not needed for hand-to-hand circulation, large denomination currency

FEDERAL RESERVE SYSTEM

lends itself readily to undesirable uses such as black market transactions and
other illegal purposes including the evasion of income and other taxes, and any
legitimate need for large denomination currency could be met by other means.
J U L Y 12,

1946

Members present: Mr. Eccles, Chairman; Mr. Szymczak; Mr. Evans.
Increase in Buying Rates on Bankers' Acceptances.
By unanimous vote approval was given to an increase from Y* to J4
per cent per annum, effective July 12, 1946, in the minimum buying
rate established by the Federal Reserve Bank of New York on bankers' acceptances, it being understood that the Bank would immediately
establish the following schedule of effective minimum buying rates on
such acceptances:
1 to 90 days
J4 per cent
91 to 120 days
Ji per cent
121 to 180 days
1 per cent
In accordance with the above action the Board subsequently, by the
unanimous votes of the members present, approved increases in the buying rates at other Federal Reserve Banks in accordance with the minimum buying rate approved for the Federal Reserve Bank of New
York, effective as of the respective dates shown below:
Boston
July 19, 1946
Philadelphia
July 19, 1946
Cleveland
July 26, 1946
Richmond
August 10, 1946
Chicago
July 19, 1946
St. Louis
July 25, 1946
Minneapolis
July 17, 1946
Kansas City
July 23, 1946
Dallas
July 19, 1946
San Francisco
July 19, 1946
The situation which made this action desirable grew largely out of the elimination by the Federal Reserve Banks earlier in the year of the preferential
rate of J^ per cent on advances to member banks secured by Government obligations. The buying rates on bankers' acceptances were not increased at that
time because it was believed desirable to watch developments in the market
following the elimination of the preferential rate and, if market rates adjusted
to the new situation and if bankers' acceptances in the market could be sold to
others than the Federal Reserve Banks, the continuation of the existing buying
rates on bankers' acceptances would not be important. It was felt, however,
that if a volume of acceptances were sold to the Federal Reserve Banks, the
minimum buying rates should be increased in order to carry out the policy
established in eliminating the preferential discount rate of J/2 per cent on
advances secured by Government obligations. Since there were sales of acceptances to the Reserve Banks during the period prior to July 12, 1946, the
action of the Board referred to above was taken for the purpose indicated.

ANNUAL REPORT OF BOARD OF GOVERNORS
AUGUST 13,

1946

Members present: Mr. Eccles, Chairman; Mr. Szymczak; Mr. Draper;
Mr. Evans.
Amendment to Regulation W, Consumer Credit.

By unanimous vote and effective September 3, 1946, Regulation W
was amended to make it applicable to consumer credits up to $2,000
instead of $1,500 and to reduce from 18 months to 15 months the
maximum maturity of instalment loans that were not for the purpose
of purchasing consumers durable goods or semi-durable goods.
The purposes of these changes were to increase the maximum amount of
instalment credits covered by the Regulation because of a substantial increase
in prices, particularly automobiles, and to bring the maturity of loans not for
the purpose of purchasing listed articles more nearly into conformity with the
permissible maximum maturit}^ on other instalment loans covered by the Regulation. The volume of consumer credit had been increasing rapidly before
this action was taken and a considerable part of the expansion was in the forms
which would be restricted by the amendment.
Revision of Regulation C, Acceptance by Member Banks of Drafts or Bills of
Exchange.
By unanimous vote, a revision of Regulation C was adopted to become effective August 31, 1946, and a letter was approved requesting
the Federal Reserve Banks to make a general review of all cases in their
respective districts in which a member bank had been granted authority
either to accept up to 100 per cent of its capital and surplus or to accept
drafts and bills for the purpose of furnishing dollar exchange, to determine whether in any such case the authority should be rescinded by the
Board.
The reasons for the adoption of the revised Regulation C were set forth in
the following statement released to the press for publication August 16, 1946:
"The Board of Governors of the Federal Reserve System has
adopted, effective August 31, 1946, a revised version of Regulation C,
Acceptance by Member Banks of Drafts or Bills of Exchange. The
regulation governs the acceptance of drafts or bills drawn against
domestic or foreign shipments of goods or secured by warehouse receipts covering readily marketable staples and the acceptance of drafts
or bills drawn for the purpose of creating dollar exchange. The revision has been made in order to simplify and clarify the regulation.
In making the revision, the Board has had the benefit of suggestions
received from a number of member banks experienced in acceptance
credit procedure and from the Federal Reserve Banks.
"While the Board, in stating the requirements that must be met, has
endeavored to lay down broad principles that should be observed, it
should be emphasized that mere technical compliance with the provisions of the regulation will not necessarily afford an accepting bank
protection from loss. Sound acceptance practice depends primarily
upon the exercise by accepting banks of good credit judgment. The

FEDERAL RESERVE SYSTEM

principal reliance for the maintenance of sound practices must be placed
upon that judgment and the continued development of seasoned policies
in this field of extension of bank credit."
The request for the review of outstanding authorizations was made because
in a number of cases such authorizations had been granted many years ago but
had not been used and, from the nature of the. banks' present business, there
appeared little likelihood that they would be needed. Subsequently, in a
number of cases where the authority was not being used and there was no
apparent need for its continuance, the authority was rescinded without objection on the part of the banks concerned.
AUGUST 23,

1946

Members present: Mr. Draper, Chairman pro tern; Mr. Evans; Mr.
Vardaman.
Increase in Buying Rates on Bankers' Acceptances.
Unanimous approval was given to an increase from YA P e r c e n t to
one per cent per annum, effective August 24, 1946, in the minimum
buying rates established by the Federal Reserve Banks of New York
and Minneapolis on bankers' acceptances, it being understood that the
Banks' effective buying rates would be raised to one per cent on acceptances of all maturities.
In accordance with the above action, the Board subsequently, by
unanimous vote of the members present, approved an increase in buying rates at other Federal Reserve Banks in accordance with the minimum buying rate approved for the Federal Reserve Banks of New
York and Minneapolis, effective as of the respective dates shown
below:
Boston
August
30, 1946
Philadelphia
September 7, 1946
Cleveland
September 7, 1946
Richmond
September 14, 1946
Atlanta . .
September 20, 1946
Chicago
August
31, 1946
St. Louis
August
29, 1946
Kansas City
September 4, 1946
Dallas
September 14, 1946
San Francisco
September 7, 1946
It appearing that additional bankers' acceptances might be offered to the
Federal Reserve Bank of New York at the buying rates then in effect, the rate
was increased to one per cent so that credit would not be available to member
banks from this source at less than the rate at which member banks could
borrow at the Federal Reserve Banks on the security of Government obligations. The action was in accordance with the general policy of, and taken for
the same reasons as, the actions taken earlier in the year to eliminate the
preferential discount rate of J4 per cent on advances to member banks secured
by Government obligations and to increase the minimum buying rates on
bankers' acceptances from ^ to % P e r cent.

ANNUAL REPORT OF BOARD OF GOVERNORS
NOVEMBER 12,

1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Draper; Mr. Evans.
Amendments to Regulation T, Extension and Maintenance of Credit by Brokers,
Dealers, and Members of National Securities Exchanges, and Regulation U,
Loans by Banks for the Purpose of Purchasing or Carrying Stocks Registered
on a National Securities Exchange.

It was voted unanimously to amend Regulations T and U in certain respects, effective December 1, 1946.
The scope of the amendments and the reasons therefor are set forth in a
statement released in the morning papers of Wednesday, November 13, 1946,
which read as follows:
"The Board of Governors of the Federal Reserve System has adopted
Amendments No. 6 to Regulation T and No. 7 to Regulation U, relating to the use of credit for purchasing securities, effective December 1,
1946.
"The amendments will permit stockholders of any corporation who
receive rights to subscribe to new issues to obtain credit for the purpose
of exercising these rights. The permission extends also to cases in
which a public utility holding company, when simplifying its corporate
structure as required by the Public Utility Holding Company Act of
1935, issues to its stockholders rights to subscribe to its holdings of outstanding securities of operating companies.
"Under these amendments, if the stockholder needs to borrow in
order to take up the rights issued directly to him by the company in
which he owns stock, he may do so by pledging securities which, for
this purpose, shall have a loan value of 50 per cent. Otherwise the
prevailing 100 per cent margin requirements remain in effect.
"The Board decided that this change in the regulations would be
appropriate as a matter of equity and that it could be made without
stimulating speculation or encouraging to any material extent the
growth of stock market credit."
NOVEMBER 15,

1946

Members present: Mr. Eccles, Chairman; Mr. Ransom, Vice Chairman;
Mr. Draper; Mr. Evans.
Revision of Regulation W, Consumer Credit.
By unanimous vote, the Board adopted a revision of Regulation W to
become effective December 1, 1946.
The reasons for the Board's action were set forth in the following statement
which was released for publication in the morning papers of November 16,
1946:
"Effective December 1, 1946, the Board of Governors has today
revised Regulation W by confining it to instalment credit and centering it on purchases of major durable goods. If regulation in the field
of consumer credit is to be continued on a peacetime basis, the Board

FEDERAL RESERVE SYSTEM

believes that the regulation should in general be in the form and scope
of this revision in order to be an effective influence towards stability
in this sector of the economy.
"This regulation now rests on an Executive Order of August 9,
1941, which is revocable by the President or by action of Congress.
The issue as to whether regulation should or should not be continued
in any form is a subject of sharp controversy among various groups
affected by it. The Board feels that the issue should be decided by the
Congress and that the present revision is an appropriate means of
bringing before the Congress the question of whether the Executive
Order should be vacated or whether authority for such regulation
should be continued by specific legislation.
"In its Annual Report to Congress last June, the Board recommended that Congress give consideration to the question of whether
regulation of consumer credit should be continued on a peacetime basis
as a subordinate but contributory factor in the maintenance of economic
stability. As the Report stated, 'Over the past 30 years consumer
instalment financing has come to occupy an important and strategic
place in the national economy. Such financing is essential to the mass
distribution and consequently to the mass production of consumers'
durable goods. From time to time, however, the expansion and subsequent contraction of consumer credit have gone so far as to accentuate
the upswings and downswings of the business cycle. There is no way
of preventing such excessive expansion and contraction except governmental regulation of the terms on which consumer credit shall be made
available, such as the down payment required on instalment sales or
financing and the length of time permissible for instalment contracts/
"The regulation is now revised in the light of the foregoing considerations. Under this revision, the regulation is focused on instalment credit, both instalment sales and instalment loans, including 12
major categories of durable consumers' goods, which constitute the
great dollar bulk of credit subject to the widest expansion and contraction. Charge accounts and single-payment loans, in which fluctuations
are comparatively small, are eliminated from the scope of the regulation. The revision effects a substantial simplification of the regulation's provisions and will make it administratively more workable.
"This revision narrows the scope of the regulation to what the Board
considers a minimum consistent with the exercise of a stabilizing influence in this area of the economy. In this form, the Board believes
the regulation can be better understood and its merits and defects better appraised. When present inflationary pressures have subsided, the
terms of the regulation would need to be modified further.
"The principal changes made by the revision are as follows:
1. The list of consumers' durable goods to which down payment and
maturity requirements apply is reduced from 36 categories to 12, the
remaining items including automobiles, major household appliances,
radios, phonographs, sewing machines, furniture, and soft-surfaced floor
coverings, but with an exemption for any article costing less than
$50.00.
2. Restrictions on charge accounts and single-payment loans are
eliminated.

IOO

ANNUAL REPORT OF BOARD OF GOVERNORS

3. A uniform maximum maturity of 15 months is established for all
new instalment credits, whether they arise from sales or loans.
4. The provisions for refinancing, including consolidations with
new credits, are simplified, and refinancing credits may have a maximum maturity of 15 months.
5. Except for floor coverings which are transferred to the category
calling for a 20 per cent down payment, the items retained have the
same down payment as presently prescribed: 33K per cent for all
articles other than furniture which is in the 20 per cent category.
6. Procedural rules are simplified in such matters as the statement
covering the transaction and the statement obtained from the borrower.
It is no longer required that a statement of the transaction be given to
the customer.
7. Minor changes reconcile the new provisions with such requirements as are retained and certain technical sections are simplified.
8. The list of articles to which down payment and maturity requirements apply is as follows:
33}i per cent down:
Automobiles
Refrigerators
Cooking stoves and ranges
Washing machines
Ironers
Dishwashers
Air conditioners
Radios and phonographs
Sewing machines
Suction cleaners
20 per cent down:
Furniture
Soft-surfaced floor coverings"

RECORD OF POLICY ACTIONS
FEDERAL OPEN MARKET COMMITTEE
March i, 1946
Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;
Mr. Szymczak; Mr. McKee; Mr. Ransom; Mr. Draper; Mr. Evans; Mr.
Leach; Mr. McLarin; Mr. Young; Mr. Clerk.
(A meeting of the Federal Open Market Committee—the last before the
members of the Committee took office who were elected as representatives
of the Federal Reserve Banks for terms of one year beginning March 1, 1946
—was held on February 28 for the purpose of ratifying actions which had
been taken under existing policies and of discussing developments in the international and domestic monetary and credit situation. At that meeting no
policy actions were taken.)
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:
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 3 billion dollars.
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 1.5 billion dollars.
Since the meeting of the Committee which was held on October 17, 1945,
some of the conditions affecting open market policy had changed materially.
The Victory Loan Drive, the last great public drive, had been completed.
Instead of being faced with further substantial increases in the public debt,
the Treasury had a balance of approximately 25 billion dollars, a large portion
of which was available for retirement of Government securities maturing
during the remainder of the calendar year. A program for the retirement
of Government debt had been undertaken by the Treasury and it had announced that 1 billion of the 4.1 billion dollars of certificates maturing on
March 1, 1946, and the 1.8 billion dollars of one per cent notes and 3 % P e r

IOI

IO2

ANNUAL REPORT OF BOARD OF GOVERNORS

cent bonds maturing on March 15, 1946, would be paid off. These issues
were held largely by commercial banks and the Federal Reserve Banks and
their retirement would effect a substantial reduction in the volume of bank
credit outstanding.
Before this meeting of the Committee, consideration had been given to the
question what should be done with respect to the preferential discount rate
of Yz per cent in effect at the Federal Reserve Banks on advances to member banks secured by Government obligations, the termination by the Federal
Open Market Committee of the Y% per cent posted rate at which the Federal
Reserve Banks stood ready to purchase Treasury bills offered to them, the
policies of the Treasury with respect to management of the public debt including debt retirement, and possible legislation by Congress to increase the
powers of the System in the field of credit regulation.
The discontinuance of the preferential discount rate was under active consideration by the Federal Reserve Banks and the Board of Governors and
was being discussed with the Treasury at the time of this meeting. It was
the belief of the Federal Open Market Committee that the discontinuance
of that rate, which was a temporary war measure designed to meet a special
situation, should be the first: step in a policy which had as its objective the
prevention of further expansion of bank reserves and that, for reasons discussed in the annual report of the Board of Governors to which this record
is appended, it was important that the large supply of funds resulting from
deficit war financing through the banks be reduced rather than increased during the year. The Committee was of the opinion that such reduction could
be effected without increasing the cost of carrying the Government debt. It
was also felt that until the preferential discount rate was eliminated and the
effects of that action on the money market and on yields on Government securities could be observed, and inasmuch as substantial amounts of reserve funds
would be required in the market in connection with the retirement of Government debt, the Committee should continue the existing open market policy
of maintaining an adequate supply of member bank reserves and at the same
time exerting an influence toward the maintenance of conditions in the Government security market that would be satisfactory from the standpoint of
Government requirements.
The above direction was adopted for that purpose. It was in the same
form as the direction issued at the meeting of the Committee on October
17, 1945, except that the limitation contained in the first paragraph on the
amount by which the total securities held in the System account could be
changed was raised from 2 billion dollars to 3 billion. The limitation
was increased in view of the large transactions in the System account which
it was expected would take place before another meeting of the Committee,
arising from the needs for reserve funds in connection with the program for
retirement of the public debt and the redemption of securities in the System
open market account.
June 10, 1946
Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;
Mr. Szymczak; Mr. Draper; Mr. Evans; Mr. Vardaman; Mr. Leach; Mr.
McLarin; Mr. Young; Mr. Clerk.
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:

FEDERAL RESERVE SYSTEM

IO3

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 an orderly market in Treasury
securities and a general level of prices and yields of Government securities which will support the Treasury issuing rates of % per cent for
one-year certificates and 2^2 per cent for 27-year bonds restricted as to
ownership; 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 Y% 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 2 billion dollars.
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 1.5 billion dollars.
During the interim since the meeting of the Committee on March 1, 1946,
action had been taken by the Federal Reserve Banks and the Board of Governors to discontinue the preferential discount rate of y2 per cent on advances
to member banks secured by Government obligations. In announcing the
discontinuance of the rate, the Board of Governors stated that it did not
favor a higher level of interest rates on Government securities than the Government was then paying. The Treasury had redeemed for cash more than
10 billion dollars of maturing Government securities since the first of the
year and it appeared at the time of this meeting that Treasury balances would
permit further substantial retirements in the months immediately ahead.
This would continue to reduce the volume of bank credit outstanding and to
prevent a return of the downward trend in yields on Government securities
that had been present earlier in the year.
At this meeting there was further discussion of the steps that might be
taken by the Committee to carry out the System credit policies directed, as
part of the program of the Government for combating inflation, toward the
prevention of a further expansion of bank reserves and at the same time of
any increase in the cost of the Government debt. It was felt that the Treasury program for debt retirement made unnecessary at this time any action to
discontinue the outstanding direction issued by the Federal Open Market
Committee to the Federal Reserve Banks to purchase Treasury bills offered
to them at a discount rate of % per cent per annum. It was also the view
of the Committee that in the existing circumstances the policy referred to
above could best be implemented by changing the direction issued to the
executive committee with respect to transactions in the System account so
that such transactions would be for the purpose of maintaining an orderly
market in Treasury securities and a general level of prices and yields of Government securities which would support the Treasury issuing rates of % per

IO4

ANNUAL REPORT OF BOARD OF GOVERNORS

cent for one-year certificates and 2^2 per cent for 27-year bonds restricted as
to ownership.
The limitation in the first paragraph of the new direction was reduced
from 3 billion to 2 billion dollars for the reason that, while operations in the
System account before another meeting of the Committee, particularly the
redemption of securities being retired, would be substantial, it was believed
that the lower limitation on the authority to change the amount of securities
in the account would be adequate to meet the situation.
October 3, 1946
Members present: Mr. Eccles, Chairman; Mr. Sproul, Vice Chairman;
Mr. Ransom; Mr. Draper; Mr. Evans; Mr. Vardaman; Mr. Leach; Mr.
McLarin; Mr. Young; 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:
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 an orderly market in Treasury securities and
a general level of prices and yields of Government securities which will
support the Treasury issuing rates of % per cent for one-year certificates
and 2*/2 per cent for 27-year bonds restricted as to ownership; 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 Y% 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 2 billion dollars.
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 1.5 billion dollars.
When this meeting was held, there had been no new developments which
presented reasons for a change in the policies adopted by the Federal Open
Market Committee. The Treasury had continued its program of debt retirement and had redeemed for cash 17.5 billion dollars of Government securities.
Further retirements were expected during the remainder of the calendar year
and, therefore, the Committee was of the opinion that there was no need at
this time for the elimination of the direction to the Federal Reserve Banks
to purchase Treasury bills offered to them at a discount rate of Y% per cent
per annum. Accordingly, for the reasons previously stated, the above direction was issued to continue the existing policies in effect.

UNITED STATES v. MOTOR CITY CREDIT
JEWELRY C0O9 INC.
DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF
MICHIGAN, SOUTHERN DIVISION
UNITED STATES OF AMERICA, Plaintiff

I Civil Action
MOTOR CITY CREDIT JEWELRY CO., INC., a corporation, and
DAVID FINK, 22900 Van Dyke Street, Van Dyke, Michigan,

°# ** '

Defendants.
JUDGMENT

The above-entitled matter came on to be heard by the Court upon the complaint and stipulation for consent judgment filed herein by the parties. Upon
consideration of the same and it appearing to the Court that plaintiff's complaint alleges in substance that the defendants named have violated Regulation
W of the Board of Governors of the Federal Reserve System and that the defendants have stipulated that this consent judgment be entered against them,
Now,

THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED

That the defendants, Motor City Credit Jewelry Co., Inc., and David
Fink, and their agents, servants, representatives, employees and persons in
active concert and participation with them, be and they are hereby permanently
enjoined, in the instalment sale of merchandise, from:
1. Making instalment sales subject to the requirements of Regulation W of
the Board of Governors of the Federal Reserve System without obtaining the
cash down payment required by Section 4(a) of said Regulation.
2. Making instalment sales subject to the requirements of Regulation W
of the Board of Governors of the Federal Reserve System without maintaining and preserving, for the life of the obligation to which they relate, such
books of account, records and other papers as are relevant to establishing
whether or not an extension of credit within the scope of said Regulation was
in conformity with the requirements thereof, as required by Section 12 (h) of
said Regulation.
Dated this 14th day of February, 1946.
By the Court:
(Signed) Ernest A. O'Brien,
Judge, United States District Court.

105

MOTOR CITY CREDIT JEWELRY CO, INC,
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
I N THE MATTER OF
MOTOR CITY CREDIT JEWELRY CO., INC.,

Van Dyke, Michigan.
FINDINGS AND OPINION

This is a proceeding under section 3(d) of Regulation W to determine
whether the Motor City Credit Jewelry Co., Inc., Van Dyke, Michigan
(hereinafter referred to as the "Registrant"), has violated sections 4(a) and
12 (h) of said Regulation, and, if so, whether Registrant's license should be
revoked or suspended.
The hearing was begun on November 9, 1945, at the offices of the Detroit
Branch of the Federal Reserve Bank of Chicago. The Registrant and the
Board were each represented by counsel, and each presented evidence. Upon
the basis of the facts developed at such hearing, the Board's Hearing Officer
submitted his recommended findings and opinion, which were furnished to
counsel in order that they might file exceptions thereto, and subsequently, on
January 25, 1946, oral argument was had before the Board at its offices in
Washington, D. C.
At the hearing in Detroit, no evidence was introduced by the Registrant to
rebut the evidence of violations of the Regulation, and counsel for the Registrant does not contend that the recommended findings were unsupported by
the evidence or erroneous. They may therefore be accepted by the Board.
It appears that Registrant is a corporation organized under the laws of the
State of Michigan. It's sole office is located at 22900 Van Dyke Street, Van
Dyke, Michigan, a suburb of the city of Detroit, where it engages principally
in the sale of jewelry on credit. Its annual business is in excess of $100,000.
At all times mentioned herein, Registrant has been licensed by the Board
under the provisions of Regulation W, and has been subject to the requirements of that Regulation.
Registrant is a family corporation, its stock being owned 45 per cent by
David Fink, 35 per cent by Sol Fink, a brother, and 20 per cent by their
mother. During the period covered by the evidence (September 1944 to
November 1945) Registrant was under the management of David Fink, President, and Eleanor Fink, Secretary-Treasurer, assisted by Leonard Fink, a
brother, who was not an officer of the company. For a part of this time there
was also one other clerk in the store, a boy about 16 years of age, whose name
does not appear.
On September 26, 1944, an investigator from the Detroit Branch of the
Federal Reserve Bank of Chicago made a routine investigation of Registrant's
books and records to determine whether Registrant was complying with Regulation W. This investigation disclosed a number of apparent violations, particularly shortages in the down payment required by section 4(a) of the Regulation. The violations also included several instances where the Registrant's
records, which are required by section I2(h) of the Regulation to be adequate
for the purpose of determining whether the provisions of the Regulation are
being obeyed, were found to be totally inadequate for that purpose. These
106

FEDERAL RESERVE SYSTEM

IO7

matters were called to the attention of Eleanor and Leonard Fink, who promised future compliance.
A second investigation was made on January 19, 1945, which again disclosed numerous shortages in down payments, as well as a continued failure to
maintain adequate records. As a result of this investigation, a disciplinary
conference was held at the offices of the Reserve Bank on February 2, 1945,
which was attended by David Fink. Once again, full future compliance was
promised.
A third investigation was commenced on April 17, 1945. Registrant's
records indicated that Registrant had carried out the suggestions made at the
disciplinary conference on February 2 and showed apparent substantial compliance with the Regulation. It was noted, however, that a considerable
number of instalment credit transactions were marked "lay-away," indicating
that the store had retained possession of the merchandise until the purchaser
had paid the full amount of the down payment required by section 4(a) of
the Regulation, at which time the records showed that delivery of the merchandise was made to the purchaser. No customer contacts were made to
verify these notations in the company's records.
A fourth and final investigation was commenced on August 31, 1945, and
again a considerable number of "lay-away" transactions were noted. This
time, customer contacts were made, and they disclosed the fact that Registrant
had been systematically falsifying its records. Specifically, they disclosed
that customers were allowed to take merchandise from the store on the day of
purchase without making the required down payment, and that the records
of these sales were marked "lay-away," showing delivery of the merchandise
on a subsequent date when the purchaser's payments had equaled or exceeded
the required down payment. The conclusion is inescapable that Registrant
availed itself of this artifice to conceal a studied and deliberate series of violations of the Regulation. In the face of repeated warnings, Registrant has
continued to violate the most fundamental requirements of the Regulation,
and for a time at least, these were aggravated by other violations designed
to conceal them.
In his oral argument before the Board, Registrant's counsel, without challenging the facts as found above, emphasized that two of the four Fink brothers had been absent in military service during all of the times referred to
herein and one of these and their mother together own a majority of the stock
of the Registrant. He urged that the Board give consideration to the fact
that these two veterans, who expect to make their livelihood from the operation of the Registrant, and their mother, all of whom were innocent of any
violations of the Regulation, would be severely penalized by a revocation of
Registrant's license.
Obviously, these arguments are in no sense exculpatory of Registrant's past
continued disobedience of the Regulation. And, however much they may
otherwise appeal to the Board, they may not properly be considered by it in
carrying out its enforcement functions under the Regulation. The latter
was promulgated as a part of the Government's program against inflation
and, to be effective, should be obeyed by all to whom it applies. If the Board
were to be deterred in its enforcement of the Regulation because of its possible effect upon innocent corporate stockholders, it would be establishing a
precedent which might very well eliminate the Regulation as an effective
medium of credit control.
These considerations were pointed out to counsel for the Registrant at the

IO8

ANNUAL REPORT OF BOARD OF GOVERNORS

time of the oral argument. At that time, however, the Board suggested that,
if some arrangement satisfactory to the Board's counsel could be worked out
which would give positive assurance of future compliance, the Board might,
consistently with its duty to preserve public respect for and continued obedience
to the Regulation, impose a less severe penalty than that recommended by the
Hearing Officer.
Since the oral argument the Board is advised that, as a result of a stipulation entered into between counsel on January 31, 1946, and approved by the
Board on that date, the following events have occurred:
1. On February 14, 1946, a consent decree was entered in the United
States District Court in Detroit against the Registrant and David Fink,
together with all of Registrant's officers and employees, enjoining them from
further violations of Regulation W.
2. David Fink resigned as President of the Registrant.
3. David Fink's stock interest in Registrant was reduced from 45 per cent
to 30 per cent by the transfer of 15 per cent to his brother, Nathan Fink.
4. Appropriate resolutions were adopted by Registrant's stockholders placing the management of Registrant's business in Sol and Nathan Fink, requiring all credit sales to be subject to the approval of either of them, and
excluding David Fink from the making of credit policies and restricting his
executive and administrative activities solely to the handling of the building
program and purchasing.
In the light of the changes thus effected in the management of Registrant,
and the continuing and effective nature of the judicial decree entered against
it and its employees, the Board is satisfied that future compliance with the
Regulation is reasonably assured. Under these circumstances the Board is
disposed to reduce the sanction recommended by the Hearing Officer. Accordingly, it is the Board's decision that Registrant's license under Regulation
W be suspended for a period of 60 days. An appropriate order will issue.
By order of the Board of Governors of the Federal Reserve System this
18th day of February 1946.

S. R. CARPENTER,

Secretary.
I N THE MATTER OF
MOTOR CITY CREDIT JEWELRY CO., INC.,

Van Dyke, Michigan.
ORDER SUSPENDING LICENSE

A proceeding having been instituted before the Board under section 3(d)
of Regulation W to determine whether the license of Motor City Credit
Jewelry Co., Inc., should be suspended or revoked; public hearings having
been held thereon; a Hearing Officer's report having been filed with the Board
and oral argument had thereon; the Board having considered the entire record
and arguments of counsel; and the Board having this day issued its findings
and opinion,
I T IS ORDERED, that the license of the Motor City Credit Jewelry
Co., Inc., issued pursuant to the Board's Regulation W, be and the same
hereby is suspended for the period from February 24, 1946, to and including
April 24, 1946, unless this order is sooner terminated by the Board.
By order of the Board of Governors of the Federal Reserve System this
18th day of February, 1946.

S. R. CARPENTER,

Secretary.

IN RE: CONSUMERS HOME EQUIPMENT CO.

I N THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN
DISTRICT OF MICHIGAN, SOUTHERN DIVISION

In re:
CONSUMERS HOME EQUIPMENT CO.,

a Corporation,

and
A. B. CHERETON,

4801-19 Woodward Avenue, Detroit, Michigan
Cr. No. 28826
Oral Opinion
This cause having come on for hearing May 27, 1946, on the Rule to
Show Cause issued pursuant to Petition filed in behalf of the United States
of America was continued from day to day thereafter until May 31, 1946.
The Court having fully considered the evidence submitted and arguments
urged on behalf of respective parties found both defendants to have violated
the terms of an injunction issued July 19, 1945 m Civil Action No. 5097 in
the following particulars.
More than thirty customer witnesses were sworn on behalf of the United
States of America and the evidence stands undisputed except in one case,
where an attempt was made to controvert the testimony of the witness for
the Government. The overwhelming weight of such testimony conclusively
establishes that the defendant Corporation and A. B. Chereton, individually,
violated the terms of said injunction in making instalment sales, of so called
listed articles without securing the one-third down payment required by Section 4 of Regulation W of the Board of Governors of the Federal Reserve
System. Under the evidence in this case there can be no doubt that the persons who made the sales to the customer witnesses produced by the Government were in fact Agents of the defendant Corporation acting under a general
policy of said company determined and controlled by the defendant A. B.
Chereton. The forms used by said Agents in negotiating sales of merchandise
bore the name of the defendant corporation and the undisputed evidence is
that the samples they displayed were the property of said defendant Corporation. While it may have been true that detailed directions as to prospective
customers were not given said Agents, it certainly can not be contradicted that
they acted under the general direction of the defendant Corporation, pursuant
to policies emanating from the defendant A. B. Chereton. It is admitted that
the goods sold were the property of the defendant Corporation and the sales
were made in behalf of said Corporation. It is admitted that the Michigan
State Sales Tax was paid in every instance by the defendant Corporation.
The form used by said Agents in making such sales was supplied by the
defendant Corporation. It appears on its face to be an order form, and with
the notations made thereon in each instance, reflects a direct instalment sale.
It is stated thereon in each instance, without equivocation that the goods described were sold on a certain date to the purchaser named and the amount

109

IIO

ANNUAL REPORT OF BOARD OF GOVERNORS

of the down payment received. It necessarily follows that the transaction is
a time or instalment sale on the face of it and that it could not be anything
else.
These salesmen did nothing whatever to enlighten the prospective purchasers as to the cash price of the goods sold with the single possible exception
noted above. A substantial number of instalment sales were made by defendants of "listed articles" selling for more than $10.00 either without any down
payment whatsoever or with a down payment substantially smaller than that
required by Section 4 of Regulation W, directly in violation of the terms of
said injunction.
Something has been said as to intent. Intent is not evidenced by what a
man says, nor by his proclamations, but by what he does. Intent in a criminal action flows not from a written or spoken word, but from the logical and
natural inferences that come from a man's actions. From all the facts presented from this witness stand, rather than from isolated declarations or written circulars of defendants, it is found that there was an intent to violate
Regulation W and the terms of said injunction.
The defendants and each of them are accordingly found guilty of contempt
of court.
The Court does not pass directly on the validity or the constitutionality of
Regulation W. The Regulation is presumed to be valid, and that is all that
is necessary in this proceeding.
ERNEST A.

O'BRIEN,

United States District Judge.
Dated: June 14, 1946.

PEOPLES BANK v. ECCLES, et aL

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
DISTRICT OF COLUMBIA

Civil Action 32200
PEOPLES BANK,

Plaintiff,

v.
MARRINER

ECCLES,

et al., Defendants

This case is before the Court on defendants' motion for judgment on the
pleadings and plaintiff's motion for summary judgment, both motions having
been orally argued on April 29th, last.
The complaint shows that plaintiff is a banking corporation organized under
the laws of the State of California; that defendants are the individual members of the Board of Governors of the Federal Reserve System; that in 1941
plaintiff applied for membership in the Federal Reserve System; that in May
1942 it was admitted to the Federal Reserve System membership upon the
following condition, among others:
"4. If, without prior written approval of the Board of Governors of
the Federal Reserve System, Transamerica Corporation or any unit of
the Transamerica group, including Bank of America National Trust
and Savings Association, or any holding company affiliate or any subsidiary thereof, acquires, directly or indirectly, through the mechanism
of loans for the purpose of acquiring bank stock, or in any other manner,
any interest in such bank, other than such as may arise out of usual correspondent bank relationships, such bank, within 60 days after written
notice from the Board of Governors of the Federal Reserve System, shall
withdraw from membership in the Federal Reserve System."
The complaint further shows that, since plaintiff's admission to the Federal
Reserve System membership, a number of its shares have been acquired by,
and registered on its books in the name of Transamerica Corporation, and that
these shares were acquired by Transamerica without plaintiff's knowledge or
consent, and without the approval of the Board of Governors.
Upon the basis of these facts plaintiff seeks a declaratory judgment that
Condition No. 4 is invalid and an injunction restraining defendants from taking any steps to enforce the Condition.
The defendants have filed a joint and several answer, in which they set
forth two defenses. The first defense is that plaintiff, having enjoyed for
almost four years the benefits of the Federal Reserve System membership,
which resulted from its acceptance of Condition No. 4, is now estopped from
challenging the validity of such Condition. The second defense is that the
complaint otherwise fails to state facts upon which any relief can be granted.
It appears that plaintiff filed its formal application for admission to the
Federal Reserve System under date of December 2, 1941 ; that on February
14, 1942, the Board of Governors rejected the application; that after a conference with the Board representatives in Washington, attended by its repre-

III

112

ANNUAL REPORT OF BOARD OF GOVERNORS

sentatives, plaintiff by letter formally requested the Board of Governors to
reconsider its decision, calling attention to the fact that a number of changes
had taken place in its stock ownership; that, following the receipt of plaintiff's formal request for reconsideration, the Board of Governors, under date
of March n , 1942, notified plaintiff that its application would be reconsidered if the plaintiff could demonstrate inter alia:
* * *
"2. That some change has been made in the arrangements for the use
of the furniture and fixtures whereby the bank will be under no obligation to Capital Company or any other part of the Transamerica group.
"3. That neither Transamerica Corporation nor any organization
affiliated or closely identified with Transamerica Corporation or any
other bank holding company group has any interest, direct or indirect,
in the applicant bank, and that the bank is in no manner obligated to
any such organization.
"4. That all stockholders have stated in writing that they have no
agreements or understandings, expressed or implied, with respect to the
sale or transfer of the stock of the bank to any such organization, and
that they do not intend to enter into any such agreements or understandings.
"5. That the bank was organized as a bona fide local, independent
institution, and is expected to be continued as such."
Plaintiff, as a means of securing the Board of Governors reconsideration
of its application, voluntarily complied with all of these requirements. Under
date of April 23, 1942, plaintiff sent to the Federal Reserve Bank of San
Francisco (1) a statement relative to the refinancing of his shares of plaintiff's stock, (2) a declaration signed by all of plaintiff's directors that plaintiff
was "organized as a bona fide local, independent institution," and that it was
not obligated in any manner to Transamerica Corporation or to any of its
affiliated companies, and (3) a signed statement of each stockholder that he
had no arrangements respecting the sale or transfer of his shares to Transamerica or any of its affiliated companies and that he did not intend to enter
into any such arrangements in the future.
Based upon the representations thus made to it by the bank and by all of
its directors and stockholders, the Board of Governors, under date of May
6, 1942, notified the plaintiff that its application had been approved subject
to a number of conditions, including Condition No. 4. Before Membership
status could attach, however, plaintiff was required to evidence its acceptance
of the conditions by formal resolution, a certified copy of which was to be
filed with the Federal Reserve Bank of San Francisco.
The plaintiff contends that the Board was without power to impose this
Condition No. 4 and therefore it is a nullity and should be cancelled. In my
opinion, however, the plaintiff is not in a position to raise this question. It
voluntarily agreed to it and on the basis of that agreement was admitted to
membership in the Federal Reserve System, and for several years has received
the benefits of membership in that System. It is true that there are many
cases in which the Supreme Court has held that a state cannot impose conditions upon the doing of business by foreign corporations which are in violation
of rights secured by the Federal Constitution, and in the case of United States
v. Chicago, M. St. P. & Pac. RR. Co., 282 U. S. 311, it held that a corporaf

FEDERAL RESERVE SYSTEM

113

tion was not estopped by a condition imposed by the Interstate Commerce
Commission which was beyond the power of the Federal Government to impose. The case of Hammer v. Dagenhart, et al., 247 U. S. 251, had not
then been overruled and was relied on by the majority of the court in holding
that neither the Interstate Commerce Commission nor Congress itself may take
any action which lies outside the realm of interstate commerce. On the other
hand, in cases such as Pierce Oil Corporation v. Phoenix Refining Co., 259
U. S. 125; St. Louis Malleable Casting Co. v. Prendergast Construction Co.,
260 U. S. 469; and Hurley v. Commission of Fisheries, 257 U. S. 223, it has
been held that where one accepts a privilege it consents to be bound by the
conditions attached to it and it will not be heard to attack its legality. And
in those cases, where a foreign corporation undertakes to do intrastate business within a state, as distinguished from business arising out of interstate
commerce, the tendency has been to sustain the conditions imposed by a state,
United Fuel Gas Co. v. Railroad Commission, 278 U. S. 300. So, too, in
the case of United States v. Chicago etc. R. R. Co., supra, at p. 342, Mr.
Justice Stone, dissenting, said:
"Courts may determine whether the Commission lacks the power to
impose a particular condition; but they may not strike from an order
the condition upon which it was granted, and thus declare that it should
stand although the condition is not complied with."
The condition here is clearly not one outside the domain of the Federal Government. Here the defendant Board, with discretionary power to admit or
to refuse to admit the plaintiff to the privilege of membership in the Federal
Reserve System, imposed a condition which was not merely acquiesced in but
agreed to by the plaintiff. The claim that this agreement was brought about
by duress of the plaintiff is, I think, without foundation. The agreement was
voluntarily made, it was acted on and the plaintiff received the benefits which
arose from its admission to membership in the System. I see nothing contrary
to public policy in the condition agreed upon by the parties; indeed, it may
well be that the condition imposed was within the Board's discretion if it
was of the opinion that unsound banking policies were being pursued by Transamerica and that the character of management of this plaintiff bank, if Transamerica obtained control, would be detrimental to sound banking.
In any event, plaintiff cannot now attack the validity of the condition to
which it voluntarily agreed and this motion of the defendants for summary
judgment will be sustained.
Mr. Justice Holtzoff has held that the Court has jurisdiction of this suit
and that a case is presented for a declaratory judgment. Peoples Bank vs.
Eccles et al. 64 F. Supp. 811; and denied a motion to dismiss the complaint
based on the ground that no justiciable controversy was presented; but the
motions for summary judgment were not before him, they having been filed
since his action on the motion to dismiss.
The defendant, John K. McKee, has moved to dismiss the complaint as to
him, and apart from the motions for summary judgment it will be sustained.
He is no longer a member of the Board; the action is not one for damages;
and he no longer has any power to take any action in the premises.

Signed)

JENNINGS BAILEY,

Justice.

BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM v. AGNEW, et a i

SUPREME COURT OF THE UNITED STATES

No. 66. October Term, 1946
BOARD OF GOVERNORS OF THE FEDERAL
RESERVE SYSTEM, ET AL., Petitioners,

Q n

v#
T

x. r^ T-

JOHN AGNEW, F. O. FAYERWEATHER.

w r k of

certiorari

t o

the United States Court
of Appeals for t h e D i s tr ct
i
°f Columbia.

[January 6, 1947]
M R . JUSTICE DOUGLAS delivered the opinion of the Court.

This case, here on certiorari to the Court of Appeals of the District of
Columbia, presents important problems under § 30 and § 32 of the Banking
Act of 1933, 48 Stat. 162, 193, 194, as amended, 49 Stat. 684, 709, 12

U.S.C. §§ 77, 78.
Section 30 of the Act provides that the Comptroller of the Currency, whenever he is of the opinion that a director or officer of a national bank has
violated any law relating to the bank, shall warn him to discontinue the
violation and, if the violation continues, may certify the facts to the Board
of Governors of the Federal Reserve System. The Board is granted power
to order that the director or officer be removed from office if it finds after
notice and a reasonable opportunity to be heard that he has continued to
violate the law.1
Section 32 of the Act prohibits, inter alia, any partner or employee of any
partnership "primarily engaged in the issue, flotation, underwriting, public
sale, or distribution, at wholesale or retail, or through syndicate participation,
of stocks, bonds, or other similar securities" from serving at the same time
as an officer, director, or employee of a member bank.2
Pursuant to the procedure outlined in § 30 the Board ordered respondents
removed from office as directors of the Paterson National Bank on the ground
that they were employees of a firm "primarily engaged" in underwriting
within the meaning of § 32. Respondents brought suit in the District Court
for the District of Columbia to review the action of the Board or to enjoin
its action. The District Court dismissed the complaint. The Court of Ap-

omcer removed trom omce as nerein provided wno tnereatter participates in any manner in tne
management of such bank shall be fined not more than $5,000, or imprisoned for not more than five
years, or both, in the discretion of the court."
2
Not material here is an exception

114

FEDERAL RESERVE SYSTEM

115

peals reversed by a divided vote, holding that the Board exceeded its authority
and that an injunction should issue. 153 F. 2d 785.
First. The Board contends that the removal orders of the Board made
under § 30 are not subject to judicial review in the absence of a charge of
fraud. It relies on the absence of an express right of review and on the nature of the Federal bank supervisory scheme of which § 30 is an integral part.
Cf. Adams v. Nagle, 303 U. S. 532; Switchmen s Union v. Mediation Board,
320 U. S. 297; Estep v. United States, 327 U. S. 114. A majority of the
Court, however, is of the opinion that the determination of the extent of the
authority granted the Board to issue removal orders under § 30 of the Act
is subject to judicial review and that the District Court is authorized to
enjoin the removal if the Board transcends its bounds and acts beyond the
limits of its statutory grant of authority. See American School of Magnetic
Healing v. McAnnnlty, 187 U. S. 94; Philadelphia Co. v. Stimson, 223 U. S.
605, 620; Stark v. Wickard, 321 U. S. 288, 309-310. That being decided,
it seems plain that the claim to the office of director is such a personal one as
warrants judicial consideration of the controversy. Cf. Columbia Broadcasting System v. United States, 316 U. S. 407; Stark v. Wickard, supra,
P. 3O5.
Second. We come then to the merits. Respondents for a number of years
have been directors of the Paterson National Bank, a national banking association and a member of the Federal Reserve System. Since 1941 they
have been employed by Eastman, Dillon & Co., a partnership, which holds
itself out as being "Underwriters, Distributors, Dealers and Brokers in Industrial, Railroad, Public Utility and Municipal Securities." During the
fiscal year ending February 28, 1943, its gross income from the underwriting
field 3 was 26 per cent of its gross income from all sources, while its gross
income from the brokerage business was 42 per cent of its gross income from
all sources. The same percentages for the fiscal year ending February 29,
1944, were 32 per cent and 47 per cent respectively; and for the period
from March 1, 1944, t 0 July 31, 1944, 39 per cent and 40 per cent respectively. Of the total number of transactions, as well as the total market value
of the securities bought and sold by the firm as broker and as dealer for an
indefinite period prior to September 20, 1943, about 15 per cent were in the
underwriting field. The firm is active in the underwriting field, getting
what business it can. In 1943 it ranked ninth among 94 leading investment
bankers in the country with respect to its total participations in underwritings
of bonds. For a time during 1943 it ranked first among the underwriters of
the country. Apart from municipals and rails, its participation in underwritings during 1943 amounted to $14,657,000. Since October, 1941, respondents have done no business with the bank other than a strictly commission business with its customers. Nor has the firm done business with the
bank since the fall of 1941.
These are the essential facts found by the Board.
On the basis of these facts the Board concluded that during the times
relevant here Eastman, Dillon & Co. was "primarily engaged" in the underwriting business and that respondents, being employees of the firm, were disqualified from serving as directors of the bank.
8
The issue, flotation, underwriting, public sale or distribution, at wholesale or retail or through
indicate participation, of stocks, bonds or other similar securities. The firm does not deal in
tilted otstcs vjovcrnmcnt UQUQS*

Il6

A N N U A L REPORT OF BOARD OF GOVERNORS

The Court of Appeals concluded that when applied to a single subject
"primary" means first, chief, or principal; that a firm is not "primarily engaged" in underwriting when underwriting is not by any standard its chief
or principal business. Since this firm's underwriting business did not by any
quantitative test exceed 50 per cent of its total business, the court held that
it was not "primarily engaged" in the underwriting business within the
meaning of § 32 of the Act.
We take a different view. It is true that "primary" when applied to a
single subject often means first, chief, or principal. But that is not always
the case. For other accepted and common meanings of "primarily" are "essentially" (Oxford English Dictionary) or "fundamentally" (Webster's New
International). An activity or function may be "primary" in that sense if it
is substantial. If the underwriting business of a firm is substantial, the firm
is engaged in the underwriting business in a primary way, though by any
quantitative test underwriting may not be its chief or principal activity. On
the facts in this record we would find it hard to say that underwriting was not
one primary activity of the firm and brokerage another. If "primarily" is not
used in the sense we suggest, then the firm is not "primarily engaged" in any
line of business though it specializes in at least two and does a substantial
amount of each. One might as well say that a professional man is not "primarily engaged" in his profession though he holds himself out to serve all
comers and devotes substantial time to the practice but makes the greater share
of his income on the stock market.
That is the construction given the Act by the Board. And it is, we think,
not only permissible but also more consonant with the legislative purpose than
the construction which the Court of Appeals adopted. Firms which do
underwriting also engage in numerous other activities. The Board indeed
observed that, if one was not "primarily engaged" in underwriting unless by
some quantitative test it was his principal activity, then § 32 would apply to
no one. Moreover, the evil at which the section was aimed is not one likely
to emerge only when the firm with which a bank director is connected has an
underwriting business which exceeds 50 per cent of its total business. Section 32 is directed to the probability or likelihood, based on the experience of
the 1920's, that a bank director interested in the underwriting business may
use his influence in the bank to involve it or its customers in securities which
his underwriting house has in its portfolio or has committed itself to take.
That likelihood or probability does not depend on whether the firm's underwriting business exceeds 50 per cent of its total business. It might, of course,
exist whatever the proportion of the underwriting business. But Congress did
not go the whole way; it drew the line where the need was thought to be the
greatest. And the line between substantial and unsubstantial seems to us to
be the one indicated by the words "primarily engaged."
There is other intrinsic evidence in the Banking Act of 1933 to support our
conclusion. Section 20 of the Act outlaws affiliation 4 of a member bank with
an organization "engaged principally" in the underwriting business. Section
19 provides control over bank holding companies. In order to vote its stock
in controlled banks a bank holding company must show that it does not own,
control, or have any interest in, and is not participating in the management
or direction of any organization "engaged principally" in the underwriting
4
Defined in § 2(b) as direct or indirect ownership or control of more than 50 per cent of the voting stock of the organization in question, common ownership or control of 50 per cent or more
of such voting stock, or a majority of common directors.

FEDERAL RESERVE SYSTEM

117

business. On the other hand, when Congress came to deal with the practice
of underwriters taking checking deposits, it used language different from what
it used either in §§ 19 and 20 on the one hand or in § 32 on the other. By
§ 21 it prohibited any organization "engaged" in the underwriting business
"to engage at the same time to any extent whatever" in the business of receiving checking deposits. Thus within the same Act we find Congress dealing
with several types of underwriting firms—those "engaged" in underwriting,
those "primarily engaged" in underwriting, those "engaged principally" in
underwriting. The inference seems reasonable to us that Congress by the
words it chose marked a distinction which we should not obliterate by reading
"primarily" to mean "principally."
The Court of Appeals laid some stress on the fact that Congress did not
abolish the bank affiliate system but only those underwriter affiliates which
were under the control of a member bank or which were under a common
control with it.5 Section 20. Since Congress made majority control critical
under § 20, it was thought that under § 32 a firm was not "primarily engaged" in underwriting unless underwriting constituted a majority of its business. But the two situations are not comparable. In § 32 Congress was not
dealing with the problem of control of underwriters by banks or vice versa.
The prohibited nexus is in no way dependent on the presence or absence of
control, nor would it be made so even if "primarily engaged" in underwriting
were construed to mean principally engaged in that business. Section 32 was
designed, as we have said, to remove tempting opportunities from the management and personnel of member banks. In no realistic sense do those opportunities disappear merely because the underwriting activities of the outside
firm with which the officer, director, or employee is connected happens to fall
below 51 per cent. Fifty-one per cent, which is relevant in terms of control,
is irrelevant here. The fact then that Congress did not abolish underwriter
affiliates serves as no guide in determining whether "primarily engaged" in
underwriting as used in § 32 means principally engaged or substantially engaged in that business.
Section 32 is not concerned, of course, with any showing that the director in
question has in fact been derelict in his duties or has in any way breached his
fiduciary obligation to the bank. It is a preventive or prophylactic measure.
The fact that respondents have been scrupulous in their relationships to the
bank is therefore immaterial.
There is a suggestion that if "primarily" does not mean principally but
merely connotes substantially, § 32 constitutes an unlawful delegation of authority to the Board. But we think it plain under our decisions that if substantiality is the statutory guide, the limits of administrative action are sufficiently definite or ascertainable so as to survive challenge on the grounds of
unconstitutionally. Sunshine Anthracite Coal Co. v. Adkins, 310 U. S. 381,
397-400; Opp Cotton Mills v. Administrator, 312 U. S. 126, 142-146; Yakus
v. United States, 321 U. S. 414, 424-428; Bowles v. Willingham, 321 U. S.
503, 512-516.
Reversed.
M R . JUSTICE RUTLEDGE, concurring.
If the question presented on the merits is reviewable judicially, in my
opinion it is only for abuse of discretion by the Board of Governors. Not only
5

See note 4, supra.

Il8

ANNUAL REPORT OF BOARD OF GOVERNORS

because Congress has committed the system's operation to their hands, but also
because the system itself is a highly specialized and technical one, requiring
expert and coordinated management in all its phases, I think their judgment
should be conclusive upon any matter which, like this one, is open to reasonable
difference of opinion. Their specialized experience gives them an advantage
judges cannot possibly have, not only in dealing with the problems raised for
their discretion by the system's working, but also in ascertaining the meaning
Congress had in mind in prescribing the standards by which they should administer it. Accordingly their judgment in such matters should be overturned
only where there is no reasonable basis to sustain it or where they exercise it
in a manner which clearly exceeds their statutory authority.
In this case I cannot say that either of these things has occurred. The
Board made its determination after the required statutory hearing on notice.
48 Stat. 162, 193, 12 U.S.C. § 77. The consideration given was full and
thorough, including detailed findings of fact and conclusions of law, followed
by a carefully written opinion.1 The Board concluded that "primarily" in § 32
does not mean "first in volume in comparison with any other business or businesses in which it [the employer] engages," 2 but means rather as "a matter of
primary importance," like "primary" colors or planets or as the word is used
in the phrase "the primary causes of a war." This view it found not only
supported by accepted dictionary meaning but also in conformity with Congress' intent as established by the legislative history. In a further ground
which we must take as reflecting its specialized experience, the Board stated:
"To say that a securities firm ranking ninth among the leading investment
bankers of the country with respect to its total participations in underwritings
of bonds, and for a period ranking first, should be held to be beyond the scope
of the statute is to say that Congress enacted a statute with the intention that
it "would apply to no one."
I cannot say that the Board's conclusion, in the light of those groundings,
is wanting either for warrant in law or for reasonable basis in fact. The
considerations stated in the Court's opinion and in the dissenting opinion filed
in the Court of Appeals, 153 F. 2d 785, 795, as well as by the Board itself,
confirm this view. I think it important, not only for this case but for like ones
which may arise in the future, perhaps as a result of this decision, to make
clear that my concurrence in the Court's disposition of the case is based upon
the ground I have set forth, and not upon independent judicial determination
of the question presented on the merits. I do not think this Court or any
other should undertake to reconsider, as an independent judgment, the Board's
determination upon that question or similar ones likely to arise, if the Board
was not without basis in fact for its judgment and does not clearly transgress
a statutory mandate. More than has been shown here would be required to
cause me to believe that the Board has exceeded its power in either respect.
M R . JUSTICE FRANKFURTER joins in this opinion.
x
The opinion is not reported, pursuant to the statutory prohibition, 12 U.S.C. § 77, which is
effective except in connection with proceedings for enforcement.
2
Under such a view, in cases involving different facts the question would become judicial
whether "primarily" means more than half of (1) the gross volume of business done; (2) the
gross profit; (3) the net profit, where some but not all these factors as relating to one phase of
the total activities carried on amounts to more than half the gross. Such discriminations would
seem to be clearly within the Board's power to determine in the first instance. If so, it is difficult to see why that power does not include the determination made here.

BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
[December 31, 1946]
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

ERNEST G. DRAPER, of Connecticut

January 31, 1950

R. M. EVANS, of Virginia
JAMES K. VARDAMAN, JR., of Missouri

January 31, 1954
January 31, i960

ELLIOTT THURSTON, Assistant to the Chairman

CHESTER MORRILL, Special Adviser to the Board of Governors
LEO H. PAULGER, Special Adviser to the Board of Governors
S. R. CARPENTER, Secretary
BRAY HAMMOND, Assistant Secretary
MERRITT SHERMAN, Assistant Secretary
GEORGE B. VEST, General Counsel

J. LEONARD TOWNSEND, Assistant General Counsel
WOODLIEF THOMAS, Director, Division of Research and Statistics
RALPH A. YOUNG, Assistant Director, Division of Research and Statistics
CHANDLER MORSE, Assistant Director, Division of Research and Statistics
J. BURKE KNAPP, Assistant Director, Division of Research and Statistics
ROBERT F. LEONARD, Director, Division of Examinations
EDWIN R. MILLARD, Assistant Director, Division of Examinations
GEORGE S. SLOAN, 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
FRED A. NELSON, Director, Division of Personnel Administration
LISTON P. BETHEA, Director, Division of Administrative Services
GARDNER L. BOOTHE, II, Assistant Director, Division of Administrative Services

FEDERAL OPEN MARKET COMMITTEE
[December 31, 1946]
MEMBERS
MARRINER S. ECCLES, Chairman (Board of Governors)
ALLAN SPROUL, Vice Chairman (Elected by Federal Reserve Bank of New York)
ERNEST G. DRAPER (Board of Governors)

R. M. EVANS (Board of Governors)
HUGH LEACH (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond)
W. S. MCLARIN, JR. (Elected by Federal Reserve Banks of Atlanta, St. Louis, and
Dallas)
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)
JAMES K. VARDAMAN, JR. (Board of Governors)

C. S. YOUNG (Elected by Federal Reserve Banks of Cleveland and Chicago)
EXECUTIVE COMMITTEE
MARRINER S. ECCLES, Chairman

OFFICERS
CHESTER MORRILL, Secretary

ALLAN SPROUL, Vice Chairman

S. R. CARPENTER, Assistant Secretary

ERNEST G. DRAPER
R. M. EVANS
HUGH LEACH

GEORGE B. VEST, General Counsel
J. LEONARD TOWNSEND, Assistant General
Counsel
WOODLIEF THOMAS, Economist

AGENT
FEDERAL RESERVE BANK OF N E W YORK

R. G. ROUSE, Manager of System Open
Market Account.

E. A. KINCAID, Associate Economist
JOHN K. LANGUM, Associate Economist
EARLE L. RAUBER, Associate Economist

O. P. WHEELER, Associate Economist
JOHN H. WILLIAMS, Associate Economist
119

FEDERAL ADVISORY COUNCIL
[December 31, 1946]
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—DAVID E. WILLIAMS, President, Corn Exchange National Bank and
Trust Company, Philadelphia, Pennsylvania.
District No. 4—JOHN H. MCCOY, President, The City National Bank and Trust Company, Columbus, Ohio.
District No. 5—A. L. M. WIGGINS, President, The Bank of Hartsville, Hartsville,
South Carolina.
District No. 6—J. T. BROWN, President, Capital National Bank, Jackson, Mississippi.
District No. 7—EDWARD E. BROWN, Chairman, The First National Bank of Chicago,
Chicago, Illinois.
District No. 8—JAMES H. PENICK, President, W. B. Worthen Company, Bankers, Little
Rock, Arkansas.
District No. 9—JULIAN B. BAIRD, President, The First National Bank of St. Paul,
St. Paul, Minnesota.
District No. 10—A. E. BRADSHAW, President, National Bank of Tulsa, Tulsa, Oklahoma.
District No. n—ED H. WINTON, President, Continental National Bank of Fort Worth,
Fort Worth, Texas.
District No. 12—RENO ODLIN, President, Puget Sound National Bank of Tacoma,
Tacoma, Washington.
EXECUTIVE COMMITTEE
EDWARD E. BROWN, ex officio
JOHN C. TRAPHAGEN
A. L. M. WIGGINS

CHARLES E. SPENCER, JR., ex officio
DAVID E. WILLIAMS
JOHN H. MCCOY

OFFICERS
President, EDWARD E. BROWN
Vice President, CHARLES E. SPENCER, JR.

I2O

Secretary, WALTER LICHTENSTEIN
Acting Secretary, HERBERT V. PROCHNOW

121

FEDERAL RESERVE SYSTEM

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS
[December 31, 1946]
CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS

Federal Reserve Bank of—

Chairman and
Federal Reserve Agent

Deputy Chairman

Boston

Albert M. Creighton

Henry I. Harriman

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

Vacancy

St. Louis

Russell L. Dearmont

Douglas W. Brooks

Minneapolis

- Roger B. Shepard

W. D. Cochran

Kansas City

Robert B. Caldwell

Robert L. Mehornay

Dallas

J. R. Parten

R. B. Anderson

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.
Mr. Caldwell, Chairman of the Federal Reserve Bank of Kansas City, served as
Chairman of the Conference and as Chairman of the Executive Committee until
December 6. The other members of the Executive Committee were Mr. Leland, Chairman of the Federal Reserve Bank of Chicago, and Mr. Grady, Chairman of the Federal Reserve Bank of San Francisco. At the meeting of the Conference on December
6, Mr. Grady, Chairman of the Federal Reserve Bank of San Francisco, was elected
Chairman of the Conference and Chairman of the Executive Committee. The other
members of the Executive Committee were Mr. Parten, Chairman of the Federal
Reserve Bank of Dallas, and Mr. Shepard, Chairman of the Federal Reserve Bank of
Minneapolis.

122

ANNUAL REPORT OF BOARD OF GOVERNORS

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Cont.
DIRECTORS

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
stockholders of banks. They are appointed by the Board of Governors as representatives not of any particular group or interest, but of the public interest as a whole.
Federal Reserve Bank branches have either five or seven directors, of whom a
majority, including the managing director if the by-laws provide for a managing
director as the chief officer of the branch, are appointed by the Board of Directors of
the parent Federal Reserve Bank and the. others are appointed by the Board of Governors of the Federal Reserve System.
District No. 1—Boston
Class A:
Allen W. Holmes
Allan Forbes
Leon A. Dodge
Class B.Roy L. Patrick
Philip R. Allen
Frederick S. Blackall, Jr.
Class C.Henry I. Harriman
Albert M. Creighton
Donald K. David

TermExpires
Dec. 31
President, The
Conn
President, State
President, The
Damariscotta,

Middletown National Bank, Middletown,
Street Trust Company, Boston, Mass
First National Bank of Damariscotta,
Me

President and Director, Rock of Ages Corporation, Burlington,
Vt
Director, Bird & Son, inc., East Walpole, Mass
President and Treasurer, Taft-Peirce Manufacturing Company, Woonsocket, R. 1
Director and Vice Chairman, New England Power Association, Boston, Mass
Chairman of the Board
.•••••.
Dean, Graduate School of Business Administration, Harvard
University, Cambridge, Mass

1946
1947
1948
1946
1947
1948
1946
1947
1948

District No. 2—New York
Class A:
S. Sloan Colt
Harry H. Pond
Howard A. Wilson
Class B.Donaldson Brown
Charles E. Adams
Carle C. Con way
Class C.Robert D. Calkins
Beardsley Ruml
William I. Myers

President, Bankers Trust Company, New York, N. Y
Chairman of the Board, The Plainfield Trust Company,
Plainfield, N. J
President, Citizens National Bank and Trust Company of
Fulton, Fulton, N. Y

1947

Vice Chairman of the Board, General Motors Corporation,
New York, N. Y
Chairman, Air Reduction Company, Inc., New York, N. Y.. .
Chairman of the Board and President, Continental Can Company, Inc., New York, N. Y

1946
1947

Dean, School
N. Y
Chairman, R.
Dean, New
University,

of Business, Columbia University, New York,
H. Macy & Company, Inc., New York, N. Y.. .
York State College of Agriculture, Cornell
Ithaca, N. Y

Buffalo Branch
Appointed by Federal Reserve Bank:
Insley B. Smith
Managing Director, Buffalo, N. Y
Elmer B. Milliman
President, Central Trust Company Rochester, N. Y.,
Rochester, N. Y
Charles H. Norton
President, Erie County Trust Company, East Aurora, N. Y.. .
Charles H. Diefendorf
President, The Marine Trust Company of Buffalo, Buffalo,
N. Y
Appointed by Board of Governors:
Thomas Robins, Jr
President, Hewitt-Robins, Inc., Buffalo, N. Y
Marion B. Folsom
Treasurer, Eastman Kodak Company, Rochester, N. Y . . . .
Carl G. Wooster
Farmer, Union Hill, N. Y

1946

1948

1948
1946
1947
1948

1946
1946
1947
1948
•
1946
1947
1948

FEDERAL RESERVE SYSTEM

123

DIRECTORS A N D SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Com.
Term
Expires
DIRECTORS—Cont.

Dec. 31

District No. 3—Philadelphia
Class A.John. B. Henning
Howard A. Loeb
George W. Reily
Class .B.James T. Buckley
Charles A. Higgins
Albert G. Frost
Class C:
Warren F. Whittier
C. Canby Balderston
Thomas B. McCabe

President, Wyoming National Bank, Tunkhannock, Pa
Chairman, Tradesmens National Bank & Trust Company,
Philadelphia, Pa
President, Harrisburg National Bank, Harrisburg, Pa

1947
1948

Chairman, Executive Committee,
Philco Corporation,
Philadelphia, Pa
Chairman and President, Hercules Powder Company, Inc.,
Wilmington, Del
President, The Esterbrook Pen Company, Camden, N. J

1947
1948

Farmer, dairyman and cattle breeder, Chester Springs, Pa.. .
Dean, Wharton School of Finance and Commerce, University
of Pennsylvania, Philadelphia, Pa
President, Scott Paper Company, Chester, Pa

1946

1946
1947
1948

District No. 4—Cleveland
Class A:
H. B. McDowell

Ben R. Conner

President, The McDowell National Bank of Sharon, Sharon,
Pa
Chairman of the Board, Peoples First National Bank & Trust
Company, Pittsburgh, Pa
President, The First National Bank of Ada, Ada, Ohio

1947
1948

Class B:
Ross Pier Wright
George D. Crabbs
Thomas E. Millsop

Secretary-Treasurer, Reed Manufacturing Company, Erie, Pa.
Industrialist, Cincinnati, Ohio
President, Weirton Steel Company, Weirton, W. Va

1946
1947
1948

F. F. Brooks

Class C.George C. Brainard
A. Z. Baker
Reynold E. Klages

President and General Manager, Addressograph-Multigraph
Corporation, Cleveland, Ohio
#
President and General Manager, The Cleveland Union Stock
Yards Company, Cleveland, Ohio
President, Columbus Auto Parts Company, Columbus.Ohio. .

1946

1946
1947
1948

Cincinnati Branch
Appointed by Federal Reserve Bank:
Waldo E. Pierson
Walter H. J. Behm
Neil H. McElroy
Spears Turley
A ppointed by Board of Governors:
S. Headley Shouse
Paul G. Blazer
Francis H. Bird

President, The First National Bank of Cincinnati, Cincinnati,
Ohio
President, Winters National Bank and Trust Company of
Dayton, Dayton, Ohio
Vice President, The Procter and Gamble Company, Cincinnati, Ohio
Vice President and Trust Officer, State Bank & Trust Company
of Richmond, Richmond, Ky

1946
1947
1948
1948

Tobacco and livestock raiser, Lexington, Ky
1946
Chairman of the Board, Ashland Oil and Refining Company,
Ashland, Ky
1947
Professor of Commerce, College ^ of Engineering and Commerce, University of Cincinnati, Cincinnati, Ohio
1948
Pittsburgh Branch

Appointed by Federal Reserve Bank:
R. E. Bowie
T. C. Swarts
Archie J. McFarland
Laurence S. Bell
Appointed by Board of Governors:
Howard W. Jordan
J. M. Koch
A. H. Burchfield, Jr

President, Security Trust Company, Wheeling, W. Va
Executive Vice President, Woodlawn Trust Company,
Aliquippa, Pa
President, Wheeling Steel Corporation, Wheeling, W. Va
Executive Vice President, The Union National Bank of
Pittsburgh, Pittsburgh, Pa

1946

President, Pennsylvania Rubber Company, Jeannette, P a . . .
Vice President and Director, Quaker State Oil Refining
Corporation, Oil City, Pa
Vice President, Joseph Home Company, Pittsburgh, Pa.. . .

1946

1947
1948
1948

1947
1948

124

ANNUAL REPORT OF BOARD OF GOVERNORS

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Com.
Term
Expires
DIRECTORS—Cont.

Dec. 31

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

Chairman of Board, Planters National Bank & Trust Company,
Rocky Mount, N. C
1946
Cashier, First National Bank in Marlinton, Marlinton, W. Va. 1947
President, First National Bank of Baltimore, Baltimore, Md. 1948
President, H. L. Rust Company, Washington-, D. C
1946
President and Treasurer, Cheraw Cotton Mills, Inc., Cheraw,
S. C
1947
President, Williams & Reed, Inc., Richmond, Va
1948
Chairman of Board, Mooresville Cotton Mills, Mooresville,
N. C
1946
President, McCormick & Company, Inc., Baltimore, Md.. . . 1947
General Manager, Southern States Cooperative, Inc., Richmond, Va
1948
Baltimore Branch

Appointed by Federal Reserve Bank:
W. R. Milford
George M. Moore
W. Bladen Lowndes
Holmes D. Baker
A ppointed by Board of Governors:
W. Frank Roberts
James M. Shriver
James E. Hooper

Managing Director, Baltimore, Md
Vice President, The Union National Bank, Clarksburg, W. Va.
President, The Fidelity Trust Company, Baltimore, Md
President, The Citizens National Bank of Frederick, Frederick,
Md

1946
1946
1947
1948

President, Standard Gas Equipment Corporation, Baltimore,
Md
1946
President, B. F. Shriver Company, Westminster, Md
1947
Vice President, William E. Hooper and Sons Company,
Baltimore, Md
1948
Charlotte Branch

Appointed by Federal Reserve Bank:
W. T. Clements
Allen H. Sims
N. S. Calhoun
Angus E. Bird
Appointed by Board of Governors:
George M. Wright
Charles L. Creech
R. Flake Shaw

Managing Director, Charlotte, N. C
Executive Vice President and Trust Officer, Citizens National
Bank in Gastonia, Gastonia, N. C
President, Security National Bank, Greensboro, N. C
Chairman of Board, The Citizens & Southern National Bank
of S. C , Charleston, S. C

1946
1946
1947
1948

President, Republic Cotton Mills, Great Falls, S. C
1946
Chairman of Board, B. F. Huntley Furniture Company,
Winston-Salem, N. C
1947
Executive Secretary, North Carolina Farm Bureau Federation, Greensboro, N. C
1948

District No. 6—Atlanta
Class A:
W. D. Cook
George J. White
R. C. Williams
Class B.Donald Comer
Ernest T . George
J. A. McCrary
Class C:
Rufus C. Harris
Frank H. Neely
J. F. Porter

President, First National Bank in Meridian, Meridian, Miss. 1946
President, The First National Bank of Mount Dora, Mount
Dora. Fla
1947
President, The First National Bank of Atlanta, Atlanta, Ga. 1948
Chairman, Avondale Mills, Birmingham, Ala
1946
President, Seaboard Refining Company, Ltd*, New Orleans,
La..
1947
Vice President and Treasurer, J. B. McCrary Company, Inc.,
Atlanta, Ga
1948
President, The Tulane University of Louisiana, New Orleans,
La
. 1946
Executive Vice President and Secretary, Rich's, Inc., Atlanta,
Ga
1947
President and General Manager, Tennessee Farm Bureau
Federation, Columbia, Tenn
1948
Birmingham Branch

Appointed by Federal Reserve Bank:
P. L. T. Beavers
James G. Hall
Gordon D. Palmer
M. B. Spragins

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

1946
1946
1947
1948

FEDERAL RESERVE SYSTEM

125

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

A ppointed by Board of Governors:
Edward L. Norton
Chairman, Voice of Alabama, Inc., Radio Station WAPI,
Birmingham, Ala
1946
John C. Curry
Administrative Assistant to Algernon Blair, Contractor,
Montgomery, Ala
1947
Wm. Howard Smith
President, McQueen-Smith Farms, Prattville, Ala
1948
Jacksonville Branch
Appointed by Federal Reserve Bank:
Geo. S. Vardeman, Jr
Managing Director, Jacksonville, Fla
1946
J. C. McCrocklin
President, First National Bank in Tarpon Springs, Tarpon
Springs, Fla
1946
J. L. Dart
President, The Florida National Bank of Jacksonville,
Jacksonville, Fla
1947
J. S. Fairchild
Cashier, The First National Bank of Winter Garden, Winter
Garden, Fla
1948
Appointed by Board of Governors:
Frank D. Jackson
President and General Manager, Jackson Grain Company,
Tampa, Fla
1946
Walter J. Matherly
Dean, College of Business Administration, University of
Florida, Gainesville, Fla
1947
Charles S. Lee
Planter and cattle raiser, Oviedo, Fla
1948
Nashville Branch
Appointed by Federal Reserve Bank:
Joel B. Fort, Tr
Managing Director, Nashville, Tenn
L. R. Driver."
President, The First National Bank in Bristol, Bristol, Tenn.
B. L. Sadler
President, First National Bank in Harriman, Harriman, Tenn.
Edward Potter, Jr
President, Commerce Union Bank, Nashville, Tenn
Appointed by Board of Governors:
W. Bratten Evans
Clyde B. Austin
H. C. Meacham

1946
1946
1947
1948

President, Tennessee Enamel Manufacturing Company,
Nashville, Tenn
1946
President, Austin Company, Inc., Greeneville, Tenn
1947
Farmer, Franklin, Tenn
1948
v

New Orleans Branch
Appointed by Federal Reserve Bank:
E. P. Paris
Managing Director, New Orleans, La
1946
John Legier
President, National American Bank of New Orleans, New
Orleans, La
1946
J. F. McRae
President, The Merchants National Bank of Mobile, Mobile,
Ala
1947
T. G. Nicholson
President, The First National Bank of Jefferson Parish,
Gretna, La
1948
Appointed by Board of Governors:
D. P. Cameron
President, The Merchants Company, Hattiesburg, Miss
1946
H. G. Chalkley, Jr
President, Sweet Lake Land and Oil Company, Inc., Lake
Charles, La
1947
John J. Shaffer, Jr..
Planter, Ellendale, La
1948

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

President, The Manufacturers National Bank of Chicago,
Chicago, 111
President, First National"Bank in Cedar Falls, Cedar Falls,
Iowa
Chairman, Continental Illinois National Bank and Trust
Company of Chicago, Chicago, 111
President and Chairman, The Murray Corporation of America,
Detroit, Mich
Vice President in Charge of Finances, Eli Lilly and Company,
Indianapolis, Ind
President, A. O. Smith Corporation, Milwaukee, Wis
President, The Studebaker Corporation, South Bend, Ind.. .
Dean, College of Liberal Arts, Northwestern University,
Evanston, 111

1946
1947
1948

1946
1947
1948
1946
1947
1948

126

ANNUAL REPORT OF BOARD OF GOVERNORS

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Com.
Term
Expires

DIRECTORS—Cont.

Detroit Branch

Dec. 31

Appointed by Federal Reserve Bank:
Rudolph E. Reichert
President, Ann Arbor Bank, Ann Arbor, Mich
1946
Charles A. Kanter
President, The Manufacturers National Bank of Detroit,
Detroit, Mich
1946
Charles T. Fisher, Jr
President, The National Bank of Detroit, Detroit, Mich
1947
Appointed by Board of Governors:
Ernest Gilbert
Farmer, Waldron, Mich
Prentiss M. Brown
Chairman, The Detroit Edison Company, Detroit, Mich

1946
1947

District No. 8—St. Louis
Class A:
G. R. Corlis
Tom K. Smith
Phil E. Chappell
Class B:
K. August Engel
Louis Ruthenburg
A. Wessel Shapleigh
Class C.Russell L. Dearmont
Douglas W. Brooks
J. P. Redman

. President, Anna National Bank, Anna, 111
1946
President, Boatmen's National Bank, St. Louis, Mo
1947
President, Planters Bank and Trust Company, Hopkinsville,
Ky
1948
President, Arkansas Democrat Company, Little Rock, Ark... 1946
President and General Manager, Servel, Inc., Evansville, Ind. 1947
President, Shapleigh Hardware Company, St. Louis, Mo
1948
Chief Counsel for Trustee, Missouri-Pacific Lines, St. Louis,
Mo
1946
President, The Newburger Company, Memphis, Tenn
1947
Farmer, Cairo, 111
1948

Little Rock Branch
Appointed by Federal Reserve Bank:
Emmet Morris
Chairman, W. B. Worthen Company, Bankers, Little Rock,
Ark
Geo. S. Neal
President, Bank of Russellville, Russellville, Ark
Chas. A. Gordon
Vice President, Simmons National Bank, Pine Bluff, Ark.. . .
Lloyd Spencer
President, First National Bank, Hope, Ark

1946
1947
1948
1948

Appointed by Board of Governors:
I. N. Barnett
Manager, Barnett Bros. Mercantile Company, Batesville,
Ark
1946
S. M. Brooks
President, Brooks Advertising Agency, Little Rock, Ark
1947
Cecil C. Cox
Farmer, Stuttgart, Ark
1948
Louisville Branch
Appointed by Federal Reserve Bank:
A. C. Voris
President, Citizens National Bank, Bedford, Ind
1946
Wallace M. Davis
Vice President, Citizens Fidelity Bank and Trust Company,
Louisville, Ky
1947
Lee L. Persise
President, The State Bank of Salem, Salem, Ind
1948
H. Lee Cooper
President, Ohio Valley National Bank, Henderson, Ky
1948
Appointed by Board of Governors:
Rosco Stone
Farmer, Hickman, Ky
E. J. O'Brien, Jr
President, E. J. O'Brien & Company, Louisville, Ky
Geo. O. Boomer
President, The Girdler Corporation, Louisville, Ky

1946
1947
1948

Memphis Branch
Appointed by Federal Reserve Bank:
W. W. Campbell
President, National Bank of Eastern Arkansas, Forrest City,
Ark
W. P. Kretschmar
President, Commercial National Bank, Greenville, Miss
Norfleet Turner
President, First National Bank, Memphis, Tenn
H. W. Hicks
President, First National Bank, Jackson, Tenn

1946
1947
1948
1948

Appointed by Board of Governors:
Rufus C. Branch
Cotton planter and ginner, Pecan Point, Ark
1946
J. Holmes Sherard
President, Jno. H. Sherard & Son, Sherard, Miss
1947
Leslie M. Stratton, Jr
Executive Vice President, Stratton-Warren Hardware Company, Memphis, Tenn
1948

FEDERAL RESERVE SYSTEM

127

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Com.
Term
Expires
DIRECTORS—Cont.

Dec. 31

District No. 9—Minneapolis
Class A.Clarence E. Hill

Chairman of the Board, Northwestern National
Minneapolis, Minn
President, Pierre National Bank, Pierre, S. D
Vice President, First National Bank, Oakes, N. D

J. R. McKnight
"P. D. McCartney
Class B:
Homer P. Clark

Bank,

1946
1947
1948

Chairman of the Board, West Publishing Company, St. Paul,
Minn
1946
President, Eddy's Bakeries, Helena, Mont
1947
President, Chippewa Canning Company, Chippewa Falls, Wis. 1948

J. E. O'Connell
Ray C. Lange
Class C:
W. D. Cochran
Roger B. Shepard
Paul E. Miller

Cochran Freight Lines, Iron Mountain, Mich
1946
Chairman of the Board
1947
Director, Agricultural Extension Division, University of
Minnesota. Minneapolis, Minn
1948
Helena Branch

A ppointed by Federal Reserve Bank:
R. E. Towle
P. B. McClintock
B. M. Harris

Managing Director, Helena, Mont
Cashier, Farmers National Bank, Chinook, Mont
President, Yellowstone Bank, Columbus, Mont

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

President, Western Life Insurance Company, Helena, Mont. 1946
Agriculturist, Great Falls, Mont
1947

1946
1946
1947

District No. 10—Kansas City
Class A:
M. A. Limbocker
W. L. Bunten
T. A. Dines
Class B:
J. M. Bernardin
L. C. Hutson
Willard D. Hosford
Class C.Robert B. Caldwell
Robert L. Mehornay
Lyle L. Hague

Chairman of the Board and President, Citizens National Bank,
Emporia, Kan
1946
Executive Vice President, Goodland State Bank, Goodland,
Kan
1947
Chairman of the Board and President, United States National
Bank, Denver, Colo
1948
Lumberman, Kansas City, Mo
1946
President and General Manager, Chickasha Cotton Oil
Company, Chickasha, Okla
1947
Vice President and General Manager, John Deere Plow
Company, Omaha, Neb
1948
Caldwell, Downing, Noble and Garrity, Kansas City, Mo.. . . 1946
President, North-Mehornay Furniture Company, Kansas City,
Mo
1947
Farmer and stockman, Cherokee, Okla
1948
Denver Branch

A ppointed by Federal Reserve Bank:
W. C. Kurtz
Harold Kountze
P. K. Alexander
A ppointed by Board of Governors:
M. E. Noonen
W. A. Alexander

President and General Manager, Independent Lumber Company, Grand Junction, Colo
1946
President, Colorado National Bank, Denver, Colo
1946
Vice President, The First National Bank of Denver, Denver,
Colo
1947
Sheep rancher, Kremmling, Colo
1946
Vice President and Assistant General Manager, The Denver
Tramway Corporation, Denver, Colo
1947
Oklahoma City Branch

Appointed by Federal Reserve Bank:
D. M. Tyler
Hugh L. Harrell
S. A. Bryant
Appointed by Board of Governors:
Neil R. Johnson
Lloyd Noble

First Vice President, Dewey Portland Cement Company,
Dewey, Okla
1946
Vice President, First National Bank and Trust Company,
Oklahoma City, Okla
1946
President, The Farmers National Bank, Cushing, Okla
1947
Rancher and farmer, Norman, Okla
President, Noble Drilling Corporation, Tulsa. Okla

1946
1947

128

ANNUAL REPORT OF BOARD OF GOVERNORS

DIRECTORS A N D SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 3 1 , 1946—Com.
Term
Expires
Dec. 31
DIRECTORS—Cont.

Omaha Branch
Appointed by Federal Reserve Bank:
George A. Bible
George W. Holmes
Walter S. Byrne
Appointed by Board of Governors:
Fred S. Wallace
L. E. Hurtz

President, First National Bank, Rawlins, Wyo
1946
President, First National Bank, Lincoln, Neb
1947
General Manager, Metropolitan Utilities District of Omaha,
Omaha, Neb
1947
Farmer, Gibbon, Neb
President, Fairmont Creamery Company, Omaha, Neb

1946
1947

District No. 11—Dallas
Class A:
Frank Turner
J. E. Woods
Valter P. Napier
Wa

President, First National Bank in Decatur, Decatur, Texas.. 1946
Chairman of Board, Temple National Bank, Temple, Texas. . 1947
President, Alamo National Bank, San Antonio, Texas
1948

Class B:
Geo. A. Hill, Jr
W. F . Beall

President, Houston Oil Company of Texas, Houston, Texas. . 1946
President and General Manager, 3 Beall Brothers 3, Department Stores, Jacksonville, Texas
1947
President, The Cooper Company, Inc., Waco, Texas
1948

J. R. Milam
Class C:
J. R. Parten
G. A. Frierson
R. B. Anderson

President, Woodley Petroleum Company, Houston, Texas. . . 1946
G. A. Frierson & Son, Planters & Merchants, Shreveport, La. 1947
General Manager, W. T. Waggoner Estate, Vernon, Texas... 1948
El Paso Branch

Appointed by Federal Reserve Bank:
R. W. McAfee
J. E. Moore
W. S. Warnock
W. Henry Wooldridge
Appointed by Board of Governors:
Jack B. Martin
Hal Bogle
Dorrance D. Roderick

President, State National Bank, El Paso, Texas
President, First National Bank, Roswell, N. M
Vice President, El Paso National Bank, El Paso, Texas
President, Lone Star Motor Company, El Paso, Texas

1946
1947
1948
1948

President, Arizona Ice and Cold Storage Company, Tucson,
Ariz
1946
Owner, Pecos Valley Alfalfa Mill Company, Dexter, N. M.. . 1947
President, Newspaper Printing Corporation, El Paso, Texas. 1948
Houston Branch

Appointed by Federal Reserve Bank:
W. N. Greer
John W. McCullough
James A. Elkins
B. C. Roberts
Appointed by Board of Governors:
George A. Slaughter
J. E. Wheat. .
Ross Stewart

President,
President,
President,
President,

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

1946
1947
1948
1948

Farming, Wharton, Texas
1946
Attorney-at-Law, Woodville, Texas
1947
General Manager, C. Jim Stewart and Stevenson, Houston,
Texas
1948
San Antonio Branch

Appointed by Federal Reserve Bank:
J. A. Walker
T. C. Frost
R. D. Barclay
C. L. Skaggs
Appointed by Board of Governors:
Holman Cartwright
J. M. Odom . . . .'
Henry P. Drought

Executive Vice President, Del Rio National Bank, Del Rio,
Texas
Vice President, Frost National Bank, San Antonio, Texas. . .
President, National Bank of Cpmmerce, San Antonio, Texas. .
President, The First National Bank of Weslaco, Weslaco,
Texas

1946
1947
1948
1948

Livestock and farming, Twin Oaks Ranch, Dinero, Texas. . . 1946
General Contractor, Austin, Texas
1947
Attorney, San Antonio, Texas
, . , , • • 1948

FEDERAL RESERVE SYSTEM

129

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Cont.
Term
Expires
DIRECTORS—Cont.

Dec. 31

District No. 12—San Francisco
Class A:
C. K. Mclntosh
Chas. H. Stewart
Carroll F. Byrd
Class B:
Walter S. Johnson
St. George Holden
Reese H. Taylor
Class C:
Brayton Wilbur
Henry F. Grady
Harry R. Wellman

Chairman of the Board, The Bank of California, N. A., San
Francisco, Calif
1946
President, Portland Trust and Savings Bank, Portland, Ore.. . 1947
Chairman of the Board and Executive Vice President, The
First National Bank of Willows, Willows, Calif
1948
President, American Box Corporation of California, San
Francisco, Calif
1946
St. George Holden Realty Company, San Francisco, Calif.. . . 1947
President, Union Oil Company of California, Los Angeles,
Calif
1948
President, Wilbur-Ellis Company, San Francisco, Calif
1946
President, American President Lines, Ltd., San Francisco,
Calif
.
1947
Director, Giannini Foundation of Agricultural Economics,
University of California, Berkeley, Calif
1948

Los Angeles Branch
Appointed by Federal Reserve Bank:
W. N. Ambrose
Managing Director, Los Angeles, Calif
1946
Herbert D. Ivey
President, Citizens National Trust & Savings Bank of Los
Angeles, Los Angeles, Calif
1946
F. E. Snedecor
President, The First National Bank of Corona, Corona, Calif. 1947
Appointed by Board of Governors:
Fred G. Sherrill
Vice President, J. G. Boswell Company, Los Angeles, Calif.. . 1946
Y. Frank Freeman
Vice President, Paramount Pictures, Inc., Hollywood, Calif.. . 1947
Portland Branch
Appointed by Federal Reserve Bank:
D. L. Davis
Managing Director, Portland, Ore
William C. Christensen
President, The Commercial National Bank of Hillsboro,
Hillsboro, Ore
E. B. MacNaughton
President, The First National Bank of Portland, Portland, Ore.
A ppointed by Board of Governors:
William H. Steen
Livestock and farming, Milton, Ore
Aaron M. Frank
President, Meier and Frank Company, Inc., Portland, Ore.. .

1946
1946
1947
1946
1947

alt Lake City Branch
Appointed by Federal Reserve Bank:
W. L. Partner
Managing Director, Salt Lake City, Utah
1946
Orval W. Adams
Executive Vice President, The Utah State National Bank of
Salt Lake City, Salt Lake City, Utah
1946
D. F. Richards
President, American National Bank, Idaho Falls, Idaho
1947
Appointed by Board of Governors:
R. C. Rich
Livestock and farming, Burley, Idaho
Henry Aldous Dixon
President, Weber College, Ogden, Utah
Seattle Branch
Appointed by Federal Reserve Bank:
C. R. Shaw
Managing Director, Seattle, Wash
Fred L. Stanton
President, The Washington Trust Company, Spokane, Wash.
Lawrence M. Arnold
. .Chairman of the Board, Seattle-First National Bank, Seattle,
Wash
Appointed by Board of Governors:
John M. McGregor
Manager, McGregor Land & Livestock Company, Hooper,
Wash
:
John T. Tenneson
President, Superior Packing Company, Seattle. Wash

1946
1947

1946
1946
1947
1946
1947

I3O

ANNUAL REPORT OF BOARD OF GOVERNORS

DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Cont.
SENIOR OFFICERS OF FEDERAL RESERVE BANKS

Federal Reserve
Bank of—

President
First Vice President

Boston

Laurence F. Whittemore E. G. Hult 1
J. C. Hunter
William Willett

New York

Allan Sproul
L. R. Rounds

E. O. Douglas
J. W. Jones
H. H. Kimball
L. W. Knoke
Walter S. Logan
A. Phelan

Philadelphia...

Alfred H. Williams
W. J._Davis

E. C. Hill
C. A. Mclllhenny
Wm. G. McCreedy Philip M. Poorman1
C. A. Sienkiewicz

Cleveland

Ray M. Gidney
Wm. H. Fletcher

W. D. Fulton
J. W. Kossin 2
A. H. Laning

Richmond

Hugh Leach
J. S. Wal'den, Jr.

Claude L. Guthrie2 C. B. Strathy
E. A. Kincaid
Edw. A. Wayne
R. W. Mercer

Atlanta. . . . . . .

W. S. McLarin, Jr.
L. M. Clark

V. K. Bowman

H. F. Conniff
S. P. Schuessler

Chicago

C. S. Young
Charles B. Dunn

Allan M. Black1
Neil B. Dawes
J. H. Dillard
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
A. F. Bailey
Wm. E. Peterson

William B. Pollard
C. A. Schacht
William H. Stead
C. M. Stewart

Minneapolis. . .

J. N. Peyton
O. S. Powell

H. G. McConnell
A. W. Mills1
Otis R. Preston

E. W. Swanson
Sigurd Ueland
Harry I. Ziemer

Kansas City...

H. G. Leedy
Henry O. Koppang

O. P. Cordill
L. H. Earhart
Delos C. Johns

John Phillips, Jr,
G. H. Pipkin
D. W. Woolley2

Dallas

R. R. Gilbert
W. D. Gentry

E. B. Austin2
R. B. Coleman
H. R. DeMoss

W. E. Eagle
W. H. Holloway
Watrous H. Irons
L. G. Pondrom

San Francisco.

C. E. Earhart

J. M. Leisner2
H. N. Mangels

H. F. Slade
W. F. Volberg

Vice Presidents

2
Cashier.
Also Cashier.
NOTE: See p. 131 for note on Conference of Presidents.

Carl B. Pitman
O. A. Schlaikjer
H. V. Roelse
Robert G. Rouse
John H. Williams
V. Willis
R. B. Wiltse

B. J. Lazar
Martin Morrison
W. F. Taylor
Donald S. Thompson

FEDERAL RESERVE SYSTEM
DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1946—Cont.
OFFICERS IN CHARGE OF BRANCHES OF FEDERAL RESERVE BANKS
Federal Reserve Bank of—

Chief Officer

New York...

Buffalo

I. B. Smith 3

Cleveland

Cincinnati
Pittsburgh

B. J. Lazar4
J. W. Kossin4

Richmond.. .

Baltimore
Charlotte

W. R. Milford3
W. T. Clements 3

Atlanta

Birmingham
Jacksonville
Nashville
New Orleans

P. L. T. Beavers3
Geo. S. Vardeman, Jr. 3
Joel B. Fort, Jr. 3
E. P. Paris 3

Chicago

Detroit

E. C. Harris 4

St. Louis

Little Rock
Louisville
Memphis

A. F. Bailey4
C. A. Schacht4
William B. Pollard4

Minneapolis..

Helena

R. E. Towle3

Kansas City..

Denver
OklahomaCity
Omaha

G. H. Pipkin 4
O. P. Cordill4
L. H. Earhart 4

Dallas

El Paso
Houston
San Antonio

W. E. Eagle4
L. G. Pondrom 4
W. H. Holloway4

San Francisco

Los Angeles
Portland
Salt Lake Cit}
Seattle

W. N. Ambrose3
D. L. Davis 3
W. L. Partner 3
C. R. Shaw3

Managing Director.

Vice President.

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 to advise the Board of Governors.
During the year Mr. Sproul, President of the Federal Reserve Bank of New York,
served as Chairman of the Conference and Mr. Davis, President of the Federal Reserve Bank of St. Louis, served as Vice Chairman. In June Mr. Treiber, Assistant
Vice President and Secretary of the Federal Reserve Bank of New York, succeeded
Mr. Sienkiewicz, Vice President of the Federal Reserve Bank of Philadelphia, as
Secretary.

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

>
CJ
>
fcrj

3
w
o
>
>

o
o
w

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

NOTE: There has been no change in district or branch territory boundaries
Report of the Board of Governors for 1942, pp. 138-45.

since the publication of the description

in the Annual

Page
Acceptance of drafts and bills of exchange by member banks:
Applications approved
Revision of Regulation C
Surrender of powers
Acceptances, bankers, buying rates increased
Administrative procedure rules, adoption of
Agnew, John, suit on removal as director of national bank
Amendments to Federal Reserve Act: (See Federal Reserve Act)
American Bankers Association, check routing symbols program inaugurated by
Anderson, R. B., designated Class C Director and Deputy Chairman at Dallas
Assessments on Federal Reserve Banks for expenses of Board
Assets, liquid: (See Liquid assets)
Assets and liabilities of Federal Reserve Banks
Audit of accounts of Board of Governors
Bank credit during reconversion
Bank holding companies:
Proposed legislation for supervision of
Voting permits granted to
Bank loans, increase during year
Bank premises, Federal Reserve Banks and branches
Bank supervision by the Federal Reserve System
Banking offices, changes in number of
Banking operations and structure
Banking quarters, proposed legislation to remove limitation on Federal Reserve branch
buildings
Board of Governors:
Audit of accounts by Federal Reserve Bank of New York
Division of Bank Operations, functions and duties of Office of Administrator for
War Loans transferred to
Employees, number of
Expenditures for 1946
Members:
List of
McKee, John K., expiration of term
Vardaman, James K., Jr., appointment of
Office of Administrator for War Loans, office abolished
Officers
Policy actions: (See Policy actions)
Publications
Receipts and disbursements for 1946
Regulations: (See Regulations)
Research and advisory services
Staff: (See Staff of Board)
Boothe, Gardner L., II, appointed Assistant Director of the Division of Administrative
Services
Branch banks:
Domestic:
Capital requirements of member banks with branches, proposed legislation. .
Changes during year.
Number of
Federal Reserve System:
Bank premises
Buildings, proposed legislation to remove limitation on
Directors, list of
Examination of
Officers in charge of

$3
42
53
95, 97
43
114
51
58
63
70
64
16
10
52
2
57, 82
51
49, 87
45
10
64
62
61
63
119
61
61
62
119
66
63
64
61
11
49
87
57, 82
10
122
51
131

133

134

INDEX

Page
Branch banks—Continued
Foreign:
Applications approved during year
53
Location of
53
Brown, Prentiss M., appointed director at Detroit Branch
59
Bryan, Malcolm H., resignation as First Vice President at Atlanta
60
Budget expenditures and receipts of Government
11
Building activity during year
23
Burchfield, Albert H., Jr., appointed director at Pittsburgh Branch
59
Business outlays, rise in
32
Buying rates on bills at Federal Reserve Banks
84
Cagle, C. E., resignation as Assistant Director of Division of Examinations
62
Cameron, D. P., appointed director at New Orleans Branch
59
Capital accounts:
Federal Reserve Banks
71, 73
Member banks
'.
47
Capital requirements of member banks with branches, proposed legislation
11
Cessation of hostilities, Proclamation of President terminating period
45
Chairmen of Federal Reserve Banks:
Conference of
121
Dearmont, Russell L., designated at St. Louis
$8
Designations for a year
58
Executive Committee
121
List of
121
Meeting of Conference of
67
Parten, J. R., designated at Dallas
58
Shepard, Roger B., designated at Minneapolis
58
Chalkley, H. G., Jr., appointed director at New Orleans Branch
59
Charts:
Classification of member bank loans and investments
17
Consumer credit outstanding
20
Individual incomes, expenditures, and taxes
31
Industrial production for war and civilian purposes
26
Loans and investments of member banks
16
Member bank capital accounts
48
Member bank earnings and profits
46
Ownership of U.S. Government securities
13
Prices
29
Stock market
22
Yields on Treasury and corporate securities
15
Check routing symbols, use of
51
Clark, L. M., appointed First Vice President at Atlanta
60
Clearing and collection:
Check routing symbols, program inaugurated by American Bankers Association .
51
Par list, number of banks on list and number not on list
50, 88
Cochran, W. D., designated Deputy Chairman at Minneapolis
58
Commitment rates at Federal Reserve Banks
84
Committees:
Executive, of Conference of Chairmen
121
Executive, of Federal Advisory Council
120
Executive, of Federal Open Market Committee
119
Condition statement of Federal Reserve Banks:
All banks combined
70
Each bank
72
Conferences: (See Meetings)
Consumer credit:
Amendments to Regulation W during year
42,93,96,98
Increase during 1946
19
Legislation proposed for regulation of
7
Minimum down payments and maximum maturities
86

INDEX

135
Page

Consumer expenditures, rise in
Consumers Home Equipment Company, violation of Regulation W
Corporate earnings, increase during year
Corporate securities, yields on
Court cases:
Consumers Home Equipment Company, conviction for violating injunction
Motor City Credit Jewelry Co., Inc., injunction under Regulation W
Peoples Bank, Lakewood Village, California, suit regarding condition of
membership
Suit regarding removal of directors of national bank, decision of Supreme Court.
Cox, Cecil C , appointed director at Little Rock Branch
Credit:
Control powers needed
Expansion slackened in 1946
Currency holdings of individuals and businesses
Currency in circulation
Curry, John C , appointed director at Birmingham Branch
David, Donald K., appointed Class C Director at Boston
Davis, W. J., appointed First Vice President at Philadelphia
Dearmont, Russell L., designated Chairman and Federal Reserve Agent at St. Louis.
Deaths:
Clerk, Ira, President at San Francisco
Demand, production, and prices
Deposits:
Decrease during year
Individuals and businesses, changes in
Maximum rate on
Deputy Chairmen:
Anderson, R. B., designated at Dallas. . .
Cochran, W. D., designated at Minneapolis
Designations for year
Harriman, Henry I., designated at Boston
List of
Directors:
Federal Reserve Banks:
Anderson, R. B., appointed Class C at Dallas
Appointments for year
Classes of
David, Donald K., appointed Class C at Boston
List of
Miller, Paul E., appointed Class C at Minneapolis
Redman, J. P., appointed Class C at St. Louis
Federal Reserve branch banks:
Appointments for year
Burchfield, Albert H., Jr., appointed at Pittsburgh Branch
Brown, Prentiss M., appointed at Detroit Branch
Cameron, D. P., appointed at New Orleans Branch
Chalkley, H. G., Jr., appointed at New Orleans Branch
Cox, Cecil C , appointed at Little Rock Branch
Curry, John C., appointed at Birmingham Branch
Drought, H. P., appointed at San Antonio Branch
Frank, Aaron M., appointed at Portland Branch
Hooper, James E., appointed at Baltimore Branch
Koch, J. M., appointed at Pittsburgh Branch
List of
Meacham, H. C , appointed at Nashville Branch

31
43,109
30
15
43,109
43,105
43,111
.44,114
59

6
1
23
24
59
58
60
58
60
25
2
23
85
58
58
58
58
121

58
58
122
58
122
58
58
59
59
59
59
59
59
59
60
60
59
59
122
59

136

INDEX

Page
Directors—Continued
Federal Reserve branch banks—-Continued
Roderick, Dorrance D., appointed at El Paso Branch
60
Shaw, R. Flake, appointed at Charlotte Branch
59
Sherrill, Fred G., appointed at Los Angeles Branch
60
Stewart, Ross, appointed at Houston Branch
60
Stratton, Leslie M., Jr., appointed at Memphis Branch
59
Tenneson, John T., appointed at Seattle Branch
60
Wallace, Fred S., appointed at Omaha Branch
60
Wooster, Carl G., appointed at Buffalo Branch
59
National banks, suit regarding removal of
44, 114
Directory:
Board of Governors
119
Federal Advisory Council
120
Federal Open Market Committee
119
Federal Reserve Banks
130, 131
Discount rates at Federal Reserve Baiks
84
Dividends, Federal Reserve Banks
S5y^°
Dollar balances held in United States by foreign countries
40
Dollar exchange, applications of member banks to accept for furnishing
53
Drinnen, Frank J., resignation as First Vice President at Philadelphia
60
Drought, H. P., appointed director at San Antonio Branch
60
Earhart, C. E., appointed President at San Francisco
60
Earning assets of member banks
45
Earnings:
Federal Reserve Banks
$$
Member banks
45
v
Earnings and expenses of Federal Reserve Banks:
All banks, 1945-1946
$$
All banks, 1914-1946
80
Each bank
78
Ellis, Howard S., resignation as Assistant Director of the Division of Research and
Statistics
61
Employees:
Board of Governors, number of
61
Federal Reserve Banks:
Number of
61
Number and salaries of
83
Employment, increase during year
30
Examinations:
Federal Reserve Banks
51
Federal Reserve branch banks
51
State member banks
51
Expenditures of Board of Governors for 1946
63
Exports from United States during year
37
Farm tenant loans, amendment to Section 24, Federal Reserve Act
45
Fayerweather, F. O., suit on removal as director of national bank
114
Federal Advisory Council:
Meetings held during year
67
Members and officers
120
Federal Open Market Committee:
Meetings during year
67
Members and officers
119
Policy actions
101
Federal Reserve Act:
Section 13, proposed amendment to
9
Section 13b, repeal recommended
9
Section 14(0) amended to authorize purchase or sale of Government obligations
by Federal Reserve Banks
44
Section
45
24, amendment relating to farm tenant loans

INDEX

137
Page

Federal Reserve Bank of Atlanta:
Staff:
Bryan, Malcolm H., resignation as First Vice President
60
Clark, L. M., appointment as First Vice President
60
Federal Reserve Bank of Boston:
Staff:.
Flanders, Ralph E., resignation as President
60
Whittemore, Laurence F., appointment as President
60
Federal Reserve Bank of New York:
Audit of accounts of Board for 1946
64
Operations as Fiscal Agent of United States
57
Federal Reserve Bank of Philadelphia:
Staff:
Davis, W. J., appointment as First Vice President
60
Drinnen, Frank J., resignation as First Vice President
60
Federal Reserve Bank of San Francisco:
Staff:
Clerk, Ira, President, death of
60
Earhart, C. E., appointment as President
60
Federal Reserve Banks:
Assessment for expenses of Board of Governors
62
Assets and liabilities of
70
Bank premises of Federal Reserve Banks and branches
57, 82
Branches: (See Branch Banks, Federal Reserve System)
Capital accounts
71, 73
Chairmen, list of
121
(See also Chairmen, Federal Reserve Banks.)
Condition statement, each Bank
72
Deputy Chairmen:
Designation of
58
List of
121
Directors: (See Directors)
Dividends
55, 80
Earnings and expenses:
All banks, 1945-1946
55
All banks, 1914-1946
80
Each bank
78
Earnings on loans and securities
$$
Employees, number of
61, 83
Examination of
51
First Vice Presidents:
Changes during year
60
List of
130
Holdings of United States securities by
76
Officers, list of
121, 130
Officers and employees, number of
61, 83
Presidents:
Changes during year
60
List of
130
Salaries of officers and employees
83
Vice Presidents, list of
130
Volume of operations
54
Volume of operations in principal departments
.
77
Federal Reserve notes, discontinuance of further printings in higher denominations...
94
Federal Reserve System:
Map
132
Membership, increase in
50

I38

INDEX
Page

Fiduciary powers granted to national banks
52
First Vice Presidents:
Changes during year
60
List of
130
Flanders, Ralph E., resignation as President at Boston
130
Foreign banking corporations, operations of
$3
Foreign branches of American banking institutions
$3
Foreign central banks:
Transactions of Federal Reserve System with
56
Visitors from
66
Foreign gold and dollar resources
39
Foreign trade and
finance
35
Foreign trade of United States in 1946
37
Foreign transactions of Federal Reserve System
56
Frank, Aaron M., appointed Director at Portland Branch
60
Gold, movement to United States during year
39
Government checks, limitations on claims connected wit1!
45
ll
Government expenditures during year
, 33
Government finance in transition
11
Government securities:
Bond yields discussed
14
Commercial bank holdings
4
Holdings by Federal Reserve Banks
76
Holdings in commercial banks
17
Ownership of:
Changes during 1946
12
Chart
13
Prices and yields discussed
3
Purchase by Federal Reserve Banks directly from Treasury, extension of provisions
of Second War Powers Act
7, 44
Refunding policies
4
System open market account, authority to effect transactions in
101, 102, 104
Treasury certificates, holdings of short-term by Federal Reserve Banks
77
Harriman, Henry I., designated Deputy Chairman at Boston
58
Hooper, James E., appointed director at Baltimore Branch
58
Imports and exports during 1946
37
Incomes, increase during year
30
Inflationary developments during year
1
Interest rates, short-term and long-term rates discussed
5
International trade and
finance
35
International transactions of United States for year
36
Kennedy, David M., resignation as Special Assistant to the Chairman
62
Knapp, J. Burke, appointed Assistant Director in Division of Research and Statistics. .
61
Koch, J. M., appointed director at Pittsburgh Branch
59
Legislation:
Bank holding company, proposed
10
Capital requirements of member banks with branches, proposed
11
Consumer credit regulation, proposed
7
Farm tenant loans, amendment to Section 24, Federal Reserve Act
45
Federal Reserve branch buildings, proposal to remove limitation on cost
10
Government checks, limitation on claims connected with
45
Loans to businesses, Reserve Bank guarantee of, proposed
8
Proposals for
7
Purchase of Government obligations by Federal Reserve Banks directly from
Treasury, extension of provisions of Second War Powers Act
7, 44
Leonard, Robert F., appointed Director of Division of Examinations
62

INDEX

139
Page

Liquid assets:
Ownership and uses of
24
Slackened growth in
22
Survey of holdings
65
Loans:
Business, proposed legislation for Reserve Bank guarantee of
8
Farm tenant, amendment to Section 24, Federal Reserve Act
45
Foreign central banks by Federal Reserve Banks
56
Increase in demand during the year
51
Member banks, expansion in
17
Member banks to commercial and industrial concerns, survey conducted by Board.
64
Real estate, expansion of
19
V-loan program for guaranteeing war production loans
Io
Loans and investments of member banks:
Change during year
47
Chart
16
Loans and securities, Reserve Bank earnings on
55
Map of Federal Reserve System
132
Margin requirements:
Amendments to Regulations T and U
42, 90, 98
Influence on stock market credit
21
Raise to 100 per cent
2
Table
85
McKee, John K., expiration of term as member of Board of Governors
61
Meacham, H. C , appointed director at Nashville Branch
59
Meetings:
Chairman of Federal Reserve Banks held on December 5 and 6
67
Economic and statistical methods held in Mexico City, attendance by representatatives of the Board
66
Examination departments of Federal Reserve Banks held in Washington on
September 11
52
Federal Advisory Council
67
Federal Open Market Committee
67
Miscellaneous conferences attended by representatives of Board and Federal
Reserve Banks
68
Presidents of Federal Reserve Banks
67
Member banks:
Capital accounts
47
Capital requirements of member banks with branches, proposed legislation
11
Changes in number during year
49, 87
Earnings of
45
Loans and investments
16, 47
Reserve requirements
85
Membership in Federal Reserve System:
Increase during year
50
Suit by Peoples Bank of Lakewood Village, California, regarding condition of. . . .43, i n
Millard, Edwin R., appointed Assistant Director of the Division of Examinations....
62
Miller, Paul E., appointed Class C Director at Minneapolis
58
Monetary policy, postwar
4
Monetary situation in 1946
1
Money rates and bond yields
14
Motor City Credit Jewelry Co., Inc., injunction under Regulation W
43,105
Mutual savings banks, changes in number during year
87
National banks:
Change in number during year
50
Fiduciary powers granted to
52
Nelson, Fred A., appointed Director of Division of Personnel Administration
62
Nonmember banks, changes in number during year
87

I4O

INDEX
Page

Par List:
Number of banks on list and number not on list
$0
Number by Federal Reserve districts and by States
88
Parten, J. R., designated Chairman and Federal Reserve Agent at Dallas
58
Paulger, Leo H., appointed Special Adviser to the Board
61
Peoples Bank v. Marriner S. Eccles et al., suit regarding condition of membership. . .43, 111
Policy actions, Board of Governors:
Federal Reserve notes, discontinuance of further printings in higher denominations
94
Penalties for deficiencies in reserves of member banks, change in rules for uniform
application by Federal Reserve Banks in waiving
91
Preferential rates on advances to member banks secured by direct obligations of
the United States, elimination of
92
Rate on advances to nonmember banks secured by direct obligations of the United
States, elimination of
91
Rates, buying on bankers' acceptances, increases in
95, 97
Regulation C, acceptance by member banks of drafts or bills of exchange, revision
of
96
Regulation T, extension and maintenance of credit by brokers, dealers, and
members of National Securities Exchanges, amendments to
90, 98
Regulation U, loans by banks for the purpose of purchasing or carrying stocks
registered on a National Securities Exchange, amendment to
90, 98
Regulation W, consumer credit:
Amendments to
93, 96
Revision of
98
Policy actions, Federal Open Market Committee:
Authority to effect transactions in System Account:
Meeting of March 1
101
Meeting of June 10
102
Meeting of October 3
104
Postal savings deposits, rate on
85
Postwar monetary policy
4
President of United States:
Proclamation terminating period of hostilities
45
Presidents of Federal Reserve Banks:
Changes during year
60
Conference of
131
List of
130
Meetings held during year
67
Prices:
Discussion of increases in
28
Increase during year
25
Proclamations:
Terminating period of hostilities of World War II
45
Production:
Civilian goods, increase in
1
Increase during year
26
Prospects for 1947
40
Public debt:
Changes in ownership of Government securities during 1946
12
Reduction during year discussed
2
Publications of Board, list of
66
Rates:
Advances to nonmember banks secured by direct obligations of the United States,
elimination of
91
Buying on bankers* acceptances, increases in
95, 97
Buying rates on bills
84
Commitment rates at Federal Reserve Banks
84

INDEX

141
Page

Rates -Continued
Discount at Federal Reserve Banks
84
Interest, changes during year
5
Maximum on time deposits
85
Money
14
Preferential rate on advances to member banks secured by direct obligations of
the United States, elimination of
3, 92
Time deposits
85
Receipts and disbursements of Board for year
63
Redman, J. P., appointed Class C Director at St. Louis
58
Regulations, Board of Governors:
C, acceptance by member banks of drafts or bills of exchange, revision of
42, 96
T, extension and maintenance of credit by brokers, dealers, and members of
National Securities Exchanges, amendments to
42, 90, 98
U, loans by banks for the purpose of purchasing or carrying stocks registered on a
National Securities Exchange, amendments to
42, 90, 98
W, consumer credit—
Amendments to
42, 93, 96
Consumers Home Equipment Company, violation of
43, 109
Motor City Credit Jewelry Co., Inc., injunction against and order suspending
license
43, 105
Restraining influence on loans
20
Revision of
20, 98
Research and advisory services of Board
64
Reserve requirements of member banks
85
Reserves of member banks, change in rules for uniform application for Federal Reserve
Banks in waiving penalties for deficiencies
91
Resignations:
Bryan, Malcolm H., as First Vice President at Atlanta
60
Cagle, C. E., as Assistant Director of Division of Examinations
62
Drinnen, Frank J., as First Vice President at Philadelphia
60
Ellis, Howard S., as Assistant Director in Division of Research and Statistics....
61
Flanders, Ralph E., as President at Boston
60
Kennedy, David M., as Special Assistant to the Chairman
62
Wyatt, Walter, as General Counsel of Board
62
Review of situation at end of 1946
34
Roderick, Dorrance D., appointed director at El Paso Branch
60
Rules of Organization and Rules of Procedure adopted by Board
43
Salaries of officers and employees of Federal Reserve Banks
83
Shaw, R, Flake, appointed director at Charlotte Branch
59
Shepard, Roger B., designated Chairman and Federal Reserve Agent at Minneapolis.
58
Sherman, Merritt, appointed Assistant Secretary of the Board
62
Sherrill, Fred G., appointed director at Los Angeles Branch
60
Sloan, George S., appointed Assistant Director of the Division of Examinations
62
Stabilization program, modification of
27
Staff of Board of Governors:
Boothe, Gardner L., II, appointed Assistant Director of Division of Administrative
Services
62
Cagle, C. E., resignation as Assistant Director of Division of Examinations
62
Ellis, Howard S., resignation as Assistant Director of Division of Research and
Statistics
61
Heads and assistant heads of divisions
'
119
Kennedy, David M., resignation as Special Assistant to the Chairman
62
Knapp, J. Burke, appointed Assistant Director in Division of Research and
Statistics
61
Leonard, Robert F., appointed Director of Division of Examinations
62
Military service, return of Board's employees from
61
Millard, Edwin R., appointee! Assistant Director of Division of Examinations....
62

142

INDEX
Page

Staff of Board of Governors—Continued
Nelson, Fred A., appointed Director of Division of Personnel Administration....
62
Number of
61
Paulger, Leo H., appointed Special Adviser to the Board
61
Sherman, Merritt, appointed Assistant Secretary
62
Sloan, George S., appointed Assistant Director of Division of Examinations. . . .
62
Townsend, J. Leonard, designation changed to Assistant General Counsel
62
Vest, George B., designation changed from General Attorney to General Counsel..
62
Wyatt, Walter, resignation as General Counsel
62
Young, Ralph A., appointed as Assistant Director of Division of Research and
Statistics
61
State member banks:
Changes during year
87
Examination of
51
Increase in number during year
50
Stewart, Ross, appointed director at Houston Branch
60
Stock market credit
21
Stratton, Leslie M., Jr., appointed director at Memphis Branch
59
Surveys:
Business finance on basis of data from financial statements of manufacturing and
trading concerns
65
Flow of money payments through major sectors of the economy
65
Liquid asset holdings, savings, incomes, and expectations of individual consumer
units
65
Liquid assets of individuals
24
Loans to commercial and industrial concerns
64
Member bank loans to commercial and industrial businesses
18
Tenneson, John T., appointed director at Seattle Branch
60
Townsend, J. Leonard, designation changed to Assistant General Counsel
62
Treasury certificates, holdings of short-term by Federal Reserve Banks
77
Treasury refunding policies
4
Trust powers of national banks, authority granted to exercise
52
Vardaman, James K., Jr., appointed member of Board of Governors
61
Vest, George B., designation changed from General Attorney to General Counsel....
62
Visitors from foreign central banks and Governments to Board
66
Volume of operations of Federal Reserve Banks
54, 77
Voting permits to baik holding companies authorized during year
52
Wallace, Fred S., appointed director at Omaha Branch
60
Whittemore, Laurence F., appointed President at Boston
60
Wooster, Carl G., appointed director at Buffalo Branch
59
Wyatt, Walter, resignation as General Counsel of the Board
62
Yields on Government securities
15
Young, Ralph A., appointed Assistant Director of Division of Research and Statistics..
61

Full text of Annual Report of the Board of Governors of the Federal Reserve System : 1946

FRASER