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FORTY-FIRST ANNUAL REPORT of 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, March 15, 1955. 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 Forty-first Annual Report of the Board of Governors of the Federal Reserve System. This report covers operations for the year 1954. Yours respectfully, W M . M C C . MARTIN, JR., Chairman. CONTENTS TEXT OF REPORT Page Introduction 1 Federal Reserve Credit Policy Open market operations Changes in discount rate Change in reserve requirements Economic Conditions Demand and production Industrial production Agriculture Labor market Prices Income and saving Debt and equity Interest rates financing 4 6 7 7 8 8 11 13 13 14 15 17 20 Bank Credit and Money Bank loans and investments Deposits and currency Bank reserve positions 22 22 26 27 World Economic and Financial Developments United States balance of payments World commodity prices Countries outside Europe and the Western Hemisphere Western Hemisphere Western Europe Summary 30 31 34 34 35 37 40 Loan Guarantees for Defense Production 40 Banking Operations and Structure Bank earnings and profits Bank earning assets Capital accounts Number of banking offices Federal Reserve membership Par and nonpar banks Designation of reserve cities 41 41 43 43 44 44 45 46 Bank Supervision by the Federal Reserve System Examination of Federal Reserve Banks Examination of State member banks 46 46 46 iii Page Bank holding companies Trust powers of national banks Acceptance powers of member banks Foreign branches and banking corporations Inter-Agency Bank Examination School 47 47 47 48 49 Changes in Regulations of the Board of Governors Reserves of member banks Clearing and collection Foreign banking 49 49 50 50 Legislation Direct purchase and sale of Government obligations Investment in bank premises Paying out Federal Reserve notes Real estate loans by national banks Housing Act of 1954 Member banks dealing in obligations of banks for cooperatives 50 50 50 51 51 51 52 Reserve Bank Operations Volume of operations Earnings and expenses Holdings of loans and securities Foreign and international accounts Bank premises Intradistrict territorial changes 53 53 53 54 55 56 57 Board of Governors—Income and Expenses 57 Federal Reserve Meetings 60 Meeting of Central Bank Technicians 60 TABLES 1. Statement of Condition of the Federal Reserve Banks (in detail), Dec. 31, 1954 62 2. Statement of Condition of Each Federal Reserve Bank at: End of 1954 and 1953 64 3. Holdings of United States Government Securities by Federal Reserve Banks, End of December 1952, 1953, and 1954 68 4. Federal Reserve Bank Holdings of Special Short-Term Treasury Certificates Purchased Directly from the United States, 1953-54.. 69 5. Volume of Operations in Principal Departments of Federal Reserve Banks, 1950-54 69 6. Earnings and Expenses of Federal Reserve Banks during 1954 70 7. Earnings and Expenses of Federal Reserve Banks, 1914-54 72 8. Member Bank Reserves, Reserve Bank Credit, and Related Items—End of Year 1918-54 and End of Month 1954 74 iv Page 9. Bank Premises of Federal Reserve Banks and Branches, Dec. 31, 1954 76 10. Number and Salaries of Officers and Employees of Federal Reserve Banks, Dec. 31, 1954 77 11. Federal Reserve Bank Discount, Interest, and Commitment Rates, and Buying Rates on Acceptances (in effect Dec. 31, 1954) 78 12. Member Bank Reserve Requirements 79 13. Maximum Interest Rates Payable on Time Deposits 79 14. Margin Requirements 80 15. Fees and Rates Established under Regulation V on Loans Guaranteed Pursuant to Defense Production Act of 1950 80 16. All Banks in the United States, by Classes, Dec. 31, 1954 and 1953, Principal Assets and Liabilities, and Number of Banks 81 17. Member Bank Earnings, by Class of Bank, 1954 and 1953 82 18. Analysis of Changes in Number of Banking Offices during 1954 83 19. Number of Banking Offices on Federal Reserve Par List and not on Par List, by Federal Reserve Districts and States, Dec. 31, 1954 84 APPENDIX Record of Policy Actions—Board of Governors 86 Record of Policy Actions—Federal Open Market Committee 92 Board of Governors of the Federal Reserve System 99 Federal Open Market Committee 100 Federal Advisory Council 101 Directors and Senior Officers of Federal Reserve Banks 102 Map of Federal Reserve Districts 117 Index 118 ANNUAL REPORT OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Broad recovery in economic activity was under way in the United States as the year 1954 closed, following the period of moderate contraction which began in mid-1953. Total output for the year as a whole was exceeded only in 1953. Abroad, activity increased throughout the year to a record level. In most industrial countries, general averages of commodity prices changed little. Prices of some agricultural and mineral products declined in international trade, and prices of others advanced. Economic readjustment within this country reflected mainly reduced expenditures for national defense and reduction of excessive business inventories. Renewal of economic expansion in the closing months of the year reflected an upswing in private demand. Throughout 1954 credit was readily available on terms attractive to borrowers and demand for many types of credit continued to grow. Nonbank sources supplied a large amount of funds and bank credit expanded appreciably. Interest rates, which by summer had declined to comparatively low levels, showed some firming tendencies over the balance of the year, mainly in response to a strengthening in credit demand. Privately held demand deposits and currency, which changed little in the early part of the year, after allowing for seasonal movements, increased substantially after midyear. At the year-end, they were 4 billion dollars or 3 per cent larger than at the end of 1953. Other liquid assets, such as time and savings deposits, savings and loan shares, and shares in credit unions, also continued to be accumulated. Security flotations and mortgage underwriting were in record volume and investor demand for common stocks was active. Prices of common stocks rose rapidly throughout the year and trading activity increased considerably. Developments in credit markets and interest rates reflected in part the effects of Federal Reserve policy. In order to cushion defense and inventory readjustments and to foster business revival 1 Z ANNUAL REPORT OF BOARD OF GOVERNORS and sustained economic growth, the Federal Reserve until late 1954 followed a policy of actively promoting credit ease. By that time recovery was sufficiently advanced to require modification of this aggressive policy. Debt management operations of the Treasury during the year had objectives parallel with System policy. Following a decline of about one-tenth from mid-1953 to the spring of 1954 and a period of little change from spring to early autumn, this country's industrial activity increased. By December output at factories and mines had recovered half of the decline. The rise reflected expanding production of automobiles and other finished consumer goods as well as gains in output of steel and other materials. The increase in industrial output also reflected the high and rising levels of construction activity. Activity in producers' and military equipment industries, which had declined from mid-1953 through the third quarter of 1954, changed little in the closing months of the year. Gross national product was 357 billion dollars for the year 1954, 8 billion less than the record level for 1953. With price averages fairly stable, the physical volume of product was correspondingly smaller than in the preceding year. Employment was lower than in 1953, and the labor force increased further. Unemployment, although somewhat less severe than in the 1949 recession period, was above the low levels of 1953, both in terms of the number of workers affected and as a percentage of the labor force. Gross national product, which was at an annual rate of 356 billion dollars during the first three quarters of the year, rose to 362 billion in the fourth quarter. Stability through the third quarter reflected important offsetting changes among major sectors of the economy. Major factors in the rise during the fourth quarter were a marked slowing down in inventory liquidation and further increases in consumer buying. Federal outlays for national security purposes were further curtailed in 1954. Business outlays for fixed capital purposes declined moderately. Liquidation of business inventories continued on a large scale in the first three quarters and at a greatly reduced rate in the fourth quarter. Consumer spending for goods and services rose steadily in 1954 to new high levels. Residential construction advanced strongly from already high levels, facilitated by the ready availability of FEDERAL RESERVE SYSTEM 3 mortgage funds on downpayment and maturity terms exceptionally attractive to borrowers. Expenditures of State and local governments increased further for roads, schools, other public improvements, and services. Foreign purchases of American goods increased. The sustained rise in consumer expenditures during the year reflected further growth in personal income after taxes. Reductions in tax rates effective at the beginning of the year and increased unemployment compensation and old-age pension payments more than offset reductions in wage and farm incomes. Lower corporate tax rates helped to sustain business profits after taxes. Dividend income and interest payments increased. Farm output continued large in 1954. Markets for important agricultural commodities also were affected by large carryovers from earlier harvests. Domestic demand for farm products was relatively strong, and exports expanded toward the end of the year. Prices of crops under Federal price support programs changed little, but prices of livestock and products declined further. Net farm income was lower than in other postwar years. Unlike some economic adjustments in the past, the business decline from mid-1953 to early 1954 did not become cumulative. Reasons for this are many but special weight must be given to the underlying strength and general resilience of our market economy in making essential adjustments flexibly. Public policy measures which contributed to recovery included prompt actions by the Federal Reserve System to ease credit conditions and reduction of Federal personal and corporate income taxes. Unemployment payments and Federal price supports for basic farm products helped to sustain the incomes of workers and farmers. The further gains in industrial production abroad provided an element of strength in world markets for industrial materials and, by enlarging buying power abroad, made possible an important rise during the year in United States exports. For Western Europe the year was one of rising prosperity, with industrial output greater than a year earlier and about one-fourth larger than in 1950. European activity rose steadily over the year in the durable goods and construction industries and continued at relatively high levels in the textile industries. In most Western European countries the balance of international payments was favorable in 1954 and gold and dollar reserves con 4 ANNUAL REPORT OF BOARD OF GOVERNORS tinued to increase. Under these circumstances, central banks and governments continued to move toward reestablishment of international convertibility of currencies. Restrictions on imports of dollar goods were greatly relaxed in some countries. Sterling held outside the sterling area was made freely transferable except to the dollar area, and Great Britain abolished most governmental controls on prices and internal trade. Financial stability was maintained in other sterling-area countries, where additional progress was made in industrial and agricultural development. In Japan, inflationary tendencies were checked and the international payments position improved. Progress toward establishing conditions appropriate to convertibility was evidenced in the gains in production and international trade in 1954 and in the measures taken to make markets more responsive to changing demand and supply forces. In some countries, however, restrictive controls continued to limit the play of market forces, and in a few of these unchecked inflation hampered sound economic growth and made it difficult to balance external payments with receipts. FEDERAL RESERVE CREDIT POLICY During most of 1954, Federal Reserve policy continued to be directed toward "promoting growth and stability in the economy by actively maintaining a condition of ease in the money market." This directive had been adopted in the latter part of 1953 after gradual relaxation of the policy of restraint followed until May 1953. The policy of restraint had had the purpose of keeping the growing use of credit within the limits set by the resources of the economy, thus avoiding developments of an inflationary arid unsustainable nature. Under that policy Federal Reserve open market operations had supplied only part of the increasing demand for bank reserves. This had made it necessary for banks to borrow frequently in substantial amounts to cover their reserve needs. The restrictive effect of such borrowing was reenforced by an increase in the Federal Reserve Bank discount rate. The new policy of actively maintaining a condition of ease in the money market enabled member banks to reduce their indebtedness to the Federal Reserve Banks and also lowered the cost to in FEDERAL RESERVE SYSTEM 5 dividual member banks of such borrowing as was necessary from time to time. Reserves made available by the usual seasonal contraction in monetary needs in the early months of 1954 were not entirely absorbed by Federal Reserve action. Sufficient reserves were thus available not only to relieve most banks of the need to borrow in order to meet temporary reserve adjustments but also to supply the basis for additional bank credit expansion. The Federal Reserve Bank discount rate was reduced twice, in February and again in midspring. Further steps were taken in the spring to support forces favorable to renewed economic growth. First, open market purchases supplied bank reserves in the late spring, to counteract seasonal pressures on bank reserve positions. Second, member bank reserve requirements were reduced around midyear. This action was taken primarily to foster bank credit expansion and provide the reserves that would normally be needed over the remainder of the year. Since more reserves were supplied than were needed initially, open market sales were made to absorb temporarily excess amounts. Over the fall of the year, when demand for credit and currency rose in response to seasonal forces and to expansion in private spending, open market purchases returned reserves to the market. After midyear, as a result of Treasury borrowing and an increase in private borrowing, demand deposits and currency began to expand. As the second half-year progressed, banks made use of available funds to increase their holdings of United States Government securities as well as of other loans and investments. Over the fall, demand deposits and currency grew at a rate of about 500 million dollars a month, after allowance for the usual seasonal increase. Meanwhile, the chief indexes of economic activity were moving to higher levels and by the end of the year it was evident that a recovery movement had taken form. In this situation, Federal Reserve policy became less active in promoting credit and monetary expansion. Member banks found it necessary to borrow at the Federal Reserve Banks to meet December needs for reserves. Credit ease during the year was reflected in an extension of the interest rate declines which had characterized credit markets during the second half of 1953. The declines in rates from their 1953 peaks were greater for issues of intermediate and longer-term securities than in comparable readjustment periods since World War I, and about 6 ANNUAL REPORT OF BOARD OF GOVERNORS as much as in the other periods for prime short-term market paper. Market yields on intermediate and longer-term securities tended to stabilize after the first quarter, while yields on short-term paper continued to decline irregularly into the summer. Yields on nearly all types of obligations, particularly short-term paper, showed firming tendencies during the second half of the year. All classes of credit market yields participated in the interest rate decline from mid-1953 to the second quarter of 1954, but differences in adjustment were marked. In general, short-term rates declined more than long-term rates; market rates more than customer rates; United States Government security yields more than those on private securities, and yields on high-grade securities more than those on lower-grade issues. The easy credit situation was also accompanied by increased availability of credit, reflected both in greater willingness of lenders to make loans to credit-worthy risks and in more attractive downpayment and maturity terms for consumer instalment credit and for mortgage borrowers. In response to greater availability of credit, lower interest costs, and other factors, lending activity expanded in some areas and maintained relatively high levels in others. The lower levels of interest rates established between mid-1953 and the second quarter of 1954 were reflected in higher prices for United States Government bonds, State and municipal bonds, and corporate bonds. The higher prices on securities, as well as higher dollar values for other long-lived capital assets, were due in part to the recapitalization of future income at reduced interest rates. The fact of higher prices on these assets tended to enhance the liquidity of the economy by increasing the proportion of assets held by individuals and businesses, especially financial institutions, that could be sold in markets at cost or profit. Greater liquidity for the economy encouraged more active spending and investing on the part of holders of capital assets. Open market operations. As in 1953, System open market operations were coordinated with discount policy and changes in reserve requirements. In January and February 1954, the Federal Reserve made open market sales to absorb only in part the redundancy of bank reserves that appears at that season. Receding credit demands in these and early spring months also contributed to easier bank reserve positions. Over this period, member bank bor- FEDERAL RESERVE SYSTEM 7 rowing tended to decline and excess reserves to rise. During the second half of May and in June, the Federal Reserve purchased about 300 million dollars of Government securities to offset a drain on bank reserves from an outflow of currency and gold and to keep banks in an easy reserve position. Following the reduction in reserve requirements during the summer, sales of Government securities were made by the System in order temporarily to absorb reserve funds not needed until the fall period of active currency and credit demand. Beginning in September, open market purchases were geared to the maintenance of an easy member bank reserve position during the fall phase of bank credit and monetary expansion. Late in the year, as business expansion began to gather momentum, open market purchases were moderated and bank reserve positions were subject to some tightening from pressures resulting from year-end and other credit demands. Changes in discount rate. During the first half of February 1954, the discount rate was reduced from 2 to 1% per cent at all Federal Reserve Banks. A second reduction was made by the Reserve Banks during the period April 14-May 21, when this rate was changed to ll/2 per cent. In both instances, the actions were designed to bring the discount rate into closer alignment with short-term market rates as well as to make it less expensive for individual member banks to make temporary adjustments in their reserve positions by borrowing at the Federal Reserve Banks. Change in reserve requirements. On June 21, 1954 the Board announced a program to reduce member bank reserve requirements. The program was made effective over a period of several weeks. When completed on August 1, 1954 it included a reduction of 1 percentage point on time deposits at all member banks, a reduction of 2 percentage points on net demand deposits at central reserve city banks, and a reduction of 1 percentage point on net demand deposits at reserve city and country banks. The reserve requirement percentages in effect following this action were 5 per cent on time deposits at all member banks and 20, 18, and 12 per cent, respectively, on net demand deposits at central reserve city, reserve city, and country banks. The reductions in reserve requirements, which released about 1.6 billion dollars of reserve funds, were made in anticipation of bank reserve needs over the fall. They took into account probable ex 8 ANNUAL REPORT OF BOARD OF GOVERNORS pansion of financing requirements of private activities, including seasonal needs for marketing crops and for replenishing retail stocks in advance of the heavy selling season, as well as resumed economic growth. They also took account of prospective Treasury financing needs and the seasonal rise in currency circulation over the second half of the year. The major objective of the action was to make sure that banks would be supplied with reserves in amounts sufficient to encourage them to seek uses for their funds and thus to foster credit and monetary expansion. ECONOMIC CONDITIONS The second cyclical postwar downturn, which was in process at the beginning of 1954, was halted in the spring and followed by rapid expansion in economic activity late in the year. Consumer and wholesale price averages continued relatively steady in 1954. Prices of farm products declined somewhat further, but less sharply than earlier. Prices of metals and some other industrial materials advanced in the spring, and late in the year increases extended to a number of other industrial materials. Strength in world demand contributed throughout the year to the firming of prices of internationally traded commodities. Demand and production. The value of total output of goods and services in the United States was 357 billion dollars in 1954 compared to a record 365 billion in 1953. Since average prices were little changed from 1953 levels, physical volume of output, as well as dollar value, was moderately smaller. The value of aggregate output, which continued to decline through the winter of 1954, was stable from early spring to early autumn at an annual rate of 356 billion dollars and expanded vigorously late in the year. In the fourth quarter of the year, gross national product was at an annual rate of 362 billion dollars, 2 per cent above the plateau of the immediately preceding quarters and about the same percentage below the peak rate of the second quarter of 1953. Total expenditures other than for national defense and additions to business inventories were considerably above their earlier peak in mid-1953. Expansion in the final quarter of 1954 reflected the combined effect of a number of factors. Of major importance were the sharp reduction in the rate of inventory liquidation and the rise of consumer spending to a new high level. Further increases in residential FEDERAL RESERVE SYSTEM GROSS NATIONAL PRODUCT Billions of dollars, annual rates 240 - 400 CONSUMPTION EXPENDITURES 200 - 360 J - 320 - 280 - 240 | I 160 120 GOVT. PURCHASES 80 PRIVATE INVESTMENT 40 200 1950 1952 1954 1950 1952 1954 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Private investment includes gross private domestic investment and net foreign investment. Government purchases include Federal and State and local purchases of goods and services. construction activity, in State and local government expenditures, and in net foreign investment also contributed to economic expansion late in the year, while national defense outlays and business expenditures for plant and equipment declined more slowly than earlier. Nonfarm business inventories were liquidated at an annual rate of 4 or 5 billion dollars from late 1953 through the third quarter of 1954. By last summer inventory holdings had been considerably reduced, particularly in hard goods lines where earlier reductions in demand had been concentrated. Thus a basis was laid for expansion in business ordering and termination of inventory liquidation. Manufacturers' new orders for durable goods recovered somewhat in the spring and summer months and rose to appreciably higher levels in the last four months of the year. With new orders about equal to sales, the sharp decline in outstanding orders of durable goods manufacturers came to a halt in late summer. Consumer spending for goods and services reached a record level in the fourth quarter, 3.5 per cent higher than a year earlier. Pur 10 ANNUAL REPORT OF BOARD OF GOVERNORS chases of new automobiles were at exceptionally high levels in December and Christmas buying in general was in record volume. For the year 1954, the rise in total consumer outlays about kept pace with the increase of 1.7 per cent in population. Spending for nondurable goods and services was in record volume while spending for durable goods was somewhat below the 1953 record level. Residential housing markets were strong throughout 1954. Some 1.2 million new dwelling units were started, compared to 1.1 million in each of the three preceding years and a record 1.4 million in 1950. During November and December 1954, the number of new private dwelling units started declined much less than seasonally. A major factor in the rapid rise in housing construction in 1954 was the increased availability of mortgage funds on terms unusually attractive to borrowers. After the beginning of the year, terms on loans guaranteed by the Veterans Administration were made substantially easier. The large increase in private units started reflected mainly expansion in units covered by arrangements for such mortgages, with a sharp increase in the proportion of such loans involving no downpayment or maturing in 30 years. Late in the year, additional stimulus to housing markets was provided by the Housing Act of 1954, effective October 1, which liberalized terms on loans insured by the Federal Housing Administration. Business outlays for new construction and durable equipment continued to decline moderately during most of 1954, and for the year were 5 per cent below the record 1953 level. A decline of 9 per cent in equipment purchases was offset in part by a further increase in business construction. Individual sectors reported diverse movements in fixed capital outlays. Spending for new commercial facilities continued to rise, and outlays by mining concerns were stable. Other industrial sectors reported reductions of varying magnitudes, including 9 per cent for manufacturing and 35 per cent for railroads. Farm investment also declined. The decline in Federal spending for national security from mid1953 to the end of 1954 was the largest contractive element influencing the economy. In the latter part of 1954, however, there was some slackening in the rate of decline in security spending. Federal purchases of goods and services for defense declined about onefourth from the second quarter of 1953 to the fourth quarter of 1954, from a seasonally adjusted annual rate of 54.0 billion dollars to one 11 FEDERAL RESERVE SYSTEM of 40.5 billion. The proportion of gross national product represented by national security purchases was reduced from nearly 15 to about 11 per cent. Reduction in defense spending reflected not only declines in expenditures for weapons and military equipment and for construction, but also a cut in the size of the armed forces and diminished outlays for operation of facilities. GNP SELECTED COMPONENTS Billions of dollars, annual rates PRIVATE INVESTMENT 30 60 GOVERNMENT PURCHASES FEDERAL NATIONAL SECURITY 50 20 10 NEW RESIDENTIAL CONSTRUCTION 0 _ 30 CHANGE IN NONFARM BUSINESS INVENTORIES STATE AND LOCAL 111 ill 0 OTHER FEDERAL I 1950 -10 1952 1954 1950 1952 1954 NOTE.—Department of Commerce quarterly estimates, adjusted for seasonal variation. Industrial production. The impact on production of the mid1953 to early 1954 decline and of the more recent resurgence in demand was largely concentrated at factories and mines. In early 1954 the Board's seasonally adjusted index of industrial production was still declining from its mid-1953 record level of 137 per cent of 12 ANNUAL REPORT OF BOARD OF GOVERNORS the 1947-49 average. The decline ended in March, when the index was 123, and during the spring and summer output was relatively stable at about that level. Industrial production then rose appreciably in the autumn and in December the index reached 130. For the year output was 125 per cent of the 1947-49 average as compared to 134 in 1953 and 124 in 1952. Production in consumer goods lines began to recover early in 1954, following sharp cutbacks in the latter half of 1953. Retail sales of most goods were maintained at relatively high levels and business stocks in most lines except automobiles were reduced. With recovery in consumer goods output, the decline in total industrial production—which had been rapid in late 1953—came to a halt in the early spring of 1954 despite continued curtailment in defense and producers' equipment lines. In the summer and early fall the rise in over-all output of consumer goods was interrupted. Auto output declined sharply during the most extensive model change-over of the postwar period. The imminence of this change-over also had considerable effects during the summer on output and inventory changes in the steel and other supplying industries. In July and August, steel output reached a low of 63 per cent of capacity. The rise in industrial output in the latter part of 1954 reflected widespread advances in industrial materials and consumer goods lines. Moreover, over-all activity in producers' and military equipment industries was showing little further change following earlier reductions. Following the model change-over, auto assemblies rose to an exceptionally high rate in December and production of other consumer metal goods remained at high levels. Output of building materials advanced, reflecting strength in construction. Steel output recovered rapidly and in November and December steel mills operated at close to 80 per cent of capacity. Production of nondurable goods, which had recovered moderately in the spring, increased further in the latter part of the year to a level about 6 per cent above the December 1953 low. Textile output rose considerably in the autumn, following a period of sustained inventory liquidation during which activity in apparel and most other major textile-consuming industries continued at relatively high levels. Output of paper and chemicals was at advanced levels during most of the year. FEDERAL RESERVE SYSTEM 13 In late 1954, minerals production was also showing substantial improvement, reflecting recovery in output of petroleum following a period of curtailment to reduce stocks, and moderate gains in other mining industries. Output of electric and gas utilities continued to advance throughout the year. Agriculture. Agricultural developments during 1954 continued to be influenced by large carryovers of commodities from previous harvests and by a further marked increase in supplies of livestock and livestock products, especially after midyear. Federal acreage restrictions and drought in some areas reduced crops in which carryovers were largest—wheat, cotton, and corn. There were partly offsetting increases in other crops. Total farm production, including livestock as well as crop marketings, was about the same as in 1953. Domestic demand for farm products generally remained strong throughout the year, while exports expanded towards the end of the year. Farm incomes declined somewhat further during 1954. Farmers' liquid asset holdings were well maintained, however, and their debts rose little. Farm real estate values firmed during the year and in November were 2 per cent higher than a year earlier and one-fifth above the 1950 level. Labor market. Further growth in the population of working age brought the civilian labor force to 64.5 million persons in 1954, about 650,000 above the previous year. Employment declined 1 million, or almost 2 per cent. Unemployment increased from an average of 1.6 million in 1953 to an average of 3.2 million. Declines in nonfarm employment, which had begun after mid1953, tapered off after the first quarter of 1954. The low point in seasonally adjusted nonfarm employment was reached in July and August, after which employment began to rise. By the end of the year employment at 48.4 million was 400,000 above the low but still about 1.5 million below the 1953 peak. Much of the change in employment after mid-1953 was concentrated in manufacturing industries, especially in metals and metal fabricating lines. Employment also was reduced in mining and in transportation. Changes in employment in most other nonmanufacturing activities were small. Average employment on farms was almost the same in 1954 as in 1953. In December 1954, unemployment was 2.8 million, or 4.5 per cent of the civilian labor force—about one-half million above a year 14 ANNUAL REPORT OF BOARD OF GOVERNORS SELECTED BUSINESS INDEXES Per cent, 1947-49 • 100 170 - 150 - 130 - 110 90 150 A' j FARM PRODUCTS K ^ V\ ^ ^ 90 1950 1952 1954 1950 195? 1954 NOTE>—Monthly series, seasonally adjusted except for prices. Indexes for retail sales and disposable personal income based on Department of Commerce data. Indexes for prices and employment based on Bureau of Labor Statistics data. Index for construction activity based on Commerce and Labor data representing work put in place. earlier., Unemployment (after adjustment for seasonal influences) reached its high point in the early part of 1954, leveled off during the summer months, and declined moderately after early fall. Prices. Consumer and wholesale prices were relatively stable in 1954 as in 1953, although changes for a number of commodities were substantial. During the contraction in industrial activity from mid-1953 to early 1954, average prices changed little as final demands FEDERAL RESERVE SYSTEM 15 for goods—except for defense and business inventories—were generally well maintained, industrial activity and demands abroad were rising, and a considerable readjustment in prices from the high post-Korean levels of early 1951 had already taken place. Supplies of foods expanded further in 1954 and prices of farm products and foods declined further. Reductions in prices were most marked for livestock products, reflecting considerable expansion in supplies in the latter part of the year, while prices of wheat and corn showed mainly seasonal changes. Following sharp increases in late 1953 and early 1954, prices of coffee and cocoa fell off substantially after midyear as buying moderated and the supply outlook improved. The over-all increase in average prices of industrial materials and products was small, amounting to about 1 per cent from the firstquarter low to the end of the year. Wholesale prices of finished products for the most part were stable, as during the earlier contraction in output. Average prices of industrial materials advanced in 1954, particularly in the latter part of the year. Prices of scrap metals and of lead and zinc rose toward the end of the first quarter, in part reflecting expansion in foreign demands for metals and revision in Federal stockpiling policies. During the recovery in industrial output later in the year, prices of basic metals rose further and prices of cotton and synthetic textiles, and some other industrial materials, also advanced. Rubber prices rose fairly steadily through the year, recovering all of the substantial decline which had occurred in 1953. Average consumer prices fluctuated within a narrow range and in December were only slightly lower than a year earlier. Food prices declined somewhat after midyear, reflecting largely increased supplies of livestock products. Prices of many other commodities, such as television, appliances, and textile housefurnishings, also declined. Discounts and other concessions from list prices, which are not fully reflected in the price indexes, were more prevalent than in 1953. Rents and charges for public transportation and a variety of personal services advanced more slowly than in other postwar years. Income and saving. Further growth in spendable incomes helped to limit the decline in activity and to set the stage for recovery. Mainly because of the reduction in Federal individual income tax 16 ANNUAL REPORT OF BOARD OF GOVERNORS rates effective at the beginning of the year, disposable personal income was at a record rate, more than 3 billion dollars larger than in 1953. Personal income in 1954 amounted to 286 billion dollars, equalling the record 1953 volume. After declining somewhat in late 1953 and early 1954, total personal income changed little during the spring and summer, and then expanded appreciably late in the year. The November and December figures exceeded the previous record high of July 1953. Wage and salary payments, particularly in durable goods manufacturing industries, advanced considerably in the autumn and accounted for most of the rise in total income. Wage rates generally continued to rise, although at a less rapid rate than in earlier postwar years. Average weekly earnings in manufacturing industries advanced moderately and were at a record level at the end of the year. Unemployment compensation payments continued to rise rapidly to the spring of 1954, but declined somewhat after midyear. Payments under the old-age and survivors insurance program expanded throughout the year. Income of nonfarm proprietors rose slowly during most of the year and in December, when retail trade advanced sharply, exceeded the high level of early 1953. Dividend and interest income expanded further in 1954, with a marked rise in December reflecting large special dividends. Income of farm proprietors declined somewhat further in 1954. Personal saving was in somewhat smaller dollar amount in 1954 than in 1953, but was larger than in any other peacetime year. For the year 1954 as a whole, the ratio of personal saving to disposable personal income was close to the relatively high rate prevailing in the preceding three years. During the course of the year, however, the ratio declined appreciably, as consumption expenditures increased more rapidly than disposable income. Corporate profits before tax, which had declined substantially in the latter part of 1953, leveled off during most of 1954 and increased in the closing months of the year. Before-tax profits for the year 1954 were at the lowest level since 1949. Tax liabilities on corporate profits, however, also declined markedly, in part reflecting repeal of the excess profits tax, and after-tax profits were only moderately smaller than in the preceding year. FEDERAL RESERVE SYSTEM 17 Debt and equity financing. Funds for debt and equity financing were available to borrowers on favorable terms in 1954 and found a large market. With reserve positions easy, commercial banks aggressively sought loans and investments. Financing institutions other than banks were active lenders of the continuing large supply of individual savings. The nature of credit demand changed considerably from the preceding year, however, with demand for long-term credit heavier and that for short-term credit lighter. Growth in outstanding real estate mortgage credit was about one-fifth larger in 1954 than in 1953, and State and local governments also increased their borrowing. The Federal Government, although sharply reducing its net cash borrowing, offered a larger amount of intermediate-term securities, especially for refunding purposes. Increases in outstanding corporate stocks and bonds, excluding those of investment and consumer finance companies, were larger than in the preceding year. Outstanding short-term bank loans to commerce and industry declined appreciably more in 1954 than in 1953. Short- and intermediateterm debt of consumers, which had increased very rapidly in earlier years, changed little. A major part of the increase in total credit and capital in 1954 was in real estate mortgages. Demand for new homes and commercial facilities was large and, with an ample supply of funds available on very favorable terms, mortgage loans were in record volume. Commercial banks increased their holdings of mortgages 1.8 billion dollars or about 10 per cent, considerably more than in the preceding year. Expansion was even greater at savings institutions; savings and loan associations alone increased their holdings 4.2 billion dollars or about 20 per cent. The outstanding volume of consumer financing, an important form of short-term credit demand, increased 0.6 billion dollars over the year as compared to 3.7 billion in 1953. Extensions of instalment credit (adjusted for seasonal variation), which had declined from March 1953 through January 1954 and then leveled off, rose during the last half of the year as a greater proportion of sales of autos and other consumer durable goods was financed with instalment credit. At the year-end, the sharp increase in sales of new-model autos was accompanied by a marked rise in instalment loan extensions. Repayments continued at a high level all year and limited 18 ANNUAL REPORT OF BOARD OF GOVERNORS GROWTH IN M A J O R T Y P E S OF D E B T AND EQUITY FINANCING [Net increase in amounts outstanding, in billions of dollars] Distribution of growth by— 1954* 1953 1952 1951 Major types: Federal cash borrowing State and local government issues (net)... Real estate mortgages Corporate bond and stock issues (net)1. .. . 0.9 5.2 12.0 6.1 4.6 4.6 9.8 5.4 3.4 3.1 9.0 -1.2 2.2 9.4 7.1 5.7 -0.7 -0.1 1.5 3.8 0.6 2.5 3.7 1.3 4.4 1.6 0.7 0.8 1.2 4.0 0.9 8.9 3.0 5.8 1.8 3.S 4.5 1.7 3.0 4.4 0.8 2.0 3.4 2 Bank loans to business Consumer credit by banks and other lenders Bank loans not included above Selected holders: Federal Reserve Banks Commercial banks Nonbank holders— Mutual savings banks Savings and loan associations Life insurance companies -0 10, 2.0 4.3 4.6 ^Preliminary. Excludes funds obtained by consumer finance companies and investment companies. 2 Excludes funds obtained by consumer finance companies. NOTE.—Includes only selected types of loan extensions and of new equity financing. Among types not included are trade credit other than consumer credit; interbank loans; security issues by foreign agencies, international organizations, nonprofit and eleemosynary institutions; nonbank loans for purchasing securities; and claims such as shares, pass books, and policies issued by financing organizations. The sum of the figures for major types of debt and equity financing does not equal the sum of the amounts shown for holders, since not all types of credit and holders are included. Holders exclude Federal, State, and local governments, individuals, corporations, foreign investors, nonlife insurance companies, and other investor groups not shown separately. U. S. Government security holdings of excluded groups are shown in the table on p. 24. Owing; to differences in coverage, most of which are indicated above, the figures for bank credit in this table differ from those used elsewhere in this Report. 1 the growth in outstanding instalment credit. The proportion of consumer credit extended by commercial banks remained about the same as in the preceding year. Business demand for bank credit was light in 1954. Reduction in inventories provided funds for repayment of bank loans in many businesses, particularly in metal goods lines. Some corporations chose to increase their working capital by security flotations and did not borrow from banks. Funds from operations were well maintained, the small decline in retained earnings having been largely offset by increases in depreciation allowances. FEDERAL RESERVE SYSTEM 19 The net increase in outstanding corporate bonds and equities, excluding investment and consumer finance companies, was substantially larger in 1954 than in 1953. New offerings exceeded retirements by about 6.1 billion dollars as compared to 5.4 billion in 1953. New issues of consumer finance companies were down substantially, and those of investment companies were off slightly. State and local governments added 5.2 billion dollars to their outstanding debt in 1954 as compared to 4.6 billion in 1953. Flotations of revenue issues continued to grow in importance. Highway construction was the most important use of borrowed funds, but amounts for educational and miscellaneous purposes also grew substantially. Financing institutions, especially commercial banks, insurance companies, and mutual savings banks, increased their holdings of State and local securities, supplying a larger proportion of the new funds than in other recent years. The proportion supplied by individual investors declined. The Federal Government virtually balanced its cash budget in the calendar year 1954 with cash outgo of 68.9 billion dollars and receipts of 68.6 billion. The small deficit of 0.3 billion dollars contrasts with a 6.1 billion deficit in the preceding year. Net cash borrowing totaled 0.9 billion dollars and the Treasury's cash balance increased slightly. The smaller deficit in 1954 reflected declines from 1953 of 7.7 billion dollars in cash outgo and only 1.9 billion in cash income. The sharp reductions in national security spending from the mid1953 peak continued in 1954. They were partly offset by increased outlays for unemployment compensation, social security programs, veterans' benefits, and farm price support programs. The decline in cash income reflected primarily reduced receipts from individual income and excise taxes, as a result of lower rates, which were partly offset by increases in corporate tax collections on the nearrecord 1953 profits and in employment tax receipts resulting from higher old-age insurance tax rates. Federal receipts continued to follow a sharp seasonal pattern, with heavy concentration in the first half of the year of both individual and corporate income tax payments. The result was a cash surplus of 7.9 billion dollars in the first half, which allowed net cash repayment of debt of 5.7 billion, and a deficit of 8.2 billion in the last half, which necessitated net cash borrowing of 6.6 billion. 20 ANNUAL REPORT OF BOARD OF GOVERNORS During 1954 the Treasury refunded a record total of more than 50 billion dollars of maturing securities—nearly 15 billion more than in 1953. This included the two largest individual refundings on record in February and December. By providing advance exchange offerings on some maturities the number of refundings was reduced to one in each quarter. Net cash offerings totaled 12.6 billion dollars, slightly less than in 1953. They provided funds for redemption of maturing tax-anticipation issues, net redemptions of nonmarketable savings bonds and notes, and attrition on refundings, in addition to 0.9 billion dollars for the cash deficit and the increase in the cash balance combined. Net redemptions of savings bonds totaled less than 0.2 billion dollars, but redemption of savings notes, no longer on sale, reached nearly 1.5 billion. Lengthening of Federal debt maturities continued during 1954, but because of the reduced level of business activity, new securities offered both in refundings and for cash were restricted to intermediate or shorter maturities that would not impinge on the flow of funds into long-term private investment. Altogether five new Treasury offerings with maturities ranging from three to nine years were issued. From December 1953 to December 1954 the average length of the total marketable Federal debt computed to the first call date was extended from three years and nine months to four years and three months; the proportion of the marketable debt maturing within one year was reduced from 47 to 40 per cent. Interest rates. Interest rates declined sharply in the early part of 1954, continuing the downward trend that began in mid-1953. The decline reflected the large volume of funds available as well as some diminution of credit demand, particularly for short-term funds. The supply of funds reflected easy bank reserve positions and also a flow of savings into life insurance, savings and loan shares, and other institutional channels in unprecedented volume for the postwar period. During the closing months of the year, most rates moved somewhat higher. Demand for both long-term and short-term credit strengthened and the increase in savings became somewhat slower. The Treasury, which had retired debt in the first half of the year, again borrowed extensively. In late November bank reserve positions became less easy. 21 FEDERAL RESERVE SYSTEM MONEY RATES Per cent per annum CORPORATE Aaa HIGH-GRADE MUNICIPAL COMMERCIAL PAPER y DISCOUNT RATE r' F — _ — — — _/.. - 3 - 2 r . / p7 i i L r TREASURY BILLS I 1950 1 ! 1951 1952 - 1 \ f 1 1953 1954 NOTE.—Treasury bill rates are market rates on longest bills. Before April 1, 1952, yields on long-term U. S. Governments include 2/4 per cent bonds first callable after 15 years; thereafter they include 2K per cent bonds first callable after 12 years. Corporate Aaa rates are from Moody's Investors Service; high-grade municipals, from Standard and Poor's Corporation. Discount rate is for Federal Reserve Bank of New York. The Treasury bill rate showed the sharpest decline during the first half of the year and the sharpest rise during the last half. At its June low, 0.61 per cent, the rate was only about one-fourth of the mid-1953 high and the lowest since mid-1947, when the Federal Reserve Banks discontinued buying bills at a posted rate of % of 1 per cent. The sharp advance during midsummer reflected in part a technical market reaction from the previous sharp drop and in part some tightening in the money centers as a result of a temporary maldistribution of bank reserves. Thereafter, the bill yield 22 ANNUAL REPORT OF BOARD OF GOVERNORS remained around 1.00 per cent until late November and December. During the last half of December, the rate averaged about the same as in early January, but almost l/2 per cent below the yield a year earlier. Yields on corporate and United States Government bonds declined steadily during the first quarter to a level of 2.85 per cent for high-grade corporate issues and just under 2.50 per cent for Government bonds. Increases were slight during the latter part of the year for high-grade corporate bonds but somewhat greater for Government bonds. High-grade municipal yields also declined steadily during the first quarter, then rose in the second quarter as new offerings reached an unprecedented volume and inventories of unsold issues accumulated at investment banking houses,, Municipal yields declined again during the summer, but at their low in August were still substantially above early 1952 levels. During the remainder of the year, yields on municipal securities generally moved upward, reflecting the continuing large supply of new offerings. BANK CREDIT AND MONEY Total loans and investments of commercial banks increased more in 1954 than in any other postwar year. Most of the expansion was in government securities—Federal, State, and local—and real estate mortgages. Deposits expanded sharply in the second half of the year. Bank reserve positions remained generally easy until late in the year. Bank loans and investments. The rise in total bank credit outstanding was close to 11 billion dollars in 1954, and exceeded 7 per cent. More than half the increase was in holdings of United States Government securities—as shown in the accompanying table. The remainder was distributed among holdings of State and local government securities, real estate mortgages, and agricultural, security, and other loans. Available reserve funds continued to be in excess of requirements to support private needs for credit, and banks increased their United States Government security portfolios 6 billion dollars or about 10 per cent. The largest percentage increases occurred in New York City banks, where outstanding loans declined, and the smallest at 23 FEDERAL RESERVE SYSTEM LOANS AND INVESTMENTS OF COMMERCIAL BANKS [In billions of dollars] Type of loan or investment Outstanding, Dec. 31, 1954 1 Increase, or decrease (—) 1954 1953 1952 + 4.1 + 0.1 + 0.5 + 9.0 Loans and investments, total 156.2 + 10.7 U. S. Government securities. Other securities 69.4 16.3 + 6.0 + 1.6 Loans, total 70.6 + 3.2 26.8 18.4 5.3 4.5 10.7 5.9 - Business Real estate Agricultural Security Consumer Other + + + + 0.4 1.7 0.3 0.9 0.2 0.8 + 3.4 + + + + 0.7 1.0 0.4 1.5 0.2 + 1.8 + 0.8 + 6.4 + + + + + + 2.0 1.1 0.5 0.6 1.9 0.3 1 Data for Dec. 31, 1954 are preliminary. NOTE.—Data exclude interbank loans. Total loans are after, and types of loans before, deductions for valuation reserves. Consumer and "other" loans are partly estimated for all dates. Details may not add to totals because of rounding. banks outside leading cities, where loan demands were well sustained during most of the year. Banks began to acquire additional United States Government securities in April and continued such acquisitions through October. Holdings declined about 3 billion dollars during the first quarter, in part reflecting the retirement of tax-anticipation certificates by the Treasury. Acquisitions were particularly heavy in May, August, and October when the Treasury sold new securities for cash. As private credit demand strengthened in November and December, banks reduced their holdings somewhat. The United States Government securities acquired by banks over the year, directly or indirectly, came largely from nonfinancial corporations, life insurance companies, mutual savings banks, and individuals. Net cash borrowing by the Treasury amounted to less than 1 billion dollars and holdings of the Federal Reserve Banks decreased by about the same amount. Thus commercial bank purchases of Government securities indirectly provided part of the large supply of funds made available to private borrowers by other lending institutions in 1954, and thereby contributed to 24 ANNUAL REPORT OF BOARD OF GOVERNORS OWNERSHIP OF THE UNITED STATES GOVERNMENT D E B T [In billions of dollars, par value, partly estimated] Net change Item Total debt outstanding Debt held by: Federal agencies and trust funds Federal Reserve Banks Commercial banks Other investors, total Insurance companies Mutual savings banks Other corporations State and local govts Miscellaneous investors Individuals, total Savings bonds Other End of 1954 1954 1953 1952 278.8 +3.6 +7.8 +7.9 49.6 24.9 69.2 + 1.3 -1.0 +5.5 135.1 -2.2 +2.4 + 1.2 +0.3 +3.9 +3.6 +0.9 +1.8 + 1.6 15.0 8.8 19.3 14.6 13.7 63.7 -0.8 -0.4 -2.2 -0.3 -0.3 + 1.7 +0.8 -1.3 -0.4 -0.3 -0.3 49.7 14.0 +0.4 -1.6 + 1.1 + 1.8 + 1.2 +0.4 +0.2 +0.1 + 1.5 + 1. 1 P) +0.1 P) 1 Less than 50 million dollars. NOTE.—Includes matured and noninterest-bearing debt, guaranteed securities, special issues to Government accounts, and also increases in debt reflecting the crediting of interest on savings bonds. Changes in total debt differ from net cash borrowing, quoted in the text, which amounted to 0.9 billion dollars in 1954, 4.6 billion in 1953, and 3.4 billion in 1952. Details may not add to totals because of rounding. Differences in figures for commercial banks compared to those in table on p. 23 result largely from the use here of par value data. Changes for Federal Reserve differ from those in the table on p. 29 because changes here are based on end-ofyear figures. the expansion in investment activity that figured so prominently in economic recovery. The maturity distribution of bank portfolios of United States Government securities lengthened substantially in 1954, reflecting in large part intermediate-term Treasury offerings during the year. Holdings of certificates declined about 5 billion dollars, reflecting net retirements of issues held outside the Federal Reserve System. In major refundings during February, August, and December, banks exchanged about 16 billion dollars of maturing issues for bonds with six-to-nine year maturities. Bank holdings of Treasury notes, particularly in three-to-five year maturities, were also increased substantially over the year through refundings and cash purchases. FEDERAL RESERVE SYSTEM 25 Holdings of Treasury bills rose only slightly, but there was some shifting among classes of banks; central reserve city banks reduced their bill portfolios while reserve city and country banks increased theirs. Commercial banks also supplied a substantial volume of investment funds through purchases of State and local government securities. The increase in their holdings exceeded 1.5 billion dollars— about three times the increase during 1953—and accounted for about one-third of the net increase in the outstanding volume of such securities over the year. Total loans at commercial banks rose more than 3 billion dollars in 1954, about the same as in 1953. A sharp expansion in the final quarter more than offset an earlier cumulative decline. Active demand for most types of bank loans was evident late in the year. Business loans rose substantially in late 1954 whereas in the same period of 1953 they had declined. Nevertheless the increase did not offset earlier reductions and these loans declined slightly over the year. The strength of business loan demand late in the year varied with the type of borrower. New borrowing by some industries with rising seasonal requirements during this period, such as commodity dealers, was larger in 1954 than in 1953. Construction loans also rose, although usually they decline during the fall and winter. The prolonged liquidation of outstanding loans by metals manufacturers tapered oflf and that by sales finance companies was reversed. Although outstanding public utility loans declined more in late 1954 than in late 1953, the reduction probably represented a substitution of long-term borrowing for bank loans and not a decline in total demand for funds from this industry. Real estate loans of commercial banks increased 1.7 billion dollars in 1954. They rose rapidly in the last half of the year, at more than twice the rate earlier in the year and throughout 1953. Consumer loans declined slightly over the year, with reductions in the first and third quarters partly offset by advances in the spring and late in the year. Loans for carrying Government and other securities increased almost a billion dollars, more than twice as much as in 1953. Agricultural loans increased much less than in 1953. Less credit was extended for the price support activities of the Commodity Credit Corporation. Short-term agricultural production loans changed little after declining in 1953. 26 ANNUAL REPORT OF BOARD OF GOVERNORS Deposits and currency. Monetary expansion was substantially greater in 1954 than in 1953. Demand deposits and currency held by businesses and individuals increased about 4 billion dollars compared to 1.5 billion in 1953 and a decline of 0.5 billion in the 1949 recession year. Expansion in 1954 was concentrated in the last half of the year, as shown by the chart. It reflected a marked increase in demand deposits offset in part by a decline in currency outside banks. DEPOSITS AND CURRENCY Billions of dollars 1953 1953 1954 1952 1954 1952 NOTE.—Figures are partly estimated. Demand and time deposits are for all banks in the United States and are adjusted to exclude U. S. Government and interbank deposits. Demand deposits are also adjusted to exclude items in process of collection. Time deposits include deposits in the Postal Savings System and in mutual savings banks. Figures are for last Wednesday of month except for Tune and December call dates. Figures for last half of 1954 are preliminary. Demand deposits adjusted declined slightly more than the usual seasonal amount early in the year and then rose slightly more than seasonally in the second quarter. A 9 billion dollar increase in the last half of the year exceeded seasonal expansion by about 3 billion dollars. The annual rate of growth in this period was about 6 per cent compared to 4 per cent for the year and 1 per cent for 1953. The post-holiday return of currency to the banks early in 1954 exceeded the usual seasonal inflow, and followed a smaller than usual FEDERAL RESERVE SYSTEM 27 outflow late in 1953. This downward trend of currency outside banks, after allowance for seasonal movements, continued until the closing months of the year when it apparently was reversed as economic activity and consumer spending increased. Time deposits of businesses and individuals continued their rapid growth of recent years, increasing almost 5 billion dollars or somewhat more than in 1953. Expansion was generally substantially ahead of that in 1953 until autumn, but in the last quarter it tended to slow down. Turnover of demand deposits was generally slightly faster in 1954 than in the previous year, rising from 18.9 times to 19.2 times for banks outside financial centers. Turnover in New York City was up substantially, reflecting in large part increased activity in the securities markets. Bank reserve positions. For the year as a whole, the reserves needed by member banks to back the deposit expansion amounted to about 900 million dollars, which was more than covered by the 1.6 billion dollar reduction in reserve requirements during the summer. Thus total required reserves were reduced about 700 million dollars. A decrease in currency supplied reserves approximately sufficient to cover the drain resulting from a decrease in the country's gold stock. Reflecting the net reduction in required reserves, Reserve Bank holdings of Government securities declined 700 million dollars and banks were able to meet credit and monetary demands from both private and Government borrowers without increasing their debt to the Reserve Banks. In December free reserves —that is, excess reserves less discounts and advances to member banks—though smaller than in summer and fall months, were somewhat larger than a year earlier. Bank reserve positions eased through April 1954, as shown in the table on page 29. A large seasonal currency inflow, together with a seasonal decline in deposits and required reserves, released substantially more reserve funds than were absorbed, largely by Federal Reserve sales and redemptions of Treasury bills and some reduction in float. Member banks reduced their borrowing from Reserve Banks 300 million dollars and increased their excess reserves 100 million. Free reserves rose to an average of more than 600 million dollars in April. 28 ANNUAL REPORT OF BOARD OF GOVERNORS MEMBER BANK RESERVES AND RELATED ITEMS Billions of dollars, monthly averages of daily figures 22 BORROWINGS; 1952 1953 1954 - 20 - 18 29 FEDERAL RESERVE SYSTEM The reserve position continued to ease through August. Reserves were made available through open market purchases by the Federal Reserve in May and early June, and through a reduction in reserve requirements on demand and time deposits during the period June 16-August 1. In order to prevent excess reserves from becoming unduly large temporarily in July and August, the Federal Reserve sold in the open market or redeemed Treasury bills. Thereafter it supplied reserves through open market purchases in order to meet fall needs for growth in required reserves and currency as well as to facilitate business recovery. Free reserves reached about 700 million dollars in June and fluctuated around that level until late in the year. Member bank borrowing remained small until late in the year. CHANGES IN MEMBER BANK RESERVES WITH RELATED FACTORS [Based on monthly averages of daily figures; in billions of dollars] Item Dec. 1953Dec. 1954 Dec. 1953Apr. 1954 Apr.Aug. 1954 - - - Aug.Dec. 1954 Member bank reserves Total reserves Excess reserves . Required reserves Effect of: Reduction in reserve requirement percentages Change in deposits Federal Reserve loans and investments: U. S. Govt. securities, total Bought outright Held under repurchase agreements., Discounts and advances: To member banks To others 1 0.5 0.8 C) -f 0.1 - 0.6 + 0.1 - 1.0 - 0.1 + 0.9 - 1.6 + 0.9 - 0.6 - 1.6 + 0.6 0.9 (Signs indicate effect on reserves) + 0.2 + 0.2 + 1.2 - 0.3 P) - o P) - - - 0.7 - 1.0 - 0.3 0.4 - 0.6 0.4 - 0.2 + 0.2 - 0.1 0.3 0.1 0.1 P) 0.2 P) P) 0.6 - 0.9 + 0.2 - 0.1 -f 0.3 + 0.1 0.9 - 0.7 + 1.0 + 0.1 p) - 0.3 + o.i P) + 0.1 + o.i P) Less than 50 million dollars. NOTE.—Details may not add to totals because of rounding. 0.9 - 0.7 Principal factors affecting reserves Currency in circulation Treasury operations Gold stock and foreign accounts Federal Reserve float Other factors 0.6 30 ANNUAL REPORT OF BOARD OF GOVERNORS Bank reserve positions became somewhat less easy in late November and December. Reserve funds from System purchases of Treasury bills in the market and under repurchase agreements with dealers, and from the year-end expansion of float, fell somewhat short of the amounts needed for a larger-than-usual growth in required reserves and currency in circulation. Banks found it necessary to reduce excess reserves somewhat and to increase their borrowing from Reserve Banks. Free reserves declined to below 500 million dollars on the average. WORLD ECONOMIC AND FINANCIAL DEVELOPMENTS The movement of recent years toward flexibility and freedom in markets continued in 1954 without interruption. The financial stability achieved in 1952 and 1953 was maintained in all leading countries of Western Europe and in the great majority of other countries. The volume of world trade expanded. Reduced demand for primary materials in the United States was in large measure counterbalanced by steadily rising demand in Europe, where industrial production reached record levels in every major nation. Important new steps were taken toward convertibility of currencies, which is now recognized by governments throughout Western Europe and the sterling area as a major goal of policy along with the maintenance of economic growth and stability in individual countries. Steps toward convertibility taken in 1954 included significant relaxations of European restrictions upon expenditures of dollars. In Great Britain, exchange controls affecting the use of sterling by residents of nonsterling countries outside the dollar area were simplified and lightened. Similar action was taken in Germany. New evidence of the current flexibility of central bank monetary policies under changing conditions was given toward the end of the year, when there was a moderate rise in rates of interest in London and some other European centers. In the short-run view, the margin of unutilized resources available in Europe to meet increasing demands appeared to have narrowed sharply. Nevertheless, scope for further advance was promised by the growth of capital resources and productivity in Europe and by the expanding trend of world production of basic materials traded internationally. One of the conditions necessary for steady advance in world production and trade is the avoidance of severe disturbances of the ££t>ERAL RESERVE SYSTEM 31 balance of international payments. Although payments to other countries from the United States in commodity trade and under Government grant and loan programs were smaller in 1954 than in 1953, the decline in these payments produced no general disturbance. In 1953 foreign countries, in the aggregate, had been adding very rapidly to their holdings of gold and dollars. Adjustment to the reduction in United States payments involved only a moderate slowing down in the rate of growth of gold and dollar reserves. Inflationary developments in a few countries and declines in world prices of some commodities were not widespread enough to have serious repercussions in the world economy. United States balance of payments. In the network of international payments, payments to and from the United States have been of special importance in recent years both because of their size and because the United States is still the only large industrial nation, except Canada, whose currency is freely convertible for use anywhere in settlement of international transactions. The maintenance U. S. BALANCE OF PAYMENTS Billions of dollars PAYMENTS FROM _ \ V EXPORTS OF GOODS AND SERVICES NET TRANSFERS OF GOLD AND DOLLARS T ll_ TT ll.lllal.lB •IT -1 1948 1950 1952 1954 NOTE.—Department of Commerce data for payments and exports; Federal Reserve data for net transfers of gold and dollars. Payments shown include civilian and military payments for goods and services, plus the net outflow of remittances, Government nonmilitary grants and loans, and private U. S. direct investment. Other capital movements are not included. Exports exclude military transfers under aid programs. 32 ANNUAL REPORT OF BOARD OF GOVERNORS of a large volume of payments from the United States has contributed to establishment of financial stability and stimulation of economic growth in other countries. In turn, rising foreign demand led to a rise in United States exports in 1954. Total payments from the United States to other countries for current transactions (including civilian and military purchases of goods and services, and also gifts other than Government aid) totaled about 16.5 billion dollars in 1954, as compared to 17 billion in 1953. Merchandise imports, which had been at a peak in the second quarter of 1953, fell until the first quarter of 1954 and then rose somewhat; for the year they totaled 10.3 billion, or 6 per cent less than in 1953. United States military purchases of goods and services for the use of our own forces abroad also decreased. Under the offshore procurement program, however, purchases of equipment to be transferred to other countries increased. Total United States military expenditures abroad were thus close to the 1953 amount of 2.5 billion dollars. United States Government grants and loans to other countries, other than aid given in the form of military supplies and services, amounted in 1954 to less than 1.5 billion dollars (net after repayments), considerably below the 2.0 billion total in 1953. The outflow of private American direct investment capital continued at close to the 1948-53 average rate of 700 million dollars. As in most recent years with the exception of 1953, the outward movement of private American portfolio and short-term capital exceeded the inward flow of foreign funds into long-term investments other than United States Government securities. Despite the declines in import payments and in Government grants and loans, total payments from the United States to other countries were still amply sufficient to support growth in world trade. Foreign countries and international institutions, which in 1953 had added 2.2 billion dollars to their holdings of short-term dollar balances, United States Government securities, and gold purchased from the United States, added a further amount of 1.6 billion in 1954. Including gold from new production and from other sources, total gold reserves and dollar holdings of foreign countries (other than the U.S.S.R.) and of international institutions increased by 2.2 billion dollars in 1954. FEDERAL RESERVE 33 SYSTEM The further additions to foreign monetary reserves were especially large among continental Western European nations, and provided direct support for the continued advance in European production and trade. In consequence of rising demand abroad and the reduction of barriers to trade, foreign countries increased their purchases of goods and services from the United States to about 17.5 billion dollars in 1954 from 17.0 billion in 1953. Merchandise exports of the United States (excluding military-aid transfers) totaled 12.8 billion dollars in 1954. In the fourth quarter, with some allowance for seasonal variation, they were at an annual rate of about 13.5 billion dollars, or about 10 per cent above the 1953 level. Exports to Canada, which had declined after the second quarter of 1953, were still slightly below the average level of 1953. On the other hand, exports to Western Europe in the second half of 1954 were more than 20 per cent above the 1953 average. There were also significant increases in exports to most other areas. EXTERNAL TRADE — WESTERN EUROPE A N D UNITED STATES Billions of U. S. dollars, annual rates 25 / 25 EXPORTS IMPORTS "A WESTERN EUROPE 20 ~ 20 WESTERN EUROPE 15 UNITED STATES *- 10 / _ 10 UNITED STATES J - i 1950 I ! 1952 5 I 1954 1950 1952 1954 NOTE.—Western European trade shown is trade of members of the Organization for European Economic Cooperation (OEEC) with all others, including dependencies—that is, intra-OEEC trade is excluded. All data are on f.o.b. basis except OEEC imports, which include transportation costs probably of the order of magnitude of 10-15 per cent. U. S. exports and OEEC imports exclude military-aid shipments from U. S. Sources: Department of Commerce and OEEC; fourth quarter 1954 OEEC trade partly estimated by Federal Reserve. 34 ANNUAL REPORT OF BOARD OF GOVERNORS World commodity prices. Outside Europe and the United States, economic developments in 1954 were diverse but generally more favorable than they would have been if the potential impact of reduced American demand upon prices of primary commodities had not been offset, in considerable degree, by the rise in European demand during 1953 and 1954. This rise in foreign industrial demand was most evident during 1954 in world markets for such commodities as metals, rubber, and lumber. World prices of these and other industrial raw materials showed an upward tendency, on the average, in 1954. Advances were very large for rubber and copper. Prices of wool and hides declined, however, reflecting lower world demand in the first case and greatly increased United States supplies in the second. World market prices for wheat and rice continued to decline in the first half of the year. The prices of the beverage commodities—coffee, cocoa, and tea—rose sharply in the first half of 1954; thereafter the price of tea continued upward but the other two dropped back in consequence of reduced buying and improvement in supply prospects. Countries outside Europe and the Western Hemisphere. While world price developments had important influences on business activity and on the balance of payments for particular countries, the course of events in each country was greatly affected by the nature of its own financial policies. In most sterling-area countries the internal financial stability earlier achieved was consolidated in 1954. Industrial production continued to rise in South Africa and Australia, and in these countries, as also in New Zealand, commercial bank loans expanded rapidly and import purchases rose through most of the year. The export receipts of Australia and New Zealand were affected by the fall in prices of wool and wheat, and in the second half of 1954 their sterling reserves declined somewhat. South Africa's reserves rose in consequence of expanded gold production and a large inflow of capital. Gradually accelerating progress was made in India's program for agricultural and public utility development, and a further advance was recorded in industrial production. There was relatively little change in India's gold and sterling reserves over the year. FEDERAL RESERVE SYSTEM 35 Ceylon's exports of rubber and tea were in strong demand. Budgetary and credit policies put into effect the previous year served to hold down imports, and the country's foreign exchange reserves recovered rapidly. Burma, on the other hand, suffered a sharp drop in reserves in consequence of rising imports and a fall in demand for its exports of rice. Pakistan continued to maintain severe restrictions on imports of consumer goods, and its exports of raw cotton declined as domestic utilization rose. Sterling reserves of British dependencies continued to increase, partly reflecting unspent earnings from exports to the Western Hemisphere and to Europe. During 1954 Japan employed a vigorous tightening of credit to check a new inflation of prices that had started in 1953. Industrial production, which had been increasing very rapidly, receded for several months but near the end of the year was advancing again. In the latter part of the year imports were considerably smaller than the year before, and the balance-of-payments deficit was converted into a surplus with the help of a steady rise of exports, supplemented by continuing sales of military supplies and services to the United States. After midyear there was a marked recovery in Japan's reserves of both dollars and sterling. In Thailand the decline in rice exports adversely affected the balance of payments and Government revenue. In Indonesia, financing of the Government deficit produced an expansion of one-third in the money supply, but imports were held in check by direct controls. The rise in rubber prices contributed to a gain in Indonesian foreign exchange reserves during the latter half of the year, and helped to check the decline in Thailand's reserves. The total value of Philippine exports was well maintained in 1954, despite lower prices for coconut oil and manila hemp. Western Hemisphere. Some South American countries continued to experience difficulty with their balance of payments not only in dollars but also in sterling and other currencies. In Brazil these difficulties became especially acute after the break in the previously rising trend of coffee and cocoa prices. The underlying problem in Brazil, however, as in Chile, Bolivia, and Paraguay, was domestic inflation. Markets in these countries were imperfectly linked to world markets through the numerous exchange rates applied to various transactions, and in some cases exports were de 36 ANNUAL REPORT OF BOARD OF GOVERNORS pressed while mounting difficulties in maintaining effective import and exchange controls were only temporarily relieved by extensions of credit from abroad. Argentina's grain exports, though large in volume, produced smaller foreign exchange earnings than in 1953. Rapid expansion of bank credit continued. Industrial activity, which in 1952 and 1953 had been below the 1947-49 average, increased after midyear, and money incomes and prices, which for two years had been relatively stable, moved up again. Some of the countries in North and Central America and in northern South America whose currencies are either fully or substantially convertible suffered slight recessions in business activity in the latter part of 1953 and the early part of 1954; these included Canada, Mexico, and Cuba. Pressures on central bank foreign exchange reserves in Mexico, and on free market exchange rates in Peru, when demand for foreign exchange tended for a time to outrun the supply, were checked after credit controls were tightened and stand-by credits obtained from the International Monetary Fund. The par value of the Mexican peso was changed in April from 11.56 cents to 8 cents. Colombia and Venezuela continued to experience rapid economic development. Both exports and imports increased. In December Colombia made a drawing on the International Monetary Fund to supplement the reserves of its central bank, which had stopped rising after the weakening of the coffee market; taxes on imports were increased and importers were required to make larger downpayments when applying for foreign exchange. In Canada, the largest single trading partner of the United States, output of minerals expanded continuously in 1953 and 1954. Manufacturing production, when some allowance is made for seasonal variation, appears to have been about 5 per cent lower during most of 1954 than at its peak in 1953. While inflow of capital continued on a large scale, both imports and exports were smaller than in 1953. The exchange rate for the Canadian dollar averaged $1.02 in the first half-year and $1.03 in the second half. With a shift in the credit policies of the Canadian authorities, yields on long-term Government bonds declined sharply from 3.7 per cent in 1953 to 3.0 per cent in the latter half of 1954. FEDERAL RESERVE SYSTEM 37 Canadian imports from the United States during 1954 averaged 13 per cent below the peak level of the second and third quarters of 1953. The corresponding decline in Canadian exports to the United States was only 6 per cent. The value of Canadian exports to other countries was depressed, however, by lower volume and prices of wheat exports. Western Europe. The balance-of-payments position of Western Europe remained extraordinarily strong in 1954. While in other parts of the world imports of many countries were roughly in line with their foreign exchange receipts—and the aggregate gold, dollar, and sterling reserves of all countries outside Europe and North America changed very little—Europe's foreign exchange receipts continued to exceed imports by a considerable margin. Under these circumstances, with production rising and domestic prices comparatively stable, the various national authorities in most Western European countries had considerable freedom to remove direct controls, lower interest rates, and provide tax incentives for investment, without fear of inflationary developments at home and adverse repercussions on reserves. They were able to relax significantly their remaining direct controls over international transactions. Gold and dollar reserves continued to increase, although at a slower rate than before, and external debts were reduced. The volume of currency and deposit money in the hands of the public continued to rise at a rate of about 4 per cent a year in several of the principal countries, and at a rate of 12 per cent in France and Germany. Toward the end of the year, the pressure of rapidly rising demand upon European resources which were virtually fully employed was reflected in rising imports, price increases for some commodities, and advances in money market rates. The expansion in Western Europe was concentrated in capital goods, consumer durable goods, and construction. Total industrial production was 9 per cent higher in 1954 than in 1953, and rose at almost this rate throughout the year. In the fourth quarter of 1954 industrial production in Western Europe was one-fourth greater than at the end of 1950. The rate of expansion varied from country to country. From the fourth quarter of 1953 to the last quarter of 1954, industrial 38 ANNUAL REPORT OF BOARD OF GOVERNORS GOLD RESERVES AND DOLLAR H O L D I N G S - B Y AREAS Billions of dollars 12 4 - 2 ^ S - 6 - 2 - DOLLAR AREA: IN LATIN AMERICA) OTHER COUNTRIES — ^^S CANADA 0 11948 1950 1952 1954 I 1 1948 - 2 NON -DOLLAR LATIN AMERICA 1 1 I 1950 1952 1954 NOTE.—End-of-quarter figures; gold reserves partly estimated. Dollar holdings include principally deposits, short-term U. S. Government securities, and certain reported holdings of long-term U. S. Government securities. production rose 4 per cent in Great Britain and Italy, with most of the advance in the first half of the year. Advances over the year amounted to 10 per cent or more in France and Belgium, where activity at the end of 1953 had not yet regained previous peaks. There were sharp increases in Austria and Greece also. In Germany, a further rise of 13 per cent brought industrial output 45 per cent above its level four years earlier. At the beginning of 1954, the labor market was already tight in many European countries. Although wage rates rose somewhat faster in 1954 than in 1953, much of their impact on production costs was offset by higher productivity. Personal saving increased further, as a result not only of growth in incomes but also of growing confidence in the stability of money values. Nevertheless, with rising levels of business activity and consumer demand, wholesale prices tended to advance a little toward the end of 1954. FEDERAL RESERVE SYSTEM 39 Partly in consequence of reductions in subsidies and continuing relaxation of food rationing and rent controls in some countries, consumer prices rose moderately in 1954, especially in the first half-year. The increases over the year as a whole were less than 4 per cent in most countries. In response to higher incomes and more readily available consumer credit, the production and sale of automobiles and some other consumer durable goods rose more than 20 per cent in several European countries. Residential construction reached a new record, and at the end of the year was still advancing, although at a reduced rate. Western European countries, in the aggregate, completed about 13 per cent more dwellings in 1954 than in 1953; completions numbered more than 6 per thousand inhabitants, which may be compared to about 7.5 per thousand in the United States. The United States rate was considerably exceeded in Germany and Norway, and equaled in Sweden. Further expansion in residential construction in 1955 in France and Italy was assured by government plans already in progress. Industrial demand for new plant and equipment was also strong in most European countries. In Great Britain industrial capital expenditures apparently increased only moderately but plans for future expenditures rose, as evidenced by sharply increased approvals of new factory construction projects. The cost of capital, as reflected in interest rates, fell further in the first half of 1954, as a result of policies pursued by governments and central banks, and of larger business and personal savings. Stock prices on the important European exchanges rose 20 to 60 per cent during the year. Governments were able to obtain larger borrowings from genuine savings and tended to reduce their demands on the banking systems. In several important countries government revenues rose more than expenditures. In certain countries the available instruments of credit control were improved and diversified during the course of the year. In the Netherlands, for example, the establishment of minimum reserve requirements had the effect of restoring to the central bank a degree of influence over credit developments which had been lost when the steady growth of foreign assets made the banking system highly liquid. 40 ANNUAL REPORT OF BOARD OF GOVERNORS In the second half of the year interest rates rose moderately in several countries. To help check a deterioration in the Danish balance of payments, the central bank raised the discount rate by 1 per cent in June and other rates of interest subsequently rose. In a number of other countries toward the end of the year the authorities permitted interest rates to rise in response to increased demands for credit and circulating cash. The most important change of this kind was the rise in short-term money rates in London beginning in November. Summary. In general, 1954 was a year of rising living standards and active investment of capital throughout the world. In Europe it was a year of high prosperity. Actions of governments and central banks indicated that in most European countries and many elsewhere the authorities were well prepared to take appropriate actions promptly, whether to guard against deflation or to prevent inflation. With continued progress in the removal of barriers to trade and investment, which was made possible by a generally satisfactory situation in international payments, the possibilities for a further period of rising world supplies in balance with rising world demand appeared brighter than they had for many years. LOAN GUARANTEES FOR DEFENSE PRODUCTION Under the provisions of the Defense Production Act of 1950 as amended and the implementing Executive Orders, certain designated procurement agencies of the Government are authorized to guarantee loans made by commercial banks and other private financing institutions to finance and expedite production for national defense, also to finance contractors and subcontractors in connection with or in contemplation of the termination of their defense contracts. The guaranteeing agencies are the Departments of the Army, Navy, Air Force, Commerce, Interior, and Agriculture, the General Services Administration, and the Atomic Energy Commission. The present program is a reactivation of the V-loan program utilized so successfully during World War II. The Federal Reserve Banks act as fiscal agents of the guaranteeing agencies in the making of such contracts of guarantee. During 1954 the guaranteeing agencies authorized the issuance of 73 guarantee agreements amounting to 141 million dollars. Loans 41 FEDERAL RESERVE SYSTEM outstanding on December 31, 1954 totaled 472 million dollars. On the same date an additional 273 million dollars was available to borrowers under guarantee agreements in force. During the year 1,562 million dollars was advanced on V loans, most of which are revolving credits. V LOANS AUTHORIZED, SEPT. 27, 1950-DEC. 31, 1954 [Percentage distribution, by size of loan and number of employees of borrower]1 Percentage of loans authorized Size of loan Under $100,000 $100,000-$499,999 $500,000-$999,999 $l,000,000-$4,999,999 $5,000,000-$9,999,999 $10,000,000 and over Cumulative percentage distribution Number Amount Number Amount 18.3 37.7 16.3 21.7 2.9 3.1 0.6 5.7 6.6 28.0 12.1 47.0 18.3 56.0 72.3 94.0 96.9 100.0 0.6 6.3 12.9 40.9 53.0 100.0 18.8 15.5 38.6 1.4 2.4 16.0 25.0 51.5 3.7 18.8 34.3 72.9 90.7 95.8 100.0 1.4 3.8 19.8 44.8 96.3 100.0 Number of employees 2 Under 50 50-99 100-499 500-2 499 . 2 500 and over Not available 17.8 5.1 4.2 1 Distributions are of 1,367 loans authorized in an aggregate amount of 2,500 million dollars. 2 Includes employees of affiliated concerns under common ownership or control. From the beginning of the program in September 1950 through December 31, 1954, 1,367 loans totaling 2,500 million dollars were authorized by the procurement agencies that may guarantee loans. The accompanying table gives the percentage distribution of authorized loans classified by size of loan and number of employees of borrower. BANKING OPERATIONS AND STRUCTURE Bank earnings and profits.1 Member bank net profits after income taxes were 1,089 million dollars in 1954, an increase of 224 million from 1953. The rise resulted for the most part from increased profits on sales of securities. Because of larger net profits 1 Figures for 1954 are based on preliminary tabulations. 42 ANNUAL REPORT OF BOARD OF GOVERNORS before income taxes, provisions for income taxes rose 112 million dollars despite removal of the excess profits tax. The ratio of net profits to average total capital accounts increased from 7.8 per cent in 1953 to about 9.3 per cent in 1954. Net current earnings before income taxes rose 15 million dollars to 1,824 million, the smallest increase in several years. Average rates of return on loans and United States Government securities changed little but average holdings of both increased. Earnings on loans rose to 2,700 million dollars, 68 million above the previous year, with average holdings 2 per cent larger. Earnings on United States Government securities were 1,063 million dollars, 52 million more than in the year before, and average holdings increased 7 per cent. An 8 per cent rise in average holdings of other securities also contributed to higher net earnings. An increase of 222 million dollars in total current earnings was largely offset by a rise in expenses. The accompanying table shows selected earnings, expenses, and profits for all member banks in 1954 and 1953. EARNINGS, EXPENSES, PROFITS, AND DIVIDENDS OF ALL MEMBER BANKS, 1954 AND 1953 [In millions of dollars] Item 1954 P 1953 4,812 4,590 1,063 2,700 1,049 1,011 2,632 947 Expenses 2,988 2,782 Net current earnings before income taxes Net losses, charge-offs, and transfers to valuation reserves 1,824 +68 1,809 251 Profits before income taxes Taxes on net income Net profits 1,893 804 1,089 1,558 692 865 456 419 Earnings On U. S. Govt. securities On loans All other Cash dividends declared ^Preliminary; final figures will appear in the Federal Reserve Bulletin, probably in the May issue. The increased profits on sales of securities were sufficient to change net profits, recoveries, losses, etc., from a loss of 251 million dollars in 1953 to a gain of 68 million in 1954; as a result, 60 per FEDERAL RESERVE SYSTEM 43 cent of net current earnings was carried to net profits after taxes as compared to 48 per cent in 1953. The year 1954 was the first since the period 1942-46 in which the excess of profits and recoveries over losses and charge-offs contributed to the net profits of member banks. About 456 million dollars or 42 per cent of the 1954 profits was distributed as dividends; this was a return on average total capital accounts of 3.9 per cent compared to 3.8 in 1953. Profits retained to strengthen capital accounts amounted to 633 million dollars compared to 446 million in 1953. Bank earning assets.2 Earning assets of member banks at the end of 1954 were 132 billion dollars, an increase of 9 billion for the year. More than half of the increase was in holdings of United States Government securities. Holdings of State and local government securities rose 1.5 billion dollars, which reflected the largest percentage increase for any type of earning asset. Loans declined seasonally during the early part of the year, but showed a net increase of 2.5 billion dollars for the year. About 1.4 billion dollars or more than half of the increase in total loans was in real estate loans. Loans for purchasing or carrying securities showed the next largest dollar increase, 860 million. Agricultural loans rose 260 million dollars, largely reflecting an increase in holdings of certificates of interest of the Commodity Credit Corporation. "Other loans to individuals," which are largely consumer loans, changed little during 1954, after having been an important factor in loan growth for two years. Commercial and industrial loans declined for the second consecutive year. According to sample data by industry groups, the over-all decline of 500 million dollars resulted from a decline of more than 1 billion dollars in loans to metals and metal products manufacturers, offset in part by increases in loans to commodity dealers and the construction industry. Capital accounts,2 Capital accounts of member banks at the end of 1954 amounted to 12.3 billion dollars, an increase of nearly 1 billion for the year. Approximately 633 million dollars of this amount came from retained earnings. Proceeds from sales of common stock accounted for most of the balance; other factors were mergers and changes in Federal Reserve membership. 9 Figures for 1954 are partly estimated. 44 ANNUAL REPORT OF BOARD OF GOVERNORS The ratio of average total capital accounts to average total assets for all member banks was 7.2 per cent, slightly above the preceding three years. The ratio of average total capital accounts to average total assets less cash assets and United States Government securities was 16.1 per cent in 1954 as compared to 15.8 per cent in the preceding year. This was the second year since 1944 in which this ratio did not decline. Number of banking offices. For the eleventh consecutive year the number of banking offices in the United States increased. It was 20,782 at the end of 1954 as compared to 20,406 a year before. The number of branches rose by 519 to 6,416, while the number of banks declined by 141 to 14,366. These figures exclude banking facilities at military and other Government establishments, of which there were 198 at the end of 1954, a decrease of one during the year. The number of banks (head offices) continued the decline of the past six years. Additions of head offices resulting from the opening for business of 73 new banks were more than offset by the consolidation or absorption of 207 banks, 176 of which were converted into branches. Table 18 on page 83 shows the increases and decreases in the number of banks and branches by class of bank. The increase of 519 in the number of branches and additional banking offices exceeded the recent annual records of 377 in 1953 and 296 in 1952. There were increases in practically all States that permit branch banking, with the largest number in Pennsylvania (87) and the second largest in California (62). More than 60 per cent of the increase in branches occurred in places outside of the head-office cities, a slightly larger proportion than in 1953. Federal Reserve membership. At the end of 1954, 6,660 banks were members of the Federal Reserve System. The membership of 4,789 national banks and 1,871 State member banks reflected net declines for the year of 67 and 16, respectively. Member banks accounted for 48 per cent of the number and held 85 per cent of the deposits of all commercial banks in the United States. State member banks accounted for 21 per cent of the number of all State commercial banks and held 65 per cent of the deposits of these banks. These relationships have remained practically unchanged since 1946. The continued decline in the number of member banks was largely the result of consolidations and absorptions. A great ma FEDERAL RESERVE SYSTEM 45 jority of the 120 member banks eliminated through consolidations and absorptions during the year continued to operate in their former locations as member bank branches. The member banks that merged or consolidated into nonmember banks were relatively small as measured by deposit size. Other declines included 4 State members that withdrew from membership and 3 national banks that converted into nonmember banks. Eighteen national banks and six State member banks were newly established during the year. Thirteen nonmember banks were admitted to membership in 1954; one of these was a national bank located in Alaska, the first member bank outside of the continental United States since 1921. Eight banks became members by conversion from nonmember to national banks; four State member banks converted into national banks. Par and nonpar banks.3 During 1954, 83 banks were added to the Federal Reserve Par List and 208 were deleted. Of the additions, 15 were nonpar banks that chose to go on the Par List, 64 were newly organized banks, 2 were former nonpar banks admitted to Federal Reserve membership, and 2 had not previously handled checking accounts. Of the deletions, only 2 withdrew from the Par List; the remainder were absorbed by other par banks and, in most cases, were converted into branches. The number of parremitting and nonpar offices at the end of 1954 is shown below: Banks (head offices) Branches Banking facilities at military and other Government establishments Total On Par List 11,960 5,783 Not on Par List 1,787 315 196 2 17,939 2,104 The par-remitting banks, representing 87 per cent of the banks on which checks are drawn, held about 98 per cent of the deposits of all commercial banks in the United States. All banks in 29 States and the District of Columbia were on the Federal Reserve Par List at the end of the year, and in each of 5 other States the 3 This section refers only to banks on which checks are drawn and their branches and offices, including "banking facilities" at military and other Government establishments. 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 Federal Reserve Banks for payment, and such nonmember banks as have agreed to do so. 46 ANNUAL REPORT OF fidAM OF GOVERNORS number of nonpar banks was less than 10. Practically all of the banks not on the Par List were in 14 Midwestern and Southern States, with the largest numbers in Minnesota and Georgia. Table 19 on page 84 shows the number of par and nonpar banking offices by States and Federal Reserve districts. Designation of reserve cities. Acting in accordance with the rule adopted by the Board on December 19, 1947, under which the classification of reserve cities is determined every three years, on February 18, 1954 the Board of Governors of the Federal Reserve System took action as follows with respect to the classification of reserve cities, effective March 1, 1954.4 (1) The City of Washington, D. C, and every city except New York and Chicago in which there is situated a Federal Reserve Bank or Branch of a Federal Reserve Bank, were continued as reserve cities. (New York and Chicago continued as central reserve cities under the Board's rule of December 19, 1947). (2) On the basis of official reports of condition in the two-year period ended on June 30, 1953, the following cities met the standard prescribed in paragraph (2) of subsection (b) of the Board's rule, and, therefore, such cities also were continued as reserve cities: Columbus, Ohio; Des Moines, Iowa; Indianapolis, Indiana; Milwaukee, Wisconsin; National City (National Stock Yards), Illinois; St. Paul, Minnesota; Tulsa, Oklahoma; Wichita, Kansas; and Forth Worth, Texas. (3) On the basis of written requests from the member banks in such cities, in accordance with paragraph (3) of subsection (b) of the Board's rule, the following cities also were continued as reserve cities: Toledo, Ohio; Cedar Rapids, Iowa; Sioux City, Iowa; Kansas City, Kansas; Pueblo, Colorado; and Topeka, Kansas. (4) The following cities did not fall within the scope of either paragraph (2) or (3) of subsection (b) of the Board's rule, and, consequently, the designation of such cities as reserve cities was terminated: Dubuque, Iowa; Lincoln, Nebraska; and St. Joseph, Missouri. BANK SUPERVISION BY THE FEDERAL RESERVE SYSTEM Examination of Federal Reserve Banks. The Board's Division of Examinations examined each of the 12 Federal Reserve Banks and their 24 branches during the year as required by law. Examination of State member banks. State member banks are subject to examinations made by direction of the Board of Governors or of the Federal Reserve Banks by examiners selected or approved *The rule regarding classification of central reserve and reserve cities appears in the Board's Annual Report for 1947, pp. 86-87. FEDERAL RESERVE SYSTEM 47 by the Board of Governors. The established policy is to conduct 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. 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 1954 program for the examination of State member banks was practically completed. Bank holding companies. During 1954 the Board authorized the issuance of six voting permits for general purposes and five permits for limited purposes to holding company affiliates of member banks. To provide information with respect to such organizations, regular annual reports were obtained from holding company affiliates to which voting permits have been granted. In accordance with established practice, a number of 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. Section 301 of the Banking Act of 1935 provides that the term "holding company affiliate" shall not include, except for the purposes of Section 23A of the Federal Reserve Act, any organization which is determined by the Board not to be engaged, directly or indirectly, as a business in holding the stock of, or managing or controlling, banks, banking associations, savings banks, or trust companies. During the year the Board made such determinations with respect to two organizations. Trust powers of national banks. During 1954, 37 national banks were granted authority by the Board to exercise one or more trust powers under the provisions of Section l l ( k ) of the Federal Reserve Act. This number includes the grant of additional powers to 19 banks which previously had been granted certain trust powers. Trust powers of 26 national banks were terminated, 24 by voluntary liquidation, consolidation, or merger and 2 by voluntary surrender. At the end of 1954, there were 1,759 national banks holding permits to exercise trust powers. Acceptance powers of member banks. During the year the Board approved the application of a member bank, pursuant to 48 ANNUAL REPORT OF BOARD OF GOVERNORS the provisions of Section 13 of the Federal Reserve Act, for permission to accept drafts or bills of exchange drawn for the purpose of furnishing dollar exchange as required by the usages of trade in such countries, dependencies, or insular possessions of the United States as may have been designated by the Board of Governors. Foreign branches and banking corporations. Under the provisions of Section 25 of the Federal Reserve Act, the Board approved during 1954 three applications made by member banks for permission to establish branches in foreign countries. One member bank opened a branch in England and another opened a branch in Cuba in 1954, the latter having been authorized by the Board in 1953. One branch in Germany was closed during the year. At the end of 1954, seven member banks had in active operation a total of 106 branches in 23 foreign countries and possessions of the United States. Of the 106 branches, four national banks were operating 99 and three State member banks were operating 7. The foreign branches in active operation were distributed geographically as follows: Latin America Argentina Brazil Chile Colombia Cuba Mexico Panama Peru Uruguay Venezuela Continental Europe Belgium France Germany 55 10 10 2 4 20 2 4 1 1 1 6 1 3 2 England 11 Far East 20 1 2 10 5 * 1 Hong Kong India JaPan Philippines ^mgfore Thailand Vn ed * ,St«tes Canal Zone Guam Puerto Rico Total 4 1 9 106 There was no change in 1954 in the list of corporations organized under State laws which operate under agreements with the Board pursuant to Section 25 of the Federal Reserve Act relating to investment by member banks in the stock of corporations engaged principally in international or foreign banking. Of the four corporations in operation, one has no subsidiaries or foreign branches; one operates a branch in England (also an agency at the New York Inter- FEDERAL RESERVE SYSTEM 49 national Airport); one operates a branch in France; and one has an English fiduciary affiliate. At the end of 1954 there were in operation two banking corporations organized under the provisions of Section 25(a) of the Federal Reserve Act to engage in international or foreign banking. The head offices of these corporations are located in New York City and both were examined during the year by the Board's Division of Examinations. One such institution operates a branch in Germany and the other has a branch in France and a fiduciary affiliate in England. During the year the Board approved the application of one of these corporations for permission to invest in the stock of an investment company proposed to be organized under the laws of a foreign country. In 1954 the Board initiated a special study of the foreign operations of American banks in financing international and foreign trade. The purpose of the study is to develop information as to changes that should be made in the Board's existing regulations, agreements, and policies regarding foreign banking corporations and foreign branches of national and State member banks, as well as changes that might be proposed in the law. Inter-Agency Bank Examination School. During 1954, three five-week sessions of the School for Assistant Examiners and two four-week sessions of the School for Examiners were held. The Inter-Agency Bank Examination School is conducted by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. Since established in 1952, the various sessions of the Inter-Agency School have been attended by 306 men, representing the three Federal bank supervisory agencies, the State Banking Departments of Indiana, Louisiana, Maine, New Hampshire, North Dakota, Oklahoma, and Virginia, the Treasury Department of the Commonwealth of Puerto Rico, and one foreign country. CHANGES IN REGULATIONS OF THE BOARD OF GOVERNORS Reserves of member banks. The Board's Regulation D was amended so as to reduce the reserves required to be maintained by member banks with Federal Reserve Banks. The percentage applicable on time deposits for all member banks was reduced from 6 to 5 per cent. The percentages on net demand deposits were 50 ANNUAL &Ef>OftT OF BOARD 61? GOVERNORS reduced from 22 to 20 per cent for central reserve city banks, from 19 to 18 per cent for reserve city banks, and from 13 to 12 per cent for all other member banks. The reduction as to time deposits became effective on June 24, 1954 for reserve and central reserve city banks, and on June 16, 1954 for other member banks. The reduction as to demand deposits became effective one percentage point at a time on June 24,1954 and July 29, 1954 for central reserve city banks, and became effective on July 29, 1954 for reserve city banks, and on August 1, 1954 for other member banks. Clearing and collection. The Board's Regulation G relating to the collection of noncash items, and Regulation J relating to check clearing and collection, were amended, effective July 15, 1954, so as to permit the collection through Federal Reserve Banks of checks drawn on nonmember par-remitting banks located in such of the Territories, dependencies, insular possessions, and parts of the United States outside of the continental United States as the Board may designate, and the collection of noncash items payable in such areas. At the same time the Board designated Alaska and Hawaii as being in the Twelfth Federal Reserve District for the purposes of these amendments. Foreign banking. The Board's Regulation K, entitled "Banking Corporations Authorized to do Foreign Banking Business under the terms of Section 25 (a) of the Federal Reserve Act," commonly known as Edge Act Corporations, was amended effective September 29, 1954 so as to change and liberalize the conditions relating to the raising of funds by such corporations not engaged in the business of receiving deposits and to increase the limit on the amount of credit that such nondeposit corporations may extend to one borrower. LEGISLATION Direct purchase and sale of Government obligations. An Act of Congress approved June 29, 1954 extended until June 30, 1956 the existing limited authority of the Federal Reserve Banks under Section 14(b) of the Federal Reserve Act to buy and sell Government obligations directly from and to the United States. This authority would otherwise have expired on June 30, 1954. Investment in bank premises. An Act of Congress approved June 30, 1954 amended Section 23A of the Federal Reserve Act, FEDERAL RESERVE SYSTEM 51 which limits the amount which a member bank may loan to or invest in the stock or obligations of an affiliate, so as to exempt from such limitations any affiliate engaged "solely" in holding bank premises. Previously the statute had exempted only affiliates engaged in holding bank premises on June 16, 1934 (whether or not solely so engaged). The same Act also amended Section 24A of the Federal Reserve Act which provides that a national bank or a State member bank must obtain the consent of the Comptroller of the Currency or of the Board of Governors, respectively, in any case in which its investment in bank premises, either directly or through an affiliate, exceeds the amount of the bank's capital stock. The amendment made it clear that the amount of any indebtedness incurred by an affiliate of the bank engaged in holding the bank's premises should be included in determining the total investment in bank premises. Paying out Federal Reserve notes. An Act approved July 19, 1954 repealed the provision in Section 16 of the Federal Reserve Act which prohibited one Federal Reserve Bank from paying out notes issued by any other Federal Reserve Bank. Real estate loans by national banks. An Act approved July 22, 1954 amended Section 24 of the Federal Reserve Act so as to make the limitations and restrictions on real estate loans by national banks not applicable to loans in which the Small Business Administration cooperates or purchases a participation. An Act approved August 17, 1954 amended certain provisions of the Water Facilities Act of August 28, 1937 (16 U.S.C. 590r, et seq.) so as to authorize the Secretary of Agriculture to insure loans made to further the objectives of the Act, and amended Section 24 of the Federal Reserve Act so as to exempt such insured loans from the limitations and restrictions on real estate loans by national banks contained in the third sentence of the first paragraph of Section 24 (relating to the permissible amount of the loan in relation to the appraised value of the land). Housing Act of 1954. The "Housing Act of 1954," approved August 2, 1954, amended Title III of the National Housing Act relating to the Federal National Mortgage Association so as to provide in Section 303 (f) of the latter, that "Notwithstanding any other provision of law, any institution, including a national bank or State member bank of the Federal Reserve System . . . shall be 52 ANNUAL REPORT OF BOARD OF GOVERNORS authorized . . . to receive stock of the Association" evidencing capital contributions made to the Association "and to hold or dispose of such stock, subject to the provisions of this title." The effect of this provision is to modify the provision of Section 5136 of the Revised Statutes of the United States prohibiting the purchase of corporate stocks by national banks and State member banks. The Act also amended the National Housing Act so that Section 309(d) of the latter authorizes the Federal National Mortgage Association, with the consent of any Government corporation or Federal Reserve Bank, or of any board, commission, independent establishment, or executive department of the Government, to avail itself of the use of information, services, facilities, officers and employees thereof, in carrying out the provisions of the Act. By Section 309 (g) the Federal Reserve Banks are authorized and directed to act as depositaries, custodians, and fiscal agents for the Association. In addition, Section 203 of the Act specifically amended the next to the last sentence of paragraph "Seventh" of Section 5136 of the Revised Statutes so as to permit national banks to deal in and underwrite obligations of the Federal National Mortgage Association. Subject,, of course, to any applicable provision of State law, the provision also extends to State member banks of the Federal Reserve System because Section 9 of the Federal Reserve Act makes this provision of Section 5136 applicable to State member banks. Another provision of the Housing Act of 1954 (Section 603) provided for the establishment of a National Voluntary Mortgage Credit: Extension Committee and directed the Housing and Home Finance Administrator to request the Board of Governors of the Federal Reserve System to designate a representative of the Board to serve on the Committee in an advisory capacity. Member banks dealing in obligations of banks for cooperatives. An Act approved August 23,1954 amended the last sentence of paragraph "Seventh" of Section 5136 of the Revised Statutes so as to permit national banks to deal in and underwrite obligations issued by the 13 banks for cooperatives organized under the Farm Credit Act of 1933, or any of them, in lieu of the existing authority which related only to obligations issued by the Central Bank for Cooperatives. Such transactions remain subject to the limitation of 10 per cent of the national bank's capital and surplus. Subject to any applicable provisions of State law, the permission also extends to State FEDERAL RESERVE SYSTEM 53 member banks of the Federal Reserve System because Section 9 of the Federal Reserve Act makes these provisions of Section 5136 applicable to State member banks. RESERVE BANK OPERATIONS Volume of operations. Table 5 on page 69 gives the volume of operations in the principal departments of the Federal Reserve Banks for the years 1950-54. In general, activities were somewhat greater in 1954 than in 1953. While discounts and advances declined, a new peak was reached in the number of checks handled. One new activity of significant proportions was begun in 1954. At the request of the Treasury and the Post Office Departments, the Reserve Banks undertook the receipt and proving of deposits from postmasters throughout the country, along with certain relevant accounting operations. This was for the purpose of simplifying operating procedures of the Post Office Department and of speeding up the flow of funds to the Treasury. The work began at the various Reserve Banks at different times during the year. By the end of 1954, a total of 3,460,000 deposits had been handled. Earnings and expenses. Current earnings, current expenses, and the distribution of net earnings of each Federal Reserve Bank during 1954 are shown in detail in Table 6 on pages 70-71, and a condensed historical statement for all Reserve Banks is shown in Table 7 on pages 72-73. The table on page 54 summarizes the earnings and expenses and the distribution of net earnings for 1954 and 1953. Current earnings of 438 million dollars in 1954 were 15 per cent less than in 1953 largely because of a lower average rate of interest on holdings of United States Government securities. Earnings from discounts and advances were also less in 1954 than in 1953, reflecting decreases in the discount rate during the early part of the year and a decline in the volume of discounts and advances. Current expenses were about 3 per cent below 1953, mainly because of decreases in the production of Federal Reserve currency and shipping charges thereon. Current net earnings in 1954 amounted to about 328 million dollars, a decrease of 18 per cent compared to 1953. The effect of profit and loss additions and deductions was minor, leaving net earnings before payments to the United States Treasury at about 328 million dollars. Statutory dividends to member banks amounted to 16 million 54 ANNUAL REPORT OF BOARD OF GOVERNORS EARNINGS, EXPENSES, AND DISTRIBUTION OF N E T EARNINGS FEDERAL RESERVE BANKS, 1954 AND 1953 OF [In thousands of dollars] Item Current earnings Current expenses 1954 1953 438,486 109,733 513,037 113,515 328,753 399,522 '527 661 '2,096 3,155 134 1,059 Net earnings before payments to U. S. Treasury 328,619 398,463 Paid U. S. Treasury (interest on F. R. notes) Dividends Transferred to surplus (Sec. 7) 276,289 16,442 35,888 342,568 15,558 40,337 Current net earnings Additions to current net earnings Deductions from current net earnings Net: deductions 1 Includes net profits on sales of U. S. Government securities: 1954—$482,000; 1953-$1,952,000. dollars, a rise of nearly 1 million dollars over 1953, which reflected an increase in the paid-in capital of the Federal Reserve Banks resulting from increased capital and surplus of member banks. Payments to the United States Treasury as interest on Federal Reserve notes amounted to 276 million dollars in 1954, or to 90 per cent of net earnings after dividends and allowances for building up surplus to 100 per cent of subscribed capital of those Banks whose Section 7 surplus was below that amount. These allowances are consistent with the provisions of the franchise tax when it was in effect; for 1954 allowances for bringing surplus up to subscribed capital were $5,187,000 for three Banks, and for 1953 they were $2,273,000 for two Banks. Total payments to the Treasury as interest on Federal Reserve notes since the policy of making such payments was begun in 1947 have amounted to 1,797 million dollars. The 36 million dollars of net earnings remaining after dividends and payments to the United States Treasury were added to surplus account. Holdings of loans and securities. Average holdings of United States Government securities amounted to 24,649 million dollars during 1954, down slightly from the all-time high in 1953. The average rate of interest on these holdings declined substantially 55 FEDERAL RESERVE SYSTEM from 2.02 to 1.76 per cent. Average holdings of discounts and advances were considerably less in 1954 than in 1953. The average rate of interest, which declined from 1.96 to 1.61 per cent, reflected two reductions in the discount rate, first from 2 per cent to 1% per cent and then to ll/2 per cent. The table below shows a comparison of average daily holdings and average interest rates on loans and securities held by the Federal Reserve Banks during each of the past three years. RESERVE BANK EARNINGS ON LOANS AND SECURITIES, [Dollar amounts in thousands] 1952-54 Total« Discounts and advances U.S. Government securities Industrial loans $23,933,643 25,438,684 24,866,567 $802,334 777,595 216,697 $23,126,674 24,657,904 24,648,691 $4,635 3,185 Earnings: 1952 1953 1954 455,898 512,841 438,359 14,083 15,265 3,479 441,629 497,455 434,837 186 121 43 Average rate of interest (per cent): 1952 1953 1954 1.90 2.02 1.76 1.75 1.91 2.02 1.76 Item and year Average daily holdings:x 1952 1953 1954 1 1.96 1.61 1,179 4.01 3.80 3.65 Based on holdings at opening of business. Foreign and international accounts. The total of earmarked gold, dollar deposits, United States Government securities, and miscellaneous holdings for foreign account at the Federal Reserve Banks continued to rise during 1954 but at a slower rate than in the two preceding years. An all-time high of 9.2 billion dollars was reached in October 1954. Following a steady advance in every year except 1951 from a total of 3.4 billion at the close of 1947, a rise of 566 million during 1954 brought the year-end total to 9.1 billion. Of this amount, 5.6 billion dollars was in the form of earmarked gold, 2.9 billion in United States Government securities, principally Treasury bills held in custody, nearly 500 million in dollar deposits, and approximately 100 million in miscellaneous securities. 56 ANNUAL REPORT OF BOARD OF GOVERNORS The gold and dollar assets of the International Monetary Fund and the International Bank for Reconstruction and Development held at: the Federal Reserve Bank of New York increased 310 million dollars during the year to a new year-end high of 3.7 billion. An account was opened during the year for a recently established central bank in the Far East. When this account ultimately absorbed the assets of an account in the name of the same institution which the Federal Reserve Bank of New York had maintained as fiscal agent of the United States, the latter account was closed. Loans secured by gold collateral increased in both number and amount.. The maximum amount outstanding on any one day aggregated 185 million dollars as compared to less than 32 million in 1953. At the end of the year only one loan was outstanding, in the amount of 133 million; it is scheduled for repayment in monthly instalments by October 1955. The policy of the Federal Reserve System continued to provide for the granting of gold loans to assist foreign monetary authorities in meeting their dollar requirements for temporary periods. The Federal Reserve Bank of New York, as depositary and fiscal agent, continued to perform various services for the International Bank for Reconstruction and Development and the International Monetary Fund. As fiscal agent of the United States it also continued to operate the United States Stabilization Fund, pursuant to instructions of the Treasury Department, and to administer on behalf of the Treasury Department the regulations affecting blocked assets and transactions in this country of Communist China and North Korea and their nationals. Bank premises. During the year the Board authorized the Federal Reserve Bank of Kansas City to construct an addition to the Omaha Branch building, and the Federal Reserve Bank of Dallas to construct a new building for the San Antonio Branch. The Board also authorized the Federal Reserve Bank of Cleveland to construct a security court in leased quarters adjacent to the Cincinnati Branch. During the year, with the approval of the Board, the Federal Reserve Banks of Chicago and Dallas acquired properties adjoining their present locations to provide for future expansion and the Federal Reserve Bank of St. Louis acquired a site for a new building for the Louisville Branch. The Federal Reserve Bank of Dallas FEDERAL RESERVE SYSTEM 57 was also authorized to acquire sites for new buildings for the El Paso and Houston Branches. Intradistrict territorial changes. During the year intradistrict territorial changes were made in three Federal Reserve districts. Each of these changes had the effect of enlarging the area served by Federal Reserve branches. In the Second District, the four counties of Ontario, Steuben, Wayne, and Yates in the State of New York were transferred from the New York head office to the Buffalo Branch territory, effective April 1,1954. In the Seventh District, the entire lower peninsula of Michigan was assigned to the Detroit Branch, effective January 1, 1954; previously 49 of these 68 counties had been in the headoffice territory. In the Twelfth District, four counties were transferred to the Los Angeles Branch effective December 1, 1954; Kern, San Luis Obispo, and Mono counties in California were transferred from the San Francisco head-office territory and Clark County, Nevada, from the Salt Lake City Branch territory. Several towns in the Eighth District were reassigned during the year so as to be included in the same head-office or branch territory as the other towns in their respective counties. BOARD OF GOVERNORS—INCOME AND EXPENSES The accounts of the Board for the year 1954 were audited by the public accounting firm of Arthur Andersen & Co., whose certificate follows: To the Board of Governors of the Federal Reserve System: We have examined the balance sheet of the Board of Governors of the Federal Reserve System as of December 31, 1954, and the related statement of income and expenses for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying balance sheet and statement of income and expenses present fairly the financial position of the Board of Governors of the Federal Reserve System as of December 31, 1954, and the results of its operations for the year then ended, and were prepared in conformity with 58 ANNUAL REPORT OF BOARD OF GOVERNORS generally accepted accounting principles applied on a basis consistent with that of the preceding year. Arthur Andersen & Co. Washington, D. C. February 15, 1955. BALANCE SHEET—DECEMBER 31, 1954 ASSETS Cash in Federal Reserve Bank of Rich mond Petty cash Miscellaneous receivables and travel advances Stockroom and cafeteria inventories, at cost Property and equipment: Land Land improvements Building Furniture and equipment Automobiles $ 738,606.91 800.00 9,978 85 14,510.71 At cost Reserve for depreciation $ 737 ,180 .30 $ 10 ,939 .15 3,794 ,693 .58 453 ,073 .17 252,784.60 15 ,388 .36 12,655.97 $5,011 ,274 .56 $265,440.57 4 ,745,833.99 $5 ,509,730.46 LIABILITIES AND FUND BALANCES Accounts payable $ 132,261.07 Employee Federal income taxes withheld 100,126.34 Accrued pay roll 120,735.19 Fund Balances: Balance, December 31, 1953. $5,172,933.27 Excess of expenses over income, per accompanying statement ( 18,813.97) Fixed assets purchased, etc. (net) 2,488.56 Balance, December 31, 1954 Represented by— Property and Equipment Fund Operating Fund $5,156,607.86 4,745,833.99 410,773.87 $5,509,730.46 NOTE—The Board provides for depreciation of furniture and equipment and automobiles, but depreciation of the building has not been recognized in the accounts inasmuch as the Board deems a provision for such depreciation as unnecessary since funds for replacement of the building will be obtained, when required, from outside sources. RESERVE SYSTEM 59 STATEMENT OF INCOME AND EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1954 INCOME: Assessments against Federal Reserve Banks Bulletin sales Other publications sales Miscellaneous receipts $4,174,600.00 13,694. 68 15,623.32 2,468.59 $4,206,386.59 EXPENSES: Salaries Retirement and insurance contributions Traveling expenses Postage and expressage Telephone and telegraph, including leased wire operations (net).. Printing and binding Stationery and supplies Equipment rental Provision for depreciation Books and subscriptions Heat, light, and power Repairs, maintenance, and alterations Insurance Consumer Finances Surveys Talle Subcommittee project Retail Credit Survey Legal and consultant fees and expenses Security clearance investigations for Board employees Meeting of Technicians of Central Banks Audit expenses applicable to Board's accounts Loss from operation of cafeteria (net) $3,007,433.18 256,451.65 228,898.63 55,778.03 55,055.77 208,116.46 29,161.97 22,561.79 25,218.38 14,370.33 37,573.83 14,720.57 5,091.77 147,123.06 5,445.47 13,500.00 6,385.93 13,920.00 10,773.52 2,562.97 38,643.82 Other 26,413.43 $4,225,200.56 EXCESS OF EXPENSES OVER INCOME $ 18,813.97 NOTE—Salaries, and retirement and insurance contributions exclude approximately $65,800 and $6,900, respectively, which were charged direct to cafeteria operations. In the foregoing statement of income and expenses, "Other" expenses of $26,413.43 includes an expenditure of $425.00, contributed by the Board of Governors for cost of a luncheon at a meeting of Treasury Department savings bonds program volunteer workers. The Board received the following reimbursements in 1954 for expenditures which it makes on a reimbursable basis: Printing Federal Reserve notes Currency Redemption Division (Office of the Treasurer of the United States) Federal Reserve Issue and Redemption Division (Office of the Comptroller of the Currency) Leased wire service (telegraph) Leased telephone lines Miscellaneous $6,132,815.92 419,574.00 164,538.48 289,647.17 9,684.00 11,943.07 60 ANNUAL REPORT OF BOARD OF GOVERNORS FEDERAL RESERVE MEETINGS The Federal Open Market Committee met on March 3, June 23, September 22, and December 7, 1954, and the executive committee of the full Committee met frequently during the year. Under the provisions of Section 12A of the Federal Reserve Act, the Federal Open Market Committee, which has responsibility for determining the policies under which the open market operations of the Federal Reserve Banks will be carried out, is required to meet in Washington at least: four times each year. A record of the action taken by the Committee on questions of policy will be found on pages 92-98 of this Report. A meeting of the Conference of Chairmen of the Federal Reserve Banks was held on December 2-3, 1954, and was attended by members of the Board of Governors. The Conference of Presidents of the Federal Reserve Banks held meetings on March 1-2, June 21-22, September 20-21, and December 6, 1954, and the Board of Governors met with the Presidents on March 3, June 23, and September 22, 1954. Meetings of the Federal Advisory Council were held on February 14-16, May 1648, September 19-21, and November 14-16, 1954. The Board of Governors met with the Council on February 16, May 18, September 21, and November 16, 1954. The Council is required by law to meet in Washington at least four times each year and is authorized by the Federal Reserve Act to consult with and advise the Board on all matters within the jurisdiction of the Board. MEETING OF CENTRAL BANK TECHNICIANS The Board of Governors and the Federal Reserve Bank of New York acted as hosts for the Fourth Meeting of Central Bank Technicians of the American Continent, which was held in Washington and New York during the first two weeks of May 1954. More than 100 delegates representing 17 Latin American countries, Canada, the Federal Reserve System, the International Monetary Fund,, the International Bank for Reconstruction and Development, and other international organizations attended the meeting. The purpose, like that of previous meetings held in Mexico, Chile, and Cuba, was to engage in objective study and discussion of current monetary and economic problems, as well as to consider central banking problems of an operating and technical nature. TABLES 62 ANNUAL REMRT OF BOARD OF NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) DECEMBER 31, 1954 [Amounts in boldface type are those shown in the Board's weekly statement. In thousands of dollars] ASSETS Gold certificates: Interdistrict settlement fund Gold certificates on hand Gold certificates with Federal Reserve Agents 7,941,547 1,015,555 11,208,000 Redemption fund for Federal Reserve notes 867,405 Total gold certificate reserves Federal Reserve notes of other Federal Reserve Banks Other cash: United States notes Silver certificates Standard silver dollars National bank notes and Federal Reserve Bank notes Subsidiary silver, nickels, and cents Total other cash Discounts and advances secured by U. S. Govt. securities: Discounted for member banks Discounted for others Other discounts and advances: Discounted for member banks Foreign loans on gold Total discounts and advances Acceptances purchased Industrial loans U. S. Government securities: Bought outright— Bills. ; Certificates Notes Bonds 21,032,507 239,001 30,816 271,836 4,715 1,981 65,312 374,660 9,970 133,334 2,167,000 13,882,341 6,037,271 2,801,750 24,888,362 44,000 Total U. S. Government securities Total loans and securities Due from foreign banks Uncollected cash items: Transit items Exchanges for clearing house Other cash items Total uncollected cash items Bank premises: Land Buildings (including vaults) Fixed machinery and equipment Total buildings Less depreciation allowances Total bank premises Other assets: Industrial loans past due .^ Miscellaneous assets acquired account industrial loans.. Miscellaneous assets acquired account closed banks Total Less valuation allowances Net .# Reimbursable expenses and other items receivable. Interest accrued Premium on securities Deferred charges Real estate acquired for banking house purposes... Suspense account All other 133,334 708 Total bought outright Total assets 9,970 143,304 Held under repurchase agreement Total other assets 20,165,102 24,932,362 25,076,374 22 3,691,348 202,323 64,884 3,958,555 64,370 27,606 91,976 52,968 15,740 39,008 54,748 10 84 94 35 59 6 ,254 115 ,833 6 ,181 1 ,545 5 ,316 496 584 136,268 50,872,135 FEDERAL RESERVE SYSTEM 63 NO. 1—STATEMENT OF CONDITION OF THE FEDERAL RESERVE BANKS (IN DETAIL) —Continued LIABILITIES Federal Reserve notes: Outstanding (issued to Federal Reserve Banks) 27,346,789 Less: Held by issuing Federal Reserve Banks 1,017,538 Forwarded for redemption 76,118 1,093,656 Federal Reserve notes, net (includes notes held by U. S. Treasury and by Federal Reserve Banks other than issuing Bank) Deposits: Member bank—reserve accounts 18,876,128 U. S. Treasurer—general account 563,137 Foreign 489,960 Other deposits: Nonmember bank—clearing accounts 92 ,555 Officers' and certified checks 8,893 Federal Reserve exchange drafts 374 International organizations1 40,712 All other 298,959 Total other deposits 26,253,133 441,493 Total deposits Deferred availability cash items Other liabilities: Accrued dividends unpaid Unearned discount Discount on securities Sundry items payable Suspense account All other 20,370,718 3,150,357 6 8,704 5,121 32 82 Total other liabilities 13,945 Total liabilities 49,788,153 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 interest on Federal Reserve notes 287,754 660,901 27,543 9,784 98,000 (22) () (22) (2) () (2) Unallocated net earnings Total other capital accounts Total liabilities and capital accounts Contingent liability on acceptances purchased for foreign correspondents (2) 107,784 50,872,135 19,052 Industrial loan commitments 1,149 1 Includes International Bank for Reconstruction and Development and International Monetary Fund. 2 Amount in this account closed out at end of year. NO. 2—STATEMENT O F CONDITION OF EACH FEDERAL RESERVE BANK AT END O F 1954 AND 1953 [In thousands of dollars] Total Item 1954 Boston 1953 1954 Philadelphia New York 1953 1954 1953 1954 1953 Cleveland 1954 Richmond 1953 1954 1953 ASSETS 20,165,102 20,453,102 1,030,159 1,035,380 5,322,811 5,197,850 1,220,496 1,300,725 1,717,478 1,770,513 1,156,033 1,064,892 Gold certificates Redemption fund for Federal Reserve 53,668 54,927 184,192 58,928 61,086 76,999 867,405 183,706 notes 82,247 74,913 900,644 76,974 pa Total gold certificate reserves.. . 21,032, 507 21,353,746 1,083,827 1,090,307 5,507,003 5,381, 556 1,279,424 1,361,811 1,794,477 1,852,760 1,230,946 1,141,866 239,001 14,846 3,972 17,291 214,128 47,323 26,487 17,104 16,882 13,707 22,852 30,147 Federal Reserve notes of other Banks. . 374,660 24,277 27,559 80,491 75,299 16,199 26,837 371,761 37,499 24,613 24,156 22,580 Other cash Discounts and advances: Secured by U. S. Govt. securities. . Other Industrial loans 9,970 133,334 708 12,855 15,000 1,879 550 ,133 600 915 450 38,667 2,625 4,425 3,900 9,867 612 3,430 1,125 1,380 2,370 12,267 1,275 1,380 750 6,800 1,200 750 60 U. S. Government securities: 24,888,362 25,317,674 1,373,290 1,394,092 6,357,284 6,517,478 1,514,656 1,525,491 2,133,107 2,149,192 1,465,875 1,501,338 Bought outright 44,000 44,000 597,900 597,900 Held under repurchase agreement. . Total loans and securities Due from foreign banks Uncollected cash items Bank premises Other assets Total assets 1 25,076,374 25,945,308 1,381,973 1,395,607 6,440,401 22 22 3,958,555 4,225,210 54,748 52,465 136,268 151,917 1 295,141 5,919 7,165 771,896 7,149 33,268 7,122,428 1,529,035 1,531,426 2,147,744 2,151,847 1,473,425 1,503,348 16 790,662 7,390 38,519 2 235,683 5,164 7,915 2 253,896 4,734 8,845 2 371,459 5,260 11,328 2 416,386 5,289 12,544 1 333,590 4,495 7,854 335,529 4,719 8,853 50,872,135 52,314,557 2,813,149 2,856,093 12,887,537 13,442,347 3,090,713 3,204,655 4,384,651 4,477,148 3,097,319 3,047,043 After deducting $16,000 participations of other Federal Reserve Banks. 1 324,264 6,232 8,151 i I LIABILITIES Federal Reserve notes 26,253,133 26,558,372 1,608,630 1,632,903 5,950,858 5,924,481 1,845,959 Deposits: Member bank—reserve accounts... 18,876,128 20 160,435 795,449 848,626 5,482,319 6,049,923 884,622 U. S. Treasurer—general account. . 563,137 345,866 47,253 39,713 8,742 70,675 95,808 Foreign 489,960 423,298 29,402 35,668 24,961 M47.721 1134,793 Other 441,493 492,815 7,609 14,135 361,474 322,038 8,744 Total deposits 20,370,718 21 ,422,414 Deferred availability cash items 3,150,357 3,290,407 13,945 Other liabilities and accrued dividends.. 18,170 Total liabilities 879,713 258,100 619 891,073 6,047,886 6,616,865 575,375 267,333 605,851 5,456 821 6,787 896,948 2,417,961 2,463,795 1,864,245 1,849,093 959,879 1,467,287 1,533,769 42,858 38,382 30,135 44,344 37,646 30,690 13,025 14,503 8,688 829,940 44,619 24,582 5,627 827,255 11,127 20,460 974,138 1,029,392 1,567,514 1,624,300 190,709 201,073 299,652 293,806 684 1,121 1,355 875 904,768 270,806 865,604 277,385 762 556 6,762 49,788,153 51,289,363 2,747,062 2,792,130 12,579,575 13,153,984 3,011,490 3,128,288 4,286,248 4,383,256 3,040,375 2,992,844 CAPITAL ACCOUNTS Capital paid in Surplus (Sec. 7) Surplus (Sec. 13b) Other capital accounts Total liabilities accounts 287,754 660,901 27,543 107,784 and capital Ratio of gold certificate reserves to deposit and F . R. note liabilities combined Contingent liability on acceptances purchased for foreign correspondents Industrial loan commitments 265,266 625,013 27,543 107,372 14,998 40,309 3,011 7,769 14,443 38,779 3,011 7,730 89,949 188,070 7,319 22,624 81,852 176,633 7,319 22,559 18,982 47,773 4,489 7,979 18,017 45,909 4,489 7,952 27,318 60,222 1,006 9,857 25,410 57,648 1,006 9,828 12,618 33,480 3,349 7,497 11,655 31,750 3,349 7,445 50,872,135 52,314,557 2,813,149 2,856,093 12,887,537 13,442,347 3,090,713 3,204,655 4,384,651 4,477,148 3,097,319 3,047,043 45.1% 44.5% 43.6% 43.2% 45.9% 42.9% 19,052 1,149 23,940 3,569 1,171 1,460 25,420 2 7,068 45.4% 46.5% 45.0% 45.3% 44.5% 42.1% 1,421 128 1,795 1,724 1,766 598 2,202 748 979 39 1,197 51 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 27,346,789 27 ,771,106 1,670,589 1,706,340 6,183,612 6,164,619 1,916,984 1,997,552 2!,559,779 2 ,577,829 1,939,335 1,955,595 Held by Federal Reserve Bank and 232,754 forwarded for redemption 73,437 1,093,656 1,212,734 71,025 100,604 141,818 114,034 75,090 106,502 61,959 240,138 Federal Reserve notes, net 3 26,253,133 26,558,372 1,608,630 1,632,903 5,950,858 5,924,481 1,845,959 1,896,948 2,417,961 2,463,795 1,864,245 1,849,093 Collateral held by Federal Reserve Agent for notes issued to Bank: 11,208,000 11,093,000 Gold certificates Eligible paper 7,150 10,130 17,140,000 17,420,000 U. S. Government securities Total collateral 640,000 640,000 2,670,000 2,670,000 800,000 550 3,900 600 2,525 ,200,000 1 ,200,000 3', 600', 000 3,600,000 1,200,000 675,000 625,000 800,000 1,050,000 1,050,000 1,200 750 3,430 ,200,000 1^550',000 i,'55O,b66\ 1,300,000 1,350,000 28,355,150 28,523,130 1,840,550 1,840,600 6,270,000 6,272,525 2,003,900 2,003,430 2,600,000 2,600,000, 1,975,750 1,976,200 lAfter deducting $342,220,000 participations of other Federal Reserve Banks on Dec. 31, 1954, and $288,486,000 on Dec. 31, 1953. After deducting $13,632,000 participations of other Federal Reserve Banks on Dec. 31, 1954, and $16,872,000 on Dec. 31, 1953. Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank. 2 3 NO. 2—STATEMENT OF CONDITION OF EACH FEDERAL RESERVE BANK AT END OF 1954 AND 1953—Continued [In thousands of dollars] Chicago Atlanta Item 1954 1953 1954 Minneapolis St. Louis 1953 1954 1953 1954 1953 Kansas City 1954 1953 Dallas 1954 San Francisco 1953 1954 1953 a ASSETS Gold certificates Redemption fund for Federal Reserve notes 904,578 Total gold certificate reserves.. Federal Reserve notes of other Banks. Other cash 958,509 42,243 33,003 Discounts and advances: Secured by U. S. Govt. securities. Other Industrial loans 53,931 5,733 912,263 3,581,139 3,743,997 782,928 857,457 421,328 484,485 838,886 854,501 807,406 151,495 47,149 49,407 24,644 25,562 39,771 41,453 28,793 971,076 3,725,147 3,895,492 20,411 27,164 29,747 62,994 62,522 32,527 830,077 12,393 24,837 906,864 15,376 24,452 445,972 8,567 8,848 510,047 7,847 7,658 878,657 10,673 14,929 895,954 8,901 15,080 836,199 9,212 14,234 847,841 2,462,269 2,498,1,172 12,737 16,308 20,939 15,322 33,192 37,312 570 450 3,333 96 1,350 375 99 1,500 5,067 525 570 6,267 500 1,515 58,813 350 645 340 144,008 18,533 1,000 2,055 5,067 U. S. Government securities: 1,267,589 1,294,974 4,350,934 4,375,7041,041,454 1,065,140 611,183 Bought outright Held under repurchase agreement Total loans and securities. . . Due from foreign banks. Uncollected cash items. . Bank premises Other assets Total assets. 2 1,273,322 1,296,309 4,369,467 4,378,759 1,046,521 1,065,710 1 311,508 3,879 7,609 1 324,678 3,636 8,676 3 638,551 6,281 25,246 3 719,839 6.448 25,931 1 154,706 2,832 5,962 1 178,013 2,898 6,261 817,442 2,381,860 2,413,597 30,399 675 80,409 13,600 84,575 w S 3 o W O 624,866 1,073,783 1,103,420 977,963 1,005,694 2,721,244 2,760,285 615,062 626,690 1,080,350 1,104,515 984,230 1,006,369 2,734,844 2,762,300 1 1 101,402 1,007 3,238 1 112,856 1,024 3,681 1 208,977 1,133 5,877 I 1 1 205,672 217,604 2,533 2,245 6,082 7,319 1 2 196,615 329,970 587 9,096 14,724 6,568 2 354,868 7,263 16,569 2,630,075 2,666,650 8,848,100 9,116,158 2,077,329 2,199,575 1,184,097 1,269,804 2,198,897 2,251,619 2,059,863 2,086,040 5,600,405 5,697,425 M LIABILITIES Federal Reserve notes Deposits: Member bank—reserve accounts. U. S. Treasurer—general account Foreign Other Total deposits Deferred availability cash items Other liabilities and accrued dividends 1,387,728 1,417,107 5,064,809 5,111,406 1,177,567 1,214,921 644,293 1,028,614 1,019,799 890,376 2,979,096 3,250,620 19,314 97,481 30,189 17,596 66,998 56,060 5,679 15,350 17,776 670,349 28,356 18,316 8,885 764,061 18,078 15,550 11,351 443,527 27,339 12,050 2,316 468,968 17,791 10,230 3,849 912,171 31,581 18,316 4,837 929,493 263,481 932,965 3,158,925 3,354,645 269,537 471,408 505,628 725,906 130,210 809,040 133,779 485,232 86,438 500,838 96,521 966,905 1,010,115 1,088,515 1,114,081 2,641,723 2,673,496 160,467 180,744 180,275 179,523 263,436 279,227 462 612 347 703 528 714 2,319 3,017 460 739,472 743,749 2,583,779 2,639,877 583,511 866,804 38,350 20,726 3,613 965,518 1,039,814 1,050,684 2,504,750 2,550,756 41,479 46,087 39,023 20,931 23,692 18,414 49,183 41,348 15,550 22,654 3,504 41,703 42,369 8,116 2,355 605 398 523 995 1,396 Total liabilities 2,581,230 2,620,323 8,697,461 8,974,696 2,034,145 2,158,352 1,155,528 1,242,355 2,156,446 2,211,263 2,008,660 2,037,876 5,489,933 5,593,996 CAPITAL ACCOUNTS 31,668 29,210 11,158 38,354 35,001 9,935 9,150 6,360 5,952 10,912 14,457 13,279 12,203 10,139 Capital paid in. p p 66,724 62,182 29,480 28,034 96,566 90,792 26,619 16,219 24,755 29,985 28,146 25,465 16,918 23,456 Surplus (Sec. 7) 2,140 2,140 1,307 762 762 1,429 1,429 521 1,137 1,307 521 1,073 1,137 1,073 Surplus (Sec. 13b) 9,940 9,897 5,432 6,400 14,290 14,240 6,109 5,647 5,454 6,373 6,087 4,205 5,624 4,218 Other capital accounts. Total liabilities and capital 2,630,075 2,666,650 8,848,100 9,116,158 2,077,329 2,199,575 ,184,097 1,269,804 2,198,897 2,251,619 2,059,863 2,086,040 5,600,405 5,697,425 accounts Ratio^of gold certificate reserves to deposit and F. R. note liabilities 47.0% 47.1% combined , 41.4% 45.3% 41.3% 46.0% 43.6% 44.8% 41.7% 44.5% 44.0% 44.1% 45.7% 45.6% Contingent liability on acceptances 1,958 2,417 purchased for foreign correspondents 826 1,029 3,279 1,077 2,669 730 902 909 480 598 730 909 104 131 17 28 Industrial loan commitments 263 887 FEDERAL RESERVE NOTE STATEMENT Federal Reserve notes: Issued to Federal Reserve Bank by Federal Reserve Agent and outstanding 1,467,671 1,501,548 5, ;,185,253 5,274,078 1,227,557 1,277,506 622,837 663,225 1,063,357 1,057,504 789,675 787,694 2,720,140 2,807,616 Held by Federal Reserve Bank 79,943 84,441 120,444 162,672 49,990 43,945 136,361 167,739 and forwarded for redemption. 62,585 39,326 18,932 37,705 34,743 50,203 Federal Reserve notes, net 1 . . . 1,387,728 1,417,107 5,064,809 5,111,406 1,177,567 1,214,921 583,511 644,293 1,028,614 1,019,799 739,472 743,749 2,583,779 2,639,877 Collateral held by Federal Reserve Agent for notes issued to Bank: Gold certificates Eligible paper U. S. Government securities Total collateral. 1 435,000 2,400,000 2,400,000 355,000 355,000 1,000,000 ,100,000 2,900,000 3,000,000 945,000 '975,606 175,000 450 500,000 175,000 1,350 500,000 280,000 525 800,000 '5*2*5,666 283,000 1,380,000 1,380,000 500 525,000 1,620,000 1,620,000 1,500,000 ,535,000 5,300,000 5,400,000 ,300,000 1,330,000 675,450 676,350 1,081,500 1,080,525 808,000 808,000 3,000,000 3,000,500 500,000 280,000 1,500 800,000 Includes Federal Reserve notes held by the U. S. Treasury and by Federal Reserve Banks other than the issuing Bank. 283,000 68 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 3—HOLDINGS OF UNITED STATES GOVERNMENT SECURITIES BY FEDERAL RESERVE BANKS, END OF DECEMBER 1952, 1953, AND 1954 [In thousands of dollars] Type of issue Rate of interest (Per cent) Treasury bonds: 1951-53 1952-54, J u n e . . . . 1952-54, Dec 1952-55 1951-55 1 .. 1955-60 1956-58... 1958, June 1958, Dec 1957-59 1956-59 1956-592 1960, Nov 1961, Sept 1961, Nov 1959-62, June3.. . 1959-62,2 Dec.3... 1958-63 1963, Aug 1960-65 2 1962-673 1963-683 1964-69, June 4 .. . 1964-69. D e c . 4 . . . 1965-705 1966-715 1967-72, June 6 .. . 1967-72, Sept..6 . . 1967-72, Dec. ... 1978-83 2 2 2 2M 2 2% 2% 2M 1953 1952 1954 1953 476,900 283,100 96,700 8,200 855,825 461,900 297,600 96,700 8,200 12,493 12,493 12,493 339,096 21,690 339,096 21,690 339,096 21,690 319,849 693,765 319,849 693,765 319,849 693,765 56,610 122,585 203,890 266,999 521 490 132,707 49,266 2.552 58 758 56,610 122,585 203,890 266,999 521,490 132,707 49,266 2,552 58,758 56 610 122,585 203,890 266,999 521 490 132,707 49,266 2 552 58 758 2 ,801,750 3 ,666,650 4,521,975 * 95^300 3 ,235,123 1 ,000,000 500,000 257,450 6 ,994.050 89,800 3 ,233,623 1 ,000,000 500,000 — 7 491 750 -257,450 +12,800 -6,994,050 +6,994,050 +5,500 89,800 + 1 ,500 3 ,233,623 1,000,000 500,000 500,000 500,000 500,000 713,848 713,848 713,848 6 ,044,271 13 ,288,771 13,773,671 -476,900 -283,100 —96,700 -8,200 -855,825 + 15,000 -14,500 2% 2Y2 2M 2U 2% 2% 2 V?, 2Y2 2H 2)4 2j| 2}A, SH 2H 1*A lil 1 *'2 -864,900 -855,325 7 491 750 244,650 17A IB Total Treasury notes Certificates 1954 Change during 2% Total Treasury bonds Treasury notes: Dec. 1 1953-A Mar. 15, 1954-A.. Dec. 15, 1954-B.. Mar. 15, 1955-A.. Dec. 15, 1955-B.. Apr. 1, 1956-EA Oct. 1, 1956-EO Mar. 15, 1957-A.. Apr. 1, 1957-EA May 15, 1957-B.. Oct. 1, 1957-EO Apr. 1, 1958-EA Oct. 1, 1958-EO Feb. 15, 1959-A.. Apr. 1,1959-EA Oct. 1, 1959-EO December 31 i| +7,440,065 +2,520,076 +3,922,200 *7 ,440,065 2 ,520,076 3 ,922,200 2 3 ,704,750 4,857,816 202 800 128,900 2 ,133,491 2% Total certificates Treasury bills Total holdings. 1 Partly tax-exempt, called for 4 Became bank-eligible during 6 -7,244,500 -3,704,750 -128,900 -2,133,491 -484,900 -4,857,816 —202,800 +3,704,750 +128,900 +2,133,491 13 ,882,341 5 ,967,141 5,060,616 +7,915,200 +906,525 2 ,204,000 2 ,993,012 1,340,750 -789,012 +1,652,262 24 ,932,362 25 ,915,574 24,697,012 -983,212 +1,218,562 2 3 redemption. Partly tax-exempt. Became bank-eligible during 1952. 1953. 6Became bank-eligible during 1954. Restricted as to commercial bank ownership. To become bank-eligible Jan. 1, 1955. 69 FEDERAL RESERVE SYSTEM NO. 4.—FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1953-541 [In millions of dollars] Date 1953—Mar. 18 19 20 21 *22 23 24 25 26 June 5 6 Amount Amount Date 110 1953—June *7 104 8 189 9 189 10 189 11 333 12 186 13 63 *14 49 15 196 16 196 17 Date Amount Amount Date 364 1954—Jan. 18 992 19 992 20 992 21 908 22 608 23 296 *24 22 25 169 26 169 Mar. 15 169 16 196 1953—June 18 374 19 491 20 451 *21 358 22 506 23 506 24 506 1954—Jan. 14 999 15 1,172 16 823 *17 323 424 323 306 283 283 283 203 3 134 190 * Sunday or holiday. J On Nov. 9, 1953, the Reserve Banks sold direct to the U. S. Treasury 500 million dollars of Treasury notes. This was the first use of the authority granted by the Act of Mar. 27, 1942, to sell U. S. Government securities directly to the United States. NOTE.—Interest rate K per cent throughout. Data for prior years beginning with 1942 are given in previous Annual Reports. There were no holdings on dates not shown. NO. 5—VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS OF FEDERAL RESERVE BANKS, 1950-54 [Number in thousands; amounts in thousands of dollars] 1954 1953 1952 1951 1950 NUMBER OF PIECES HANDLED 1 Discounts and advances: 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. Govt. checks Postal money orders All others Collection items handled: U. S. Govt. coupons paid. . . All other Issues, redemptions, and exchanges of U. S. Govt. securities Transfers of funds () () () 11 8 1.4 .7 () () 4,384,270 7,001,838 4,405,255 5,889,238 4,183,063 5,716,379 4,066,619 5,889,223 3,846,397 7,190,498 481,408 354,368 2,513,966 458,607 366.807 2,415,164 446,084 371.318 2,293,061 412,865 365,812 2,122,147 1,955,232 12,753 15,443 13,703 14,360 13,599 14,172 14,510 13,428 15,323 12,793 191,112 1,808 177,596 1,718 163,568 1,595 154,335 1,525 153,886 1,343 AMOUNTS HANDLED 22,871,449 93,438,640 105,549,326 43,422,106 17,050,334 Discounts and advances Industrial loans: 7,477 22,009 31,193 27,656 Loans made 6,530 Commitments to make industrial loans 980 3,468 9,078 4,019 520 ,039,335 Currency received and counted.. 28,482,428 29,514,663 27,001,076 26,175,324 Coin received and counted 622,620 607,205 558,416 592,664 761,062 Checks handled: 141,037,495 140,739,438 119,423,270 89,648,061 ,569,739 U. S. Govt. checks 6,091,173 5,943,178 5,996,899 Postal money orders 882,971,848 885 ,726,031 840,094,629 799,891,846 856 ,952^849 All others Collection items handled: 2,209,045 2,270,606 1,923,079 2,020,560 ,173,589 U. S. Govt. coupons paid. . . 5,085,695 4,615,970 5,103,262 5,121,274 ,758,483 All other Issues, redemptions, and exchanges of U. S. Govt. 469,247,400 381,877,330 355,234,532 344,771,945 346,224,112 securities 1,038,100,606 876,838,475 767,974,539 656,771,175 509,167,912 Transfers of funds ! Two or more checks, coupons, etc., handled as a single item are counted as one "piece." Less than 50. Figures beginning with 1951 exclude checks drawn on the Federal Reserve Banks; the 1950 data include 1,785,000 of such items amounting to $178,120,377,000. 2 3 NO. 6—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS DURING 1954 Roston Item New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco CURRENT EARNINGS $3,478,513 $193,855 $749,576 $217,069 $276,513 $220,540 $276,644 $632,661 $148,443 $144,803 $250,061 $131,054 $237,294 Discounts and advances 34,985 304 2,479 5,134 42,902 Industrial loans Commitments to make in171 6,158 1,178 694 448 5,135 13,784 dustrial loans f,428 22, 145,602 75,691,706 18,200,386 10,679,996 18,789,637 17,116,359 47,450,053 U. S. Government securities. . 434,837,470 23,951,036 111,697,773 26,360,236 37, 127,258 25,627,428 14,749 3,559 4,263 7,181 12,211 6,532 12,090 12,851 4,878 113,371 19,690 9,885 All other 5,482 Total current earnings... 438,486,040 24,154,776 112,467,039 26,620,165 37,422,140 25,855,252 22,437,993 76,339,287 18,352,388 10,835,415 19,057,684 17,251,676 47,692,225 CURRENT EXPENSES Salaries: Officers Employees Directors' and other fees.... Retirement contributions. . . Traveling expenses Postage and expressage Telephone and telegraph.... Printing, stationery, and supplies Insurance. Taxes on real estate Depreciation (building) Light, heat, power, and water Repairs and alterations Rent Furniture and equipment: Purchases Rentals Assessment for expenses of Board of Governors Federal Reserve currency. . . Ail other 332,345 418,618 354,800 407,039 4,857,821 564,316 344,340 261,667 297,951 294,686 871,985 302,200 407,874 68,456,540 4,269,294 15,427,610 4,042,966 5,852,256 4,299,586 3,980,110 11,008,883 3,963,345 2,063,321 3,528,492 3,298,237 6,722,440 14,860 60,426 16,390 41,177 18,552 28,328 18,356 26,301 15,239 25,159 18,597 312,044 28,659 393,815 580,087 417,934 1,083,646 391,136 423,511 1,455,672 440,183 201,511 364,851 344,624 6,766,917 669,947 51,707 106,410 161,472 91,773 107,611 100,915 65,524 79,971 84,463 180,493 83,958 135,451 1,249,748 918,222 1,328,437 1,386,941 1,361,017 2,196,737 856,129 505,854 811,336 1,807,392 885,874 15,618,786 1,234,294 2,326,553 68,204 110,058 50,024 61,573 81,259 58,784 63,342 52,828 194,701 34,691 54,879 924,293 93,950 Total 5,162,460 1,028,361 2,771,539 2,522,722 1,116,881 647,542 499,688 372,015 70,295 450,210 403,814 94,803 33,281 1,418 923,649 200,752 616,585 309,931 194,464 32,979 3,512 290,014 48,412 119,437 66,352 74,991 111,689 37,248 400,516 95,114 249,961 392,616 104,385 216,811 64,029 360,091 88,202 130,058 263,665 91,198 36,706 2,025 398,626 64,066 138,170 162,812 57,858 29,509 105,584 925,187 124,962 390,512 268,506 162,706 42,120 85,444 356,607 70,217 101,761 68,052 85,229 73,566 23,887 128,933 33,203 100,150 48,684 34,085 14,977 52,576 306,925 78,043 131,683 118,067 90,193 15,858 13,915 230,152 47,759 66,066 37,469 45,607 12,966 51,354 469,745 107,336 276,946 382,754 81,362 27,080 58,696 1,556,999 4,365,739 71,281 387,818 135,157 662,123 149,165 323,407 281,330 372,495 164,743 305,784 207,542 268,835 187,057 682,985 137,804 267,120 37,494 158,693 53,625 262,426 50,146 233,803 81,655 440,250 4,174,600 6,489,895 H,665,852 255,300 440,377 127,525 1,207,900 1,311,293 283,170 311,000 500,162 118,519 382,400 579,512 415,066 212,900 531,176 120,868 578,800 182,500 491,556 1,077,102 108,810 281,132 159,800 340,930 113,073 105,500 125,569 104,114 158,100 251,012 127,485 194,300 194,090 84,727 426,100 647,116 170,916 U30,188,427 9,085,569 26,364,830 7,954,335 11,969,874 8,967,804 8,610,814 19,950,177 7,531,881 4,091,785 6,852,745 6,162,497 13,035,669 Less reimbursement for certain fiscal agency and other 120,455,496 expenses Net expenses 109,732,931 1,117,461 3,901,978 1,085,998 1,838,603 1,160,133 1,389,514 3,589,960 1,279,010 7,968.108 22,462,852 603,044 1,468,944 1,210,442 2,199,962 6,868,337 10,131,271 7,807,671 7,221,300 16,360,217 6,252,871 3,488,741 5,383,801 4,952,055 10,835,707 PROFIT AND LOSS Current net earnings 328,753,109 16,186,668 90,004,187 19,751,828 27,290,869 18,047,581 15,216,693 59,979,070 12,099,517 7,346,674 13,673,883 12,299,621 36,856,518 Additions to current net earnings: Profits on sales of U. S. Government securities (net) All other 481,620 45,246 32,661 538 111,317 117 30,741 83 45,289 11,556 31,735 9,213 26,876 85 72,999 11,578 25,452 5,050 14,804 3,431 21,791 2,711 21,920 545 46,035 339 Total additions. 526,866 33,199 111,434 30,824 56,845 40,948 26,961 84,577 30,502 18,235 24,502 22,465 46,374 Deductions from current net earnings: Reserves for contingencies All other 412,739 247,768 38,512 3,768 65,715 7,080 27,181 291 28,717 1,454 52,509 637 27,001 50,700 49,792 111,432 21,655 5,524 13,429 402 23,210 57,158 21,921 2,177 43,097 7,145 660,507 42,280 72,795 27,472 30,171 53,146 77,701 161,224 27,179 13,831 80,368 24,098 50,242 133,641 9,081 +38,639 4-3,352 +26,674 12,198 50,740 76,647 +3,323 +4,404 55,866 1,633 3,868 Total deductions Net deductions Net earnings before payments to U. S. Treasury 328,619,468 16,177,587 Paid U. S. Treasury (interest 276,289,457 13,765,123 on F . R. notes) Dividends paid 16,442,236 882,897 90,042,826 19,755,180 27,317,543 18,035,383 15,165,953 59,902,423 12,102,840 7,351,078 13,618,017 12,297,988 36,852,650 73,549,613 16,779,300 23,166,338 15,573,733 13,012,038 51,963,902 10,380,897 5,056,042 1,111,286 1,577,114 731,160 707,940 2,164,551 568,325 6,287,237 11,691,201 9,632,252 30,487,823 826,455 1,823,626 365,163 627,677 Transferred to surplus (Sec. 7) 35,887,775 1,529,567 11,437,171 1,864,594 2,574,091 1,730,490 1,445,975 5,773,970 1,153,618 698,678 1,299,139 1,839,281 4,541,201 Surplus (Sec. 7) January 1 625,013,743 38,779,128 176,633,418 45,908,519 57,647,949 31 ,749,515 28,034,120 90,791 ,917 25,465,369 16,219,368 23,456,042 28,145,914 62,182,484 Surplus (Sec. 7) December 31. 660,901,518 40,308,695 188,070,589 47,773,113 60,222,040 33,480,005 29,480,095 96,565,887 26,618,987 16,918,046 24,755,181 29,985,195 66,723,685 1 After deducting $389,553 of prorated inter-Bank expenses to avoid duplication in combined totals. C/5 % W C/i 1 NO. 7—EARNINGS AND EXPENSES OF FEDERAL RESERVE BANKS, 1914-54 Bank and period All Federal Reserve Banks, by years: 1914-15 1916 1917 1918 1919 Current earnings Current expenses Net earnings before payments to U. S. Treasury1 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 -141,459 2,750,998 9,582,067 52,716,310 78,367,504 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 28,431,126 149,294,774 82,087,225 16,497,736 12,711,286 3,718,180 1925 1926 1927 1928 1929 41,800,706 47,599,595 43,024,484 64,052,860 70,955,496 27,528,163 27,350,182 27,518,443 26,904,810 29,691,113 1930 1931 1932 1933 1934 36,424,044 29,701,279 50,018,817 49,487,318 48,902,813 1935 1936 1937 1938 1939 Dividends paid Franchise tax paid to U. S. Treasury 217,463 1,742,774 6,804,186 $ 5,540,684 5,011,832 Paid to U. S. Treasury (Sec. 13b) Paid to U. S. Treasury (Interest on F. R. notes) Transferred to surplus (Sec. 13b) Transferred to surplus (Sec. 7) 1,134,234 2,703,894 1,134,234 48,334,341 70,651,778 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 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 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 -60,323 -2,297,724 -7,057,694 11,020,582 -916,855 6,510,071 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 1942 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 1947 1948 1949 142,209,546 150,385,033 158,655,566 304,160,818 316,536,930 48,717,271 57,235,107 65,392,975 72,710,188 77,477,676 92,662,268 92,523,935 95,235,592 197,132,683 226,936,980 10,182,851 10,962,160 11,523,047 11,919,809 12,329,373 262,133 27,708 86,772 81,969,625 81,467,013 8,366,350 18,522,518 21,461,770 1950 1951 1952 1953 1954 275,838,994 394,656,072 456,060,260 513,037,237 438,486,040 80,571,771 95,469,086 104,694,091 113,515,020 109,732,931 231,561,340 297,059,097 352,950,157 398,463,224 328,619,468 13,082,992 13,864,750 14,681,788 15,558,377 16,442,236 1,636,462,231 3,090,837,530 352,589,399 4,777,114,762 Total—1914-54. 2,6 i i! i i 8 247,659 67,054 35,605 $ 75,223,818 166,690,356 193,145,837 196,628,858 254,873,588 291,934,634 342,567,985 276,289,457 149,138,300 2,188,893 1,797,354,533 21,849,490 28,320,759 46,333,735 40,336,862 35,887,775 -3,658 2 789,570,063 8 | Aggregate for each Federal Reserve Bank, 1914-54: Boston 315 ,727,959 New York 1,225 ,162,926 331 ,670,418 Philadelphia 440 ,209,761 Cleveland 282 ,739,512 Richmond 245 ,729,125 Atlanta 699 ,966,556 Chicago 231 ,615,567 St. Louis 144 ,233,519 Minneapolis 222 ,971,084 Kansas City 196 .534,628 Dallas 440 553,707 San Francisco Total 117,479,523 376,396,842 114,929,931 151,123,932 103,496,327 85,912,337 226,692,363 89,298,393 54,563,158 90,282,018 73,483,945 152,803,462 196,043,602 846,139,853 216,453,494 282,830,430 175,822,889 154,261,450 462,954,551 137,013,842 87,823,584 129,259,684 119,705,829 282,528,322 23,224,408 119,048,914 30,022,607 35,018,425 15,008,272 13,128,184 42,201,078 12,197,226 8,352,007 12,160,892 12,704,073 29,523,313 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 4,777,114,762 1,636,462,231 3,090,837,530 352,589,399 149,138,300 114,752,611 434,255,226 117,464,922 169,450,608 115,225,155 97,345,824 283,370,897 90,367,938 53,288,056 81,217,694 71,966,279 168,649,323 + 135,412 -433,413 +290,661 -9,907 -71,516 +5,491 + 11,681 -26,514 -8,674 +55,336 -17,090 50,538,933 224,893,748 62,393,997 73,445,927 39,288,296 34,752,126 111,906,324 31,712,099 20,860,131 28,886,459 34,318,009 76,574,014 2,188,893 1,797,354,533 -3,658 789,570,063 280,843 369,116 722,406 82,930 172,493 79,264 151,045 7,464 55,615 64,213 102,083 101,421 +64,875 1 Current earnings less current expenses, plus and minus profit and loss additions and deductions. The $789,570,063 transferred to surplus was reduced by direct charges of $139,299,557 for contribution to capital of the Federal Deposit Insurance Corporation and $500,000 for charge-off on bank premises, and was increased by $11,131,012 transferred from reserves for contingencies, leaving a balance of $660,901,518 on December 31, 1954. 2 i NO. 8—MEMBER BANK RESERVES, RESERVE BANK CREDIT, AND RELATED ITEMS—END O F YEAR 1918-54 AND END OF MONTH 1954 r In millions of dollars] Deposits, other than member bank reserve balances, with F. R. Banks Reserve Bank credit outstanding U. S Government securities End of year or month Total Held under Bought repuroutchase right agreement Discounts and advances Float All otheri Total Gold stock 2 2,639 1,709 3,373 1,842 3 642 1 958 3,957 2,009 4,212 2,025 5,325 4,403 4,530 4,757 4,760 218 214 225 213 57 96 11 38 5 12 3 4 18 15 26 19 99 19 20 1,781 1,753 1 934 1,898 2,220 1,654 51 298 285 276 275 258 1,884 2,161 14 59 4,817 4,808 4,716 4,686 4,578 16 17 18 21 19 21 21 24 272 293 301 348 393 2 212 2,194 2 487 2,389 2,355 2,256 2,250 2,424 2,430 2,428 —44 -56 63 —41 -73 375 354 355 360 241 2 471 1,961 2 509 2,729 4,096 2,375 1,994 1,933 1,870 2,282 96 -33 576 859 1,814 253 261 263 260 251 5,587 6,606 7,027 8 724 11,653 2,873 2,707 1920 1921 1922 1923 1924 287 234 436 134 287 234 436 80 2,687 1,144 262 146 273 355 390 3-355 1,563 L,405 1,238 1,302 1,795 1,707 4 320 119 40 78 27 52 8 3 57 31 23 643 637 582 1,056 632 63 45 63 24 34 378 384 393 500 405 I 459 1,381 I 655 1,809 . .583 4 112 1,977 4,205 1,991 4 092 2,006 3,854 2,012 3,997 2,022 686 775 1 851 2,435 2,430 43 42 4 251 638 235 2 98 21 20 14 15 5 372 378 41 137 21 1,373 1,853 2 145 2,688 2,463 4,306 4,173 4 226 4,036 8,238 2,027 2,035 2,204 2,303 2,430 2,430 2,564 2,564 2,484 1 12 39 19 17 91 38 28 19 16 11 2,486 2,500 2,612 2,601 2,593 10,125 11,258 12,760 14 512 17,644 228 197 511 488 1930 1931 1932 1933 1934 729 817 1 855 2,437 2,430 1935 1936 1937 1938 1939 2,431 2 430 2,564 2 564 2,484 W 1,636 1,890 2,498 3,292 367 312 560 o § 118 208 294 575 375 315 617 51 68 25 28 199 201 1925 1926 1927 1928 1929 1,585 1,822 96 73 1,766 2,215 54 Excess 6 51 31 239 300 536 > Required 6 288 385 239 300 540 Member bank reserve balances Other FedMoney Treasury eral in cash Recircu- holdserve lation 4 ings TreasForac- 5 Other counts Total ury eign deposits deposits deposits 4,951 5,091 1918 1919 . . . Treasury currency outstanding 3 618 723 7 5 3 10 4 7 211 216 29 8 46 5 6 6 19 54 8 6 79 19 2,511 4,603 211 5,360 222 5,388 272 5,519 284 5,536 3,029 2,476 2,532 2,637 2,798 2,963 5,882 6,543 6,550 6,856 7,598 203 201 208 202 2,566 2,376 3,619 2,706 2,409 23 3 4 121 20 22 31 24 128 169 544 244 29 99 226 160 142 923 634 172 199 397 235 242 256 2,743 2,844 4,622 1,984 5,815 1,212 5,519 3,205 6,444 5,209 o o 2,274 2 361 1 6,679 12,239 19,745 21,995 22 737 22,726 21,938 20,619 3 087 3 247 3 648 4,094 4,131 8 732 11 160 15,410 20,449 25,307 2 213 2 215 2 193 2,303 2,375 368 867 799 579 440 1 133 774 793 1,360 1,204 599 586 485 356 394 284 291 256 339 402 578 580 535 541 534 8 10 14 10 4 2 1 1 1 2 25 091 24,093 23 181 24 097 19,499 20,065 20,529 22,754 24 244 24,427 4,339 4,562 4 562 4 589 4,598 28 515 28,952 28,868 28 224 27,600 2 287 2,272 1 336 1 325 1,312 977 393 870 1 123 821 862 508 392 642 767 446 314 569 547 750 495 607 563 590 706 7,411 6,615 14,026 12 450 9,365 3 085 13,117 11,129 1,988 12,886 11,650 1,236 14,373 12,748 1,625 15,915 14,457 1,458 562 16,139 15,577 17,899 16,400 1,499 20 479 19,277 1 202 16,568 15,550 1,018 67 19 156 28 1,368 1,184 967 935 3 5 4 2 22,216 25,009 25,825 26,880 22,706 22,695 23,187 22,030 4,636 4,709 4,812 4,894 27,741 1,293 29,206 1,270 30,433 1,270 30,781 761 668 247 389 346 895 526 550 423 565 363 455 493 714 746 777 839 17,681 20,056 19,950 20,160 16,509 1,172 389 19,667 20,520 -570 19,397 763 156 350 147 172 245 37 184 200 132 297 398 143 640 827 535 576 723 567 672 473 779 721 657 808 2 25,437 2 25,688 1 25,316 25,382 25,781 25,642 25,183 24,696 25,183 1 25,401 1 25,944 1 25,885 21,956 21,958 21,965 21,969 21,973 21,927 21,908 21,809 21,810 21,759 21,710 21,713 4,899 4,913 4,935 4,951 4,957 4,959 4,960 4,966 4,972 4,977 4,982 4,985 29,981 29,904 29,707 29,735 29,870 29,922 29,892 29,929 29,985 30,074 30,500 30,509 793 811 819 819 820 811 798 811 786 806 800 796 405 542 722 579 408 875 716 511 704 729 694 563 440 490 494 471 527 545 533 477 461 426 397 490 459 491 363 321 645 377 503 501 422 496 381 441 830 909 917 850 878 988 908 925 931 884 880 907 19,384 19,412 19,194 19,528 19,563 19,011 18,702 18,316 18,676 18,722 18,985 18,876 19,016 18,821 18,689 18,844 18,891 18,412 17,763 17,572 17,724 18,251 18,467 18,618 1940 1941 1942 1943 1944 2,184 2,184 2 254 2 254 6,189 6,189 11,543 11,543 18,846 18,846 3 3 6 5 80 80 94 471 681 815 1945 1946 1947 1948 1949 24,262 23,350 22,559 23 333 18,885 24,262 23,350 22,559 23 333 18,885 249 163 85 223 78 1950 1951 1952 1953 20,778 23,801 24,697 25,916 20,725 23,605 24,034 25,318 1954— January.... February March.. .. April May June July August September October.. November JDecember.. 24,640 24,509 24,632 24,632 24,812 25,037 24,325 24,023 24,270 24,381 24,888 24,932 24,640 24,509 24,632 24,632 24,812 25,037 24,325 23,894 24,270 24,381 24,888 24,888 1 53 196 663 598 129 44 368 591 505 684 672 599 939 744 952 471 518 258 Includes Government overdrafts in 1918, 1919, and 1920. Prior to Jan. 30, 1934, included gold held by Federal Reserve Banks and in circulation. The stock of money, other than gold, for which the Treasury is primarily responsible—silver bullion at monetary value and standard silver dollars, subsidiary silver and minor coin, and United States notes; also, Federal Reserve bank notes and National Bank notes for the retirement of which lawful money has been deposited with the Treasurer of the United States. Includes money of these kinds held in the Treasury and the Federal Reserve Banks as well as that in circulation. 4 Gold other than that held against gold certificates and gold certificate credits, including the reserve against United States notes and Treasury notes of 1890, monetary silver other than that held against silver certificates and Treasury notes of 1890, and the following coin and paper money held in the Treasury: subsidiary silver and minor coin United States notes, Federal Reserve notes, Federal Reserve bank notes, and National Bank notes. 5 The total of Federal Reserve Bank capital paid in, surplus, other capital accounts, and other liabilities and accrued dividends, less the sum of bank premises and other assets. 6 These figures are estimated. Available only on call dates prior to 1929. NOTE.—For description of figures and discussion of their significance, see Banking and Monetary Statistics, Sec. 10, pp. 360-66. 2 3 I C/l 1 76 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 9—BANK PREMISES OF FEDERAL RESERVE BANKS AND BRANCHES DECEMBER 31, 1954 Cost Federal Reserve Bank or branch Land Building (including vaults) i Fixed machinery and equipment Net book value Total $ 1,628,132 $ 5,948,069 $ 2,866,643 $10,442,844 $ 5,918,633 Boston New York. . . . Annex Buffalo 5,215,656 592,679 255,000 12,183,528 1,451,570 542,797 4,877,779 497,722 22,276,963 2,541,971 797,797 5,716,499 995,518 437,436 Philadelphia. . 1,884,357 6,972,273 920,743 9,777,373 5,163,732 Cleveland Cincinnati. . . . Pittsburgh 1,295,490 380,744 1,189,941 6,681,971 1,083,985 1,162,918 1,688,119 879,537 689,889 9,665,580 2,344,266 3,042,748 2,036,488 1,584,574 1,639,070 Richmond.... Annex. . . . . Baltimore . . . . Charlotte 389,611 80,333 250,487 105,701 3,682,181 482,482 1,251,072 308,749 1,648,745 135,106 480,555 154,449 5,720,537 697,921 1,982,114 568,899 3,256,414 136,865 764,900 337,129 Atlanta Birmingham. . Jacksonville. . . Nashville New Orleans.. 632,238 124,137 164,004 48,000 277,078 1,461,474 330,680 1,680,835 211,616 762,456 308,082 70,510 628,139 35,091 265,700 2,401,794 525,327 2,472,978 294,707 1,305,234 957,142 128,105 2,258,865 81,837 452,963 Chicago Detroit...... 2,963,548 1,147,542 6,540,905 2,815,843 2,752,351 1,199,616 12,256,804 5,163,001 2,063,950 4,216,597 St. Louis Annex Little Rock.. . Louisville Memphis 1,496,060 179,720 85,007 131,177 128,542 2,136,438 1,035,281 264,604 231,702 287,468 1,328,426 524,429 158,320 72,464 105,442 4,960,924 1,739,430 507,931 435,343 521,452 1,263,051 989,880 187,422 156,073 235,628 Minneapolis. . Helena 600,521 15,710 2,316,746 126,401 629,944 44,142 3,547,211 186,253 924,729 82,090 Kansas City. . Denver Oklahoma City Omaha 545,764 101,512 65,021 444,147 3,514,875 461,823 421,252 488,162 1,234,369 86,910 97,588 94,549 5,295,008 650,245 583,861 1,026,858 1,420,440 243,498 201,016 668,032 Dallas El Paso Houston San Antonio. . 189,831 39,004 78,812 477,347 1,362,220 119,739 317,336 344,577 466,692 32,575 112,111 55,859 2,018,743 191,318 508,259 877,783 310,576 38,849 121,244 662,534 San Francisco. Los Angeles... Portland Salt Lake City Seattle 476,768 478,603 161,239 114,075 274,772 3,419,261 3,709,542 1,678,511 341,449 1,891,564 1,036,864 325,782 630,920 84,814 642,240 4,932,893 4,513,927 2,470,670 540,338 2,808,576 1,271,640 3,124,350 2,116,242 183,065 2,400,355 24,708,310 80,024,355 27,863,216 132,595,881 54,747,431 Total OTHER REAL ESTATE ACQUIRED FOR BANKING HOUSE PURPOSES New York Buffalo Richmond Charlotte Birmingham Nashville Chicago Louisville Denver Dallas Los Angeles Portland Total 45,000 353,550 146,550 10,868 203,215 422,110 1,040,000 458 918 405,413 494,935 290,853 37,000 3,908,412 137,490 1,192,196 26 013 132,466 29,464 1,385,163 132,466 182,490 353,550 146,550 10,868 203,215 422,110 2,364,662 484 931 405,413 494,935 320,317 37,000 76,662 353,550 146,550 10,868 203,215 422,110 2,361,021 484 931 405,413 494,935 320,317 37,000 5,426,041 5,316,572 1 Includes expenditures incident to construction programs carried in unallocated accounts pending completion of programs and subsequent allocation of costs to appropriate accounts. NO. 10—NUMBER AND SALARIES OF OFFICERS AND EMPLOYEES OF FEDERAL RESERVE BANKS [December 31, 1954] President Federal Reserve Bank (Including branches) Boston New York Philadelphia Cleveland Richmond Atlanta Chicago St. Louis Minneapolis Kansas City Dallas San Francisco Total 1 Includes 688 part-time employees. Annual salary . . Other officers Number Annual salaries Employees1 Number Annual salaries Total Number Annual salaries $30,000 60,000 30,000 30,000 30,000 30,000 40,000 30,000 26,500 30,000 25,000 30,000 24 51 24 30 27 32 39 29 21 25 25 33 $285,000 776,950 302,500 389,500 321,600 358,000 514,200 307,800 228,000 272,200 283,500 374,500 1,271 3,731 1,160 1,663 1,310 1,293 2,922 1,183 654 1,026 948 1,801 $4,163,791 14,949,206 3,885,057 5,618,153 4,151,106 3,916,856 10,529,115 3,685,733 1,994,415 3,357,987 3,202,613 6,346,805 1,296 3,783 1,185 1,694 1,338 1,326 2,962 1 213 676 1,052 974 1,835 $4,478,791 15,786 156 4,217,557 6 037 653 4,502,706 4,304,856 11,083,315 4,023 533 2,248,915 3,660,187 3,511,113 6,751,305 $391,500 360 $4,413,750 18,962 $65,800,837 19,334 $70,606,087 NO. 11—FEDERAL RESERVE BANK DISCOUNT, INTEREST, AND COMMITMENT RATES, AND BUYING RATES ON ACCEPTANCES [Per cent per annum] In effect December 31, 1954 Type of transaction Boston New l York | cieiphia Cleveland Discounts for and advances to member banks: Advances secured by Government obligations and discounts of and advances secured by eligible paper (Sees. 13 and 13a of the Federal Reserve A c t ) . . . . Other secured advances (Sec. 10b of the Federal Reserve Act) Richmond Atlanta Chicago IK IK IK IK 2 2 2 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) 2M 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 Tofinancinginstitutions Minneapolis St \ Louis T 3-5 K 0) (3) K-U KD 0) 3 ) i-ly 4-i y 4-Vi l-i K 2K-5 25€-5 2K-5 0) 0) 2K-5 2K-5 Dallas IK IK IK 2 2 3 3 3-5K 3-5K 2% 3-5 K 3-5 K 0) San Francisco Kansas Cily K-i^ 5 O K-U KU Rate charged borrower by financing institution less commitment rate. 2 Rate charged borrower but not to exceed 1 per cent above the discount rate. 3 Rate charged borrower. 4 Financing institution is charged K P e r cent per annum on undisbursed portion of loan. 5 Financing institution is charged M per cent per annum on undisbursed portion of loan. 6 The rates shown for the Federal Reserve Bank of New York also apply to any purchases made by the other Federal Reserve Banks. NOTE.—Maximum maturities. Discounts for and advances to member banks: 90 days for discounts and advances 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 advances secured by obligations of Federal intermediate credit banks maturing within 6 months are limited to maximum maturities of 15 days; 4 months for advances under Section 10(b). Advances to individuals, partnerships, or corporations under the last paragraph of Section 13: 90 days. Industrial loai?s and commitments under Section 13b: 5 years. s 0) (3) Effective minimum buying rates on prime bankers' acceptances payable in dollars 1-90 days 91-120 days 121-180 days 1 tr I 79 FEDERAL RESERVE SYSTEM NO. 12—MEMBER BANK RESERVE REQUIREMENTS [Per cent of deposits] Net demand deposits 1 Effective date of change 1917—June 21 Central reserve city banks Reserve city banks 13 10 1936—Aug. 1937—Mar. May 1938—Apr. 16 1 1 16 22M 26 22 % 1941—Nov. 1942—Aug. Sept. Oct. 1 20 14 3 26 24 22 20 1948—Feb. June Sept. Sept. 27 11 16 24 22 24 1949—May May June July Aug. Aug. Aug Aug. Aug. Sept. 1 5 30 1 1 11 16 18 25 1 Central reserve and reserve city banks Country banks 3 3 7 20 2 14 12 4 6 5 14 20 4 6 5 6 4 6 16 22 24 21 20 23^ 19^ 23 22^ 22 19 15 18 23 19 24 20 22 19 1954—j u n e 15 June 24 July 29 Aug. 1 21 20 18 In effect Jan. 1, 19552 20 18 7 7 6 14 13 . 1951—Jan. 11 Jan 16 Jan. 25 Feb 1 1953—Tulv July Country banks 15 26 . . Time deposits 6 5 5 12 2 6 6 13 14 13 1 9 5 5 12 12 5 5 1 Demand deposits subject to reserve requirements, which beginning Aug. 23, 1935, have been total demand deposits minus cash items in process of collection and demand balances due from domestic banks (also minus war loan and series E bond accounts during the period Apr. 13, 1943-June 30, 1947). 2 Present legal minimum and maximum requirements on net demand deposits—central reserve cities, 13 and 26 per cent; reserve cities, 10 and 20 per cent; country, 7 and 14 per cent, respectively; on time deposits at all member banks, 3 and 6 per cent, respectively. NO. 13—MAXIMUM INTEREST RATES PAYABLE ON TIME DEPOSITS i [Per cent per annum] Nov. 1, 1933 to Jan. 31, 1935 Feb. 1, 1935 to Dec. 31, 1935 In effect beginning Jan. 1, 1936 Savings deposits 3 2K 2K Postal Savings deposits 3 2J4 2y2 Other time deposits payable: In 6 months or more In 90 days to 6 months In less than 90 days 3 3 3 2y2 i% iy2 Type of deposit 1 V4 1 Maximum rates that may be paid by member banks as established by the Board of Governors under provisions of Regulation Q. Under this regulation 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 Digitized for under FRASER the laws of the State in which the member bank is located. Maximum rates that may be paid 80 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 14—MARGIN REQUIREMENTS* Prescribed by Board of Governors of the Federal Reserve System in accordance with Securities Exchange Act of 1934 [Per cent of market value] Jan. 21, 1946— Feb. 1, 1947— Mar. 30, 1949— 1947 1949 1951 75 75 100 100 75 75 50 50 75 100 75 50 July 5, 1945— Jan. 20, 1946 Regulation T: For extensions of credit by brokers and dealers on listed securities.. . For short sales Regulation U: For loans by banks on stocks Jan. 31, Mar. 29, Jan. 16, Jan. 17, Feb. 20, 1951— Feb. 20, 1953 Effective 1953— Jan. 4, 1955 Jan. 4, 75 75 50 50 60 60 75 50 60 1955 the "margin requirements shown in this table are the diiierence between the market value (100 per cent) and the maximum loan value. Changes on Feb. 20, 1953 and Jan. 4, 1955 were effective after the close of business on these dates. NOTE.—For earlier data, see Banking and Monetary Statistics, Table 145, p. 504, and Annual Report of the Board of Governors for 1948, p. 77. NO. 15—FEES AND RATES ESTABLISHED UNDER REGULATION V ON LOANS GUARANTEED PURSUANT TO DEFENSE PRODUCTION ACT OF 1950 [In effect December 31, 1954] Fees Payable to Guaranteeing Agency by Financing Institution on Guaranteed Portion of Loan Percentage of loan guaranteed 70 or less 75 80 85 90 95 Over 95 Guarantee fee (Percentage of interest payable by borrower) Percentage of any commitment fee charged borrower 10 15 20 25 30 35 40-50 10 15 20 25 Maximum Rates Financing Institution May Charge Borrower [Per cent per annum] Interest rate Commitment rate. 30 35 40-50 NO. 16—ALL BANKS IN THE UNITED STATES, BY GLASSES, DECEMBER 31, 1954 AND 1953 PRINCIPAL ASSETS AND LIABILITIES, AND NUMBER OF BANKS [In millions of dollars] Commercial banks All banks Item Member banks Total Total i National State1 Mutual savings banks Insured nonmember Noninsured Total i Insured1 Noninsured 20,860 11,630 9,230 6,160 3,070 840 6,980 3,370 3,610 2,570 1,040 190 6,490 December 31, 1954P Loans and investments, total Loans Investments U S Govt obligations Other securities Cash assets Deposits total Interbank Other demand Other time Total capital accounts . . . ... . Number of banks 184,280 85,780 98,500 78,140 20,360 43,490 156,440 70 780 85,660 69 410 16,250 42,460 131,850 60,240 71,610 58 100 13,510 37,300 88,240 39,280 48,960 39,330 9,630 25,030 43,610 20,960 22,650 18,770 3,880 12,270 22,450 9,950 12,500 10,120 2,380 4,750 2,160 410 27,840 15,000 12,840 8,730 4,110 1,030 209,920 16 440 120,180 73,300 17,390 183,580 16 440 120,130 47,010 14,710 156 200 15 620 102 780 37,800 12,300 104,730 10 450 68,350 25,930 8,080 51,470 5 170 34,430 11,870 4,220 25,350 2,050 26,340 19,850 16,150 8,830 2,080 1,200 400 330 50 26,290 2,680 50 19,800 1,910 6,490 770 14,367 13,840 6,660 4,789 1,871 6,647 536 527 218 309 19,252 10,016 9,236 6,476 2,760 799 6,558 2,910 3,649 2,707 18,383 6,015 370 600 1,560 1,200 360 450 December 31, 1953 Loans and investments, total Loans Investments U S Govt obligations Other securities Cash assets .. 171,497 80,518 90,979 72,610 18,370 45,811 145,687 67,593 78,094 63,426 14,668 44,828 122,422 57,762 64,660 52,603 12,057 39,381 81,913 37,831 44,082 35,482 8,600 26,479 40,509 19,931 20,578 17,121 3,457 12,903 21,396 9,328 12,069 9,790 2,278 5,020 1,891 511 1,380 1,045 430 25,810 12,925 12,885 9,184 3,701 983 Deposits total Interbank Other demand Other time Total capital accounts 201,100 15,957 116,788 68,354 16,118 176,702 15,955 116,750 43,997 13,559 150,164 15,170 99,780 35,213 11,316 100,654 10,152 66,343 24,160 7,391 49,510 5,019 33,437 11,054 3,925 24,555 2,005 24,398 378 407 15,758 8,419 1,925 1,212 3 38 2 35 386 320 24,358 2,559 18,345 1,819 6,013 14,509 13,981 6,743 4,856 1,887 6,672 569 528 219 309 Number of banks 335 941 184 2 740 P Figures for Dec. 31, 1954 are preliminary and based largely on data regularly collected or estimated as of the last Wednesday of the month, "published in the Federal Reserve Bulletin. Some items, particularly cash assets and demand deposits, are subject to large daily changes, and the estimates for Dec. 31,1954 may be considerably different from reported figures; the latter will be published in the Bulletin, probably in the May issue. 1 Member bank figures and insured mutual savings bank figures both include three member mutual savings banks. These banks are not included in the total for "commercial and are included only once in the total for "all banks." Member bank figures for Dec. 31, 1954 include one bank in Alaska that became a member on Apr. 15, 1954. Digitizedbanks;" for FRASER 82 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 17—MEMBER BANK EARNINGS, BY GLASS OF BANK, 1954 AND 1953 [Dollar amounts in millions] Central reserve city banks Total Item New York 1954P Earnings On U. S. Govt. securities On other securities On loans All other Expenses Salaries and wages.. Interest on deposits. All other Net current earnings before income taxes. Recoveries and profits 1 .. Losses and charge-offs2... Net addition to valuation reserves 1953 1954P 1953 Chicago 1954P $4,812 $4,590 $778 $757 $192 1,063 1,011 252 2,700 2,632 695 153 137 43 434 144 56 "418 92 2,988 2,782 428 404 228 28 148 106 1,824 1,809 349 353 86 1,371 425 985 1953 Reserve city banks 1954P 1953 Country banks 1954P 1953 $188 $1,878 $1,798 $1,965 $1,847 53 12 95 28 397 376 96 1,059 267 456 445 100 1,045 257 102 1,161 1,083 1,292 1,192 566 48 529 201 15 181 426 39 372 717 715 672 655 120 332 47 136 45 128 40 15 16 Profits before income 1,893 1,558 taxes 692 804 Taxes on net income.. . 865 1,089 Net profits deGash dividends 419 456 clared3 556 224 328 681 257 424 167 143 129 18.5 1.18 15.4 1.10 1.11 9.6 0.63 8.5 0.54 9.7 0.69 8.1 0.56 1.94 4.72 1.99 4.75 2.02 5.45 2.00 5.49 374 161 312 151 745 347 610 282 213 161 398 113 103 180 13.2 1.14 13.9 1.21 14.8 1.06 15.7 1.07 17.4 1.14 8.0 0.70 6.3 0.55 9.1 0.66 7.9 0.54 1.79 3.55 1.91 3.55 1.91 3.57 1.94 3.61 333 Ratios (per cent): Net current earnings before income taxes Avers.ge total capital 15.6 16.4 accounts 1.15 Average total assets.. 1.12 Net profits to— Average; total capital 9.3 7.8 accounts Avera.ge total assets.. 0.67 0.55 Average return on U. S. 1.98 1.95 Govt. securities Average return on loans. 4.69 4.69 p Data for 1954 are preliminary, and some items are not available; final figures will appear in the Federal Reserve Bulletin, probably in the May issue. 1 Includes recoveries credited to valuation reserves. 2 Includes losses charged to valuation reserves. 3 Includes interest on capital notes and debentures. 83 FEDERAL RESERVE SYSTEM NO. 18—ANALYSIS OF CHANGES IN NUMBER OF BANKING OFFICES DURING 19541 Commercial and stock savings banks and nondeposit trust companies Member banks All banks Total Nonmember banks State Mutual savings banks National l member2 Insured Noninsured2 Insured2 Noninsured Number of banks, Dec. 31, 1953. 14,509 13,981 4,856 1,887 6,672 569 219 309 Changes during 1954 New banks** Suspensions Consolidations and absorptions: Banks converted to branches... Other Voluntary liquidations4 Other changes ^ Conversions: National into State State into National Federal Reserve membership:6 Admission of national bank in Alaska Admissions of State banks .. Withdrawals of State 7banks.. Federal deposit insurance: Admissions of State banks.. . Withdrawal of State bank Net increase or decrease +73 +73 +18 +6 +43 +6 -176 -31 -7 -175 -31 -7 -80 -14 -1 -22 -4 -71 -11 __1 -2 2 -5 +1 +1 +1 -1 + 12 +1 +1 +1 + 12 -4 -16 Number of banks, Dec. 31,1954. 14,367 13,840 4,789 Number of branches and addi-8 tional offices, Dec. 31, 1953 .. 5,897 5,627 2,590 1,871 -142 -141 Number of banking facilities, Dec. 31, 1954*0 1 +8 —9 —1 —1 198 198 -25 6,647 -1 -28 +1 -33 -1 536 218 309 41 192 78 +88 +26 +79 +47 +2 +9 +97 -7 -5 +21 +2 +6 +29 1,710 1,462 36 221 87 21 22 _5 +1 —2 +1 +2 156 21 21 +341 + 172 + 174 + 101 -16 -28 +53 -6 +519 +481 +310 —9 +4 +28 1,365 +371 + 176 -28 +8 -11 1,631 Number of branches and additional offices, Dec. 31, 19548.. 6,416 6,108 2,900 Number of banking facilities, 199 156 Dec. 31, 19531(> 199 Changes during 1954 Established . Discontinued Interclass changes Net increase or decrease -1 +3 -3 -67 Changes during 1954 De novo branches Banks converted into branches... Discontinued Interclass changes—net® Net increase or decrease —1 +5 -6 -29 +79 -6 -23 +9 —2 - 1 —1 Excludes banks in United States territories and possessions except one national bank in Alaska, with no branches, that became a member of the Federal Reserve System on Apr. 15, 1954. 2 State member bank figures and the insured mutual savings bank figures both include 3 member mutual savings banks, not included in the total for "commercial banks." State member bank figures also include one noninsured trust company without deposits. 3 Exclusive of new banks organized to succeed operating banks. 4 Exclusive of liquidations incident to the succession, conversion, and absorption of banks. 5 One institution restored to series, previously eliminated. 6 Exclusive of conversions, if any, of national banks into State member banks, or vice versa. 7 Exclusive of insured nonmember banks converted into national banks or admitted to Federal Reserve membership, or vice versa. 8 Covers all branches and other additional offices at which deposits are received, checks paid, or money lent, except banking facilities which are shown separately. 9 For gross changes by class of bank see Federal Reserve Bulletin, February 1955. 1 °Banking facilities are provided at military and other Government establishments through arrangements made by the Treasury Department with banks designated as depositaries and financial agents of the Government. These figures exclude branches that have also been designated as banking facilities. 84 ANNUAL REPORT OF BOARD OF GOVERNORS NO. 19—NUMBER OF BANKING OFFICES ON FEDERAL RESERVE PAR LIST AND NOT ON PAR LIST, BY FEDERAL RESERVE DISTRICTS AND STATES, DECEMBER 31, 19541 On par list Not on par list (Nonmember) Total 1 Federal Reserve district or State Total Member Nonmember Branches Branches Branches Branches Banks Branches & offices Banks & offices Banks & offices Banks & offices Banks & offices DISTRICT Boston New Y o r k . . . . Philadelphia. . Cleveland.... Richmond. . . . Atlanta Chicago St. Louis Minneapolis. . Kansas City. . Dallas San Francisco 1 Total STATE Alabama Alaska 1 Arizona Arkansas California . . . Colorado Connecticut. . Delaware Dist. of Col.. Florida Georgia Idaho Illinois Indiana. . . . . . Iowa... . . . . Kansas Kentucky.... Louisiana. . . . M!aine IVlaryland Massachusetts Michigan Minnesota.... Mississippi. . . 454 787 777 1,029 1,004 1,244 2,485 1,457 1,280 1,754 1,049 456 1,178 318 499 454 787 777 1,029 749 817 294 659 747 2,485 199 1,142 116 679 28 1,747 85 456 1,178 318 499 311 680 587 632 476 597 373 252 747 1,017 490 131 473 74 749 28 247 436 143 107 190 397 385 341 217 286 387 1,468 80 652 29 206 18 998 49 427 1,627 957 427 13,747 6,296 11,960 234 1 37 138 1 37 96 37 42 12 82 12 82 4 59 8 72 1,627 632 234 357 1,086 5,979 6,654 13 4,787 5,306 1,192 1,787 317 115 163 6 1,120 70 107 3 1,033 45 56 5 88 33 54 153 97 34 17 5 88 33 54 94 57 13 13 4 70 13 44 59 40 21 4 907 473 664 602 370 63 47 90 205 273 6 15 388 261 16 23 82 37 195 64 11 23 177 83 139 7 52 262 34 490 55 40 407 222 20 1 212 109 Pennsylvania. Rhode Island. South Carolina South Dakota. Tennessee.... Texas Utah Vermont Virginia Washington., . West Virginia. Wisconsin.... Wyoming. . . . 853 10 151 170 295 922 54 64 316 107 183 553 53 396 63 78 52 128 17 38 13 157 186 150 1 67 60 152 173 425 270 43 75 89 156 232 337 6 25 535 110 413 8 75 304 52 558 106 59 634 376 46 1 853 10 72 72 212 879 54 64 313 107 182 553 53 1 3 51 37 70 136 230 206 32 3 66 1 24 2 231 26 960 304 23 333 2 138 50 280 58 160 600 370 1 1 5 392 239 498 3 66 596 110 413 8 75 304 52 558 210 154 634 383 46 17 3 95 2 513 234 166 Missouri M^ontana . Nebraska Nevada New Hamp. „ . New Jersey... New Mexico New York . . . North Carolina North Dakota. Ohio Oklahoma. . . Oregon 116 1 18 20 10 9 51 60 3 153 162 102 89 156 232 337 6 86 3 87 87 65 20 905 473 664 172 60 152 173 425 678 197 96 23 10 56 65 3 153 162 1 24 2 231 26 960 159 6 333 2 138 396 63 71 27 114 17 38 13 157 186 150 1 644 6 34 62 84 577 29 38 205 47 111 166 40 '315' 601 7 152 42 68' 42 92 23 1,120 169 121 38 187 585 23 131 153 97 34 17 11 59 65 212 35 360 51 45 10 325 193 1,496 231 163 219 401 38 99 92 71 63 3 43 1 21 1 205 9 899 89 295 2 129 335 48 57 23 85 17 34 4 105 176 22 1 82 56 18 358 27 274 1 23 42 18 68 51 19 227 154 26 209 4 38 10 128 302 25 26 108 60 71 387 13 5 2 2 12 42 66 27 64 io' 105 27 408 154 61 61 3 1 26 17 61 70 6 38 104 95 145 17 7 9 61 15 14 4 29 4 9 52 10 79 98 83 43 7 25 14 3 1 128 1 Comprises all commercial banking offices on which checks are drawn, including 198 banking facilities (see note 10, Table 18). Excludes banks in the United States territories and possessions except one member national bank in Alaska, with no branches, that became a member in 1954, included in the San Francisco District. Number of member banks is less here than in Table 18 by 3 member nondeposit trust companies and 3 mutual savings banks; number of nonmember commercial banks less by 90 banks and trust companies on which no checks are drawn. Digitized for isFRASER RECORD OF POLICY ACTIONS BOARD OF GOVERNORS FEBRUARY 4, 1954 Reduction in Rates on Discounts for and Advances to Member Banks by Federal Reserve Banks. Effective February 5, 1954, the Board approved actions taken by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, St. Louis, and San Francisco in establishing a rate of 1 % per cent (a reduction from 2 per cent) on discounts for and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. Votes for this action: Messrs. Martin, Evans, Vardaman, Mills, and Robertson. Votes against this action: none. Mr. Szymczak, who was not present when this action was taken, stated that he concurred in it. Pursuant to the policy established by this action, the Board subsequently approved the same rate for the other Federal Reserve Banks, effective on the dates indicated below: Cleveland February 15, 1954 Richmond February 12, 1954 Atlanta February 9, 1954 Chicago February 11, 1954 Minneapolis February 5, 1954 Kansas City February 12, 1954 Dallas February 15, 1954 The Board also approved, for each of the Federal Reserve Banks, a rate of 2lA per cent (a reduction from 2*/2 per cent) on advances to member banks under Section 10(b) of the Federal Reserve Act. The effective dates of these approvals were those shown above. In addition, the Board approved certain changes at some of the Federal Reserve Banks in other rates, including rates on advances to individuals, partnerships, and corporations under the last paragraph of Section 13 of the Act and on industrial loans and commitments under Section 13b. In accordance with the provisions of the Federal Reserve Act, the Federal Reserve Banks establish, subject to review and determination of the Board of Governors, rates on discounts and advances to member banks at least every 14 days and submit such rates to the Board for consideration. No changes FEDERAL RESERVE SYSTEM 87 involving new policy had been made in these rates since those referred to on pages 82 and 85 of the Board's Annual Report for 1953. As evidences of receding levels of economic activity became increasingly apparent after the middle of 1953, the Federal Reserve System, as outlined in the text of this Report and the Board's Annual Report for 1953, modified its credit policies to bring about easier conditions in the money markets. When the above reductions in Federal Reserve Bank rates were approved by the Board of Governors, the System was following a policy of supplying or maintaining member bank reserves adequate to promote growth and stability in the economy with emphasis on a program of actively maintaining a condition of ease. The reduction in rates brought them more nearly in line with existing short-term money market rates, and furthered current monetary and credit policy by reducing the cost to member banks of borrowing from Reserve Banks to make temporary adjustments in reserve positions. APRIL 13, 1954 Reduction in Rates on Discounts for and Advances to Member Banks by Federal Reserve Banks. Effective April 14, 1954, the Board approved action taken by the Board of Directors of the Federal Reserve Bank of Chicago in establishing a rate of V/2 per cent on discounts for and advances to member banks under Sections 13 and 13a of the Federal Reserve Act. Votes for this action: Messrs. Martin, Szymczak, Evans, Vardaman, and Robertson. Votes against this action: none. Mr. Mills, who was not present when this action was taken, stated that he concurred in the action. Pursuant to the policy established by this action, the Board subsequently approved the same rate for the other Federal Reserve Banks, effective on the dates indicated below: New York San Francisco Cleveland St. Louis Kansas City Dallas Boston Minneapolis Richmond Atlanta Philadelphia April April April April April April April April May May May 16, 16, 23, 23, 23, 23, 27, 29, 15, 15, 21, 1954 1954 1954 1954 1954 1954 1954 1954 1954 1954 1954 The Board also approved actions taken by the Boards of Directors 88 ANNUAL REPORT OF BOARD OF GOVERNORS of all the Federal Reserve Banks except Kansas City in establishing a rate of 2 per cent on advances to member banks under Section 10(b) of the Federal Reserve Act. The effective dates of these approvals were those shown above except that the reduction at the Federal Reserve Bank of Chicago became effective on September 13, 1954. Inasmuch as market rates had continued to decline since the reductions in Federal Reserve Bank rates in February and the System was continuing the policy of actively maintaining ease in the money markets, the above reductions were approved for substantially the same reasons as prompted the earlier action. JUNE 21, 1954 Reduction in Reserve Requirements of Member Banks. The supplement to Regulation D, Reserves of Member Banks, was amended to decrease reserve requirements with respect to deposits of member banks as follows: On net demand deposits— Effective June 24, July 29, July 29, August 1,, 1954 1954 1954 1954 For Central reserve city banks Central reserve city banks Reserve city banks Banks not in central reserve or reserve cities Percentage From 22 to 21 per cent From 21 to 20 per cent From 19 to 18 per cent From 13 to 12 per cent On time deposits— For Effective June 16, 1954 1 June 24, 1954 Banks not in central reserve or reserve cities Central reserve and reserve city banks Percentage From 6 to 5 per cent From 6 to 5 per cent Votes for this action: Messrs. Martin, Szymczak, Vardaman, and Mills. Votes against this action: Mr. Robertson The reasons for this action were stated as follows in a press statement issued by the Board on June 21, 1954: "This action was taken in conformity with the Federal Reserve System's policy of making available the reserve funds required for the essential needs of the economy and facilitating economic growth. The reduction will release a total of approximately 1,555 million dollars of reserves. It was made in anticipation of estimated 1 This reduction was made retroactive so as to apply to the average balance in each bank's account with its Federal Reserve Bank for the period June 16 through June 30, 1954. FEDERAL RESERVE SYSTEM 89 demands on bank reserves during the summer and fall, taking account of probable private financing requirements, including the marketing of crops and replenishment of retail stocks in advance of the fall and Christmas sale seasons, as well as the Treasury's financing needs. ". . . Changes in reserve requirements supply or withdraw relatively large amounts of bank reserves, even when effected on a gradual basis, as in the present action. Accordingly, such changes are comparatively infrequent. For more flexible and frequent adjustments to the credit needs of the economy the System relies chiefly upon open market operations to release or absorb reserve funds." As indicated by the above statement, it was realized that this action would supply more member bank reserves than were called for at the time. It was taken with the understanding that the increase would be partly offset by open market operations. Accordingly, during July and August System holdings of Government securities were reduced by about 1 billion dollars. Thereafter, as the needs for reserves became evident, the System again purchased securities for the open market account. Although Governor Robertson agreed with the majority of the Board with respect to the need for providing a substantial amount of reserves during the remainder of 1954, he favored a smaller reduction in reserve requirements at this time and a review of the situation later in the year to determine what, if any, further action seemed necessary in the light of developments. JULY 2, 1954 Amendments to Regulation J, Check Clearing and Collection, and Regulation G, Collection of Noncash Items. Effective July 15, 1954, Regulations J and G were amended so as to permit the collection through Federal Reserve Banks of checks drawn on nonmember par-remitting banks located in such of the Territories, dependencies, insular possessions, and parts of the United States outside the continental United States as the Board of Governors might designate, and the collection of noncash items payable in such areas. At the same time, the Board designated Alaska and Hawaii as being in or of the Twelfth Federal Reserve District for the purposes of Regulations J and G, effective on and after July 15, 1954. Votes for this action: Messrs. Mills and Robertson. Messrs. Martin, Szymczak, and Vardaman, who were absent, had previously indicated their approval. Votes against this action: none. This action was taken on this date because in the circumstances it was desirable to have the new procedures become effective as soon as possible with reasonable notice thereof. The 90 ANNUAL REPORT OF BOARD OF GOVERNORS action was ratified by unanimous vote at the next meeting on July 7, 1954, at which Messrs. Martin, Vardaman, Mills, and Robertson were present, and became effective on July 15, 1954. Following the admission of an Alaskan bank to membership in the Federal Reserve System in April 1954, certain nonmember banks in that Territory announced that they intended to remit for cash items at par, as member banks are required to do. Similarly, all banks in the Territory of Hawaii made known their willingness to remit at par for cash items sent to them through the facilities of the Federal Reserve System. Prior to the amendments referred to above, the two regulations technically did not permit Federal Reserve Banks to collect cash items drawn on parremitting nonmember banks located in Territories, dependencies, insular possessions, and parts of the United States outside the continental United States, nor to collect noncash items payable in such areas. The Board took the actions stated because it felt that the Federal Reserve Banks should be in a position to make available their collection services to expedite and simplify the presentation and collection of checks and other items for their depositors and for the general public. SEPTEMBER 29, 1954 Amendment of Regulation K, Banking Corporations Authorized to do Foreign Banking Business under the Terms of Section 25 (a) of the Federal Reserve Act. Effective immediately, Sections XI and XV of Regulation K were amended to broaden the powers of banking corporations authorized to do foreign banking business under the terms of Section 25(a) of the Federal Reserve Act (commonly known as Edge Act corporations) to raise funds through the sale of their unsecured notes or debentures if such corporations are not engaged in the business of receiving deposits, and to increase the amount of credit that such a nondeposit corporation may extend to a single borrower. Votes for this action: Messrs. Martin, Szymczak, Vardaman, Mills, Robertson, Miller, and Balderston. Before this amendment was adopted, Regulation K contemplated two types of Edge Act corporations. One type would finance its operations principally through the issuance of obligations secured by the pledge of collateral; such a corporation could not receive deposits in the United States except those incidental to its foreign operations and could not receive deposits abroad except those incidental to the conduct of its exchange, discount or loan operations. The other type could do a general foreign banking business; these corporations could receive in the United States only such deposits as were incidental to their foreign operations but could receive deposits of any kind outside the United States. FEDERAL RESERVE SYSTEM 91 The amendment will permit Edge Act corporations which do not receive deposits either within the United States or abroad to finance themselves chiefly through the sale of unsecured notes. It thus provides a more flexible means of financing than was previously available, and was adopted primarily to put such nondeposit corporations in a better position to finance durable goods exports which require financing on longer terms than are usual in ordinary commercial banking transactions. It was the view of the Board that such a liberalization of its regulation within the limitations established by the amendment was desirable in promoting international and foreign trade. RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE MARCH 3, 1954 1. Authority to Effect Transactions in System Account. The following directive to the executive committee was approved: The executive committee is 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 light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to promoting growth and stability in the economy by actively maintaining a condition of ease in the money market, (c) to correcting a disorderly situation in the Government securities market, and (d) to the practical administration of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than 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. The executive committee is further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (which Bank shall have discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed in the aggregate 2 billion dollars. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Evans, Leedy, Mills, Robertson, Szymczak, Williams, and Young. Votes against this action: none. 92 FEDERAL RESERVE SYSTEM 93 This directive was in the same form and had the same limitations as the directive adopted by the Federal Open Market Committee at its meeting in December 1953. The December action was for the purpose of providing, as the central objective of current credit policy, that transactions for the System open market account should be with a view "to promoting growth and stability in the economy by actively maintaining a condition of ease in the money market." The objective of this directive was to combat the moderate but unmistakable decline in economic conditions that had become apparent after mid-1953 and which was continuing as the year came to a close. The Committee's review of the economic situation in March 1954 showed that the recessionary tendencies which had appeared during the second half of 1953 were continuing. Industrial production had decreased by about 8 per cent from the high levels of April-August 1953, and other important measures of activity had shown similar declines, although commodity prices had been relatively stable. It was not evident whether there soon would be either an upturn in activity or a leveling out of the decline. Pursuit by the Federal Reserve in late 1953 and in the first two months of 1954 of the credit policy described as "active ease" was for the purpose of assuring that recession tendencies would not be accentuated, as at times in the past, by pressure for liquidation of bank credit, and that tendencies toward economic recovery would be encouraged by an ample volume of reserves at the banks and aggressive efforts to extend the availability of credit. The easing tendencies, both in the market and in System policy, were confirmed and reinforced in February by reductions in discount rates at the Federal Reserve Banks. In order to continue this atmosphere and to foster recovery, the Committee concluded that the policy of actively providing reserves to the money market to facilitate credit expansion should be continued during the spring of 1954. 2. Review of Continuing Authorities or Statements of Policy. The Committee reviewed and reaffirmed without change all continuing statements of operating policy and specific authorities for operations which were in effect immediately prior to this meeting on March 3, 1954, at which the newly elected members of the Federal Open Market Committee assumed their duties. In this connection, Mr. Sproul referred to the action taken by the Committee at its meeting in December 1953 in approving a statement of policy that, until superseded or modified by further action of the Committee, "transactions for the System account in the open market shall be entered into solely for the purpose of providing or absorbing reserves (except in the correction of disorderly markets), and shall not include offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System's portfolio." Mr. Sproul moved that the first clause of this statement of policy 94 ANNUAL REPORT OF BOARD OF GOVERNORS be rescinded and that the Committee rely on the policy statement which had been adopted by unanimous vote in March 1953 that "it is not now the policy of the Committee to support any pattern of prices and yields in the Government securities market, and intervention in the Government securities market is solely to effectuate the objectives of monetary and credit policy (including correction of disorderly money markets)." In the absence of a second to Mr. Sprout's motion, it was not brought to a vote and the statement of policy set forth above was continued. 3. Minimum Buying Rate on Bankers' Acceptances. At this meeting, the action taken by the members of the Committee effective February 5, 1954, reducing the minimum buying rate on prime eligible bankers' acceptances from 2 per cent to 1% per cent, was approved, ratified,, and confirmed. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Evans, Leedy, Mills, Robertson, Szymczak, Williams, and Young. Votes against this action: none. The reduction in the minimum buying rate on bankers' acceptances was in response to a recommendation from the Manager of the System Open Market Account on February 4, 1954, that this rate be reduced as a reflection of the existing and developing pattern of interest rates in general, which had been declining in response to the Federal Reserve System's recent policy of actively maintaining a condition of ease in the money market. This pattern included reductions in the Federal Reserve Bank discount rates from 2 per cent to 1 % per cent effective at several Federal Reserve Banks on February 5 and at the remaining Reserve Banks within a few days thereafter. JUNE 23, 1954 1. Authority to Effect Transactions in System Account. At this meeting, the Committee renewed without change the directive to the executive committee which was adopted in December 1953 and renewed without change at the meeting on March 3, 1954. The directive is set forth on page 92 of this report. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Bryan, Leedy, Mills, Robertson, Szymczak, Vardaman, Williams, and Young. Votes against this action: none. The economic outlook had improved somewhat between the March and June meetings of the Committee. In March, recession was the dominant characteristic of industrial and commercial activity, and there was serious question whether the recessionary tendency might become self-feeding and cumulative, although there was also a view that an early end to the economic FEDERAL RESERVE SYSTEM 95 decline might be anticipated. In that atmosphere, the Committee had continued a policy of actively supplying reserves to the market. By June, it was apparent that there had been a slackening of the decline in production and consumption. In fact, a slight rise had taken place in industrial output, construction activity had advanced further to record levels, and the decline in employment had slackened. Prices had continued to show little change. Production abroad had continued to rise. On the other hand, elements in the situation clouding the outlook included the continued contraction in outlays of the Federal Government for national security, a decline in farm income, and a decline in the income of industrial workers. The Committee concluded that, under the circumstances, monetary policy continued to bear a heavy countercyclical responsibility. It felt that the policy of "active ease" which had been maintained for some months had facilitated and made possible the financing of business without causing distortions in the credit and capital markets. In the Committee's opinion such revival as had occurred was insufficient to call for modification of the policy of active ease and, therefore, action was taken to renew without modification the directive calling for a policy of actively promoting ease in the money market. At the same time the Committee noted that the Board of Governors of the Federal Reserve System had acted in June to reduce the amount of reserves which member banks are required to carry against their deposits, such reductions to become effective during June, July, and August. In this connection, it was suggested that the prospective reduction in reserve requirements should be observed carefully and that, while the Committee's existing general policy of "active ease" should be continued, in the interests of avoiding undesirable redundancy in the money market it would be desirable to absorb temporarily some of the excess reserves that would be released to the market during the summer months as a result of the action taken by the Board of Governors. 2. Minimum Buying Rate on Bankers' Acceptances. The Committee approved, ratified, and confirmed the action taken by the members of the Federal Open Market Committee, effective April 16, 1954, reducing from 1% per cent to ll/2 per cent the minimum buying rate on prime eligible bankers' acceptances. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Bryan, Leedy, Mills, Robertson, Szymczak, Vardaman, Williams, and Young. Votes against this action: none. This further reduction in the minimum buying rate on bankers' acceptances was made at the time the discount rates of the Federal Reserve Banks of Chicago (April 14) and New York and San Francisco (April 16) were reduced from 1% per cent to 154 per cent, which reductions were followed shortly by corresponding reductions in discount rates at all other Federal Reserve Banks. As was the case with the reduction effective February 5, 96 ANNUAL REPORT OF BOARD OF GOVERNORS 1954, this decrease in the minimum buying rate was in recognition of the existing market conditions and developments and was made in accordance with the Committee's general policy of actively promoting a condition of case in the money market. 3. Repurchase Agreements. The Committee modified the authority granted to the Federal Reserve Banks to enter into repurchase agreements with nonbank dealers in United States Government securities so as to provide that the rates or rate ranges on such repurchase agreements would be prescribed by the executive committee rather than by the Manager of the System Open Market Account, as had been the case since mid-1952. This action did not modify the policy with respect to the use of repurchase agreements, which remained subject to the general limitation adopted on July 22, 1952, that in no event should the effective rate be below whichever was the lower of (1) the discount rate of the purchasing Federal Reserve Bank on eligible commercial paper, or (2) the average issuing rate on the most recent issue of 3-month Treasury bills. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Bryan, Leedy, Mills, Robertson, Szymczak, Vardaman, Williams, and Young. Votes against this action: none. SEPTEMBER 22, 1954 1. Authority to Effect Transactions in System Account. The Committee again renewed without change the directive to the executive committee which was adopted in December 1953, and continued without change at the meetings on March 3 and June 23, 1954. This directive, which provided as the current credit policy of the Committee that transactions in the account should be with a view, among other things, to "promoting growth and stability in the economy by actively maintaining a condition of ease in the money market," is set forth on page 92 of this report. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Bryan, Leedy, Miller, Mills, Robertson, Szymczak, Vardaman, Williams, and Young. Votes against this action: none. The Committee gave attention to developments in the economy since its June meeting, particularly to the "sidewise" movement that had been taking place during the summer months, and to the question of how long the economy might continue such a movement before showing a definite upturn or downturn. The Committee felt that the policy of "active ease" that had been pursued since late 1953 had helped to maintain a stable economic and business situation which, in turn, had given encouragement to investors. FEDERAL RESERVE SYSTEM 97 It was the view of the Committee at this time that the ready availability and low cost of bank credit and capital funds had maintained a monetary climate favorable to business expansion and high employment. Although the economy had been on a plateau for several months, following cessation of the moderate decline that had taken place in output and employment between the summer of 1953 and late spring of 1954, there was some evidence that there might be an upturn in the autumn months. Inventory liquidation had continued, but further declines in Government defense outlays were expected to be small, private capital investment and State and local capital outlays were holding up well, and consumer spending had remained high. At the time of this meeting there had not been an upturn in economic activity which appeared to warrant any reduction in the flow of money and credit and the Committee believed that in supplying reserves to the market in the weeks ahead, any doubts should be resolved on the side of ease rather than the reverse. The Committee recognized that credit policy was only one part of the whole complex, but it felt that the economic outlook at the time warranted a continuation of the existing credit policy of actively maintaining a condition of ease in the money market, and it therefore renewed its directive in the same form that had been approved at the three preceding meetings. DECEMBER 7, 1954 1. Authority to Effect Transactions in System Account. The following directive to the executive committee was approved: The executive committee is 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 light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to promoting growth and stability in the economy by maintaining a condition of ease in the money market, (c) to correcting a disorderly situation in the Government securities market, and (d) to the practical administration of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than 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. 98 ANNUAL REPORT OF BOARD OF GOVERNORS The executive committee is further directed, until otherwise directed by the Federal Open Market Committee, to arrange for the purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (which Bank shall have discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) 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 total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed in the aggregate 2 billion dollars. Votes for this action: Messrs. Martin, Chairman, Sproul, Vice Chairman, Balderston, Bryan, Leedy, Mills, Robertson, Szymczak, Vardaman, Williams, and Young. Votes against this action: none. This directive was changed in only one respect from the directive approved at the December 1953 and the March, June, and September 1954 meetings: the word "actively" was deleted from clause (b) of the first paragraph so as to provide that transactions in the System open market account: should be with a view, among other things, "to promoting growth and stability in the economy by maintaining a condition of ease in the money market." For a year preceding this meeting, the clause had provided that transactions should be with a view "to promoting growth and stability in the economy by actively maintaining a condition of ease in the money market." The Committee's review of the economic situation at this meeting showed that expansion in the economy had started to take place during the fall months, following a period of relative stability during the second and third quarters of 1954. For more than a year, the Committee had been following a policy of aggressively maintaining a condition of ease in the money market as a means of facilitating economic recovery, recognizing that monetary policy was only one factor in the complex of elements on which an upward movement might be based. In evaluating the situation, the Committee took cognizance of evidences of expansion available from data on production, employment, capital expenditures, Federal defense outlays, construction, and commodity prices, and also of the sharply increased activity and price levels in securities markets as well as other less tangible manifestations of a speculative attitude in some areas. A re-examination of the policy of "active ease" in the light of this economic review led the Committee to the conclusion that the developing economic situation did not warrant continuing as active a program of supplying reserves to the market as had been followed during the preceding year, although it did not feel that a policy of credit restraint was called for at the time. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [December 31, 1954] W M . MCC. MARTIN, JR., of New York, Chairman M. S. SZYMCZAK of Illinois Term Expires January 31, 1956 January 31, 1962 JAMES K. VARDAMAN, JR., of Missouri January 31, 1960 A. L. MILLS, JR., of Oregon J. L. ROBERTSON of Nebraska January 31, 1958 January 31, 1964 C. CANBY BALDERSTON of Pennsylvania ELLIOTT THURSTON, Assistant to the Board WINFIELD W. RIEFLER, Assistant to the Chairman January 31, 1966 WOODLIEF THOMAS, Economic Adviser to the Board ALFRED K. CHERRY, Legislative Counsel S. R. CARPENTER, Secretary MERRITT SHERMAN, Assistant Secretary KENNETH A. KENYON, Assistant Secretary GEORGE B. VEST, General Counsel FREDERIC SOLOMON, Assistant General Counsel HOWARD H. HACKLEY, Assistant General Counsel DAVID B. HEXTER, Assistant General Counsel G. HOWLAND CHASE, Assistant General Counsel RALPH A. YOUNG, Director, Division of Research and Statistics FRANK R. GARFIELD, Adviser on Economic Research, Division of Research and Statistics KENNETH B. WILLIAMS, Assistant Director, Division of Research and Statistics SUSAN S. BURR, Assistant Director, Division of Research and Statistics GUY E. NOYES, Assistant Director, Division of Research and Statistics ALBERT R. KOCH, Assistant Director, Division of Research and Statistics ARTHUR W. MARGET, Director, Division of International Finance LEWIS N. DEMBITZ, Assistant Director, Division of International Finance ROBERT F. LEONARD, Director, Division of Bank. Operations J. E. HORBETT, Assistant Director, Division of Ban\ Operations LOWELL MYRICK, Assistant Director, Division of Ban\ Operations GEORGE S. SLOAN, Director, Division of Examinations C. C. HOSTRUP, Assistant Director, Division of Examinations FRED A. NELSON, Assistant Director, Division of Examinations ARTHUR H. LANG, Chief Federal Reserve Examiner, Division of Examinations ROBERT C. MASTERS, Assistant Director, Division of Examinations GLENN M. GOODMAN, Assistant Director, Division of Examinations HENRY BENNER, Assistant Director, Division of Examinations EDWIN J. JOHNSON, Director, Division of Personnel Administration H. FRANKLIN SPRECHER, JR., Assistant Director, Division of Personnel Administration LISTON P. BETHEA, Director, Division of Administrative Services JOSEPH E. KELLEHER, Assistant Director, Division of Administrative Services GARDNER L. BOOTHE, II, Administrator, Office of Defense Loans EDWIN J. JOHNSON, Controller, Office of the Controller M. B. DANIELS, Assistant Controller, Office of the Controller Special Assistants to the Board—CHARLES MOLONY and CLARKE L. FAUVER 99 FEDERAL OPEN MARKET COMMITTEE [December 31, 1954] MEMBERS W M . MCC. MARTIN, JR., Chairman (Board of Governors) ALLAN SPROUL, Vice Chairman (Elected by Federal Reserve Bank of New York) C. CANBY BALDERSTON (Board of Governors) MALCOLM BRYAN (Elected by Federal Reserve Banks of Atlanta, St. Louis, and Dallas) H. G. LEEDY (Elected by Federal Reserve Banks of Minneapolis, Kansas City, and San Francisco) A. L. MILLS, JR. (Board of Governors) J. L. ROBERTSON (Board of Governors) M. S. SZYMCZAK (Board of Governors) JAMES K. VARDAMAN, JR. (Board of Governors) ALFRED H. WILLIAMS (Elected by Federal Reserve Banks of Boston, Philadelphia, and Richmond) C. S. YOUNG (Elected by Federal Reserve Banks of Cleveland and Chicago) OFFICERS EXECUTIVE COMMITTEE W M . MCC. MARTIN, JR., Chairman WINFIELD W. RIEFLER, Secretary ALLAN SPROUL, Vice Chairman ELLIOTT THURSTON, Assistant Secretary J. L. ROBERTSON GEORGE B. VEST, General Counsel M. S. SZYMCZAK FREDERIC SOLOMON, Assistant General Counsel ALFRED H. WILLIAMS WOODLIEF THOMAS, Economist KARL R. BOPP, Associate Economist GEORGE W. MITCHELL, Associate Economist AGENT FEDERAL RESERVE BANK OF NEW YORK ROBERT G. ROUSE, Manager of System Open Market Account EARLE L. RAUBER, Associate Economist H. V. ROELSE, Associate Economist CLARENCE W. TOW, Associate Economist RALPH A. YOUNG, Associate Economist 100 FEDERAL ADVISORY COUNCIL [December 31, 1954] MEMBERS District No. 1—WILLIAM D. IRELAND, President, The Second National Bank of Boston, Boston, Massachusetts. District No. 2—HENRY C. ALEXANDER, President, J. P. Morgan & Co., Inc., New York, New York. District No. 3—GEOFFREY S. SMITH, President, Girard Trust Corn Exchange Bank, Philadelphia, Pennsylvania. District No. 4—GEORGE GUND, President, The Cleveland Trust Company, Cleveland, Ohio. District No. 5—ROBERT V. FLEMING, President and Chairman, The Riggs National Bank, Washington, D. C. District No. 6—WALLACE M. DAVIS, President, Hibernia National Bank, New Orleans, Louisiana. District No. 7—EDWARD E. BROWN, Chairman, The First National Bank of Chicago, Chicago, Illinois. District No. 8—W. W. CAMPBELL, Chairman, National Bank of Eastern Arkansas, Forrest City, Arkansas. District No. 9—JOSEPH F. RINGLAND, President, Northwestern National Bank of Minneapolis, Minneapolis, Minnesota. District No. 10—CHARLES J. CHANDLER, President, First National Bank in Wichita, Wichita, Kansas. District No. 11—GEO. G. MATKIN, President, The State National Bank of El Paso, El Paso, Texas. District No. 12—JOHN M. WALLACE, President, Walker Bank & Trust Company, Salt Lake City, Utah. EXECUTIVE COMMITTEE EDWARD E. BROWN, ex officio ROBERT V. FLEMING, ex officio HENRY C. ALEXANDER 'GEOFFREY S. SMITH GEORGE GUND OFFICERS President, EDWARD E. BROWN Vice President, ROBERT V. FLEMING Secretary, HERBERT V. PROCHNOW 101 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS [December 31, 1954] CHAIRMEN AND DEPUTY CHAIRMEN OF BOARDS OF DIRECTORS Federal Reserve Bank of— Chairman and Federal Reserve Agent Deputy Chairman Boston Harold D. Hodgkinson Ames Stevens New York Jay E. Crane William I. Myers Philadelphia William J. Meinel Henderson Supplee, Jr. Cleveland John C. Virden Leo L. Rummell Richmond John B. Woodward, Jr W. G. Wysor Atlanta Rufus C. Harris Paul E. Reinhold Chicago John S. Coleman Bert R. Prall St. Louis M. Moss Alexander Caffey Robertson Minneapolis Leslie N. Perrin Kansas City Raymond W. Hall Cecil Puckett Dallas J. R. Parten Robert J. Smith San Francisco A. H. Brawner Y. Frank Freeman Vacancy 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. Hodgkinson, Chairman of the Federal Reserve Bank of Boston, was elected Chairman of the Conference and of the Executive Committee in April 1953 and served as such through the meeting held in December 1954. Mr. Virden, Chairman of the Federal Reserve Bank of Cleveland, and Mr. Meinel, Chairman of the Federal Reserve Bank of Philadelphia, served with Mr. Hodgkinson as members of the Executive Committee, Mr. Virden also serving as Vice Chairman of the Conference. At the meeting held in December 1954, Mr. Virden was elected Chairman of the Conference and of the Executive Committee. Mr. Woodward, Chairman of the Federal Reserve: Bank of Richmond, was elected Vice Chairman and a member of the Executive Committee, and Mr. Crane, Chairman of the Federal Reserve Bank of New York, was elected as the other member of the Executive Committee. 102 FEDERAL RESERVE SYSTEM 103 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—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 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 arc 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 Term Expires DIRECTORS Class A: Harold I. Chandler Oliver B. Ellsworth Lloyd D. Brace Class B.Frederick S. Blackall, jr Harry E. Umphrey Harvey P. Hood Class C: Ames Stevens Harold D. Hodgkinson James R. Killian, Jr Dec. 31 Executive Vice President, The Keene National Bank, Keene, N. H 1954 President, Riverside Trust Company, Hartford, Conn.. 1955 President, The First National Bank of Boston, Boston, Mass 1956 President and Treasurer, The Taft-Peirce Manufacturing Company, Woonsocket, R. 1 1954 President, Aroostook Potato Growers, Inc., Presque Isle, Me 1955 President, H. P. Hood & Sons, Inc., Boston Mass..... 1956 President, Ames Worsted Company, Lowell, Mass.. .. 1954 Vice President, General Manager and Chairman of Management Board, Wm. Filene's Sons Company, Boston, Mass 1955 President, Massachusetts Institute of Technology, Cambridge, Mass 1956 District No. 2—New York Class A: F. Palmer Armstrong N. Baxter Jackson John R. Evans Class B: John E. Bierwirth Clarence Francis Lansing P. Shield President, The Keyport Banking Company, Keyport, N. J 1954 Chairman of the Board, Chemical Corn Exchange Bank, New York, N. Y 1955 President, The First National Bank of Poughkeepsie, Poughkeepsie, N. Y 1956 President, National Distillers Products Corporation, New York, N. Y 1954 Director and member of Executive Committee, General Foods Corporation, New York, N. Y 1955 President, The Grand Union Company, East Paterson, N.J 1956 104 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Class C: William I. Myers Franz Schneider Jay E. Crane Dec. 31 Dean, New York State College of Agriculture, Cornell University, Ithaca, N. Y 1954 New York,N. Y 1955 Vice President, Standard Oil Company (New Jersey), New York, N. Y 1956 Buffalo Branch Appointed by Federal Reserve Bank: Lewis G. Harriman Chairman of the Board, Manufacturers and Traders Trust Company, Buffalo, N. Y Bernard E. Finucane President, Security Trust Company of Rochester, Rochester, N. Y Edward P. Vreeland President, Salamanca Trust Company, Salamanca, N. Y Robert L. Davis President, The First National Bank of Olean, Olean, N. Y Appointed by Board of Governors: Clayton G. White Dairy farmer, Stow, N. Y Edgar F. Wendt President, Buffalo Forge Company, Buffalo, N. Y Robert C. Tait President, Stromberg-Carlson Company, Rochester, N. Y 1954 1955 1955 1956 1954 1955 1956 District No. 3—-Philadelphia Class A: Wadsworth Cresse Bernard C. Wolfe Wm. Fulton Kurtz Class B.Andrew Kaul, III Charles E. Oakes Warren C. Newton Class C: William J. Meinel Henderson Supplee, Jr Lester V. Chandler Executive Vice President and Trust Officer, The First National Bank and Trust Company, Woodbury, N. J. 1954 President, The First National Bank of Towanda, Towanda, Pa 1955 Chairman of the Board, The Pennsylvania Company for Banking and Trusts, Philadelphia, Pa 1956 President and Director, Speer Carbon Company, St. Marys, Pa 1954 President, Pennsylvania Power and Light Company, Allentown, Pa 1955 President, O. A. Newton and Son Company, Bridgeville, Del 1956 President and Chairman of the Board, Heintz Manufacturing Company, Philadelphia, Pa 1954 President, The Atlantic Refining Company, Philadelphia, Pa .' 1955 Professor of Economics, Princeton University, Princeton, N. J 1956 District No. 4—Cleveland Class A: Edison Hobstetter John D. Bainer J. Brenner Root President, The Pomeroy National Bank, Pomeroy, Ohio 1954 President, The Merchants National Bank and Trust Company of Meadville, Meadville, Pa 1955 President, The Harter Bank & Trust Company, Canton, Ohio 1956 FEDERAL RESERVE SYSTEM 105 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Class B: Joel M. Bowlby Edward C. Doll Alexander E. Walker Class C: Leo L. Rummell Sidney A. Swensrud John C. Virden Dec. 31 Chairman of the Board, The Eagle-Picher Company, Cincinnati, Ohio 1954 President, Lovell Manufacturing Company, Erie, Pa... 1955 Chairman of the Board, The National Supply Company, Pittsburgh, Pa 1956 Dean, College of Agriculture, The Ohio State University, Columbus, Ohio 1954 Chairman of the Board, Gulf Oil Corporation, Pittsburgh, Pa 1955 Chairman of the Board, John C. Virden Company, Cleveland, Ohio 1956 Cincinnati Branch Appointed by Federal Reserve Bank: Joseph B. Hall E. S. Dabney Fred A. Dowd Leonard M. Campbell President, The Kroger Company, Cincinnati, Ohio President, Security Trust Company, Lexington, Ky President, The First National Bank of Cincinnati, Cincinnati, Ohio President, The Second National Bank of Ashland, Ashland, Ky 1954 1954 1955 1956 Appointed by Board of Governors: John C. Baker Henry C. Besuden Anthony Haswell President, Ohio University, Athens, Ohio 1954 Farmer, Winchester, Ky 1955 President, The Dayton Malleable Iron Company, Dayton, Ohio 1956 Pittsburgh Branch Appointed by Federal Reserve Bank: William B. McFall John C. Warner Paul Malone Albert L. Rasmussen President, Commonwealth Trust Company of Pittsburgh, Pittsburgh, Pa President, Carnegie Institute of Technology, Pittsburgh, Pa President, The Second National Bank of Uniontown, Uniontown, Pa President, The Warren National Bank, Warren, Pa 1954 I954 I955 1956 Appointed by Board of Governors: Clifford F. Hood Douglas M. Moorhead Henry A. Roemer, Jr President, United States Steel Corporation, Pittsburgh, Pa 1954 Farmer, North East, Pa I955 President, Sharon Steel Corporation, Sharon, Pa 1956 District No. 5—Richmond Class A: James D. Harrison Warren S. Johnson John A. Sydenstricker President, First National Bank of Baltimore, Baltimore, Md 1954 Investment Counselor, Peoples Savings Bank & Trust Company, Wilmington, N. C 1955 Executive Vice President, First National Bank in Marlinton, Marlinton, W. Va 1956 106 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Class B.Edwin Hyde H. L. Rust, Jr W. A. L. Sibley Class C: W. G. Wysor John B. Woodward, Jr Alonzo G. Decker, Jr Dec. 31 President, Miller & Rhoads, Inc., Richmond, Va 1954 President, H. L. Rust Company, Washington, D. C... 1955 Vice President and Treasurer, Monarch Mills, Union, S. C 1956 Management Counsel, Southern States Cooperative, Inc., Richmond, Va 1954 Chairman of the Board, Newport News Shipbuilding & Dry Dock Company, Newport News, Va 1955 Vice President, The Black & Decker Manufacturing Company, Towson, Md 1956 Baltimore Branch Appointed by Federal Reserve Bank: Charles A. Piper Lacy I. Rice Stanley B. Trott Charles W. Hoff President, The Liberty Trust Company, Cumberland, Md President, The Old National Bank, Martinsburg, W. Va President, Maryland Trust Company, Baltimore, Md... President, Union Trust Company of Maryland, Baltimore, Md 1954 1955 1955 1956 Appointed by Board of Governors: Clarence R. Zarfoss Howard M. Taylor, Jr Theodore E. Fletcher, Sr Vice President, Western Maryland Railway Company, Baltimore, Md 1954 President, International Bedding Company, Baltimore, Md 1955 Senior Partner, Albert W. Sisk & Son, Preston, Md 1956 Charlotte Branch Appointed by Federal Reserve Bank: Thomas J. Robertson George S. Crouch Jonathan Woody Archie K. Davis President, First National Bank of South Carolina, Columbia, S. C Chairman of the Board, The Union National Bank, Charlotte, N. C President, First National Bank, Waynesville, N. C . . . . Senior Vice President, Wachovia Bank and Trust Company, Winston-Salem, N. C 1954 1955 1955 1956 Appointed by Board of Governors: Paul T. Taylor T. Henry Wilson William H. Grier President, Taylor Warehouse Company, WinstonSalem, N. C 1954 President & Treasurer, Henredon Furniture Industries, Inc., Morganton, N. C 1955 Executive Vice President, Rock Hill Printing & Finishing Company, Rock Hill, S. C 1956 District No. 6—Atlanta Class A: W. C. Bowman Leslie R. Driver Roland L. Adams Chairman of the Board, TheFirst National Bank of Montgomery, Montgomery, Ala 1954 President, The First National Bank in Bristol, Bristol, Tenn 1955 President, Bank of York, York, Ala 1956 FEDERAL RESERVE SYSTEM 107 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Class B: Pollard Turman Donald Comer A. B. Freeman President, J. M. Tull Metal & Supply Company, Inc., Atlanta, Ga 1954 Chairman of the Board, Avondale Mills, Birmingham, Ala 1955 Chairman of the Board, Louisiana Coca-Cola Bottling Company, Ltd., New Orleans, La 1956 Class C: Paul E. Reinhold Rufus C. Harris Harllee Branch, Jr Chairman of the Board, Foremost Dairies, Inc., Jacksonville, Fla 1954 President, The Tulane University of Louisiana, New Orleans, La 1955 President, Georgia Power Company, Atlanta, Ga 1956 Birmingham Branch Appointed by Federal Reserve Bank: Malcolm A. Smith John B. Barnett, Jr Frank M. Moody John Will Gay First Vice President, Birmingham Trust National Bank, Birmingham, Ala President, The Monroe County Bank, Monroeville, Ala Vice President, The First National Bank of Tuskaloosa, Tuscaloosa, Ala President, The First National Bank of Scottsboro, Scottsboro, Ala 1954 1955 1955 1956 Appointed by Board of Governors: Edwin C. Bottcher Thad Holt Adolf Weil, Sr Farmer, Cullman, Ala 1954 Investments, Birmingham, Ala 1955 President, Weil Brothers-Cotton, Inc., Montgomery, Ala 1956 Jacksonville Branch Appointed by Federal Reserve Bank: G. W. Reese Frank W. Norris J. Carlisle Rogers T. A. Davis, Jr President, The Citizens and Peoples National Bank of Pensacola, Pensacola, Fla President, The Barnett National Bank of Jacksonville, Jacksonville, Fla President, The First National Bank of Leesburg, Leesburg, Fla President, Pan American Bank of Miami, Miami, Fla... 1954 1955 1955 1956 Appointed by Board of Governors: J. Wayne Reitz Harry M. Smith McGregor Smith Provost for Agriculture, University of Florida, Gainesville, Fla 1954 President and Manager, Winter Garden Ornamental Nursery, Inc., Winter Garden, Fla 1955 Chairman of the Board and Director, Florida Power and Light Company, Miami, Fla 1956 Nashville Branch Appointed by Federal Reserve Bank: Sam M. Fleming James V. Sprouse President, Third National Bank in Nashville, Nashville, Tenn 1954 President, The First National Bank of Springfield, Springfield, Tenn 1955 108 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. T. R. Keys W. E. Tomlinson Dec. 31 President, Erwin National Bank, Erwin, Tenn 1955 President, The Hamilton National Bank of Johnson City, Johnson City, Tenn 1956 Appointed by Board of Governors: H. C. Meacham Ernest J. Moench Frank B. Ward Farming, Franklin, Tenn 1954 President, Tennessee Tufting Company, Nashville, Tenn 1955 Dean, College of Business Administration, University of Tennessee, Knoxville, Tenn 1956 New Orleans Branch Appointed by Federal Reserve Bank: Philip C. Williams Keehn W. Berry James T. Brown Leon J. Minvielle President, Bank of Yazoo City, Yazoo City, Miss President, Whitney National Bank of New Orleans, New Orleans, La Chairman of the Board, First National Bank of Jackson, Jackson, Miss President, The Peoples National Bank of New Iberia, New Iberia, La 1954 1955 1955 1956 Appointed by Board of Governors: Joel L. Fletcher, Jr E. O. Batson E. E. Wild President, Southwestern Louisiana Institute, Lafayette, La 1954 President, Batson-McGehee Company, Inc., Millard, Miss 1955 Rice grower, Midland, La 1956 District No. 7—Chicago Class A: Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company of Chicago, Chicago, 111 1954 Nugent R. Oberwortmann.. .President, The North Shore National Bank of Chicago, Chicago, 111 1955 Vivian W. Johnson President, First National Bank, Cedar Falls, I o w a . . . . 1956 Class B: Walter E. Hawkinson William J. Grede William A. Hanley Class C: Bert R. Prall John S. Coleman J. Stuart Russell Vice President in Charge of Finance, and Secretary, Allis-Chalmers Manufacturing Company, Milwaukee, Wis 1954 President, Grede Foundries, Inc., Milwaukee, Wis.... 1955 Director, Eli Lilly and Company, Indianapolis, Ind 1956 President, Butler Bros., Chicago, 111 1954 President, Burroughs Corporation, Detroit, Mich 1955 Farm Editor, The Des Moines Register and Tribune, Des Moines, Iowa 1956 Detroit Branch Appointed by Federal Reserve Bank: Howard P. Parshall John A. Stewart Raymond T. Perring President, Bank of the Commonwealth, Detroit, Mich. 1954 Vice President and Cashier, Second National Bank & Trust Company, Saginaw, Mich 1954 President, The Detroit Bank, Detroit, Mich 1955 FEDERAL RESERVE SYSTEM 109 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Ira A. Moore Dec. 31 President, Peoples National Bank of Grand Rapids, Grand Rapids, Mich 1956 Appointed by Board of Governors: John A. Hannah William M. Day Watson H. Vanderploeg President, Michigan State College, East Lansing, Mich. 1954 Vice President and General Manager, Michigan Bell Telephone Company, Detroit, Mich 1955 President, Kellogg Company, Battle Creek, Mich 1956 District No. 8—St. Louis Class A: Phil E. Chappell J. E. Etherton William A. McDonnell Class B.Leo J. Wieck S. J. Beauchamp, Jr Louis Ruthenburg President, Planters Bank & Trust Company, Hopkinsville, Ky 1954 President, The Carbondale National Bank, Carbondale, 111 1955 President, First National Bank in St. Louis, St. Louis, Mo 1956 Vice President and Treasurer, The May Department Stores Company, St. Louis, Mo 1954 President, Terminal Warehouse Company, Little Rock, Ark 1955 Chairman of Board, Servel, Inc., Evansville, Ind 1956 Class C: Joseph H. Moore Caffey Robertson M. Moss Alexander Farmer, Charleston, Mo 1954 President, CafFey Robertson Company, Memphis, Tenn. 1955 President, Missouri Portland Cement Company, St. Louis, Mo 1956 Little Rock Branch Appointed by Federal Reserve Bank: H. C. McKinney, Jr Thos. W. Stone Harvey C. Couch, Jr Donald Barger President, The First National Bank of El Dorado, El Dorado, Ark President, The Arkansas National Bank of Hot Springs, Hot Springs, Ark President, Union National Bank of Little Rock, Little Rock, Ark President, Peoples Exchange Bank, Russellville, Ark... 1954 1954 1955 1956 Appointed by Board of Governors: Shuford R. Nichols A. Howard Stebbins, Jr Sam B. Strauss Farmer, Ginner and Cotton Broker, Des Arc, Ark 1954 President, Stebbins and Roberts, Inc., Little Rock, Ark. 1955 President, Pfeifers of Arkansas, Little Rock, Ark • • 1956 Louisville Branch Appointed by Federal Reserve Bank: M. C. Minor Ira F. Wilcox Magnus J. Kreisle Noel Rush President, The Farmers National Bank of Danville, Danville, Ky President, The Union National Bank of New Albany, New Albany, Ind President, The Tell City National Bank, Tell City, Ind. President, Lincoln Bank and Trust Company, Louisville, Ky 1954 1954 1955 1956 110 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires Dec. 31 DiREcroits—Cont. Appointed by Board of Governors: Pierre B. McBride President, Porcelain Metals Corporation, Louisville, Ky 1954 Farmer, Cadiz, Ky 1955 Vice President and Treasurer, Standard Oil Company (Kentucky), Louisville, Ky 1956 Smith Broadbent, Jr David F. Cocks Memphis Branch Appointed by Federal Reserve Bank: John A. McCall President, The First National Bank of Lexington, Lexington, Tenn President, National Bank of Commerce in Memphis, Memphis, Tenn Chairman of Board, Phillips National Bank, Helena, Ark President, The First National Bank of West Point, West Point, Miss William B. Pollard Ben L. Ross John K. Wilson 1954 1954 1955 1956 Appointed by Board of Governors: A. E. Hohenberg Henry Banks John D. Williams President, Hohenberg Bros. Company, Memphis, Tenn. 1954 Farmer, Clarkedale, Ark 1955 Chancellor, The University of Mississippi, University, Miss 1956 District No. 9—Minneapolis Class A: John W. Scott Edgar F. Zelle Harold N. Thomson Class B.Ray C. Lange Homer P. Clark J. E. Corette Class C: Vacancy F. Albae Flodin Leslie N. Perrin President, The First State Bank of Gil by, Gilby, N. D.. 1954 Chairman of the Board, First National Bank of Minneapolis, Minneapolis, Minn 1955 Vice President, Farmers and Merchants Bank, Presho, S. D 1956 President, Chippewa Canning Company, Inc., Chippewa Falls, Wis 1954 Honorary Chairman of the Board, West Publishing Company, St. Paul, Minn 1955 President and General Manager, Montana Power Company, Butte, Mont 1956 1954 President and General Manager, Lake Shore Engineering Company, Iron Mountain, Mich 1955 Director, General Mills, Inc., Minneapolis, Minn 1956 Helena Branch Appointed by Federal Reserve Bank: J. Wilkrd Johnson Geo. N. Lund A. W. Heidel Financial Vice President and Treasurer, Western Life Insurance Company, Helena, Mont 1954 Chairman of the Board and President, The First National Bank of Reserve, Reserve, Mont 1954 Vice President, Powder River County Bank, Broadus, Mont 1955 Appointed by Board of Governors: Carl McFarland George R. Milburn President, Montana State University, Missoula, Mont. Manager, N Bar Ranch, Grass Range, Mont 1954 1955 FEDERAL RESERVE SYSTEM 111 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Dec. 31 District No. 10—Kansas City Class A: Harold Kountze W. S. Kennedy W. L. Bunten President, The Colorado National Bank of Denver, Denver, Colo 1954 President and Chairman of the Board, The First National Bank of Junction City, Junction City, Kan.... 1955 President, Goodland State Bank, Goodland, Kan 1956 Class B: Max A. Miller E. M. Dodds K. S. Adams Livestock rancher, Omaha, Neb 1954 President, United States Cold Storage Corporation, Kansas City, Mo 1955 Chairman of the Board, Phillips Petroleum Company, Bartlesville, Okla 1956 Class C: Lyle L. Hague Raymond W. Hall Cecil Puckett Farmer and stockman, Cherokee, Okla 1954 Vice President and Director, Hall Brothers, Inc., Kansas City Mo 1955 Dean, College of Business Administration, University of Denver, Denver, Colo 1956 Denver Branch Appointed by Federal Reserve Bank: Ralph S. Newcomer Arthur Johnson Merriam B. Berger Executive Vice President, First National Bank in Boulder, Boulder, Colo 1954 President, First National Bank in Raton, Raton, N. Mex 1954 Vice President, The Colorado National Bank of Denver, Denver, Colo 1955 Appointed by Board of Governors: G. Norman Winder Aksel Nielsen Rancher, Craig, Colo 1954 President, The Title Guaranty Company, Denver, Colo. 1955 Oklahoma City Branch Appointed by Federal Reserve Bank: F. M. Overstreet President, The First National Bank at Ponca City, Ponca City, Okla 1954 Frank A. Sewell Chairman of the Board and President, The Liberty National Bank and Trust Company of Oklahoma City, Oklahoma City, Okla .' 1954 George R. Gear President, The City National Bank of Guymon, Guymon, Okla 1955 Appointed by Board of Governors: Phil H. Lowery Davis D. Bovaird Owner, Lowery Hereford Ranch, Loco, Okla President, The Bovaird Supply Company, Tulsa, Okla.. 1954 1955 Omaha Branch Appointed by Federal Reserve Bank: William N. Mitten Ellsworth Moser George J. Forbes Chairman of the Board and President, First National Bank of Fremont, Fremont, Neb 1954 President, The United States National Bank of Omaha, Omaha, Neb 1955 Executive Vice President, The First National Bank of Laramie, Laramie, Wyo 1955 112 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Manville Kendrick Rancher, Sheridan, Wyo 1954 Gilbert C. Swanson Chairman of the Board, C. A. Swanson & Sons, Omaha, Neb 1955 District No. 11—Dallas Class A: P P. Butler J. Edd McLanghlin W. L. Peterson Class B: D. A. Hulcy J. B. Thomas John R. Alford Class C: Robert J. Smith J. R. Parten Hal Bogle President, First National Bank in Houston, Houston, Tex 1954 President, Security State Bank & Trust Company, Rails, Tex 1955 President, The State National Bank of Denison, Denison, Tex 1956 Chairman of the Board and President, Lone Star Gas Company, Dallas, Tex 1954 President and General Manager and Director, Texas Electric Service Company, Fort Worth, Tex 1955 Industrialist and Farmer, Henderson, Tex 1956 President, Pioneer Air Lines, Inc., Dallas, Tex 1954 President, Woodley Petroleum Company, Houston, Tex 1955 Rancher and Feeder, Dexter, N. Mex 1956 El Paso Branch Appointed by Federal Reserve Bank: John P. Butler President, The First National Bank of Midland, Midland, Tex J. M. Sakrison President, Southern Arizona Bank and Trust Company, Tucson, Ariz Thomas C. Patterson Vice President, El Paso National Bank, El Paso, Tex... F. W. Barton President, The Marfa National Bank, Marfa, Tex 1954 1954 1955 1956 Appointed by Board of Governors: Tames A. Dick President, James A. Dick Investment Company, El Paso, Tex 1954 E. J. Workman President, and Director of Research and Development Division, New Mexico Institute of Mining and Technology, Socorro, N. Mex 1955 D. F. Stahmann Farmer, Las Cruces, N. Mex 1956 Houston Branch Appointed by Federal Reserve Bank: O R. Weyrich President, Houston Bank & Trust Company, Houston, Tex P R. Hamill President, Bay City Bank & Trust Company, Bay City, Tex S. Marcus Greer Chairman of Executive Committee, The City National Bank of Houston, Houston, Tex I. F. Betts President, The American National Bank of Beaumont, Beaumont, Tex 1954 1954 1955 1956 FEDERAL RESERVE SYSTEM 113 DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Dec. 31 Appointed by Board of Governors: Ross Stewart Chairman of the Board of Directors, Stewart & Stevenson Services, Inc., Houston, Tex 1954 Dean of Agriculture, A. & M. College of Texas, College Station, Tex 1955 T. O. Sutton and Sons, Colmesneil, Tex 1956 Charles N. Shepardson Herbert G. Sutton San Antonio Branch Appointed by Federal Reserve Bank: E. A. Baetz President, Bexar County National Bank of San Antonio, San Antonio, Tex President, Gonzales State Bank, Gonzales, Tex President, The Corpus Christi National Bank, Corpus Christi, Tex President, The First National Bank, Harlingen, Tex... V. S. Marett Burton Dunn E. C. Breedlove 1954 1954 1955 1956 Appointed by Board of Governors: Henry P. Drought D. Hayden Perry Clarence E. Ayres Attorney at Law, San Antonio, Tex 1954 Livestock farming, Robstown, Tex 1955 Professor of Economics, The University of Texas, Austin, Tex 1956 District No. 12—San Francisco Class A: Carroll F. Byrd John A. Schoonover M. Vilas Hubbard Class B: Reese H. Taylor Walter S. Johnson Alden G. Roach Class C: Harry R. Wellman Y. Frank Freeman A. H. Brawner President, The First National Bank of Willows, Willows, Calif 1954 President, The Idaho First National Bank, Boise, Idaho 1955 President and Chairman of the Board, Citizens Commercial Trust and Savings Bank of Pasadena, Pasadena, Calif 1956 President, Union Oil Company of California, Los Angeles, Calif 1954 President, American Forest Products Corporation, San Francisco, Calif 1955 President, Columbia-Geneva Steel Division and Consolidated Western Steel Division, of United States Steel Corporation, San Francisco, Calif 1956 Vice President, Agricultural Sciences, University of California, Berkeley, Calif 1954 Vice President, Paramount Pictures Corporation, Hollywood, Calif 1955 President, W. P. Fuller & Company, San Francisco, Calif 1956 Los Angeles Branch Appointed by Federal Reserve Bank: Anderson Borthwick James E. Shelton Hugh C. Gruwell President, The First National Trust and Savings Bank of San Diego, San Diego, Calif 1954 President, Security-First National Bank of Los Angeles, Los Angeles, Calif 1954 President, First National Bank of Arizona, Phoenix, Ariz 1955 114 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS, Dec. 31, 1954—Cont. Term Expires DIRECTORS—Cont. Appointed by Board of Governors: Bryant Essick President, Essick Manufacturing Company, Angeles, Calif Paul H. Helms President, Helms Bakeries, Los Angeles, Calif Dec. 31 Los Portland Branch Appointed by Federal Reserve Bank: Frank Wortman President, The First National Bank of McMinnville, McMinnville, Ore John B. Rogers President, The First National Bank of Baker, Baker, Ore E. C. Sammons President, The United States National Bank of Portland, Portland, Ore Appointed by Board of Governors: William H. Steiwer, Sr Livestock and farming, Fossil, Ore Philip I. Welk President, Preston-Shaffer Milling Company, Walla Walla, Wash ' Salt Lake City Branch Appointed by Federal Reserve Bank: Russell S. Hanson Vice President and Cashier, The First National Bank of Logan, Logan, Utah George S. Eccles President, First Security Bank of Utah, National Association, Ogden, Utah. Salt Lake City, Utah Harry Eaton Executive Vice President, Twin Falls Bank and Trust Company, Twin Falls, Idaho Appointed by Board of Governors: Geo. W. Watkins President, Snake River Equipment Company, Idaho Falls, Idaho Joseph Rosenblatt President, The Eimco Corporation, Salt Lake City, Utah Seattle Branch Appointed by Federal Reserve Bank: Vacancy S. B. Lafromboise President, The First National Bank of Enumclaw, Enumclaw, Wash Charles F. Frankland President, The Pacific National Bank of Seattle, Seattle, Wash Appointed by Board of Governors: Ralph Sundquist Fruit Grower and Cold Storage Operator, Yakima, Wash D K. MacDonald Chairman of the Board, D. K. MacDonald & Company, Inc., Seattle, Wash 1954 1955 1954 1954 1955 1954 1955 1954 1954 1955 1954 1955 1954 1954 1955 1954 1955 115 FEDERAL RESERVE SYSTEM DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS Dec. 31, 1954—Cont. SENIOR OFFICERS OF FEDERAL RESERVE BANKS [December 31, 1954] Federal Reserve Bank of— President First Vice President Vice Presidents Boston. J. A. Erickson Alfred C. Neal Robert B. Harvey2 E. O. Latham Carl B. Pitman O. A. Schlaikjer R. F. Van Amringe New York. Allan Sproul William F. Treiber H. A. Bilby John Exter H. H. Kimball A. Phelan H. V. Roelse Robert G. Rouse T. G. Tiebout V. Willis R. B. Wiltse J. H. Wurts Philadelphia.. Alfred H. Williams W. J. Davis Karl R. Bopp Robert N. Hilkert E. C. Hill Wm. G. McCreedy P. M. Poorman J. V. Vergari3 Richard G. Wilgus1 Cleveland W. D. Fulton Donald S. Thompson Dwight L. Allen Roger R. Clouse A. H. Laning2 Martin Morrison H. E. J. Smith Paul C. Stetzelberger Richmond. Hugh Leach Edw. A. Wayne N. L. Armistead Aubrey N. Heflin Upton S. Martin J. M. Nowlan 1 James M. Slay C. B. Strathy Chas. W. Williams Atlanta. Malcolm Bryan Lewis M. Clark V. K. Bowman L. B. Raisty J. E. Denmark Earle L. Rauber 2 John L. Liles, Jr. S. P. Schuessler Harold T. Patterson Chicago. C. S. Young E. C. Harris Neil B. Dawes W. R. Diercks W. A. Hopkins L. H. Jones1 L. G. Meyer George W. Mitchell A. L. Olson Alfred T. Sihler W. W. Turner St. Louis Delos C. Johns Frederick L. Deming Dale M. Lewis Wm. E. Peterson H. H. Weigel J. C. Wotawa Minneapolis.. O. S. Powell A. W. Mills E. B. Larson H. G. McConnell Otis R. Preston M. H. Strothman, Jr. Sigurd Ueland Kansas City. . H. G. Leedy Henry O. Koppang John T. Boysen1 Clarence W. Tow E. D. Vanderhoof D. W. Woolley Dallas Watrous H. Irons W. D. Gentry E. B. Austin J. L. Cook2 T. W. Plant L. G. Pondrom Morgan H. Rice Harry A. Shuford San Francisco. C. E. Earhart H. N. Mangels E. R. Millard H. F. Slade Eliot J. Swan2 O. P. Wheeler 1 Cashier. 2 Also Cashier. 3 Counsel. 116 ANNUAL REPORT OF BOARD OF GOVERNORS DIRECTORS AND SENIOR OFFICERS OF FEDERAL RESERVE BANKS Dec. 31, 1954—Cont. VICE PRESIDENTS IN CHARGE OF BRANCHES OF FEDERAL RESERVE BANKS Federal Reserve Bank of— New York . . . Cleveland. . .. Richmond Atlanta Chicago St. Louis Minneapolis., Kansas City. . Dallas San Francisco Branch Buffalo Cincinnati Pittsburgh Baltimore Charlotte Birmingham Jacksonville Nashville New Orleans Detroit Little Rock Louisville Memphis Helena Denver Oklahoma City Omaha El Paso Houston San Antonio Los Angeles Portland Salt Lake City Seattle Chief Officer I. B. Smith R. G. Johnson J. W. Kossin D. F. Hagner R. L. Cherry H. C. Frazer T. A. Lanford R. E. Moody, Jr. M. L. Shaw R. A. Swaney Fred Burton V. M. Longstreet Darryl R. Francis C. W. Groth G. A. Gregory R. L. Mathes P. A. Debus C. M. Rowland W. H. Holloway \V. E. Eagle W. F. Volberg J. A. Randall W. L. Partner J. M. Leisner CONFERENCE OF PRESIDENTS The Presidents of the Federal Reserve Banks are organized into a Conference of Presidents which meets from time to time to consider matters of common interest and to consult with and advise the Board of Governors. Mr. Leach, President of the Federal Reserve Bank of Richmond, who was elected Chairman of the Conference in February 1952, was re-elected as such in March 1953 and continued to serve until March 1954. Mr. Young, President of the Federal Reserve Bank of Chicago, was elected Vice Chairman in September 1953, to succeed Mr. Gilbert, who retired as President of the Federal Reserve Bank of Dallas. Mr. Young continued to serve as Vice Chairman until March 1954. Mr. Aubrey N. Heflin, Vice President and General Counsel, Federal Reserve Bank of Richmond, who was elected Secretary of the Conference in June 1952, was re-elected as such in March 1953, and continued to serve until March 1954. At the meeting held in March 1954, Mr. Young, President of the Federal Reserve Bank of Chicago, and Mr. Earhart, President of the Federal Reserve Bank of San Francisco, were elected Chairman of the Conference and Vice Chairman, respectively, and served as such during 1954. Mr. Robert C. Holland, an Economist at the Federal Reserve Bank of Chicago, was elected Secretary of the Conference at the meeting held in March 1954, and served as such during 1954. FEDERAL RESERVE SYSTEM BOUNDARIES OF FEDERAL RESERVE DISTRICTS AND THEIR BRANCH TERRITORIES 1 = BOUNDARIES OF FEDERAL RESERVE DISTRICTS BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES Tfc ® • BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM FEDERAL RESERVE BANK CITIES FEDERAL RESERVE BRANCH CITIES NOTE—For a description of the Federal Reserve districts and branch territories, see the Annual Report of the Board of Governors for 1953, pp. 124-34; for recent changes in branch territory lines, see p. 57 of this Report. INDEX Page Acceptances: Bankers', buying rates on 78, 94, 95 Drafts of bills of exchange for purpose of furnishing dollar exchange, application granted 47 Agriculture, developments during year 13 Alaska: Admission of national bank to membership in Federal Reserve System 45, 90 Amendments to Regulations G and J with respect to items i n . . . . 50, 89 Designation as being in or of Twelfth Federal Reserve District for purposes of Regulations G and J 50, 89 Assets and liabilities: All banks in the United States, by classes 81 Federal Reserve Banks 62, 64 Balance of payments, United States 31 Bank credit and money, review for year 22 Bank holding companies 47 Bank premises: Federal Reserve Banks and branches 56, 76 Investment in, amendments to Sections 23A and 24A of Federal Reserve Act 50 Bank supervision by Federal Reserve System 46 Banking offices, number and analysis of changes 44, 83 Banks for cooperatives, authority of member banks to deal in and underwrite obligations of 52 Board of Governors: Accounts audited 57 Income and expenses 57 Members 99 Officers 99 Policy actions (See Policy actions, Board of Governors) Reimbursable expenditures 59 Branch banks: Domestic, number and analysis of changes 44, 83 Federal Reserve System: Bank premises 56, 76 Cincinnati, construction of security court authorized 56 Directors, list of 104 El Paso, acquisition of site for new building authorized 57 Houston, acquisition of site for new building authorized 57 Louisville, site for new building acquired 56 Omaha, construction of addition authorized 56 San Antonio, construction of new building authorized 56 Territory of, intradistrict changes in 57 Vice Presidents in charge of 116 Foreign, number in operation 48 Buying rates on acceptances 78, 94, 95 118 INDEX 119 Page Capital accounts: All banks in the United States, by classes 81 Federal Reserve Banks 63, 65, 67 Member banks 43, 81 Central bank technicians, meeting of 60 Chairmen of Federal Reserve Banks: Conference of 102 Executive committee 102 List of 102 Meeting 60 Charts: Deposits and currency 26 External trade, Western Europe and United States 33 Gold and dollar holdings, by areas 38 Gross national product 9 Gross national product, selected components 11 Member bank reserves and related items 28 Money rates 21 Selected business indexes 14 United States balance of payments 31 Clearing and collection: Designation of Alaska and Hawaii as being in or of Twelfth Federal Reserve District for purposes of Regulations G and J 50, 89 Items in Territories of Alaska and Hawaii, amendments to Regulations G and J 50, 89 Par list 45, 84 Commercial banks: Assets and liabilities 81 Holdings of Government securities 23 Loans and investments 23 Condition statements of Federal Reserve Banks: All banks combined 62 Each bank 64 Conferences {See Meetings) Credit, Federal Reserve policy 4 Credit and money, review for year 22 Currency, holdings and circulation during year 26 Debt and equity financing 17 Deposits: All banks in the United States, by classes 81 Expansion during year 26 Time deposits, maximum interest rates on 79 Deputy Chairmen of Federal Reserve Banks 102 Directors: Federal Reserve Banks: Classes of 103 List of 103 Federal Reserve branch banks, list of 104 Discount rates at Federal Reserve Banks 7, 78, 86, 87 120 INDEX Page Dividends: Federal Reserve Banks 54, 71, 72 Member banks 42, 82 Dollar exchange, permission to accept drafts or bills drawn for purpose of furnishing 47 Earnings and expenses: Federal Reserve Banks: 1954 53, 70 1914-1954 72 Member banks 42, 82 Economic conditions, review for year 8 Economic and financial developments, world 30 Examinations: Federal Reserve Banks 46 Foreign banking corporations 49 Holding company affiliates 47 State member banks 46 Expenses: Board of Governors 59 Federal Reserve Banks 54, 70, 72 Federal Advisory Council: Executive committee 101 Meetings 60 Members and officers 101 Federal National Mortgage Association, provisions of Housing Act of 1954 relating to 51 Federal Open Market Committee: Executive committee 100 Meetings 60 Members and officers 100 Policy actions 92 Review of continuing authorities or statements of policy 93 Federal Reserve Act: Section 14(b), amendment extending authority of Federal Reserve Banks for direct purchase and sale of Government obligations from and to the United States 50 Section 16, amendment repealing provisions prohibiting one Federal Reserve Bank from paying out Federal Reserve notes of another Federal Reserve Bank 51 Section 23A, amendment relating to investment in bank premises.... 50 Section 24, amendments relating to real estate loans by national banks 51 Section 24A, amendment relating to investment in bank premises. . . . 51 Federal Reserve Bank of Chicago, property acquired for expansion.... 56 Federal Reserve Bank of Dallas, property acquired for expansion 56 Federal Reserve Banks: Assets and liabilities 62, 64 Authority for direct purchase and sale of Government obligations from and to the United States, extension of 50 Bank premises 56, 76 Capital accounts 63, 65, 67 INDEX 121 Page Federal Reserve Banks—Continued Chairmen (See Chairmen of Federal Reserve Banks) Condition, statement of 62, 64 Directors 103 Discount rates 7, 78, 86, 87 Dividends 54, 71, 72 Earnings and expenses 53, 70, 72 Earnings on loans and securities 55 Examination of 46 First Vice Presidents 115 Foreign and international accounts 55 Holdings of Government securities 54, 68 Holdings of special short-term Treasury certificates purchased directly from the United States 69 Officers 115 Officers and employees, number and salaries 77 Presidents 115 Profit and loss 71 Territory of, intradistrict changes in 57 Vice Presidents 115 Volume of operations 53, 69 Federal Reserve credit policy 4 Federal Reserve notes:. Cost of printing 59 Issued to and held by Federal Reserve Banks 63, 65, 67 Payments to Treasury as interest on 54, 71, 72 Repeal of provisions prohibiting one Federal Reserve Bank from paying out notes of another Federal Reserve Bank 51 Federal Reserve System: Changes in membership 44 Map 117 Fiduciary powers of national banks 47 Foreign banking corporations 48, 50, 90 Foreign countries: Economic and financial developments 30 Gold and dollar holdings, by areas 38 Foreign operations of American banks, study of 49 Government securities: Direct purchase and sale of, from and to the United States, extension of authority of Federal Reserve Banks 50 Holdings of commercial banks 23 Holdings of Federal Reserve Banks 54, 68 Open market operations 6, 29 Treasury certificates, holdings of special short-term, purchased directly from the United States, by Federal Reserve Banks 69 Hawaii: Amendments to Regulations G and } with respect to items in . . . 5 0 , 89 Designation as being in or of Twelfth Federal Reserve District for purposes of Regulations G and J 50, 89 Holding company affiliates 47 122 INDEX Page 51 15 11 49 Housing Act of 1954 Income and saving Industrial production Inter-Agency Bank Examination School Interest rates: Changes during year Federal Reserve Banks Loans guaranteed under Defense Production Act Time deposits, maximum rates on Investments: Bank premises, amendments to Sections 23A and 24A of Federal Reserve Act Labor market, developments during year Legislation: Direct purchase and sale of Government obligations from and to the United States, extension of authority of Federal Reserve Banks. . . . Federal National Mortgage Association, provisions of Housing Act of 1954 relating to Federal Reserve notes, repeal of provisions prohibiting one Federal Reserve Bank from paying out notes of another Federal Reserve Bank Housing Act of 1954 Investment in bank premises, amendments to sections 23A and 24A of Federal Reserve Act Obligations of banks for cooperatives, amendment permitting member banks to deal in and underwrite Real estate loans by national banks, amendments to Section 24 of Federal Reserve Act Loans: Defense production loans: Fees and rates under Regulation V Guarantees of Federal Reserve Banks, earnings on Industrial loans under Section 13(b) of Federal Reserve Act, changes in rates approved Real estate loans by national banks, amendments to Section 24 of Federal Reserve Act Loans and investments: All banks in the United States, by classes Commercial banks Margin requirements, table Meetings: Central bank technicians Chairmen of Federal Reserve Banks Federal Advisory Council Federal Open Market Committee Presidents of Federal Reserve Banks Member banks: Acceptance powers Analysis of changes 20 78 80 79 50 13 50 51 51 51 50 52 51 80 40 55 86 51 81 23 80 60 60 60 60 60 47 83 INDEX 123 Page Member banks—Continued Assets and liabilities 81 Capital accounts 43, 81 Dividends 42, 82 Earnings and expenses 41, 42, 82 Investment in bank premises, amendments to Sections 23A and 24A of Federal Reserve Act 50 Number of 44 Obligations of banks for cooperatives, authority to permit dealings in 52 Obligations of Federal National Mortgage Association, authority to permit dealings in 52 Reserve positions 27 Reserve requirements: Reduction in 7, 49, 88 Table 79 Reserves, Reserve Bank credit, and related items 74 Stock of Federal National Mortgage Association, authority to permit purchase 51 Membership in Federal Reserve System, changes in 44 Money and bank credit, review for year 22 Mutual savings banks: Analysis of changes 83 Assets and liabilities 81 National banks: Admission of national bank in Alaska to membership in Federal Reserve System 45, 90 Analysis of changes 83 Assets and liabilities 81 Real estate loans by, amendments to Section 24 of Federal Reserve Act 51 Trust powers granted to 47 National Voluntary Mortgage Credit Extension Committee 52 Nonmember banks: Analysis of changes 83 Assets and liabilities 81 Par list, number on list and not on list 84 Open market operations 6, 29 Par list: Number of banks on, changes during year 45 Number of banks on list and not on list, by Federal Reserve Districts and States 84 Policy actions, Board of Governors: Designation of Alaska and Hawaii as being in or of Twelfth Federal Reserve District for purposes of Regulations G and J 89 Discounts for and advances to member banks, reductions in rates. . 86, 87 Regulation D, Reserves of Member Banks, amendment to 88 Regulation G, Collection of Noncash Items, amendments to 89 Regulation J, Check Clearing and Collection, amendments to 89 124 INDEX Page Policy actions, Board of Governors—Continued Regulation K, Banking Corporations Authorized to Do Foreign Banking Business under the Terms of Section 25(a) of the Federal Reserve Act:. Amendment of Sections XI and XV 90 Policy actions, Federal Open Market Committee: Authority to eflect transactions in System account: Meeting of March 3, 1954 92 Meeting of June 23, 1954 94 Meeting of September 22, 1954 96 Meeting of December 7, 1954 97 Bankers' acceptances, reductions in minimum buying rate 94, 95 Repurchase agreements 96 Review of continuing authorities or statements of policy 93 Presidents of Federal Reserve Banks: Conference of 116 List of 115 Meetings 60 Prices: Changes in 14 World commodity prices 34 Production, review for year 8 Rates: Advances to individuals, partnerships, and corporations other than member banks 78, 86 Advances to member banks under Section 10(b) of Federal Reserve Act 78, 86, 88 Buying, on acceptances 78, 94, 95 Discount rates at Federal Reserve Banks 7, 78, 86, 87 Industrial loans and commitments under Section 13(b) of Federal Reserve Act 78, 86 Interest rates 20, 78 Loans guaranteed under Defense Production Act 80 Postal Savings deposits 79 Savings deposits 79 Time deposits 79 Regulations, Board of Governors: D, Reserves of Member Banks, amendment decreasing reserve requirements 49, 88 G, Collection of Noncash Items: Amendments with respect to items payable in Territories of Alaska and Hawaii 50, 89 Designation of Alaska and Hawaii as being in or of Twelfth Federal Reserve District for purposes of 50, 89 }, Check Clearing and Collection: Amendments with respect to checks drawn on nonmember parremitting banks in Territories of Alaska and Hawaii 50, 89 Designation of Alaska and Hawaii as being in or of Twelfth Federal Reserve District for purposes of 50, 89 INDEX 125 Page Regulations, Board of Governors—Continued K, Banking Corporations Authorized to Do Foreign Banking Business under the Terms of Section 25(a) of the Federal Reserve Act:. Amendment of Sections XI and XV 50, 90 V, Loan Guarantees for Defense Production 40 Repurchase agreements 96 Reserve cities, designation of 46 Reserve positions of member banks 27 Reserve requirements: Member banks: Reduction in 7, 49, 88 Table 79 Reserves, member banks, 1918-1954 74 Revised Statutes, Section 5136: Amendment permitting member banks to deal in and underwrite obligations of banks for cooperatives 52 Amendment permitting member banks to deal in and underwrite obligations of Federal National Mortgage Association 52 Salaries: Board of Governors 59 Officers and employees of Federal Reserve Banks 70, 77 Secretary of Agriculture, loans insured by, amendment to Section 24 of Federal Reserve Act 51 Small Business Administration: National bank loans in which Small Business Administration cooperates or purchases participation, amendment to Section 24 of Federal Reserve Act 51 State member banks: Assets and liabilities 81 Examination of 46 Number and analysis of changes 44, 83 Stock of Federal National Mortgage Association, legislation permitting purchase by member banks 51 System open market account: Authority to effect transactions in 92, 94, 96, 97 Bankers' acceptances 94, 95 Repurchase agreements 96 Review of continuing authorities or statements of policy 93 Territory of Federal Reserve Banks and branches, intradistrict changes in 57 Trust powers of national banks 47 Voting permits issued to bank holding companies 47